WEBVTT - The Federal Budget Reality Check with Economist Leith van Onselen 0:00:00.200 --> 0:00:03.000 Leithan Ust and welcome back, mate, Yeah you can that Mark. 0:00:03.040 --> 0:00:04.040 Thanks having me back on. 0:00:04.360 --> 0:00:05.720 But really busy week or so. 0:00:06.200 --> 0:00:09.240 Of course, the budget was last week and by now, 0:00:09.520 --> 0:00:11.880 what's good about doing this interview for me anyway right 0:00:11.920 --> 0:00:15.960 now is I've sort of started to absorb and sort 0:00:16.000 --> 0:00:18.160 of think through the budget a lot more, both from 0:00:18.160 --> 0:00:21.239 lots of points of views, not at the least which 0:00:21.280 --> 0:00:23.520 is my own personal point of view, but also you know, 0:00:23.520 --> 0:00:26.040 the points of view of the community that listens to 0:00:26.079 --> 0:00:28.280 me and to some extent listeners to you too. We've 0:00:28.280 --> 0:00:31.080 got slightly different communities, but nonetheless, but let me just 0:00:31.160 --> 0:00:33.600 start off right from very beginning. 0:00:33.760 --> 0:00:36.479 The thing that really bothers a lot of people these days. 0:00:36.200 --> 0:00:39.400 Is interest rates, and they're meant to bother people because 0:00:39.440 --> 0:00:42.680 that's exactly what the reserve banks mandate is is to 0:00:43.880 --> 0:00:49.400 change our behavior through increasing interest rates. And interest rates 0:00:49.760 --> 0:00:52.599 and inflation more importantly, are sensitive to fiscal policy. 0:00:53.920 --> 0:00:56.360 Last week's budget is a piece of fiscal policy. 0:00:57.480 --> 0:01:02.720 Maybe what do you you see that budget as doing 0:01:02.920 --> 0:01:04.480 relative to inflation? 0:01:05.280 --> 0:01:07.200 Yeah, so I don't think that budget on its own 0:01:07.240 --> 0:01:09.759 is going to really change the trajectory that we're on beforehand. 0:01:09.840 --> 0:01:12.440 So unfortunately, you know, we we if we go if 0:01:12.440 --> 0:01:14.680 we step back a few months, right, So, before the 0:01:14.720 --> 0:01:16.720 war and the mentales kicked off, at the end of February, 0:01:16.800 --> 0:01:20.600 we had obviously higher inflation than what the RBA wanted, 0:01:20.640 --> 0:01:21.840 So core inflation. 0:01:21.560 --> 0:01:24.840 Was above the target three point eight and three points trimmed. 0:01:25.400 --> 0:01:27.639 Yeah, spot on, So you know, it was above the target, 0:01:27.640 --> 0:01:30.240 and the RBA obviously responded by doing the first rate hike. Right, 0:01:30.280 --> 0:01:33.399 So we went into this this Middle aged crisis with 0:01:33.640 --> 0:01:37.480 you know, above target inflation, and let's be honest, a 0:01:37.480 --> 0:01:40.160 lot of that high inflation has been caused by excessive 0:01:40.200 --> 0:01:43.480 government spending. So we've got basically the federal government running 0:01:43.520 --> 0:01:48.280 a wartime expansionary budget, you know, pretty much the biggest 0:01:48.280 --> 0:01:51.000 budget we've had since the height of the pandemic can 0:01:51.040 --> 0:01:53.080 also going back to the Second World Wars as a 0:01:53.120 --> 0:01:55.480 share of the economy. So they're obviously spinning way too much. 0:01:56.280 --> 0:01:59.760 And and this budget to me, doesn't really change that, right, 0:02:00.160 --> 0:02:02.600 not really cutting back. I mean, obviously there's some talk 0:02:02.600 --> 0:02:05.120 about cutting. The ndis spinning going forward, which is good. 0:02:05.400 --> 0:02:07.480 I don't know how they're going to reach their targets 0:02:07.560 --> 0:02:10.720 because we've just had double digit annual growth in the NDIS, 0:02:10.800 --> 0:02:12.240 and they want to get it down to two percent 0:02:12.240 --> 0:02:14.600 annual growth for the end of the decade and then 0:02:14.600 --> 0:02:15.400 five percent after that. 0:02:15.440 --> 0:02:16.440 I don't think that's really. 