Speaker 1: Leithan Ust and welcome back, mate, Yeah you can that Mark.
Speaker 2: Thanks having me back on.
Speaker 1: But really busy week or so.
Speaker 3: Of course, the budget was last week and by now,
Speaker 3: what's good about doing this interview for me anyway right
Speaker 3: now is I've sort of started to absorb and sort
Speaker 3: of think through the budget a lot more, both from
Speaker 3: lots of points of views, not at the least which
Speaker 3: is my own personal point of view, but also you know,
Speaker 3: the points of view of the community that listens to
Speaker 3: me and to some extent listeners to you too. We've
Speaker 3: got slightly different communities, but nonetheless, but let me just
Speaker 3: start off right from very beginning.
Speaker 1: The thing that really bothers a lot of people these days.
Speaker 3: Is interest rates, and they're meant to bother people because
Speaker 3: that's exactly what the reserve banks mandate is is to
Speaker 3: change our behavior through increasing interest rates. And interest rates
Speaker 3: and inflation more importantly, are sensitive to fiscal policy.
Speaker 1: Last week's budget is a piece of fiscal policy.
Speaker 3: Maybe what do you you see that budget as doing
Speaker 3: relative to inflation?
Speaker 4: Yeah, so I don't think that budget on its own
Speaker 4: is going to really change the trajectory that we're on beforehand.
Speaker 4: So unfortunately, you know, we we if we go if
Speaker 4: we step back a few months, right, So, before the
Speaker 4: war and the mentales kicked off, at the end of February,
Speaker 4: we had obviously higher inflation than what the RBA wanted,
Speaker 4: So core inflation.
Speaker 1: Was above the target three point eight and three points trimmed.
Speaker 4: Yeah, spot on, So you know, it was above the target,
Speaker 4: and the RBA obviously responded by doing the first rate hike. Right,
Speaker 4: So we went into this this Middle aged crisis with
Speaker 4: you know, above target inflation, and let's be honest, a
Speaker 4: lot of that high inflation has been caused by excessive
Speaker 4: government spending. So we've got basically the federal government running
Speaker 4: a wartime expansionary budget, you know, pretty much the biggest
Speaker 4: budget we've had since the height of the pandemic can
Speaker 4: also going back to the Second World Wars as a
Speaker 4: share of the economy. So they're obviously spinning way too much.
Speaker 4: And and this budget to me, doesn't really change that, right,
Speaker 4: not really cutting back. I mean, obviously there's some talk
Speaker 4: about cutting. The ndis spinning going forward, which is good.
Speaker 4: I don't know how they're going to reach their targets
Speaker 4: because we've just had double digit annual growth in the NDIS,
Speaker 4: and they want to get it down to two percent
Speaker 4: annual growth for the end of the decade and then
Speaker 4: five percent after that.
Speaker 2: I don't think that's really.
Speaker 4: Achievable, and a lot of that will actually involve shifting
Speaker 4: costs elsewhere, so they want to sort of move autism
Speaker 4: out of the NDIS. That'll just go into other programs, right,
Speaker 4: So we spent somewhere else. But you know, overall, the
Speaker 4: budget's not really doesn't well to me at least, doesn't
Speaker 4: seem to be doing much to actually contract government spending
Speaker 4: and therefore it's not going to contract that much from
Speaker 4: agriga demand and then therefore take pressure off interest rates.
Speaker 4: So mate, I personally think we're just we're going to
Speaker 4: be stuck in this sort of you know, stag inflationary
Speaker 4: environment for a while. Obviously we've got the global oil
Speaker 4: shop now and now start to get the second round
Speaker 4: impacts of that. So we've got the initial inflationary shock
Speaker 4: from the higher fuel prices, and then now we're seeing
Speaker 4: the second round. And you're obviously in the property you know,
Speaker 4: you obviously know a lot about the property sector. Well,
Speaker 4: a lot of developers now talking about rising input costs
Speaker 4: on cement bricks, would timber. All sorts of things now
Speaker 4: starting to feed into that process. And you know, the
Speaker 4: RBA Governor Michelle Bullock is very concerned now about the
Speaker 4: second round impacts from the inflation, whereby businesses stuck into
Speaker 4: those higher costs from the fuel than they start passing
Speaker 4: them on. And in fact, the latest business surveys showed
Speaker 4: that input costs have searched and final prices, which is
Speaker 4: their cost that they pass on the consumers, have not
Speaker 4: yet searched. So I think we're now going to get
Speaker 4: that second round impact from the high fuel prices, which
Speaker 4: is just going to feed a second round inflation impact.
Speaker 4: So unfortunately, it's a perfect stime, mate, We've got excessive governments,
Speaker 4: meaning still on top of you know, fuel shocks and
Speaker 4: now second round impacts from from those fuel shocks. Unfortunately,
Speaker 4: it's just going to it's a bit of a nightmare
Speaker 4: for the Reserve Bank.
Speaker 3: So at least and maybe a little bit later, we'll
Speaker 3: if you have time, if we've got time, we'll actually
Speaker 3: visit some of the more are sides of the budget.
Speaker 3: Let's just look at it though from a fiscal point
Speaker 3: of view, fiscal policy point of view. Just to let
Speaker 3: the audience understand, Zervank runs monetary policy, try to control
Speaker 3: inflation and unemployment or employment full employment by virtue of
Speaker 3: using interest rates up or down, but they're stuck with inflation.
