Uncensored Money Season Four: Predictions for 2023
Melissa Browne: Ex-Accountant, Ex-Financial Advisor, Ex-Working Till I Drop, Now Serial Entrepreneur & Author, Financial Wellness Advocate, Living a Life by Design | 10/01/2023
It’s the start of a new year. So in this solo episode, Mel shares her 5 predictions for 2023 and what that might mean for your finances.
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It's early January, 2023 and many of us either just returning to work or like me still on holidays and we're in that New Year haze of "this is going to be our year", but what does that really mean for you financially?
Well, part of that is figuring out what's going to happen in the world this year, what's going to happen with finances this year, so that you can start to make some great financial decisions so that it genuinely is going to be your year.
And the problem is when it comes to money, there are so many clickbait headlines, so it becomes really difficult to know who to trust when it comes to your finances. And part of what I want to do is to be that voice of reason against many of the clickbait headlines that you read, but I also want to add my expert voice to commentary and to let you know what I think when it comes to money, wealth creation, and finances.
Oh, and occasionally shoes, but whether I believe Crocs are going to come in in 2023, or the fact that they are coming back, I can't deal with that, so we're not going to talk about that today. Instead, in this episode, I want to cover off my five predictions of 2023, and then at the end of the year, we're going to come back to it and see how I went, but also to talk about what that meant and if you'd followed what I'd suggested what that might mean for your finances. So without further ado, let's get into it.
Now number one is recession. This year we are going to hear more and more talks about a recession. Now, what is a recession? Just to recap quickly. So a recession simply means a meaningful and extensive downturn in economic activity.
And if we look at the actual meaning, or if we look to the definition of it, it's two quarters of decreased economic output, when GDP goes backwards. Now, what does it look like? Well, it looks like decreased economic output, which simply means that businesses and consumers spend less, that there is lower consumer demand, and ultimately higher unemployment because there are less jobs.
Now, interestingly, in 2022, the editors of the English the Collins English dictionary declared 'permacrisis' to be their word of the year for 2022, which was defined as an extended period of instability and insecurity.
Now, as we look at the beginning of 2023, I know that instability and insecurity are not two words we want to hear anymore. And yet permacrisis and instability and insecurity and recessions are kind of words we need to get used to hearing and for us to hear them and know, yep, I know that's coming and I know what I'm going to do about it. Now, what I really want to say here is that yes, we are looking at a global recession. However, Australia and other countries such as New Zealand will look to escape it in the same way that we escaped it when the GFC happened.
Now, it's not to say we won't be affected because the world will be in recession. We simply won't be in the definition of recession ourselves. And what I found really interesting over the last few months is that commentators and journalists have already started using the word recession when it comes to Australia in New Zealand and describing things as being indicators of a recession that actually are not.
And so we need to be really careful about what we digest and what we believe because some things are just the natural way of what happens in a normal economy. Some things are simply inevitable as a result of there's no longer any stimulus and companies didn't survive Covid, and we're starting to see that.
So we are going to be really mindful not to blame everything on doom and gloom on a recession. But what it means for you is we want to be smart during a recession. We want to make sure that we have our buffer, so that means simply three months’ worth of cash in a separate account such as an offset account or a high interest account, so that if life happens, we're okay. We want to be paying our mortgages at one to 3% more than whatever interest rate they're currently set up. We don't want to be taking up bad debt. We might want to be a little less speculative with our investments. You know, rather than trying to pick individual stocks, we might look at things like ETFs. We might look at blue chip shares and it's interesting you might go, but yeah, Mel, aren't they your good things to potentially be considering anyway?
And the answer is yes, because when there's talk of a recession, when there's talk of instability and insecurity, going back to the basics is more important now than ever before. The simple things like understanding where you're spending, spend less than you earn. You know, all those boring things are more important than ever before. And if you are not doing that, now is the time to get that right.
So number one is a recession, and it's really important to understand that, as I said we are going to hear more and more and more talk about recession. We're going to hear more and more talk about instability and insecurity, but I want you to be aware that Colin's English dictionary declared 'permacrisis' to be the word of 2022 for a reason. And we simply need to expect that this is going to be part of our lexicon moving forward. But you are not going to be concerned because you've been told that by me. And you have those really great basics, financial basics that you're doing, so that you are going to be ok.
Number two is property and interest rates.