0:02:16.280 --> 0:02:19.680 Achievable, and a lot of that will actually involve shifting 0:02:19.680 --> 0:02:21.720 costs elsewhere, so they want to sort of move autism 0:02:21.800 --> 0:02:24.800 out of the NDIS. That'll just go into other programs, right, 0:02:24.840 --> 0:02:28.000 So we spent somewhere else. But you know, overall, the 0:02:28.600 --> 0:02:31.040 budget's not really doesn't well to me at least, doesn't 0:02:31.080 --> 0:02:33.680 seem to be doing much to actually contract government spending 0:02:34.200 --> 0:02:36.799 and therefore it's not going to contract that much from 0:02:37.120 --> 0:02:40.160 agriga demand and then therefore take pressure off interest rates. 0:02:40.160 --> 0:02:42.359 So mate, I personally think we're just we're going to 0:02:42.400 --> 0:02:44.320 be stuck in this sort of you know, stag inflationary 0:02:44.400 --> 0:02:47.200 environment for a while. Obviously we've got the global oil 0:02:47.200 --> 0:02:48.839 shop now and now start to get the second round 0:02:48.840 --> 0:02:51.800 impacts of that. So we've got the initial inflationary shock 0:02:51.840 --> 0:02:54.480 from the higher fuel prices, and then now we're seeing 0:02:54.480 --> 0:02:57.000 the second round. And you're obviously in the property you know, 0:02:57.720 --> 0:02:59.280 you obviously know a lot about the property sector. Well, 0:02:59.280 --> 0:03:02.000 a lot of developers now talking about rising input costs 0:03:02.080 --> 0:03:08.280 on cement bricks, would timber. All sorts of things now 0:03:08.560 --> 0:03:12.240 starting to feed into that process. And you know, the 0:03:12.360 --> 0:03:14.720 RBA Governor Michelle Bullock is very concerned now about the 0:03:14.720 --> 0:03:19.079 second round impacts from the inflation, whereby businesses stuck into 0:03:19.080 --> 0:03:21.360 those higher costs from the fuel than they start passing 0:03:21.400 --> 0:03:24.320 them on. And in fact, the latest business surveys showed 0:03:24.360 --> 0:03:28.560 that input costs have searched and final prices, which is 0:03:28.560 --> 0:03:30.320 their cost that they pass on the consumers, have not 0:03:30.400 --> 0:03:32.680 yet searched. So I think we're now going to get 0:03:32.680 --> 0:03:34.960 that second round impact from the high fuel prices, which 0:03:35.000 --> 0:03:37.720 is just going to feed a second round inflation impact. 0:03:37.760 --> 0:03:41.280 So unfortunately, it's a perfect stime, mate, We've got excessive governments, 0:03:41.320 --> 0:03:44.880 meaning still on top of you know, fuel shocks and 0:03:44.960 --> 0:03:48.960 now second round impacts from from those fuel shocks. Unfortunately, 0:03:48.960 --> 0:03:50.800 it's just going to it's a bit of a nightmare 0:03:50.800 --> 0:03:51.520 for the Reserve Bank. 0:03:52.240 --> 0:03:55.200 So at least and maybe a little bit later, we'll 0:03:55.520 --> 0:03:58.080 if you have time, if we've got time, we'll actually 0:03:58.200 --> 0:04:03.000 visit some of the more are sides of the budget. 0:04:03.160 --> 0:04:05.520 Let's just look at it though from a fiscal point 0:04:05.520 --> 0:04:07.560 of view, fiscal policy point of view. Just to let 0:04:07.600 --> 0:04:10.720 the audience understand, Zervank runs monetary policy, try to control 0:04:10.720 --> 0:04:15.520 inflation and unemployment or employment full employment by virtue of 0:04:15.600 --> 0:04:20.440 using interest rates up or down, but they're stuck with inflation. 0:04:21.040 --> 0:04:24.920 The fiscal policy is a government's game where they can 0:04:24.960 --> 0:04:29.279 sort of look at things like stand living in our country, 0:04:29.480 --> 0:04:33.400 maybe help growth, you know, help our prosperity at the 0:04:33.400 --> 0:04:35.880 same time not ignoring welfare because you know, you don't 0:04:35.880 --> 0:04:38.680 want people to be sort of sliding off and going downhill. 0:04:39.440 --> 0:04:40.960 But these two have to work together. 0:04:41.000 --> 0:04:43.880 Maybe you could explain to us, as an economist, explain 0:04:43.960 --> 0:04:49.239 to us the audience the sort of general view around 0:04:49.360 --> 0:04:52.560 fiscal policy, how it should be done in an ideological way. 0:04:53.760 --> 0:04:55.240 And I don't mean from a labour point of view 0:04:55.279 --> 0:04:57.520 or a liberal point of view, but what is a country? 