Speaker 3: The fiscal policy is a government's game where they can
Speaker 3: sort of look at things like stand living in our country,
Speaker 3: maybe help growth, you know, help our prosperity at the
Speaker 3: same time not ignoring welfare because you know, you don't
Speaker 3: want people to be sort of sliding off and going downhill.
Speaker 1: But these two have to work together.
Speaker 3: Maybe you could explain to us, as an economist, explain
Speaker 3: to us the audience the sort of general view around
Speaker 3: fiscal policy, how it should be done in an ideological way.
Speaker 3: And I don't mean from a labour point of view
Speaker 3: or a liberal point of view, but what is a country?
Speaker 1: What are the people looking for? What do we expect?
Speaker 3: I know you haven't done a survey, but as an economist,
Speaker 3: what do people expect from a federal budget, from federal
Speaker 3: fiscal policy in terms of all the other aspects as
Speaker 3: opposed to these little ideological things like you know, rich
Speaker 3: people should be paying more tax on their property gains.
Speaker 4: Well for me personally, There's two things. First of all,
Speaker 4: you want no governments to spend money properly, right, so
Speaker 4: you know this is why they matter. So basically, the
Speaker 4: federal budget accounts for about one quarter of national spending, right,
Speaker 4: so we should care about it.
Speaker 2: Right.
Speaker 4: So basically, you know, and obviously that one quarter of
Speaker 4: spending is primarily.
Speaker 2: Raised through taxes. They tax us workers, businesses, et cetera.
Speaker 4: And then they spend that money, which is about a
Speaker 4: quarter of the nation spending, right, so it does matter.
Speaker 4: So the first thing we should want is that that
Speaker 4: money is spent as you know, as well targeted and
Speaker 4: spent as efficiently as possible, which I don't think we're getting.
Speaker 4: And the second second thing from an economic point of
Speaker 4: view is you want the government to spend. You know,
Speaker 4: you wanted spending to a ligne with the economic cycle.
Speaker 4: So at the moment, obviously we've got inflation above target, etc.
Speaker 4: And the government's running an expansiory fiscal policy when really
Speaker 4: it should be, and it's working at cross purposes with
Speaker 4: the Reserve Bank. So one of my buddies, tarryck Brooker,
Speaker 4: is an economists. He actually coined the term burnout economics.
Speaker 4: And we've got a bit of a burnout economy at
Speaker 4: the moment, where by the Reserve Bank's got its foot
Speaker 4: planted on the break, hiking interest rates, trying to slow
Speaker 4: the economy down, and you've got the government. So I'm
Speaker 4: blaming the federal governments also the states as well. The
Speaker 4: States are also spending big, but we've got governments based
Speaker 4: in the foot plant and on an accelerator, so they're
Speaker 4: working at cross purposes of the RBA, which means the
Speaker 4: RBA has got to.
Speaker 2: High, creates harder, etcetera.
Speaker 4: So for me personally, and I guess an economic point
Speaker 4: of view, you want a governments to spend our money
Speaker 4: properly because again, the federal budget is twenty five percent
Speaker 4: of economic spending and once you had the states it's
Speaker 4: about forty percent. And b you want the governments to
Speaker 4: be working hand in hand with the Reserve Bank, trying
Speaker 4: to boost the economy when it's needed, you know, ie recession,
Speaker 4: and slow the economy when you have times like this.
Speaker 4: But unfortunately, our governments are working at cross purposes with
Speaker 4: the Reserve Bank.
Speaker 3: So if the government was spending the money properly, and
Speaker 3: I think you mean that in two parts, how much
Speaker 3: they spend relative to how much they raise and the
Speaker 3: government's revenuers taxes our money, but.
Speaker 1: Also where they spend the money. And efficiency is spending efficiency.
Speaker 3: Yes, when you say the government current government spending is expansionary,
Speaker 3: what do you mean by that? Like, it's what do
Speaker 3: you mean expensary? It's going to increase demand and therefore
Speaker 3: increase prices, therefore increase infation.
Speaker 2: Yeah.
Speaker 4: So basically, so you have agrig command, right, that's the
Speaker 4: total demand in the economy, and at the moment we've
Speaker 4: got agrig demand running ahead of supply. So that's basically
Speaker 4: the capacity of the economy to cope with that demand.
Speaker 4: And because we've got low prodctivity Belieth and.
Speaker 1: You mean agrig demand for goods and services.
Speaker 4: Yes, just overall economic activity, spending is running above what
Speaker 4: the economy's capacity is to accommodate that spending. And when
Speaker 4: you get that, you get too much demand pushing up
Speaker 4: against again supply, you get high higher prices, which is
Speaker 4: basically what we've got right, And part of that is
Speaker 4: not just a spending story. It's also a productivity story,
Speaker 4: which we can get into as well. Unfortunately Australia, as
Speaker 4: productivity growth in the last decade, if you look at
Speaker 4: the OECD, we've been amongst the very poorest in the OECD.
Speaker 4: And because we've got very low, poor productivity growth, we've
Speaker 4: also had very poor growth in household disposed income. So
Speaker 4: again our growth in household sposed incomes, which is sort
Speaker 4: of the best single measure I guess for living standards,
Speaker 4: it's actually been amongst the porous in the OECD as well.