Again, two areas where there is going to be so much chatter throughout 2023. So many experts coming out and weighing in as to what they believe will happen. Now as to what I think will happen, I believe rates will continue to climb until, say, mid 2023 at a minimum. And the indicators you need to look at to figure out do we, should we expect a softening of rates or should we expect rates to continue to climb, is inflation.
So inflation at the end of 2022 in Australia was sitting at around 7%. The Reserve Bank wants it at two to 3%. Now that's really simple maths, right? So if we're sitting here in May and inflation's still at five to 6%, then the Reserve Bank really only has one lever. And they're going to continue to pull that lever of interest rates until they start to see that inflation rate go down, until they see that people are spending less.
And it's going to be interesting, right? Because you are going to hear commentary from retail around people aren't spending as less as much, and this is problematic. And yet, if we are not spending less, interest rates are going to go up. So I want you to hear that commentary and go, okay. Yep. Mel said that we were going to have these two very large voices around retail and people aren't spending, and this is problematic and inflation and interest rates. And I'm just going to hold my course.
Now, once that inflation starts to come under control, that's when we should see an easing back. I expect to see inflation rates from December to be quite high in January because when we're on holidays we spend more, and of course in Christmas we spend more so we can, I believe we can predict with absolute certainty and interest rate, as much as you can predict these things with certainty, in Feb. And then really, we are going to be looking to inflation rates in Feb, March, April, to know whether those interest rate increases will happen beyond June, but I believe that it will happen until at least mid-June and then hopefully it'll start to ease back.
Now, what will happen with property is that, of course, what we are also going to see in the beginning of 2023 is a whole lot of fixed interest rates start to come off. A whole lot of interest only start to come off. And what will happen is people will need to refinance those and people will start to pay interest at a higher interest rate.
And of course, what that means is hopefully it will mean that inflation will be lower, cause there'll be less cash in those people's pockets. But also it may see a slowdown of the housing markets because yes, there has been a reduction in prices. But with that, I don't believe, cause interest rates are still not up at eight per cent where it was pre-Covid.
So because of that, I don't believe we are going to see the selloff, which might lead to a crash. Instead, there'll just be a winding back and certainly commentators have said that they expect to see that slowdown really come to an end by mid to late 2023. And of course, what do we also think will come to an end is the uncertainty around interest rates.
So I think those two things will align so that the property market will really start to settle down and it, and I'm not suggesting that it will rise again, but certainly I'm suggesting a stagnation for some time once the interest rates start to calm down. But of course, in amongst that, there is always going to be pockets of growth. So is property still a great long-term investment? Absolutely, in the same way that I believe shares are still a great long-term investment, but what we want to do is make sure that we're looking at property for that long term, we're looking at is it a great investment? What's happening in the area that we are looking to buy? What's its proximity to things like our public transport and jobs and infrastructure? And if we are buying that property as an investment, we need to be really smart about the fundamentals of that. And I think because of that, things like buyer's agents are going to become more and more used be as people become more nervous around properties and investments. They don't believe it'll be like shooting fish in a barrel like it might have been for the last four or five years. But instead, they're going to want to be really careful when they're buying it. And so they will see a rise in things like property agents, buyer's agents, and that'll feel like more of a norm, even for home buyers.
So to recap, for property and interest rates, interest rates I believe will continue to climb until at least mid 2023 at a minimum. You need to look at inflation as that leading indicator as to whether the interest rates will start to level out, and property potentially still to have a softening, but really for it to be stagnant, certainly until at least, the end of 2023.
Number three is the share market. Now, if you remember what I said at the beginning of this, that the 2022 word was 'permacrisis'. And certainly we've seen that in the share market in 2022. From the tech crash to US markets free falling. Two retractions in our home market in Australia.
The share market has really been in for a wild ride in the last couple of years, and that permacrisis word, that instability and insecurity, I think we'll see more and more of that. And in a global recession, people look to markets that are safe. If Australia comes through relatively unscathed, the share market in Australia may look attractive for overseas investors, which might push our share further forward. However, certainly what I do think will be attractive to investors are the tried and true. It'll be the blue-chip shares. In a recession, things like health shares, ETFs etc. So it'll be those safer known products will be the things that people feel more comfortable with. As I believe people will still see the share market as a good long-term investment. They're just not going to want to risk their house by trying to pick individual speculative shares.