0:04:57.520 --> 0:05:00.000 What are the people looking for? What do we expect? 0:05:00.440 --> 0:05:02.800 I know you haven't done a survey, but as an economist, 0:05:02.839 --> 0:05:06.400 what do people expect from a federal budget, from federal 0:05:06.760 --> 0:05:10.400 fiscal policy in terms of all the other aspects as 0:05:10.440 --> 0:05:14.080 opposed to these little ideological things like you know, rich 0:05:14.120 --> 0:05:16.680 people should be paying more tax on their property gains. 0:05:16.880 --> 0:05:20.240 Well for me personally, There's two things. First of all, 0:05:20.279 --> 0:05:23.120 you want no governments to spend money properly, right, so 0:05:23.279 --> 0:05:25.120 you know this is why they matter. So basically, the 0:05:25.160 --> 0:05:29.480 federal budget accounts for about one quarter of national spending, right, 0:05:29.520 --> 0:05:30.720 so we should care about it. 0:05:30.960 --> 0:05:31.120 Right. 0:05:31.160 --> 0:05:33.839 So basically, you know, and obviously that one quarter of 0:05:33.839 --> 0:05:35.520 spending is primarily. 0:05:35.200 --> 0:05:38.400 Raised through taxes. They tax us workers, businesses, et cetera. 0:05:38.920 --> 0:05:41.400 And then they spend that money, which is about a 0:05:41.480 --> 0:05:43.760 quarter of the nation spending, right, so it does matter. 0:05:44.080 --> 0:05:45.839 So the first thing we should want is that that 0:05:45.920 --> 0:05:49.680 money is spent as you know, as well targeted and 0:05:49.760 --> 0:05:52.279 spent as efficiently as possible, which I don't think we're getting. 0:05:52.680 --> 0:05:54.680 And the second second thing from an economic point of 0:05:54.720 --> 0:05:58.720 view is you want the government to spend. You know, 0:06:00.320 --> 0:06:02.360 you wanted spending to a ligne with the economic cycle. 0:06:02.520 --> 0:06:06.159 So at the moment, obviously we've got inflation above target, etc. 0:06:06.760 --> 0:06:10.039 And the government's running an expansiory fiscal policy when really 0:06:10.080 --> 0:06:11.960 it should be, and it's working at cross purposes with 0:06:12.000 --> 0:06:15.760 the Reserve Bank. So one of my buddies, tarryck Brooker, 0:06:15.800 --> 0:06:18.640 is an economists. He actually coined the term burnout economics. 0:06:19.080 --> 0:06:20.760 And we've got a bit of a burnout economy at 0:06:20.760 --> 0:06:22.599 the moment, where by the Reserve Bank's got its foot 0:06:22.680 --> 0:06:26.360 planted on the break, hiking interest rates, trying to slow 0:06:26.360 --> 0:06:28.960 the economy down, and you've got the government. So I'm 0:06:28.960 --> 0:06:30.880 blaming the federal governments also the states as well. The 0:06:30.880 --> 0:06:33.640 States are also spending big, but we've got governments based 0:06:33.680 --> 0:06:35.680 in the foot plant and on an accelerator, so they're 0:06:35.720 --> 0:06:37.839 working at cross purposes of the RBA, which means the 0:06:37.880 --> 0:06:38.400 RBA has got to. 0:06:38.440 --> 0:06:39.480 High, creates harder, etcetera. 0:06:39.640 --> 0:06:42.760 So for me personally, and I guess an economic point 0:06:42.760 --> 0:06:45.839 of view, you want a governments to spend our money 0:06:45.920 --> 0:06:48.880 properly because again, the federal budget is twenty five percent 0:06:49.200 --> 0:06:51.280 of economic spending and once you had the states it's 0:06:51.279 --> 0:06:54.960 about forty percent. And b you want the governments to 0:06:55.000 --> 0:06:58.839 be working hand in hand with the Reserve Bank, trying 0:06:58.839 --> 0:07:02.400 to boost the economy when it's needed, you know, ie recession, 0:07:03.040 --> 0:07:05.760 and slow the economy when you have times like this. 0:07:05.880 --> 0:07:08.279 But unfortunately, our governments are working at cross purposes with 0:07:08.320 --> 0:07:09.040 the Reserve Bank. 0:07:09.480 --> 0:07:12.800 So if the government was spending the money properly, and 0:07:12.840 --> 0:07:15.160 I think you mean that in two parts, how much 0:07:15.160 --> 0:07:18.120 they spend relative to how much they raise and the 0:07:18.160 --> 0:07:21.760 government's revenuers taxes our money, but. 0:07:21.800 --> 0:07:27.360 Also where they spend the money. And efficiency is spending efficiency. 