Speaker 4: So we have this economy that has a very slow
Speaker 4: speed limit on growth, so the RBA thing puts it
Speaker 4: about two percent, and yet we've got the government which
Speaker 4: is pumping demand through success is spending, which is pushing
Speaker 4: us above that speed limit. And that's one of the
Speaker 4: reasons why we have this inflationary problem.
Speaker 3: Why would government do that? I mean, they're not stupid.
Speaker 3: I mean maybe they're but generally speak less, make the
Speaker 3: presumption that they're not stupid. Is this an ideological thing?
Speaker 3: Why would they do that?
Speaker 2: Yeah? I mean, good question.
Speaker 4: I mean that they certainly shouldn't be doing that, but
Speaker 4: obviously they have, you know, things they want to spend
Speaker 4: their money on, and.
Speaker 1: Our money, our money, borrow our money.
Speaker 2: Yeah, absolutely, mate.
Speaker 4: It's twenty five percent of roughly know, the economies demand
Speaker 4: is generated by the federal budget, so and forty percent
Speaker 4: once you had the states thereabouts. So you know, this
Speaker 4: is we're talking big bucks here, and every dollar of
Speaker 4: that's spending by the federal government, not including what they borrow,
Speaker 4: so they borrow a bit as well, but every dollar
Speaker 4: that's going to be raised by tax review and that
Speaker 4: comes from obviously households and businesses and that sort of thing.
Speaker 4: So which is why we should all care because ultimately
Speaker 4: it's our money that the government's spending. And i'd argue,
Speaker 4: I mean, I argue that they're not spending that particularly
Speaker 4: well in a.
Speaker 2: Lot of areas.
Speaker 4: There's a lot of waste across indis the green infrastructure,
Speaker 4: all this sort of stuff, or a lot of this
Speaker 4: so called green projects, and that are also incredibly wasteful.
Speaker 4: With the snowy hydro two point zero, but there's a
Speaker 4: whole bunch of them. We've blown billions of dollars on
Speaker 4: green hydrogen, which was never feasible in.
Speaker 2: The first place. You just look right across the board.
Speaker 2: There's a lot of waste.
Speaker 4: And we've also have way too many bureaucrats. The growth
Speaker 4: in the bureaucracy across the state and federal government has
Speaker 4: just been excessive as well.
Speaker 2: And if you.
Speaker 4: Actually look at the productivity in the government funded sector,
Speaker 4: so it's not actually just public service. They call it
Speaker 4: the non market sector, which is basically the public service
Speaker 4: plus healthcare and social systems, which is driven by the
Speaker 4: NDIS at the moment, and the education sector. The proactivity
Speaker 4: growth in that sector is basically back where it was
Speaker 4: about twenty five years ago. So it's gotten so bad,
Speaker 4: and that's one of the reasons why why the economy
Speaker 4: has such poor proctivity growth, because we've had this bloating
Speaker 4: in this non market sector that is crowding out the
Speaker 4: private sector or the markets sector, which actually is growing
Speaker 4: in productivity terms, and that's dragging down the nation's overall
Speaker 4: productivity growth. It's one of the reasons why we have
Speaker 4: amongst the poorest productivity growth in the OECD and then
Speaker 4: amongst the poorest real per capital houseold disposed income growth
Speaker 4: over the last decade. So unfortunately, it's not a great equation.
Speaker 1: So when you talk about.
Speaker 3: Let's call it the government or the non market sector
Speaker 3: expanding and growing, and as I understand, it has probably
Speaker 3: grown more over the last couple of years, and it
Speaker 3: ever has in its history as a percentage. And then
Speaker 3: you talk about the markets part of the economy, that's
Speaker 3: the private part of the economy, private businesses, et cetera.
Speaker 3: Is the private part of the economy. Is that shrinking
Speaker 3: or is it just a lot a much lower percentage
Speaker 3: of the total because the public sector has grown much more.
Speaker 1: How's that working?
Speaker 4: Yeah, so in the light since about start in twenty
Speaker 4: twenty three, about two thirds of the job growth has
Speaker 4: been this non market sector. So the market sector is growing,
Speaker 4: it's just growing at an incredibly slow rate. And it's
Speaker 4: I mean, I guess once once you'd probably adjust for
Speaker 4: you know, inflation, that sort of thing. It's probably barely growing,
Speaker 4: but it's having so the share of the economy that
Speaker 4: has now been taken up with this government funded sector,
Speaker 4: the non market sector continues to expand as a share.
Speaker 4: And so at the moment, the non market sector accounts
Speaker 4: for about thirty one and a half percent of total jobs,
Speaker 4: and if you went back, say a decade, it was
Speaker 4: about probably think it was about twenty seven percent. So
Speaker 4: it keeps growing its share of the economy. And it's
Speaker 4: actually this non market sector of the government funded sector
Speaker 4: has encountered for us I said about two thirds of
Speaker 4: the job growth since it started twenty twenty three and
Speaker 4: actually most of and the majority of the job's growth
Speaker 4: into the pandemic.
Speaker 2: So you know, unfortunately that's not a.
Speaker 4: Great story from a productivity viewpoint, where when labor protiuity
Speaker 4: growth in that has fallen sharply, it's now tracking back
Speaker 4: where it was about twenty to twenty five years ago.
Speaker 4: So that is one of the reasons why Australia's proactivity
Speaker 4: growth is lagged so poorly. It's not the only one,
Speaker 4: but it's certainly one of them.
