Are we just kicking the can down the road?

I’m always talking about watching your money.

New real time data shows that spending is returning to normal, at just 3% below pre-crisis levels (May 22nd report).

While this evidence confirms mortgage deferrals and other hardship measures are supporting spending, it also suggests that we may be simply kicking the can down the road until September or after – when stimulus measures and bank mortgage holidays come to a grinding halt.

The Australian Banking Association has released new figures showing 429,000 mortgages had been deferred, totalling $153.5 billion. The evidence suggests that these hardship provisions are supporting spending.

Comparing people who received mortgage deferrals with those who did not, there is very little difference between levels of discretionary spending. Many people on hardship have experienced income reductions. Without hardship provisions these people would have to cut their spending significantly in response.

Become sensible – do not face a cliff in September.

These trends show that come September, we will be staring down the cliff face.

Mortgages will need to be repaid, those in hardship will further clamp down on discretionary spending, having a catalytic impact on the economy.

It could be a double-whammy if the hardship provisions end at the same time as Government support.

We are starting to see now some great ideas coming forward from the government and I think a big stimulus package will be “heart starting” the domestic building market. Ideas around the moment is social housing which includes the development of 30,000 new houses as well as bringing in a new home owners grant of $40-$50,000 that would really kick things on.

But whatever happens it is going to get tough. You need a tough advisory and accounting firm to stop that can from rattling down the road, stabilise your business and your budgets, keep you in sweet with the tax department and not only help you survive but to grow your business.