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Speaker 1: Welcome to Ask Fear and Greed, where we take your

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Speaker 1: questions and do our best to answer them. I'm Michael Thompson,

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Speaker 1: and good afternoon, Sean.

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Speaker 2: Aylmer. Michael. I like the way you say do our best.

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Speaker 2: That is exactly, that's very accurate.

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Speaker 1: I'm not over committing here, Sean, because if I say

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Speaker 1: that we are going to guaranteed solid gold, gold plated,

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Speaker 1: absolute guarantee that we will answer it, well, it's kind

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Speaker 1: of setting us up to fail.

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Speaker 2: Yeah. You in some in economics particularly, some questions are unanswerable.

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Speaker 1: That's right. I'm setting us a low bar and together, Sean,

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Speaker 1: we will step over it.

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Speaker 2: Excellent.

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Speaker 1: The question today that we are going to tackle it

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Speaker 1: comes from Nina, and if you happen to have a question,

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Speaker 1: some burning question about economics or business or anything, send

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Speaker 1: it on through LinkedIn, Instagram, Facebook or Fearangreed dot com.

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Speaker 1: Toda are you. Nina has done this and she has

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Speaker 1: asked the question, will the new income tax reductions affect inflation?

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Speaker 1: Sean over to.

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Speaker 2: You absolutely totally. Remember these tax cuts are worth a

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Speaker 2: lot of money. They were first announced by then Treasurer

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Speaker 2: Scott Morrison back in twenty nineteen Jim Chalmers. The current

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Speaker 2: treasure changed things up this year. In the first year

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Speaker 2: of operation, taxpayers will receive twenty three billion dollars. Over

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Speaker 2: the next decade, tax collections from the government will be

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Speaker 2: reduced by three hundred and thirty billion dollars. Therefore, on average,

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Speaker 2: thirty three billion dollars is going back into the economy

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Speaker 2: every year. So a person earning fifty thousand dollars will

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Speaker 2: get a nine hundred and twenty nine dollars annual tax credit.

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Speaker 2: Someone who is earning one hundred and ninety thousand dollars

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Speaker 2: will end up with about four and a half thousand

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Speaker 2: more annually. So undoubtedly these are inflationary. The next part

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Speaker 2: is where it gets really interesting. Does this mean that

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Speaker 2: all these assumptions that the reserve banks made, treasuries made,

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Speaker 2: all these market economists have made will change because of this?

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Speaker 2: And the short answer is no, because they've taken this

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Speaker 2: into account. So they're saying, we think inflation will keep falling,

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Speaker 2: and we know these tax cuts are coming. What's tricky

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Speaker 2: in this, though, they don't really know what people are

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Speaker 2: going to do with the extra money. So Michael, let's

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Speaker 2: say you earn one hundred thousand dollars, So you'll get

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Speaker 2: an extra forty one forty two dollars a week. What

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Speaker 2: would you do with it?

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Speaker 1: Look, I would probably put an extra forty dollars into

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Speaker 1: the mortgage because I know that I can also access

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Speaker 1: that via redraw if I need to, So I'm probably

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Speaker 1: one of those ones.

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Speaker 2: Yeah, So I've set up my account to start taking

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Speaker 2: more out from July one so that it goes into

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Speaker 2: my mortgage exactly the same surveys have suggested that up

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Speaker 2: to eighty percent of people will do that will actually

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Speaker 2: save the money. And when you say say, that's a

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Speaker 2: very generic term, so it could actually be putting into

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Speaker 2: the bank, it could be putting into your mortgage save

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Speaker 2: it rather than spend it. So if that happens, that's

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Speaker 2: actually that's a huge amount of people saving money. And

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Speaker 2: so what you will find if percent actually saved it

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Speaker 2: or put it into their mortgage, the impact on the

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Speaker 2: economy would actually be less inflationary, ironically than what the

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Speaker 2: Reserve Bank and Treasury in that are forecasting.

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Speaker 1: Now.

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Speaker 2: Of course, the flip side is if most people spend it,

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Speaker 2: then it could be more inflationary. So the bottom line,

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Speaker 2: Nina is absolutely this is an inflationary policy decision on

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Speaker 2: average each year over the next decade, putting thirty three

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Speaker 2: billion dollars into the economy that wouldn't be there. That,

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Speaker 2: of course pushes prices higher, but all the forecasting has

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Speaker 2: taken that into account. The smoking in all this is

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Speaker 2: exactly what people do with their money. If you're really boring,

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Speaker 2: like Michael and I, you save it all. Well, actually

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Speaker 2: inflation might not be as high as we thought. If

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Speaker 2: you spend it all, or if everyone spends it all,

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Speaker 2: maybe it will.

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Speaker 1: I reckon. We just stepped over that low bar we

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Speaker 1: set for ourselves there, shot I hope, So I reckon.

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Speaker 1: I don't want to speak for Nina, but I reckon.

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Speaker 1: You answered that question very satisfactorily.

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Speaker 2: Thank you. That's good that one I knew. I mean

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Speaker 2: next one later in the week, who knows.

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Speaker 1: Yeah, we'll see what we get next time. Thank you

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Speaker 1: very much Nina for your question. Remember if you've got

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Speaker 1: something you'd like to know, then send it through via LinkedIn, Instagram, Facebook,

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Speaker 1: or at Fear and Greed and we'll do it all

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Speaker 1: again later in the week. I'm Michael Thompson and this

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Speaker 1: was asked Fear and Greed