Speaker 3: So when we look at let's call it gross GUDP growth,
Speaker 3: which is sort of mentioned earlier on the RBA is
Speaker 3: tracking it around saying around two point two, two point one,
Speaker 3: whatever the percentage is. And of course you know that's
Speaker 3: one way we measure government's activity. We will say, look,
Speaker 3: you know GDP was great, You've done a good job man.
Speaker 3: It's one measure, one measure of how well the governments
Speaker 3: from a financial point of view, is measuring the managing
Speaker 3: the country's economy. Where does immigration fit into that and
Speaker 3: how is immigration The large numbers in immigration historically large
Speaker 3: numbers in immigration, how do they fit into GDP.
Speaker 4: Yes, so obviously if you import more people, that's more
Speaker 4: inputs in the economy. You're going to get more outputs.
Speaker 4: But so unfortunately for US two decades so, we've been
Speaker 4: running this very high migration for about twenty years, kicked
Speaker 4: off from the mid two thousands and ever since then
Speaker 4: it's been very high and that has actually driven the
Speaker 4: majority of Australia's overall GDP growth, and our per capita
Speaker 4: growth has been appalling. It's actually fallen that the growth
Speaker 4: in per capita GDP, which is actually what should matter
Speaker 4: for living standards, has actually been falling for that twenty
Speaker 4: year period. And so you know, for example, in the
Speaker 4: most recent year, from my memory says me correct, immigration
Speaker 4: was about one point one percent of the population, right,
Speaker 4: so when you look at the overall GDP in Australia,
Speaker 4: you've got to deduct that straight off to get your
Speaker 4: per capita measure. And over the last sort of several
Speaker 4: years we've we actually had growth the last quarter, but
Speaker 4: we actually had I think it was like eight out
Speaker 4: of twelve quarters. We've actually gone backwards in per capita
Speaker 4: GDP and that just tells you that the growth that
Speaker 4: Australia's experience over certainly since the pandemic, has been put
Speaker 4: on through population growth, and I'd argue that's actually through
Speaker 4: population growth through immigration, but also government spending by this
Speaker 4: expansion non market sector. So if you actually look a
Speaker 4: look at you, I guess per capita growth in the
Speaker 4: private economy, it's been absolutely appalling. So unfortunately, our economy
Speaker 4: has become uber reliant on high population growth through immigration
Speaker 4: as well as as well as this expansion of the
Speaker 4: non market government funded economy, which obviously is not very
Speaker 4: good for living standards, but it does make the GDP
Speaker 4: look better.
Speaker 3: So if I look at those two propositions then and
Speaker 3: it might be unfair, but let me know what you
Speaker 3: think those two propositions. That is, building the employment numbers
Speaker 3: up by offering more jobs both the federal and the state,
Speaker 3: which means unemployment number looks pretty healthy at four point
Speaker 3: two or four point three whatever.
Speaker 1: Is at the moment.
Speaker 3: So everyone goes, wow, I've got a job, and the
Speaker 3: Australian unemployment number looks great, and you know, treasurers go
Speaker 3: up and stand up in front of the public and say, look,
Speaker 3: we've got a really good unemployment. If you look at
Speaker 3: that one aspect, that's government offering jobs. Two, government allowing
Speaker 3: immigration to continue on at a fast rate. That has
Speaker 3: been in the last twenty years, but nonetheless it has
Speaker 3: been we do take a lot of people in relatively speaking,
Speaker 3: but we're taking many more than we have had in
Speaker 3: the past, which somehow makes the headline GDP number look
Speaker 3: fair enough, whether it's to two percent, But when you
Speaker 3: do it on a per capita basis, we're going backwards.
Speaker 1: Is it a from a fiscal point policy point of view?
Speaker 3: Is it a fair thing to say that governments can
Speaker 3: manipulate measures of how the economy is going by playing
Speaker 3: games with us letting more people in the country and
Speaker 3: employing more people. And I'm not saying that this is
Speaker 3: what their intention is. It looks a bit that way,
Speaker 3: but I'm not saying that. But how would you look
Speaker 3: at that as an economist?
Speaker 4: Yeah, one hundred percent, mate. So the federal government, so
Speaker 4: we'll take the immigration thing first, right, So the federal
Speaker 4: government loves big migration, right, and it loves it for
Speaker 4: two main reasons. So the federal government collects about eighty
Speaker 4: percent of the nation's tax revenue, so it is the
Speaker 4: major beneficiary from running a big immigration program because it
Speaker 4: imports hundreds of thousands of people every year. Most of
Speaker 4: those people obviously work, they pay personal income taxes. Personal
Speaker 4: income taxes go to the federal government. You also get
Speaker 4: a little bit more company tax revenue from you know,
Speaker 4: sort of consumer facing firms, that sort of thing, banks, whatever,
Speaker 4: you've got to lend, lend to these people, so you.
Speaker 2: Get a little bit more company tax.
