‘The Lucky Country’ is an apt nickname for Australia. It was used as an insult by Donald Horne in his book ‘The Lucky Country’ to criticise us for being too lazy and taking our luck for granted. Basically he said we didn’t deserve the prosperity and easy lives we enjoyed when he wrote his critique in 1964. But as is the Australian way, we took that term and wore it with pride, happy to delude ourselves into thinking our luck would never run out.

And amazingly we just kept getting lucky. When the Asian financial crisis hit, we were insulated by our ties with the US and other western trading partners… but when the GFC hit those western partners, we were insulated by our relationships in Asia and their soaring demand for our resources… it seemed that no matter what economic tsunami befell others, we were always just far enough away to not be disturbed too much by the ripples.

We’ve stumbled blindly from one lucky break to another, and it’s worked… so far.

I put it to you that our luck is done and dusted. The next few years may be the hardest our country has faced in anyone’s living memory.

With every passing year we’ve rolled the economic dice and hoped that we’d roll well in spite of all the things we were doing to hurt our own economy. Things like our high minimum wage, our inflexible labour laws, our stifling red tape, or the myriad of reasons why a business shouldn’t bother being here, and workers shouldn’t bother working. And every year our economic growth remained (relatively) strong no matter what, always thanks to our ability to ride shotgun on another countries growth.

Our resources rode piggy-back on other countries good fortune, and the rest of the country rode piggy-back on our resources sector.

But who is left to ‘ride’? China are slowing fast and depending on which set of swirling rumours coming out of China you do or don’t believe, things in the PRC may well be very bad indeed! The US are struggling to reboot their economy, still in a malaise 8 years after the GFC despite the economic boost of low oil prices and the fracking revolution. Europe are a basket-case who seem determined to burn down what’s left of their basket… and short of an economic miracle… no scratch that, short of an Act of God in New Zealand which suddenly causes them to start buying billions of dollars worth of our resources… we’re fast running out of buyers.

To make matters worse, our own internal mismanagement and inefficiency, caused by decades of ‘easy living’ and getting away with it, mean that we’re woefully unprepared for a serious economic downturn.

If we accept the Keynsian argument that government spending can re-boot an economy (which I don’t) then we’re certainly in trouble, as we’re already pushing our way towards losing our AAA credit rating (making borrowing much more expensive) and as this article clearly shows, our spending is utterly out of control and debt is climbing fast, with neither major party taking it seriously. In short, we don’t have anything ‘left in the tank’ for the government to spend to ‘re-boot the economy’, even if such a thing were actually a good idea.

But getting back to the real world, where it’s the private sector that drives economic growth, not ‘shovel ready government projects’, we’re in even more trouble. Household debt, consumer debt, and business debt are all at startlingly high levels, and in some cases among the very highest in the world, depending on which particular metric you’re looking at. In other words, we are very exposed in the event that interest rates start to climb. So that’s risk #1.

Which might lead you to conclude that it’s a really great thing that interest rates are so low… and seemingly set to get even lower… except that such low interest rates are a direct symptom of just how bad our economy already is. In theory (getting back to Keynsian fantasies) the economy will be improved by the RBA lowering interest rates, but around the world we see many examples of zero and even negative interest rates in countries where their economy isn’t on life support… someone’s already pulled the plug! The stagnation that abounds in spite of zero or negative interest rates tells us the theory isn’t working, and that’s risk #2.

I’m also of the opinion that war isn’t far away. It’s always dangerous trying to predict such things and history abounds with examples of people who tried and failed to predict future geopolitics, but I feel that 3-5 years is a reasonable time-frame for a serious direct war between serious world powers (I say ‘direct’ war to distinguish it from the proxy wars which super powers have been fighting almost without a break for the last 50 years). Now the Keynsians will be delighted at the prospect of war! Just think of how many broken windows there will be! Every bomb brings wonderful ‘economic stimulus’ to the people lucky enough to have it land on their heads. In reality of course, war is the second biggest bringer of poverty and suffering to mankind, second only in human history to socialism in its death toll.