0:07:27.440 --> 0:07:31.200 Yes, when you say the government current government spending is expansionary, 0:07:31.280 --> 0:07:33.040 what do you mean by that? Like, it's what do 0:07:33.080 --> 0:07:36.440 you mean expensary? It's going to increase demand and therefore 0:07:36.520 --> 0:07:39.400 increase prices, therefore increase infation. 0:07:39.840 --> 0:07:40.040 Yeah. 0:07:40.080 --> 0:07:42.920 So basically, so you have agrig command, right, that's the 0:07:42.960 --> 0:07:45.440 total demand in the economy, and at the moment we've 0:07:45.480 --> 0:07:49.119 got agrig demand running ahead of supply. So that's basically 0:07:49.200 --> 0:07:51.920 the capacity of the economy to cope with that demand. 0:07:52.000 --> 0:07:54.160 And because we've got low prodctivity Belieth and. 0:07:54.200 --> 0:07:57.120 You mean agrig demand for goods and services. 0:07:57.280 --> 0:08:02.120 Yes, just overall economic activity, spending is running above what 0:08:02.160 --> 0:08:05.040 the economy's capacity is to accommodate that spending. And when 0:08:05.080 --> 0:08:07.200 you get that, you get too much demand pushing up 0:08:07.200 --> 0:08:10.080 against again supply, you get high higher prices, which is 0:08:10.120 --> 0:08:13.040 basically what we've got right, And part of that is 0:08:13.080 --> 0:08:16.080 not just a spending story. It's also a productivity story, 0:08:16.080 --> 0:08:19.600 which we can get into as well. Unfortunately Australia, as 0:08:19.560 --> 0:08:21.920 productivity growth in the last decade, if you look at 0:08:21.920 --> 0:08:25.200 the OECD, we've been amongst the very poorest in the OECD. 0:08:25.560 --> 0:08:28.960 And because we've got very low, poor productivity growth, we've 0:08:29.000 --> 0:08:32.240 also had very poor growth in household disposed income. So 0:08:32.280 --> 0:08:35.040 again our growth in household sposed incomes, which is sort 0:08:35.080 --> 0:08:37.720 of the best single measure I guess for living standards, 0:08:38.480 --> 0:08:41.120 it's actually been amongst the porous in the OECD as well. 0:08:41.360 --> 0:08:43.880 So we have this economy that has a very slow 0:08:43.920 --> 0:08:46.160 speed limit on growth, so the RBA thing puts it 0:08:46.160 --> 0:08:50.080 about two percent, and yet we've got the government which 0:08:50.120 --> 0:08:53.760 is pumping demand through success is spending, which is pushing 0:08:53.800 --> 0:08:56.200 us above that speed limit. And that's one of the 0:08:56.200 --> 0:08:59.120 reasons why we have this inflationary problem. 0:08:59.559 --> 0:09:02.360 Why would government do that? I mean, they're not stupid. 0:09:02.520 --> 0:09:05.800 I mean maybe they're but generally speak less, make the 0:09:05.920 --> 0:09:09.240 presumption that they're not stupid. Is this an ideological thing? 0:09:09.400 --> 0:09:10.160 Why would they do that? 0:09:10.720 --> 0:09:12.120 Yeah? I mean, good question. 0:09:12.200 --> 0:09:14.240 I mean that they certainly shouldn't be doing that, but 0:09:14.559 --> 0:09:18.319 obviously they have, you know, things they want to spend 0:09:18.360 --> 0:09:19.120 their money on, and. 0:09:19.679 --> 0:09:21.160 Our money, our money, borrow our money. 0:09:21.200 --> 0:09:22.360 Yeah, absolutely, mate. 0:09:22.360 --> 0:09:27.920 It's twenty five percent of roughly know, the economies demand 0:09:28.480 --> 0:09:31.959 is generated by the federal budget, so and forty percent 0:09:32.000 --> 0:09:34.520 once you had the states thereabouts. So you know, this 0:09:34.640 --> 0:09:37.920 is we're talking big bucks here, and every dollar of 0:09:37.920 --> 0:09:40.960 that's spending by the federal government, not including what they borrow, 0:09:41.160 --> 0:09:43.439 so they borrow a bit as well, but every dollar 0:09:43.480 --> 0:09:45.720 that's going to be raised by tax review and that 0:09:45.800 --> 0:09:48.440 comes from obviously households and businesses and that sort of thing. 