Speaker 4: So the federal government collects all the bounty from immigration,
Speaker 4: primarily again through personal income taxes, but the cost of
Speaker 4: that immigration then gets deferred onto other areas of the economy. So,
Speaker 4: for example, the state governments typically lose because the state
Speaker 4: governments have got to the fund the infrastructure. We're talking schools, hospitals, roads,
Speaker 4: public transfit, all that sort of thing, and as a result,
Speaker 4: the state governments lose, as individuals often lose as well
Speaker 4: because the state governments. And you obviously live in Sydney, right,
Speaker 4: So if you go back to Sydney at the turn
Speaker 4: of the center, I think you had about two toll
Speaker 4: roads and Sydney's population was about four million people. You
Speaker 4: now added one and a half million people since then
Speaker 4: to accommodate all those people. Because Sydney was already built out,
Speaker 4: they've had to build toll roads everywhere, right, and they've
Speaker 4: privatized them. So now you can't drive around Sydney with
Speaker 4: that transurban putting the hand in your pocket and fleecing
Speaker 4: you for tolls. And that was those tolls were built
Speaker 4: to keep up with the immigration foisted upon Sydney by
Speaker 4: the federal government effectively. And the other reason why the
Speaker 4: federal government loves big migration is because it obviously pumps
Speaker 4: up the GDP, right, so there's nothing a politician hates
Speaker 4: more than having to front the camera.
Speaker 2: And you know, had overall.
Speaker 4: GDP's gone backwards and we're in recession. But Australia's basically
Speaker 4: avoided a recession outside of COVID since the early nineties
Speaker 4: by running a very high migration program that is way
Speaker 4: bigger than just about every other country in the World's
Speaker 4: basically boosted artificially boosted our headline GDP figures, even though
Speaker 4: our per capita growth has been a poorly So we've
Speaker 4: basically grown the economic pie by importing way more people
Speaker 4: than the just about anywhere else, but everyone sliced the
Speaker 4: pie hasn't improved. And that's effectively the mechanism that the
Speaker 4: federal government uses a it boosts the federal budget by
Speaker 4: bringing in all these extra people the cost of deferred elsewhere,
Speaker 4: and it also makes the economy look better than it is.
Speaker 4: And that's basically why the federal government does that. Obviously,
Speaker 4: we've got this you know, this NDS wide elephant, which
Speaker 4: is driving a lot of that non market sector job
Speaker 4: So the government has boosted the number of bureaucrats quite
Speaker 4: a lot, but the bigger boost to the jobs has
Speaker 4: actually been through the NDIS. There has been you know,
Speaker 4: the single biggest job booster since the pandemic has been
Speaker 4: through the NIAS and because because that program has expanded
Speaker 4: so aggressively, that's been one of the main drivers of
Speaker 4: why Australia has had such strong job growth. And it's
Speaker 4: also arguably the single biggest reason why Australia's unemployment rates
Speaker 4: are four point three percent, and it's you know, five
Speaker 4: percent in New Zealand and over five percent in Canada
Speaker 4: and hiring these other places around the world. We our
Speaker 4: labor markets meet artificially supported by this huge government spending.
Speaker 4: You know, a lot of that is through the NDIS,
Speaker 4: and that's made the labor market look better than it
Speaker 4: naturally is. So we do we have a bit of
Speaker 4: a false economy at the moment mark whereby running a
Speaker 4: huge immigration program and then also got this big government spending,
Speaker 4: so whereas a private sector economy, the per capita and
Speaker 4: private sector economies are actually very weak.
Speaker 1: What would you have liked to see in the budget then?
Speaker 3: In relation to those two factors, that is, what government
Speaker 3: spends by neural and how much they spend relative to
Speaker 3: how much they take in, and what should they have done?
Speaker 3: What would you have liked to see them to be
Speaker 3: done in relation to immigration policy?
Speaker 4: Well, I'll do immigration first, as I started that before. Unfortunately,
Speaker 4: the federal budget actually revised up immigration. So every single
Speaker 4: budget that the Albanese government's had since they got elected
Speaker 4: is undershot. So they've come out with fore cast immigration
Speaker 4: and they've overshot it. And since in their first I
Speaker 4: think it's three point three and one quarter years since
Speaker 4: they came to office, that's all we've.
Speaker 2: Got data for.
Speaker 4: We've had about one point three million net overseas migrants
Speaker 4: lean on that period, which is astonishingly high. That's like
Speaker 4: I'm trying to remember how many per day. It's yeah,
Speaker 4: it's an enormous mat It's like one one hundred and
Speaker 4: fifty net overseas migrants per day.
Speaker 1: I think it is Wow.
Speaker 4: It's a huge number, basically double the previous two governments
Speaker 4: per day, almost double. And unfortunately this federal budget that
Speaker 4: came out last week actually upgraded net overseas migration by
Speaker 4: fifty five thousand, so about thirty five thousand this financial
Speaker 4: year and twenty five twenty thousand next financial year. So
Speaker 4: unfortunately they have lost control of migration, and that is
Speaker 4: the fundamental it's a primary reason why we have a
Speaker 4: rental crisis in this country, because we've had this massive
Speaker 4: surge in people who need housing, and you feel it
Speaker 4: first through the rental market because most migrantcy come to Australia,
Speaker 4: they rent before they buy, right, so almost all we'll rent,
Speaker 4: and we've had this huge crash in the rental banksy
Speaker 4: rate because the supply side of the housing market, the
Speaker 4: construction side, is completely bottleneck. To the moment, we've had
Speaker 4: a forty percent increasing costs since the pandemic. Costs are
Speaker 4: now rising again because of this oil this energy shock.
Speaker 4: Obviously we've got much high interest rates. So during the
Speaker 4: second half last decade we had that big high rise
Speaker 4: apartment building boom, the cash rate was one half percent.
