YOUR MONEY: Be alert, not alarmed and you’ll survive the rates and soaring fuel price double whammy

“Everybody be cool! This is a robbery.”

That’s what’s been going through all of our minds as we’ve pulled into a petrol station in recent weeks.

But I’m not saying fuel prices are a Pulp Fiction, Pumpkin and Honey Bunny-style stick-’em-up.

We’ve been here before, people. We’ve faced unpredictable global shocks. On most occasions, nearly all of us survived (but we do always suffer a few casualties along the way).

Why, only a year ago we soiled the bed when we thought global trade was dead and we were going to be stuck with our current iPhones forever.

War is a different beast, though. And most wars in recent times haven’t impacted Australians in such a direct sense as this, with oil prices soaring.

Walk the line

Fuel prices have risen between 30 and 40 per cent nationally, but worse in Perth.

This feeds into the cost of so much, so we’ll all be paying more for household goods, lifting inflation. That’ll put pressure on the Reserve Bank to lift interest rates to reduce demand.

For the average motorist, the increased cost of fuel is already the equivalent of an interest rate rise, just at the bowser (not including how it will feed into groceries, etc).

Double that for a two-car household, obviously.

Add on the two interest rate rises we’ve already had this year and . . . the pain is already very real for gas-guzzling mortgagees.

And this war doesn’t look like it’s going to be over as fast as it might have initially seemed.

Pin ears back

For most households, this is going to be a double squeeze. The only solution will be to find household budget cuts, wherever they can be found.

That’s the usual personal budgeting advice that you’ll find everywhere, tailored a little to the current problems.

That will include consuming less fuel by driving less, walking more, using public transport and carpooling. Cut back on grocery spending, eating out, turn lights off, etc.

The flow-on effects to the economy will be certain sectors getting hit hard. Retail spending, hospitality and domestic tourism are likely to be quick culls for household budgets.

If your employment is in these sectors, as a business owner or even employee, expect impacts such as your income to soften or your hours to drop.

Interest rate rises pretty quickly feed into demand for property. So, expect some heat to come out of the market, as some buyers drop out.

The contrarian

There are always those who like to do the opposite of whatever everyone else is doing, or what authorities are trying to encourage us to do.

Contrarian investors look to buy quality assets that others are discarding. When others are reacting to their pain, contrarians are looking ahead, knowing that common sense will, at some point, prevail.

We’ve had a big spike in volatility on share markets. At one point during trading last week, Australia’s market hit a technical correction by falling more than 10 per cent from its peak.

The falls aren’t uniform, obviously. The biggest losers out of this squeeze are likely to be stocks in consumer spending (particularly discretionary), property and those sensitive to rates.

For example, listed property (real estate investment trusts) is down more than 10 per cent since the war started, but more than 21 per cent since its peak in October. That’s an example, not a recommendation.

Markets move on expectations, not reality. Right now, markets are expecting things to get worse, not better.

We don’t know for sure what the reality is going to look like.

Deep diving

There’s rarely a reason to panic, though. Panicking rarely achieves anything positive.

Sure, save money and cut back where you can. For those in tight spots, take whatever steps you need to make sure you stay solvent.

But if you can “be cool”, and you’re not getting crunched by higher rates and higher fuel prices, opportunities will always arise.

Be alert. Not alarmed.

Find small ways to take advantage of the situation. That might be adding to investments while they’re down, adding more into your superannuation earlier.

Are electric vehicle owners feeling smug? Or do regular car owners just think they’re feeling that way?

Some drivers might be running their car with a close to empty tank. Roadside assist callouts for fuel have risen.

I’ll be contrarian there. Keeping it full, in case of rationing.

Bruce Brammall is the author of Mortgages Made Easy and is both a financial adviser and mortgage broker. bruce@brucebrammallfinancial.com.au.