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And we shall scrimp and save

Elisabeth Wynhausen | March 28, 2009

THE first sign of the global financial crisis to confront Ellen Liauw was that people were coming into her shop, not to buy baby clothes but to sell them. Liauw stocks new and second-hand babies' and children's clothing at Magic Roundabout, her shop in the Sydney suburb of Stanmore, an inner-city neighbourhood that, at least until the downturn, was rapidly being gentrified.

The well-to-do people who had moved into the area didn't, as a rule, shop at Magic Roundabout and Liauw saw little of them until they started wandering in with cots and clothes they hoped to sell. Some had spent hundreds of dollars on a piece of clothing for a toddler. One woman brought in a Christian Dior tracksuit for a newborn; another produced size-two Dolce & Gabbana overalls that Liauw took home for her own two-year-old. "Customers used to take store credit," she says. "Now they want cash."

Indeed, some have gone through the stuff piled up at the back of their garage to lug out an old pram or bassinet in the hope of getting cash for it: one more sign that people are preparing for hard times.

Some see the new age of austerity as a welcome retreat from values and attitudes that took hold during the 1980s and were cemented by a boom that began in the mid-'90s but seemed never-ending. This was a period in which individual and household debt ballooned.

"A friend of mine recently had $10,000 of credit card debt," says Melbourne writer Katrina Farrell. "For someone on a moderate income in their 20s, that is unacceptable. When you tell people about it, they say, 'Oh, my friend has $15,000' or 'My friend has $20,000'. You get an idea of the amount of credit card debt young people hold.

"I don't think they've ever had anything to make them realistic in their spending."

But people aren't waiting for two consecutive quarters of negative growth, the technical definition of a recession, to change their behaviour.

"In some ways it's people moving back to basics," says Liauw. "I've got three friends who've bought sewing machines." Others talk of growing their own produce, even if it's only cucumbers, tomatoes and a few herbs in an inner-urban yard.

"With a recession coming, my style of living has to change," says freelance television director Bev Shroot, 35. "I am on a mission to save money." She decided to stop using her car and had a child seat fitted on her bicycle. Her son, Louis, is two. "I take Louis to the nursery and the swimming pool on the bicycle," she says. If her partner didn't need the car for his job, she would like to get rid of it altogether. "I don't want to be pissing my money away on petrol, it's such a useless commodity," Shroot says.

"In a recession there's better things to spend my money on, like making sure we can pay our rent and eat. I want to go home to Scotland and visit my family."

Figuring out another way to reduce expenses, she set up a babysitting co-operative with several friends, thus saving $15 to $20 an hour for a babysitter. They swap tokens Shroot designed that say: "One hour babysitting. Not a minute more. Not a minute less." They didn't previously ask each other to babysit, thinking it would be an imposition, she says. "But now you've got to earn tokens to spend them."

Although some tertiary students may be planning to use their $900 government handout towards a trip to Bali or Vietnam, so many people are intent on saving rather than splurging that seeing posters for the movie Confessions of a Shopaholic is as jarring as being handed flyers promoting the seven deadly sins.

Frugality may be the new black but Daryl MacGraw, chief executive of the Wine Society, is hoping people will blow their stimulus packages on wine - domestic, of course - instead of big-ticket appliances. It may be wines that cost $9.99 or $14.99 a bottle, however, rather than $19.99 or $29.99. "The trend is to lower-price purchases," MacGraw says.

Courtney O'Regan, manager of the Camperdown Cellars bottle shop in inner-Sydney suburb Darlinghurst, has another angle on the new thrift.

"We've definitely noticed people are buying a lot more beer than wine," she says.

Yasmine Bennett and her husband were at one point thinking of buying a plasma-screen television, but that purchase has been indefinitely deferred.Instead, the $900 payments they receive will probably go on building costs, she says.

Bennett used to work as a pattern-maker for Cue Design and her husband had a job with Credit Suisse. But after their second child was born last year, they decided to move to the country. The plan was that they would unshackle themselves from the mortgage, sell their house in Sydney and build on a piece of land they owned at Meadow Flat, central-western NSW, renting in nearby Bathurst while looking for other jobs.

"Simon's worked in finance since he left university," Bennett says. "It's always been easy to find jobs. We didn't think it would be that hard this time.

"He'd accept pretty much anything he can get, but he hasn't even had an interview yet."

