We want to know if a recession is coming. It’s the wrong question

OpinionMoney columnistNovember 15, 2026 — 5:01amNovember 15, 2026 — 5:01amThis week, someone asked me a question on my podcast that has stuck with me. Should Australians be preparing for a recession?I can understand why they’re asking. Interest rates have been rising, inflation is proving stubborn and the economic headlines haven’t been reassuring. It feels like every other week there’s another economist warning us about what might be around the corner.Prices are going up and up, and so are interest rates.Louie DouvisI follow these conversations closely. It’s my job, after all. But I sometimes wonder whether we’re so focused on predicting what the economy will do next that we’re overlooking something much closer to home.After years working as a financial adviser and now in mortgage broking, my understanding of what it means to be wealthy has changed quite a bit. Early in my career, I probably would have measured wealth in the traditional sense.How much someone earned, what their home was worth, how much they’d accumulated in investments. All perfectly reasonable measures, and ones that still matter. But having spent years looking at people’s finances behind closed doors, I’ve realised those numbers can tell you surprisingly little about how financially secure someone actually is.Some of the most eye-opening clients I worked with were households earning $600,000, sometimes upwards of $1 million a year. On paper, they were doing extraordinarily well. They owned beautiful homes, drove expensive cars and had the sorts of careers most people would consider incredibly successful.The older I get, the less impressed I am by the outward signs of financial success. I’m far more interested in whether someone has choices.Yet when we sat down and went through their finances, the reality was sometimes quite different. These clients’ mortgages were enormous, their spending had grown alongside their incomes and there was little room for anything to go wrong. Some had accumulated substantial assets but had surprisingly little put aside for retirement.Others were so dependent on maintaining their current incomes that even a relatively short interruption could have forced some very difficult decisions. I’ve met people who could afford almost anything, except the freedom to stop working.I don’t share that to criticise them. It’s remarkably easy for your lifestyle to expand as your income increases, particularly when the people around you are doing the same thing. And a large mortgage isn’t necessarily a problem if you have the income and financial buffers to support it.What struck me was how different their financial reality could be from the picture everyone else saw. I’ve thought about those clients a lot over the years, particularly when conversations about recessions start making headlines.Reserve Bank governor Michele Bullock on November 3, after the bank raised interest rates for a fifth time this year.Dominic LorrimerThere are genuine reasons to be paying attention to the economy right now. This month, the Reserve Bank increased the cash rate to 4.85 per cent, while annual inflation reached 3.9 per cent in the September quarter.Unemployment averaged 4.6 per cent over the same period, and the RBA now expects it to climb to 5.1 per cent by the end of 2028. That’s hardly an economic outlook anyone would describe as particularly comfortable.But Australia’s economy is still growing, with GDP increasing 2.1 per cent over the year to June, and the RBA’s central forecasts point to slower growth rather than an outright recession. Even economists working with sophisticated forecasting models can’t tell us with certainty what happens next.The difficulty is that a recession isn’t experienced equally. Some people will barely notice it. Others may lose their jobs, see their businesses struggle or find themselves needing to access savings much sooner than expected. And some Australians will experience serious financial hardship even if the economy never officially enters a recession.If you’re earning a comfortable income, it’s tempting to assume you’re financially secure. You can afford your mortgage, your bills are paid and your investments are ticking along. There might not be any obvious reason to question whether the life you’ve built is sustainable until something changes.I also think we need to be careful about how we talk about preparing for difficult economic conditions. There’s no shortage of financial advice telling people to build emergency funds, reduce debt and spend less. Those are sensible suggestions, but they’re considerably easier to follow when you have money left over at the end of each week.For someone already struggling with rent, groceries and electricity bills, being told to save six months of expenses can feel almost insulting. Financial security isn’t just about making good decisions. Income, opportunity, family circumstances and plain old luck have an enormous influence on the options available to us.For those of us who do have some financial flexibility, there’s a responsibility to be more deliberate about what we do with it. That doesn’t mean living frugally for the sake of it or feeling guilty about enjoying the money you’ve worked hard to earn.I’m certainly not suggesting we should all stop going on holidays or buying things we love. It means recognising the difference between being able to afford something today and being able to sustain it if your circumstances change.It’s something I think about differently now, both professionally and personally. The older I get, the less impressed I am by the outward signs of financial success. I’m far more interested in whether someone has choices.Whether they could take time away from work if they needed to, whether an unexpected expense would derail their plans, or whether they’re building towards a retirement that doesn’t depend on everything going perfectly.And that brings me back to the question I was asked this week. Should Australians be preparing for a recession? I think it’s worth understanding the risks, but I wouldn’t encourage anyone to make dramatic financial decisions based on predictions about when the next downturn might arrive.Trying to time the economy is difficult enough for economists, let alone the rest of us. I’d much rather see people take an honest look at how their finances would hold up if life became a little less predictable.That might mean building some savings, reviewing financial commitments or simply having a clearer understanding of where their money goes. What that looks like will be different for every household.I don’t know whether Australia is heading towards a recession. But I do know that financial security has very little to do with impressing the people around you.These days, my definition of wealth is having enough peace of mind to know that if something unexpected happens, you have the freedom to work out what comes next without everything you’ve built falling apart.Victoria Devine is an award-winning retired financial adviser, a bestselling author and host of Australia’s No.1 finance podcast, She’s on the Money. She is also founder and director of Zella Money.Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.Expert tips on how to save, invest and make the most of your money delivered to your inbox every Sunday. Sign up for our Real Money newsletter.Victoria Devine is an award-winning retired financial adviser, best-selling author, and host of Australia’s number one finance podcast, She’s on the Money. Victoria is also the founder and managing director of Zella Money.From our partners