0:09:48.480 --> 0:09:51.119 So which is why we should all care because ultimately 0:09:51.559 --> 0:09:55.040 it's our money that the government's spending. And i'd argue, 0:09:55.080 --> 0:09:56.880 I mean, I argue that they're not spending that particularly 0:09:56.960 --> 0:09:58.000 well in a. 0:09:57.920 --> 0:09:58.480 Lot of areas. 0:09:58.480 --> 0:10:04.199 There's a lot of waste across indis the green infrastructure, 0:10:04.200 --> 0:10:06.600 all this sort of stuff, or a lot of this 0:10:07.000 --> 0:10:11.440 so called green projects, and that are also incredibly wasteful. 0:10:11.480 --> 0:10:13.559 With the snowy hydro two point zero, but there's a 0:10:13.559 --> 0:10:16.800 whole bunch of them. We've blown billions of dollars on 0:10:16.920 --> 0:10:18.880 green hydrogen, which was never feasible in. 0:10:18.800 --> 0:10:20.960 The first place. You just look right across the board. 0:10:20.960 --> 0:10:21.840 There's a lot of waste. 0:10:22.040 --> 0:10:25.160 And we've also have way too many bureaucrats. The growth 0:10:25.160 --> 0:10:27.560 in the bureaucracy across the state and federal government has 0:10:27.600 --> 0:10:28.680 just been excessive as well. 0:10:29.120 --> 0:10:30.280 And if you. 0:10:30.200 --> 0:10:33.160 Actually look at the productivity in the government funded sector, 0:10:33.200 --> 0:10:35.160 so it's not actually just public service. They call it 0:10:35.160 --> 0:10:38.560 the non market sector, which is basically the public service 0:10:38.600 --> 0:10:41.360 plus healthcare and social systems, which is driven by the 0:10:41.440 --> 0:10:45.240 NDIS at the moment, and the education sector. The proactivity 0:10:45.280 --> 0:10:48.040 growth in that sector is basically back where it was 0:10:48.080 --> 0:10:50.800 about twenty five years ago. So it's gotten so bad, 0:10:50.840 --> 0:10:53.199 and that's one of the reasons why why the economy 0:10:53.240 --> 0:10:55.640 has such poor proctivity growth, because we've had this bloating 0:10:56.080 --> 0:10:58.800 in this non market sector that is crowding out the 0:10:58.800 --> 0:11:02.280 private sector or the markets sector, which actually is growing 0:11:03.000 --> 0:11:06.040 in productivity terms, and that's dragging down the nation's overall 0:11:06.080 --> 0:11:07.880 productivity growth. It's one of the reasons why we have 0:11:08.679 --> 0:11:11.720 amongst the poorest productivity growth in the OECD and then 0:11:11.760 --> 0:11:16.240 amongst the poorest real per capital houseold disposed income growth 0:11:16.240 --> 0:11:19.280 over the last decade. So unfortunately, it's not a great equation. 0:11:20.200 --> 0:11:21.959 So when you talk about. 0:11:23.200 --> 0:11:25.720 Let's call it the government or the non market sector 0:11:25.960 --> 0:11:28.880 expanding and growing, and as I understand, it has probably 0:11:29.640 --> 0:11:32.439 grown more over the last couple of years, and it 0:11:32.520 --> 0:11:35.920 ever has in its history as a percentage. And then 0:11:35.960 --> 0:11:38.840 you talk about the markets part of the economy, that's 0:11:38.880 --> 0:11:42.720 the private part of the economy, private businesses, et cetera. 0:11:43.320 --> 0:11:47.560 Is the private part of the economy. Is that shrinking 0:11:47.840 --> 0:11:52.000 or is it just a lot a much lower percentage 0:11:52.000 --> 0:11:55.040 of the total because the public sector has grown much more. 0:11:55.520 --> 0:11:56.160 How's that working? 0:11:56.360 --> 0:11:58.960 Yeah, so in the light since about start in twenty 0:11:59.240 --> 0:12:02.480 twenty three, about two thirds of the job growth has 0:12:02.520 --> 0:12:05.559 been this non market sector. So the market sector is growing, 0:12:05.640 --> 0:12:08.679 it's just growing at an incredibly slow rate. And it's 0:12:09.200 --> 0:12:11.599 I mean, I guess once once you'd probably adjust for 0:12:12.120 --> 0:12:14.520 you know, inflation, that sort of thing. It's probably barely growing, 0:12:15.000 --> 0:12:18.800 but it's having so the share of the economy that 0:12:18.840 --> 0:12:22.800 has now been taken up with this government funded sector, 0:12:22.840 --> 0:12:25.600 the non market sector continues to expand as a share. 