What is a recession, and what does it mean for you?

If you’ve watched any news recently, you will have heard talk about “recession”. Just hearing the word can strike fear in many. Having said that, most people don’t actually understand what a recession is. 

Essentially, a recession is a measure of how a country’s economy is tracking. A more formal definition is “a recession is 2 quarters of negative Gross Domestic Product (GDP). Gross Domestic Product is a measure of a country’s spending. So, a recession is 6 months in a row of decreased spending across the whole economy.

At first glance, this may seem a bit innocuous. I mean what does it matter if people spend a little less money than they have over the last 6 months. But it’s not that simple. An economic recession is bad. Money flows around the economy. If someone earns money, they will spend money. This keeps the economy flowing and stimulates economic growth. If people stop spending, everyone loses as the economy contracts.

When people stop spending, businesses stop investing. When people stop spending, businesses stop employing people.  people stop employing. If people lose their jobs they struggle to pay their bills – their mortgages and their gas and electricity bills.

When people stop spending money and economic indicators start to turn, governments have a few levers up their sleeves. There are a number of things they will try in order to stimulate spending. They will start with lowering interest rates. They may try printing more money. 

Lower interest rates are helping to hold up the economy as people are still investing in real estate. There are incredibly great home loan products available at the moment. At the time of writing you can potentially get interest rates below 2%

When a recession hits, more often than not it is the  middle and low-income earners that are disproportionately affected. It’s those living in the middle and outer suburbs. These people are my clients. They live in suburbs like Frankston, Cranbourne and Berwick. They are hard working people just going about their lives, trying to support their family and have a yearly holiday. When rich people and politicians make decisions, it’s these people that are impacted in a recession. 

The economy goes through peaks and troughs. There are good times and there are bad times. We can’t have boom times forever. It’s important that we all take advantage of the good times to be prepared for the bad. Whilst we have record low interest rates you should look at options to reduce your repayments and potentially put aside some savings. 

Will Bell Mortgage Broker is a mortgage and finance broker based in Melbourne specializing in residential home loans.  Will is all about the average Australian understanding just enough of the broader economy to take action on your own personal economy.  He is the host of the My Personal Economy Podcast.

If you would like to get in contact click here

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Will Bell Mortgage Broker
Based on 56 reviews
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00:45 19 Nov 21
Will did an amazing job in restructuring multiple investment loans for me. It greatly reduced repayments and released some equity as well.Thanks for all your hard work!
Harsha Jayaratne
Harsha Jayaratne
10:19 21 Sep 21
It is pleasure to work with always keep you informed and prompt service.
Jen Furlong
Jen Furlong
00:51 21 Sep 21
Will was an absolute pleasure to deal with and made the process of obtaining a mortgage very easy.
00:54 03 Sep 21
Thanks Will for helping me! Great service!
Imogen Armstrong
Imogen Armstrong
03:11 13 Aug 21
Will is a legend!!!! So helpful, explains everything well, couldn’t speak more highly of him!! Definitely recommend!
Brooke Ware
Brooke Ware
06:10 10 May 21
Will was recommended to me by our real estate and he has been amazing to deal with. He is very responsive with messages and calls and also gives you his honest opinion of what deal is best suited.Definitely looks out for the best interest of his clients....would highly recommend going through Will.Doesn't matter how many questions I had he always talked me through anything I needed.
Sarah H
Sarah H
03:36 06 May 21
Will was recommended to me by my co worker and I was a little sceptical that I would find a broker that could help me in my situation. I’m a single mum of 2 teenagers and have been told previously that I could only borrow a small amount...not enough to purchase a home, even though my salary is quite good and I’m able to service a loan.Will went above and beyond my expectations, he was prompt with initial contact, made me feel like nothing was ever a problem, reassured me that he could help me purchase a brand new home. The whole experience was simple, stress free and fast. Will has a very calming presence and is always smiling, which was very reassuring for me in a stressful time of my life. Thanks so much Will, I will definitely recommend you to everyone I know!
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