Speaker 4: Now it's four point three five percent, likely to go
Speaker 4: to four point six or four point eighty five by
Speaker 4: the end of the year. So that's obviously constrained on construction.
Speaker 4: We've got labor shortages, all these sorts of things. So
Speaker 4: the government's basically pumped in huge amounts of people into
Speaker 4: a supply constrictor market that's driven up rents. According to Fatality,
Speaker 4: the medium advertised rent nationally is increased by fifty percent
Speaker 4: now since the end of twenty nineteen. That's added over
Speaker 4: eleven thousand dollars per year to the cost of renting
Speaker 4: the meeting home if you use totalities figures, So it's
Speaker 4: a huge hit. So yeah, I would have loved to
Speaker 4: have seen the government actually tighten up the migration system considerably.
Speaker 4: Canada has actually done that. Mark So Canada, which also
Speaker 4: has left of center labor type government, they've caught the
Speaker 4: liberals over there, but especially the labor equivalent. Canada experienced
Speaker 4: a massive explosion immigration post pandemic and a similar surge
Speaker 4: in rents, and all the similar problems that we've got
Speaker 4: to Australia. But unlike Australia, the Canadian Liberal government in
Speaker 4: mid twenty twenty four actually did a three year population
Speaker 4: freeze and they've actually slashed temporary migration, so they've sent
Speaker 4: a lot of temporary migrants home. They've also cut the
Speaker 4: purlm mirgant intake by twenty percent and Canada recorder its
Speaker 4: first population declined since the Second World War last year
Speaker 4: had actually lost twenty five thousand people. And guess what,
Speaker 4: Canada's had nineteen consecutive months of falling rents because it's
Speaker 4: taking the pressure off housing. Now, that is a template
Speaker 4: that Australia should be doing something like that, but unfortunately
Speaker 4: the government doesn't mean he will will do that. And
Speaker 4: on the budget side, my biggest gripe with the budget
Speaker 4: is that the federal governments found all these different ways
Speaker 4: to raise tax Right, We've got the capital gains tax,
Speaker 4: negative gearing taxes on trus and some of that is justified,
Speaker 4: some of it not, which I'm sure we'll get into,
Speaker 4: but my issue with it is that they didn't use
Speaker 4: that extra money which they're raising to then index say
Speaker 4: marginal taxcals to inflation.
Speaker 2: Because Australia.
Speaker 4: Australia is one of the most reliant economies in the
Speaker 4: world on personal income taxes, so fifty two percent of
Speaker 4: the federal budgets tax renew comes from personal income taxes.
Speaker 2: And despite the fact that we've us.
Speaker 4: As Australians as a whole, we've experienced about six percent
Speaker 4: decline in real wages since the pandemic, so we've all
Speaker 4: gone backwards on average lunch or just for inflation. We're
Speaker 4: all paying much higher taxes because our nominal wage growth
Speaker 4: that's wage growth that hasn't kept up with inflation, but
Speaker 4: our wages have gone up, has pushed us into higher
Speaker 4: tax brackets. And every year we're paying higher and higher
Speaker 4: average tax rates. And the absurdity of it was I
Speaker 4: did some analysis last week in a market. This shows
Speaker 4: you the absurdity of the personal income tax system. The
Speaker 4: median full time salary now in Australia is just over
Speaker 4: one hundred thousand dollars. It's about one hundred thousand, whereas
Speaker 4: the top malet of tax rate kicks in one hundred
Speaker 4: and ninety, so you only need to earn one point
Speaker 4: nine times a median full time salary in Australia to
Speaker 4: pay the top mative tax rate. And if you extrapolate
Speaker 4: the federal budgets figures over the next three years, in
Speaker 4: three years time, roughly the median full time salary is
Speaker 4: going to be over one hundred and eight thousand, and
Speaker 4: by that stage you only have to earn one point
Speaker 4: seventy five times a median to pay the top marti
Speaker 4: of tax rate. Now, if the government doesn't fix this situation,
Speaker 4: we're going to have this situation whereby average tax rates
Speaker 4: rise every single year despite the fact that once you're
Speaker 4: just inflation, we're experiencing any wage growth. And in fact,
Speaker 4: the Reserve Bank of Australia forecasts that by twenty twenty
Speaker 4: eight Australians are going to basically over the next several years,
Speaker 4: we're going to experience zero real wage growth. So we're
Speaker 4: going to go back backward for the next year or
Speaker 4: so because wages an't going to keep up inflation. Then
Speaker 4: we're going to catch it up a bit. But despite that,
Speaker 4: we're going to keep paying these high and high every
Speaker 4: tax rates. So what I would have loved to have
Speaker 4: seen the government do is actually index those tax scales
Speaker 4: by at least the midpoint of the RBA's band, so
Speaker 4: index and by two point five percent every year, and
Speaker 4: that way the government wouldn't experience this forever rising you know,
Speaker 4: tax revenue from personally contextas because the government doesn't have
Speaker 4: to do anything at the moment, they can do nothing
Speaker 4: and just let inflation push us all into higher tax brackets.
Speaker 4: And the federal budget actually forecasts that the federal government's
Speaker 4: tax take from personally income taxes will rise from fifty
Speaker 4: two percent this year to fifty four and a half
Speaker 4: percent in about three years, oh sorry, by by twenty thirty,
Speaker 4: So they are forecasting more and more tax taken. I
Speaker 4: think the annoys me about it is they if you
Speaker 4: give the government more spending and you have no cap
Speaker 4: on what they can raise off you, they're just going
Speaker 4: to spend it and waste it.