The US has been (rightly) criticised for starting wars and causing trouble in various parts of the world since the end of WWII, but despite the many serious flaws of the ‘Pax Americana’, the fact is that we’ve enjoyed decades of relative peace thanks to the fact that the US has had the ‘big stick’.

But times are changing, balances of power are shifting, and a range of flashpoints are poised to go off. I’m not going to predict which particular flash point will be the first to go, but I suggest that once one serious conflict starts which draws in large amounts of US resources, then the others will fall like dominos as everyone from Russia to China to North Korea to Pakistan to Iran spies their opportunity to take advantage of the US being split between too many different wars and conflicts, and sets out to ‘settle the score’ on any one of dozens of decades or centuries-old disputes with their neighbors.

I hope I’m wrong, of course. But as I look around I can’t help but feel we’re soon going to enter another ‘world war’, whatever that may look like. Probably not the comparatively clear-cut alliances of WWII, but more likely a hopelessly intertwined web of localised conflicts layered up with international alliances which overlap in bizarre ways to create an incomprehensible train-wreck of a world war. Think ‘ISIS vs Syria’, but happening in 15 different parts of the world at once, and each one having a different and even conflicting set of ‘allies’, ‘enemies’, ‘partners’, and ‘objectives’ for each of the combatants.

So combine the rapid fall in global demand for our products, with our high debt levels right across the public and private sectors, with our high costs of production, with what I believe to be the very real risk of a serious war or set of wars which we’ll be inevitably drawn into… and I don’t know about you but I’m thinking the next 5 years are likely to be tough.

So if I’m right, (and I’ll say again, I hope I’m not, and I may very well be wrong… but I’m trying to read the world as best I can!) then what can / should we do about it?

First up, don’t go all ‘prepper’ on me and head for the hills with a tent and a hunting rifle. We’re not there yet.

What I’ll be doing is trying to structure my life for maximum flexibility, keep my living costs low and options open. And I’ll be doing the same with the video production company I run. We’ve stopped buying equipment on finance, and any new capital expenditures are being funded strictly via cashflow, not debt. We’re growing rapidly, but keeping our core team small and cultivating a network of freelancers and sub-contractors who do top quality work when we need them. Minimum overhead, maximum flexibility.

What we’re about to go through isn’t the end of the world, and I remain, as ever, very optimistic about the future and the medium to long term outlook for my life, for my children, and for the human race. In no way am I a ‘doom and gloom’ catastrophist, nor do I think that what we’re about to face is any worse than what most other countries on earth have faced once, twice, or even more times in the last 50-100 years. And I think on the other side of what is about to come are more good times, and quite possibly a whole lot more ‘luck’.

But what worries me is that we are in denial about it, and we’ve gotten away with being so ‘lucky’ for so long that too many people here won’t know how to adapt and handle it if the good times end.

I think it would be foolish for me (and you, if that wasn’t clear enough) to look at the world as it stands today, not to mention the Australian economic outlook, and not take some simple measures to ensure that I can look after myself and my family if things get hard.

Just give it some thought. What are your options if your employer lays off a whole bunch of people? What can you do to expand those options and maximise your ability to ‘roll with the punches’? If you’re self employed or in a small business, what are your plans if clients stop paying bills or start breaking contracts? What if your sales dry up? Will you carry on with ‘business as usual’ until the money runs out or do you have a plan? Do you personally have a buffer of savings or other resources to buy you time to adjust if things unexpectedly get tough?

Don’t rush out and spend a bunch of money if you don’t have to… not even to ‘prepare’ for an economic apocalypse! I might be wrong you know! So please don’t do anything rash or without proper thought…

But get tactical, do give it some thought, and have a plan so you, your loved ones, and maybe even your business, will be able to adapt, minimise your risks, maximise your opportunities, and come out the other side of whatever is coming our way still in business, still with somewhere to live, clothes on your back, and with life able to go on when things get easier.

And when you look back at how well you rode out the ‘great crisis of 2020’, well may you say, “Phew, that was lucky.”

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