0:12:26.360 --> 0:12:29.800 And so at the moment, the non market sector accounts 0:12:29.840 --> 0:12:32.240 for about thirty one and a half percent of total jobs, 0:12:32.760 --> 0:12:34.240 and if you went back, say a decade, it was 0:12:34.240 --> 0:12:36.079 about probably think it was about twenty seven percent. So 0:12:36.320 --> 0:12:38.800 it keeps growing its share of the economy. And it's 0:12:38.800 --> 0:12:41.800 actually this non market sector of the government funded sector 0:12:42.360 --> 0:12:44.360 has encountered for us I said about two thirds of 0:12:44.400 --> 0:12:47.000 the job growth since it started twenty twenty three and 0:12:47.080 --> 0:12:49.200 actually most of and the majority of the job's growth 0:12:49.280 --> 0:12:49.920 into the pandemic. 0:12:50.760 --> 0:12:54.440 So you know, unfortunately that's not a. 0:12:54.440 --> 0:12:59.280 Great story from a productivity viewpoint, where when labor protiuity 0:12:59.360 --> 0:13:02.760 growth in that has fallen sharply, it's now tracking back 0:13:02.760 --> 0:13:04.640 where it was about twenty to twenty five years ago. 0:13:04.800 --> 0:13:08.680 So that is one of the reasons why Australia's proactivity 0:13:08.720 --> 0:13:10.920 growth is lagged so poorly. It's not the only one, 0:13:10.960 --> 0:13:11.920 but it's certainly one of them. 0:13:12.480 --> 0:13:15.320 So when we look at let's call it gross GUDP growth, 0:13:15.760 --> 0:13:18.240 which is sort of mentioned earlier on the RBA is 0:13:18.240 --> 0:13:20.640 tracking it around saying around two point two, two point one, 0:13:20.720 --> 0:13:24.600 whatever the percentage is. And of course you know that's 0:13:24.640 --> 0:13:28.280 one way we measure government's activity. We will say, look, 0:13:28.360 --> 0:13:31.920 you know GDP was great, You've done a good job man. 0:13:32.000 --> 0:13:35.760 It's one measure, one measure of how well the governments 0:13:36.360 --> 0:13:39.040 from a financial point of view, is measuring the managing 0:13:39.080 --> 0:13:43.439 the country's economy. Where does immigration fit into that and 0:13:44.280 --> 0:13:49.240 how is immigration The large numbers in immigration historically large 0:13:49.280 --> 0:13:52.240 numbers in immigration, how do they fit into GDP. 0:13:52.920 --> 0:13:56.120 Yes, so obviously if you import more people, that's more 0:13:56.160 --> 0:13:57.880 inputs in the economy. You're going to get more outputs. 0:13:57.920 --> 0:14:01.400 But so unfortunately for US two decades so, we've been 0:14:01.480 --> 0:14:04.360 running this very high migration for about twenty years, kicked 0:14:04.360 --> 0:14:06.320 off from the mid two thousands and ever since then 0:14:06.320 --> 0:14:08.920 it's been very high and that has actually driven the 0:14:08.960 --> 0:14:12.720 majority of Australia's overall GDP growth, and our per capita 0:14:12.760 --> 0:14:16.480 growth has been appalling. It's actually fallen that the growth 0:14:16.559 --> 0:14:19.480 in per capita GDP, which is actually what should matter 0:14:19.560 --> 0:14:22.640 for living standards, has actually been falling for that twenty 0:14:22.720 --> 0:14:26.360 year period. And so you know, for example, in the 0:14:26.600 --> 0:14:29.920 most recent year, from my memory says me correct, immigration 0:14:32.360 --> 0:14:35.160 was about one point one percent of the population, right, 0:14:35.280 --> 0:14:37.880 so when you look at the overall GDP in Australia, 0:14:37.880 --> 0:14:40.720 you've got to deduct that straight off to get your 0:14:40.760 --> 0:14:44.280 per capita measure. And over the last sort of several 0:14:44.440 --> 0:14:47.720 years we've we actually had growth the last quarter, but 0:14:47.800 --> 0:14:49.800 we actually had I think it was like eight out 0:14:49.840 --> 0:14:52.520 of twelve quarters. We've actually gone backwards in per capita 0:14:52.640 --> 0:14:56.200 GDP and that just tells you that the growth that 0:14:56.280 --> 0:14:59.800 