Speaker 2: Whereas if you.
Speaker 4: Actually index the tax scales to two and a half percent,
Speaker 4: which is the midpoint of the Reserve Bank's target band,
Speaker 4: they wouldn't experience this ever rising personal income taxes every
Speaker 4: single year, and they'd have to actually have to budget
Speaker 4: better and how they spend their money. And that's the
Speaker 4: thing that annoys me about it, because they can literally
Speaker 4: do nothing every year while our incomes go backwards because
Speaker 4: it doesn't think they don't keep up with inflation, they
Speaker 4: still collect more and more taxes office every single year,
Speaker 4: and that to me is the biggest single fallion on
Speaker 4: this budget. It was a tax grab, not tax reform.
Speaker 4: And what they should have done is actually use the
Speaker 4: extra revenue from closing these loopholes using that quote unquote
Speaker 4: to then lower taxes on workers, because the workers are
Speaker 4: the ones who can absolutely ham it.
Speaker 3: So are you saying, Leath that the extra money that
Speaker 3: the gun is going to raise from all the changes
Speaker 3: is basically just going to be spent, I think, but
Speaker 3: nothing is going to come back to workers or whoever
Speaker 3: by changing the point at which the higher tax brackets
Speaker 3: start to kick in relative to your wages.
Speaker 4: Yeah, it's what's going to get worse because it's not
Speaker 4: just it's not just the people in the top rate,
Speaker 4: it's it happens right across the tax ban, across the board.
Speaker 2: Yeah.
Speaker 4: Yeah, yeah, because every single year, even if you don't
Speaker 4: necessarily move into a higher tax bracket because you're still
Speaker 4: stuck between, your average tax rate still goes up because
Speaker 4: a higher share of your earnings gets at that higher
Speaker 4: rate that you're on. So every single year our average
Speaker 4: tax rates go up despite the fact that our real
Speaker 4: wages if you just the wage price in next from
Speaker 4: the ABS with inflation, it's the following up about six
Speaker 4: percent since.
Speaker 3: The tax reform. So this is not tax reform, it's
Speaker 3: extra tax. So do you say that would you say
Speaker 3: that this the narrative that's been pushed around in relation
Speaker 3: to by the government in relation to this budget is
Speaker 3: dishonest because I mean, they're not stupid people. They know
Speaker 3: exactly all the stuff that you know.
Speaker 2: They know.
Speaker 3: If they don't know, Treasure would have told them. They
Speaker 3: go out and say that this is a tax reform
Speaker 3: budget and it's great for Australia, et cetera. And we're
Speaker 3: going to lower rents, and we've got a Treasury paper
Speaker 3: that says rents are only going to go by two
Speaker 3: dollars a month or a week, and then we're going
Speaker 3: to make more houses available for younger people, et cetera.
Speaker 1: Is it therefore dishonest a little bit?
Speaker 4: So Look, I'll be honest, I personally don't care that
Speaker 4: they've done the CGT and the negative gearing on established housing.
Speaker 4: So my personal view is if you reduce demand for
Speaker 4: property investors into the established market, you're not going to
Speaker 4: really impact supply pretty much at all, but reduced yeah yeah, yeah,
Speaker 4: but you will reduce some demand obviously, and that will
Speaker 4: help to lower prices at the margin. And if you
Speaker 4: actually look at the mortgage I've actually got a great chart.
Speaker 4: So it's basically it compares mortgage mortgage finance commitments through
Speaker 4: investors versus first home buyers, and they're basically the polar opposite, right,
Speaker 4: So when investor mortgage demand goes up, first home buyers
Speaker 4: goes down, and that tells you that that investors tend
Speaker 4: to crowd out first home buyers. So if you do
Speaker 4: reduce that investor demand, but you're going to get more
Speaker 4: first home buyers in the market, you can get slightly
Speaker 4: lower prices, you're going to increase the homeownership rate.
Speaker 2: A little bit.
Speaker 4: That's all fine, But at the same time, the government
Speaker 4: has ramped up immigration, which is which hurts first home
Speaker 4: buyers because first home buyers typically rent before they buy.
Speaker 4: So if you're pushing up rents because of the high immigration,
Speaker 4: well it packs some longer to save a deposit. And
Speaker 4: also high immigration does put some upward pressure on house prices.
Speaker 4: There's more of an impact on rents, but does do
Speaker 4: a little bit, So it's a double whammy for first
Speaker 4: home buyers. Secondly, if they want to talk about intergenerational
Speaker 4: equity and that sort of thing, well, obviously, young people
Speaker 4: who need to buy homes, they're weight and salary editors,
Speaker 4: and they're getting more and more of their their income
Speaker 4: taking every year by bracket creep right, which makes it
Speaker 4: harder to purchase housing, makes it harder to leave. In general,
Speaker 4: the government's done nothing about that, and they're going to
Speaker 4: continue to tax the debuggery. And thirdly, if you want
Speaker 4: to fix intergenerational equity, well you don't want to. You
Speaker 4: don't want to put young people into more debt, more
Speaker 4: public debt. So now if you go back to sort
Speaker 4: of the start of the century, if you ever averaged
Speaker 4: out the federal or the federal and state debt per capita,
Speaker 4: it was a couple thousand bucks ahead. Now it's tens
Speaker 4: one thousand dollars ahead, right because because both states and
Speaker 4: federal governments have run up so much debt. Now that
Speaker 4: just means if you're born today, you're born negative tens
Speaker 4: of thousands of dollars in debt because the decisions that
Speaker 4: people who came before you made, like the government's before
Speaker 4: you made. So if you actually want to improve intergenerational equity,
Speaker 4: well it might be a good idea if the government
Speaker 4: actually spends our money a little bit better and doesn't
Speaker 4: run up this big debt tab, because then that'll hurt
Speaker 4: young people. So you know that there's a few facts here. Yes,
Speaker 4: they I don't really care about the negative geary and
Speaker 4: capital gains tax changes on established housing. I think that's
Speaker 4: good at the margin. There's a whole lot of stuff.