Number four is an interesting one, and that's women's spending and money. So I believe more and more we are going to see financial products aimed at women as women start to take ownership and women more and more start to care about money and start to want their own financial independence. I think this concept of a man being a financial plan and abdicating finance. We saw more and more people divorcing through Covid. We saw more and more people realising they actually need to give a shit about their finances because whilst you may have been apathetic, when times are good, you can't be that when times are uncertain and because that uncertainty and instability is going to stay with us for some time to come, I think women, which is what we are seeing already, will become more and more interested and wanting to invest and wanting to take hold of their finances. And I think as a result of that, we are going to see more and more products and services aimed at women that will ultimately see an explosion of these.
Now, some of these will simply be pink products. You know, back in the day there was a razor where it was the same as a blokes, but they coloured it pink and they made it more expensive. So I think that there is going to be a little bit of that, and I think women need to be really wise about that in the same way that I am seeing more and more life coaches realise that, Ooh, I could become a money coach or a money mindset coach, and suddenly women care about that and I can really push into this new niche. Or I'm seeing more and more marketers go, Ooh, this is a good thing. I'll just grab some financial advisors and people that know what they're doing and I'll push them forward as the experts, but I'll be the one behind the scenes doing it.
We're seeing books on finance published by marketers. We're seeing books on finance published by journalists, all directed at women, and I think we're going to see more and more of that. And what I want to say is that consumers need to be really savvy because in the same way that we saw Afterpay, a financial product created and marketed at women to the detriment of women, I believe we are going to see more and more financial products aimed at women, both for our buying power and our investing power. And as women, I think it's really important to ask who's behind those products? Who are the experts behind that product? Is it just pink washing? and what does it mean for me? Because what we don't want to do is simply think that this is something that's good to do and just be sold something. And this is genuinely something that I am concerned about. It's a space that I've been in, that I've played in for the last 15, 20 years, when it comes to women and business and women in their money. And as I said, I'm seeing more and more marketers and companies and businesses go, this looks like a good area to get into, and I think it's something that women need to get savvy about and go, right, this is what Mel said was coming, right? I'm going to ask the question who's behind it? I'm not just going to go to someone who doesn't have any expertise in this.
I might follow people. I'm, I'm such a fan of people sharing their money experiences and people are following them that are talking about money and going, you know, let's just make money another thing we talk about. But when it comes to financial products and financial services, I think it's really important to ask the question, who's behind this? What's their expertise? And is it just simply pink washing? And if it is just to call BS to it.
Finally, it's ethical spending and investing. I think with women becoming more and more financially savvy and younger generations entering the market who are demanding and who are so concerned about climate change, I think the appetite for ethical investing will increase.
I think we're not going to see just products labelled 'ethical' or labelled 'sustainable' within a company's portfolio of just other products. But I think more and more we are going to see companies that say the only thing that we are prepared to offer are ethical and sustainable products. I think we are going to see more and more financial services, whether that's banks, whether that's online banks and neobank, whether that's investments, whether that's insurances and more that are all coming out and will say 'we are an ethical or a sustainable product', and it's up to us to be savvy and to ask the question. Like I said before, with the explosion of financial products aimed at women and being careful, it's not just pink washing. We need to be careful this isn't just greenwashing. And again, to ask the question who's behind it, what's their motivation? What are they choosing to spend or invest in? And just as importantly, what are they choosing not to spend or invest on? For example, they might choose to not spend or invest in fossil fuels. And that's just as important as what they are choosing to invest in. And I think as investors and spenders, we need to choose to put our money where our mouth is.
Will it be more expensive? Sometimes absofreakinglutely. But we need to ask the question, at what cost? I watched a really great documentary during my holidays where they said fast fashion is the second biggest polluter. I just need you to say that again. Fast fashion is the second biggest polluter and young women particularly are the drivers of that. Young women who believe in sustainability, who believe, who are march against climate change, and yet they are one of the biggest contributors to pollution. And I think it's, we need to stop and say, at what cost? Because yes, sometimes things can be cheap. Yes, sometimes things can be easy, but at what costs? And I think 2023 needs to be the year that we all ask at what cost?
I hope you've enjoyed my five predictions, covering the big things: the recessions and global recessions, property and interest rate, the share market, women's spending and money and ethical spending and investing.
I'd love to hear your opinion. So either send me an email at hello[at]melissabrowne[dot]com au or come over to Insta and DM me at @moremoneyforshoes and let me know what you think.