Australia's experience over certainly since the pandemic, has been put 0:14:59.840 --> 0:15:03.480 on through population growth, and I'd argue that's actually through 0:15:04.000 --> 0:15:07.440 population growth through immigration, but also government spending by this 0:15:07.560 --> 0:15:10.280 expansion non market sector. So if you actually look a 0:15:10.440 --> 0:15:13.960 look at you, I guess per capita growth in the 0:15:14.040 --> 0:15:18.520 private economy, it's been absolutely appalling. So unfortunately, our economy 0:15:18.520 --> 0:15:22.880 has become uber reliant on high population growth through immigration 0:15:23.960 --> 0:15:26.280 as well as as well as this expansion of the 0:15:26.480 --> 0:15:31.000 non market government funded economy, which obviously is not very 0:15:31.000 --> 0:15:33.400 good for living standards, but it does make the GDP 0:15:33.520 --> 0:15:33.920 look better. 0:15:34.520 --> 0:15:38.040 So if I look at those two propositions then and 0:15:38.360 --> 0:15:40.480 it might be unfair, but let me know what you 0:15:40.560 --> 0:15:46.320 think those two propositions. That is, building the employment numbers 0:15:46.400 --> 0:15:48.760 up by offering more jobs both the federal and the state, 0:15:49.120 --> 0:15:52.240 which means unemployment number looks pretty healthy at four point 0:15:52.280 --> 0:15:53.920 two or four point three whatever. 0:15:53.720 --> 0:15:54.200 Is at the moment. 0:15:55.680 --> 0:15:57.640 So everyone goes, wow, I've got a job, and the 0:15:57.680 --> 0:16:01.280 Australian unemployment number looks great, and you know, treasurers go 0:16:01.440 --> 0:16:03.040 up and stand up in front of the public and say, look, 0:16:03.080 --> 0:16:05.400 we've got a really good unemployment. If you look at 0:16:05.440 --> 0:16:10.800 that one aspect, that's government offering jobs. Two, government allowing 0:16:11.360 --> 0:16:14.240 immigration to continue on at a fast rate. That has 0:16:14.320 --> 0:16:16.560 been in the last twenty years, but nonetheless it has 0:16:16.640 --> 0:16:19.760 been we do take a lot of people in relatively speaking, 0:16:20.040 --> 0:16:21.600 but we're taking many more than we have had in 0:16:21.640 --> 0:16:25.600 the past, which somehow makes the headline GDP number look 0:16:26.480 --> 0:16:29.960 fair enough, whether it's to two percent, But when you 0:16:30.080 --> 0:16:31.840 do it on a per capita basis, we're going backwards. 0:16:33.760 --> 0:16:37.200 Is it a from a fiscal point policy point of view? 0:16:37.320 --> 0:16:40.120 Is it a fair thing to say that governments can 0:16:40.200 --> 0:16:46.600 manipulate measures of how the economy is going by playing 0:16:46.640 --> 0:16:48.920 games with us letting more people in the country and 0:16:49.040 --> 0:16:51.280 employing more people. And I'm not saying that this is 0:16:51.320 --> 0:16:54.120 what their intention is. It looks a bit that way, 0:16:54.240 --> 0:16:56.480 but I'm not saying that. But how would you look 0:16:56.480 --> 0:16:57.440 at that as an economist? 0:16:58.000 --> 0:17:02.160 Yeah, one hundred percent, mate. So the federal government, so 0:17:02.240 --> 0:17:04.720 we'll take the immigration thing first, right, So the federal 0:17:04.760 --> 0:17:07.600 government loves big migration, right, and it loves it for 0:17:07.720 --> 0:17:10.280 two main reasons. So the federal government collects about eighty 0:17:10.280 --> 0:17:13.320 percent of the nation's tax revenue, so it is the 0:17:14.400 --> 0:17:18.040 major beneficiary from running a big immigration program because it 0:17:18.160 --> 0:17:20.840 imports hundreds of thousands of people every year. Most of 0:17:20.920 --> 0:17:24.280 those people obviously work, they pay personal income taxes. Personal 0:17:24.359 --> 0:17:26.720 income taxes go to the federal government. You also get 0:17:26.720 --> 0:17:29.080 a little bit more company tax revenue from you know, 0:17:29.160 --> 0:17:31.720 sort of consumer facing firms, that sort of thing, banks, whatever, 0:17:31.760 --> 0:17:34.679 you've got to lend, lend to these people, so you. 