Banking & Saving - What should we do in the event of a recession in Australia?

The RBA estimated the loss of 100,000 jobs by 2009, leaving unemployment to more than 5%.

The worst affected area is said to be New South Wales based on its “Service” orientated sectors. These consist of finance and retail services which are known for falling as a result of a recession. Queensland and the west are more likely to survive due to heavy mining.

Commsec economist Savanth Sebastian says: "The worst-affected will be Victoria and NSW, where there are big retail sectors. We recently saw the worst retail sales data in 12 years and it's the country's biggest employer, so it doesn't look good. The RBA's goal was to slow the economy gently, but with data looking so bleak, it looks like we could be heading for a hard landing -- particularly in retail which, with two quarters of negative growth behind it, is already technically in recession.''

As people will be losing jobs they must be prepared, spending time looking at the redundancy packages available and which best suits them. For example it may be in the employees best interests to take a lump sum payment rather than an annual rate based on age/current situations enabling them to pay off home loans or invest into high interest savings accounts.

Paul Bilson, from Woodwood Nhill Financial Planning, said: "See a planner, as the tax differences in the choices can be significant. The maximum tax-free portion of any redundancy payout is $7350, plus $3676 for each completed year of service. So, if you had 10 years of service, you'd be entitled to $44,110 tax-free. Anything above that would be taxable.''

putting your redundancy payouts into superannuation may suit you, but if you are under 55 you won't be able to access the funds, which is a bad idea if you need the money at the time.

There are many things you can do to prepare yourself for a recession. Some may sound obvious to you, but its surprising just how effective they can be:

• Save a sum of money for a rainy day

  Why not open up a savings account and set up a direct debit each month, even a small amount each month will soon build up

• Switch any debts that incur high interest

  You may be paying well over the odds in interest on your credit card/loan. Look at what credit cards are available, you can usually find credit cards with 0% interest on balance transfers for competitive period, for example the St. George Vertigo credit cards offers 0% interest on balance transfers for 6 months, and 11.89% on anything else.

• Protect yourself from inflation by keeping your funds in a high interest savings account

Its possible to lose money in a savings account due to the interest rate paid being close to the rate of inflation. You are taxed on the interest you earn, so a 5% interest rate against the 4.5 % inflation rate (with taxes in mind) will result in your money losing value.

There are plenty of good savings accounts out there that pay well above the inflation rate so shop around!

• Have your salary paid into an high interest instant access savings account

  This will allow you to earn interest on your money without even noticing. This may not be suitable for everyone; however it is a great way of earning a high level of interest on your salary as soon as it is in your possession. You can then move funds to your current account as and when required.