How Australia's recession impacts your finances and banking

We’ve all seen the headlines: Australia is now facing its first recession in nearly 30 years. The numbers support the claim.
Australian Bureau of Statistics data released this week shows the nation’s economy contracted by 7% in the June quarter, the sharpest quarterly fall in the Gross Domestic Product (GDP) on record.
It follows another GDP drop of 0.3% in the March quarter. This means the country has now recorded two consecutive quarters of negative growth - the technical definition of a recession, which Australia hasn’t experienced since 1991.
Treasurer Josh Frydenberg said these numbers “confirm the devastating impacts on the Australian economy from COVID-19.”
Many people are out of work, while others have seen their pay cheques cut. Spending is down too, with a number of recent surveys revealing most Australians are pulling the reins in on discretionary purchases and focusing on savings instead. So, what’s next?
Savings mode during slower times
Mozo’s banking expert, Peter Marshall says the ABS announcement may only intensify the thrifty mindset we’ve adopted over the past few months.
“It’s a bit of a self-perpetuating cycle. Consumer confidence being undermined means people are adjusting their behaviours and being much more financially conservative, and that means it’s hard for the economy to get going again,” he says.
The road to economic recovery, Marshall said, will be “very, very slow”.
“Until people start to feel like there are some improvements coming through in the foreseeable future, they’re going to keep saving as much money as they can and avoid borrowing anything unless they really need to,” he said.
“As well as the practical impacts of the pandemic, there’s been a crisis in confidence and it’s going to take some time to get over that.”
Which banking products are useful during a recession?
So with the future unclear and no guarantee things will get better soon, what banking products could help in the meantime with saving up, paying off debt and improving personal cashflow?
Here are a few to consider:
High interest savings account
With a growing number of Aussies now dedicating more income to saving than spending, it pays to choose the right parking spot for that money.
While banks have tried to cut their losses by repeatedly slashing savings rates, there are still some good offers in the market. Namely, with a high interest savings account you could be looking at ongoing maximum rates as decent as 1.65% (with MyState Bank Bonus Saver Account, Volt Savings Account, and ING Savings Maximiser).
Just bear in mind that with many high interest accounts, there are often monthly conditions attached (like no withdrawals, or a minimum deposit or number of card transactions). So make sure you can realistically meet their requirements before moving your savings stash there.
Where to next? Compare options over at our high interest savings accounts page.
Refinance home loan
If you’ve got a mortgage under your name and have the financial capacity to refinance right now, this is a great way to give yourself an instant pay raise.
For one, home loan rates are at a record low and have only grown more competitive throughout 2020. Mozo data reveals that in just six months (March to September), the average variable home loan rate has dropped down from 3.68% to 3.36% - a 32 basis point difference.
For a $700,000 home loan over 25 years, that difference could mean shaving $125 off your mortgage repayments per month, and saving $45,073 in interest over the life of the loan.
What’s also worth noting is an emerging trend of providers trying to attract refinancers by offering their best rates to borrowers with loan to value ratios (LVRs) below 80%, 70% and 60%.
So, if you’ve been paying down your mortgage for years and now have a larger equity in your home, you could have access to even more killer rates.
Where to next? Scroll down below to compare offers, or head over to our refinance home loans page for more deals.
Compare refinance home loans - rates updated daily
Smart Booster Home Loan
2 Year Discounted Variable Rate, Owner Occupier, Principal & Interest, <80% LVR
interest rate
comparison rate
2.60% p.a.variable for 24 months and then 3.00% p.a. variable2.96% p.a.Smart Booster Home Loan
New super low introductory rate home loan for two years. Min 20% deposit. No monthly or ongoing fees. Fast settlement times. Mozo award-winning online lender. Friendly, local Australian based team.
- Ongoing fees
- $0.00
- Discharge Fee
- $0.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- Optional - with 0.10% additional interest
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- $50,000
- maximum borrowing amount
- $1,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Smart Booster Home Loan
- Featured Product
Neat Home Loan
Owner Occupier, Principal & Interest, LVR <60%
interest rate
comparison rate
2.64% p.a. variable2.65% p.a.Neat Home Loan
Low variable rate. Ideal for buyers or investors. No annual fees to pay. Unlimited additional repayments. Free redraw facility available. Fast digital application. 40% deposit required.