0:17:34.640 --> 0:17:35.800 Get a little bit more company tax. 0:17:35.840 --> 0:17:39.080 So the federal government collects all the bounty from immigration, 0:17:39.600 --> 0:17:42.840 primarily again through personal income taxes, but the cost of 0:17:42.880 --> 0:17:45.800 that immigration then gets deferred onto other areas of the economy. So, 0:17:45.880 --> 0:17:48.320 for example, the state governments typically lose because the state 0:17:48.400 --> 0:17:53.960 governments have got to the fund the infrastructure. We're talking schools, hospitals, roads, 0:17:54.960 --> 0:17:57.879 public transfit, all that sort of thing, and as a result, 0:17:57.920 --> 0:18:02.080 the state governments lose, as individuals often lose as well 0:18:02.160 --> 0:18:05.119 because the state governments. And you obviously live in Sydney, right, 0:18:05.240 --> 0:18:07.000 So if you go back to Sydney at the turn 0:18:07.040 --> 0:18:08.320 of the center, I think you had about two toll 0:18:08.400 --> 0:18:11.879 roads and Sydney's population was about four million people. You 0:18:12.000 --> 0:18:14.000 now added one and a half million people since then 0:18:14.640 --> 0:18:17.200 to accommodate all those people. Because Sydney was already built out, 0:18:18.000 --> 0:18:20.480 they've had to build toll roads everywhere, right, and they've 0:18:20.560 --> 0:18:23.080 privatized them. So now you can't drive around Sydney with 0:18:23.119 --> 0:18:26.159 that transurban putting the hand in your pocket and fleecing 0:18:26.200 --> 0:18:29.119 you for tolls. And that was those tolls were built 0:18:29.280 --> 0:18:32.080 to keep up with the immigration foisted upon Sydney by 0:18:32.080 --> 0:18:36.320 the federal government effectively. And the other reason why the 0:18:36.480 --> 0:18:39.080 federal government loves big migration is because it obviously pumps 0:18:39.160 --> 0:18:41.280 up the GDP, right, so there's nothing a politician hates 0:18:41.320 --> 0:18:43.720 more than having to front the camera. 0:18:43.840 --> 0:18:45.520 And you know, had overall. 0:18:45.280 --> 0:18:48.840 GDP's gone backwards and we're in recession. But Australia's basically 0:18:49.320 --> 0:18:54.000 avoided a recession outside of COVID since the early nineties 0:18:54.119 --> 0:18:57.000 by running a very high migration program that is way 0:18:57.119 --> 0:18:59.920 bigger than just about every other country in the World's 0:19:00.040 --> 0:19:04.080 basically boosted artificially boosted our headline GDP figures, even though 0:19:04.119 --> 0:19:06.800 our per capita growth has been a poorly So we've 0:19:06.840 --> 0:19:10.119 basically grown the economic pie by importing way more people 0:19:10.160 --> 0:19:12.960 than the just about anywhere else, but everyone sliced the 0:19:13.040 --> 0:19:17.440 pie hasn't improved. And that's effectively the mechanism that the 0:19:17.480 --> 0:19:20.159 federal government uses a it boosts the federal budget by 0:19:20.240 --> 0:19:22.800 bringing in all these extra people the cost of deferred elsewhere, 0:19:23.480 --> 0:19:25.520 and it also makes the economy look better than it is. 0:19:25.920 --> 0:19:29.320 And that's basically why the federal government does that. Obviously, 0:19:29.400 --> 0:19:32.000 we've got this you know, this NDS wide elephant, which 0:19:32.000 --> 0:19:34.359 is driving a lot of that non market sector job 0:19:34.440 --> 0:19:37.120 So the government has boosted the number of bureaucrats quite 0:19:37.160 --> 0:19:42.159 a lot, but the bigger boost to the jobs has 0:19:42.160 --> 0:19:44.320 actually been through the NDIS. There has been you know, 0:19:45.560 --> 0:19:48.639 the single biggest job booster since the pandemic has been 0:19:48.680 --> 0:19:52.480 through the NIAS and because because that program has expanded 0:19:52.520 --> 0:19:55.280 so aggressively, that's been one of the main drivers of 0:19:55.400 --> 0:19:58.880 why Australia has had such strong job growth. And it's 0:19:58.920 --> 0:20:03.920 also arguably the single biggest reason why Australia's unemployment rates 0:20:03.960 --> 0:20:05.880