Of course they hadn't anticipated he would be looking for work as thousands of people were joining the jobless queues.

"The last couple of weeks we're getting a little bit concerned," she says. "We're living off the money we got from selling our place in Sydney. As that goes down, we have less to build our new house. Simon is worried about shopping. He keeps saying 'essentials only'. We've started going to the farmers markets, that's cheaper for produce and you can get organic stuff for the kids."

Bennett has stopped buying magazines, stopped looking for bargains on eBay and given up the idea of Pilates classes. She always made her own curtains and some of her children's clothes. The other week she hauled out the boxes of fabric she has been collecting for years, to start making children's clothing to sell at markets.

Critics may carp that even though International Monetary Fund managing director Dominique Strauss-Kahn is proclaiming that the world is in the grip of a "great recession", for many people austerity is a matter of style over substance. If it comes to that, David Potts, author of The Myth of the Great Depression (the myth being widespread suffering), sounds a little nostalgic for the bad old days. Potts, a retired academic whose book is based on interviews many years ago with people who had lived through the '30s Depression, insists those people were better equipped than us to deal with adversity.

"In those days they believed in stoicism and they believed in thrift," says Potts, who believes life then was not quite as wretched as some historians suggest. "Suicide rates went up early, then dropped away quickly. Malnutrition, which was high in inner-city slums, was not higher during the Depression. The dole was brought in so women had a regular supply of food."

Large numbers of people started vegetable gardens. Indeed, says Potts, "there was a lot of bonding through what I call unmeasured economic activities. Men went out fishing and rabbiting with their kids. The mothers ... mended clothing, knitted, darned socks, all that sort of stuff."

Moreover they made their own entertainment, holding little concerts at home.

Potts does not expect to see that trend these days. "I think people are more vulnerable," he says.

Nonetheless, the new austerity has some of the hallmarks of the old. "It's just getting back to what's essential and what's not," says Lorraine Leung, 36, who has just lost her job as an internet manager. Her husband works in financial services. They have two small children. "For now, we've got a bit of money saved. If I'm sensible, we can manage and keep going for a bit longer," says the quietly spoken Sydney resident.

"We're already thinking, 'What will we have to juggle?' I think we'll start with really simple things. You can easily knock off $10 here, $10 there. Because I'm not working in the city, I don't buy coffees, I don't buy lunch. I'm not going to go out and buy books, I will go to the library."

They did not go out much at night in the first place. "Now I don't work, we will cut it right back," says Leung, who has already reduced the food bills a bit by shopping for meat and produce at the supermarket.

"I used to buy groceries online and get them delivered. Because of the delivery costs, I will go myself and save the fee. When you've got an income coming in, you think it's just money and I don't have the time. Now I've got time but no income.

"We've even talked about what happens if (my husband) loses his job. In the past we haven't ever had to think about it."

The slight sense of foreboding in recent months influenced her to start saving a little more than usual even before she lost her job. "There's a general mood of financial awareness. People are thinking, 'I should be more frugal in case I'm made redundant.' People who thought they were safe are not safe."In the first two months of the year, as sales of second-hand cars edged up a bit, sales of new cars fell by an unprecedented 20 per cent.

But whatever they're doing, people can be surprisingly philosophical about a situation that has seen many of them lose 40 per cent or more of their savings.

Retired pharmacist Geoff Watson, 72, is among the thousands of self-funded retirees who have lost a bundle. Most of Watson's savings were in shares, he says over the phone from his home on Victoria's Mornington Peninsula. "And the All Ords is down 40 per cent," he says. "It's the same for anyone who had shares. If they tell you otherwise, they're fibbing. I play a lot of golf. I can tell you the No1 conversation among all the retirees is 'What's happening?', 'Where are we going?' and 'How will we survive?'. And no one's got an answer. Most are looking in wonderment where the money's gone." His income has not fallen yet, he says, but "that may change if dividends go down further".

But he doesn't want anyone to think he's crying poor, Watson says. "I think about it, but it hasn't made any difference to my style of life."

His generation has gone through previous recessions, of course, unlike some of the people wandering into Magic Roundabout for the first time.

Though Liauw hesitates to say much about it, for fear of distressing people who already look a little uncomfortable walking into a second-hand shop, she has the impression some are counting on the money.

"We sell things on consignment. We sell a cot and they'll say, 'Oh that can go on the school shoes,"