- Ongoing fees
- $0.00
- Discharge Fee
- $300.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 60.00%
- minimum borrowing amount
- $80,000
- maximum borrowing amount
- $5,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Neat Home Loan
Unloan Variable
Owner Occupier, Refinance Only
interest rate
comparison rate
2.64% p.a. variable2.56% p.a.Unloan Variable
For refinancers only. Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply in as little as 10 minutes.
- Ongoing fees
- -
- Discharge Fee
- $0.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- $10,000
- maximum borrowing amount
- $3,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Unloan Variable
Variable Home Loan
Owner Occupier, Principal & Interest, LVR <60%
interest rate
comparison rate
2.64% p.a. variable2.66% p.a.Variable Home Loan
Purchase and Refinance. Yard’s low-rate variable special home loan is packed with all features – unlimited additional repayments, free redraw, optional 100% offset account. Enjoy a simple online application.
- Ongoing fees
- $0.00
- Discharge Fee
- $500.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- Optional - $10 per month
- Maximum loan to value ratio
- 60.00%
- minimum borrowing amount
- $150,000
- maximum borrowing amount
- $1,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Variable Home Loan
Discounted Variable Home Loan
Owner Occupier, Principal & Interest
interest rate
comparison rate
3.44% p.a. variable3.83% p.a.Discounted Variable Home Loan
Enjoy a great low rate with no ongoing fees. Ability to split your loan between fixed and variable. 100% offset account. Refinance and get up to $3,000 cashback. LVR ≤90%. $2,000 cashback for loans ≥ $250k, plus bonus $1,000 for loans ≥ $500k. Limited time offer extended, T&Cs apply.
- Ongoing fees
- $395.00 yearly
- Discharge Fee
- $0.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- yes
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- $150,000
- maximum borrowing amount
- -
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- Up to $3,000 cashback when you refinance your home loan from another financial institution when you apply by 30 Sept 2022 and are funded by 30 Nov 2022, LVR <90%. $2,000 cashback for loan amounts of $250,000 and a bonus $1,000 for $500,000 or more.
Read our Mozo Review to learn more about the Discounted Variable Home Loan
No interest personal loan
For Aussies who are short on cash and need a little extra to cover the cost of essentials, a no interest personal loan could help.
As the name suggests, this type of loan charges no interest at all. It’s offered by GoodShepherd Microfinance (in partnership with NAB and the Australian government), via two initiatives:
- No Interest Loan Scheme (NILS): Aussies can borrow up to $1,500 over 12 to 18 months to pay for necessities like medical procedures, car repairs, education and household item purchases.
- Household Relief Loans Without Interest: Aussies can borrow up to $3,000 for rent and utilities, to be repaid over 24 months.
There are no catches in terms of fees, charges or credit score checks, but you will need to meet an eligibility criteria for both.
Where to next? For more information on how to apply, check out the NILS and Household Relief websites.
Balance transfer credit card
A staggering 78% of Australians are worried about how they’ll repay debt, according to recent Mozo research. If you’re one such Aussie and have credit card debt hanging over your head, it may be time to consider a balance transfer.
With a balance transfer, you can move your existing debt to a new credit card offering 0% interest over a fixed period (say, 9-22 months). Essentially, this gives you more time to clear your debts without drowning in further interest charges.
Just be sure to pay off your balance before the BT period ends, as the card will then revert to a higher rate.
Where to next? Compare 0% interest deals over at our balance transfer credit cards page.
Financial assistance options
Remember that if you’re struggling, there’s absolutely no shame in seeking help from your bank or ringing up a free financial counselling service to figure out your next steps.
Our page on COVID-19 and your finances also lists a range of resources and relief options that could provide some breathing space as you navigate these tough times.
* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.
** Initial monthly repayment figures are estimates only, based on the advertised rate, loan amount and term entered. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.
Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.
While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.