Speaker 2: That's not good.
Speaker 4: But they've given up those small gains for running a
Speaker 4: much high immigration program than they should, penalizing wage and
Speaker 4: salary earners through bracket crete, which the federally, as I said,
Speaker 4: the federal budget itself forecasts higher tax collections from personal
Speaker 4: income taxes ahead, so they're going to squeeze its harder.
Speaker 4: And then also by spinning too much and running up
Speaker 4: this commonwealth debt as well as state debt separately, which
Speaker 4: also is a which is basically stealing our future generations,
Speaker 4: so that those are yeah, yeah, sorry sorry. So those
Speaker 4: are basically my three big issues from an intergenerational perspective.
Speaker 3: At least, So maybe we could just have a look
Speaker 3: at this point. And I think it's an important point.
Speaker 3: You raised the fact that this budget did not look
Speaker 3: at the adjusting tax when the higher tax rate kick
Speaker 3: in four varies for anybody. And they do talk about
Speaker 3: intergenerational inequity, and as I've said earlier, I mean, you know,
Speaker 3: Costello talked about an intergeneration equity in the two thousands period,
Speaker 3: and one of the things that he said, in order
Speaker 3: to make sure we don't have intergenerational equity is to
Speaker 3: make sure that we have fiscal restraint. In other words,
Speaker 3: we don't spend more than we raise. And when we
Speaker 3: spend more than we raise, we raise money from two places,
Speaker 3: that's taxes and debt. The government borrows money. And Costello's
Speaker 3: thesis or hypothesis was that we should not leave debt
Speaker 3: to our children and grandchildren, et cetera, because that is
Speaker 3: actual one form of intergenerational equity. Given where we're at
Speaker 3: the moment in terms of national debt, and I forget
Speaker 3: state debt for the moment that gets out as a
Speaker 3: national bit the national debt number only. Do you think
Speaker 3: that that's a fair argument for this government to run
Speaker 3: and their narrative is that this budget has directed it
Speaker 3: intergenerational and equity and write into generational inequity.
Speaker 1: Do you think it's a fair narrative?
Speaker 2: No, no, no, no, I don't for those you know,
Speaker 2: for those two reasons.
Speaker 4: Obviously, the government continues to run up debt. So I
Speaker 4: think I think Chris Richardson on last week and he
Speaker 4: reckons net debt the commonwealth level is about six hundred
Speaker 4: billion dollars. There's another figures have gone out there saying's
Speaker 4: about a trillion, but he used the term six hundred billion,
Speaker 4: and he's a lot smarter than me on pudget issues.
Speaker 4: I'm not going to contradict that, but that alone would
Speaker 4: be about twenty two thousand dollars per head. I think
Speaker 4: it is per per capita. Again, you know, if we
Speaker 4: go back to the start of the century or early
Speaker 4: in the century, we had almost no government debt, so
Speaker 4: right from the start. Now, once you're born into Australia,
Speaker 4: you're born with this. You know, twenty thousand plus dollars
Speaker 4: of debt gone on Chris Richardson figures. And secondly, obviously
Speaker 4: we've got you know, personal income taxes now are taking
Speaker 4: a higher and highest share of the federal budget and
Speaker 4: higher high and hire a share of our wages. So
Speaker 4: the government is basically taxes to death as well. And
Speaker 4: that's only look at the personal income tax side, not
Speaker 4: across all the taxes across pretty much everywhere across the economy.
Speaker 4: So I'd argue that, yeah, the government can't make that
Speaker 4: argument because its debt is growing and it's a It's
Speaker 4: not at an internationally high level, but it's at a
Speaker 4: Obviously the trajectory is bad as well as it's taking
Speaker 4: more and more of our incomes every year through taxation.
Speaker 4: So yeah, I don't agree with that premise.
Speaker 3: One of the interest generational inequities is that young people
Speaker 3: can't afford to buy a house or apartment or dwelling.
Speaker 3: What are the sort of things that economists would like
Speaker 3: to see in a government budget in terms of policy
Speaker 3: that could have potentially address that.
Speaker 4: Okay, so I'm not your typical economists on this, so
Speaker 4: it's a lot of economists don't probably won't agree with
Speaker 4: on this. But first of all, I mean, the government
Speaker 4: needs to run an immigration program that is below the
Speaker 4: nation's capacity to build houses in infrastructure. So for the
Speaker 4: last twenty years we haven't done that. We've obviously run
Speaker 4: an incredibly strong immigration program. It's pretty much crush loaded everything.
Speaker 4: So it's crush loaded infrastructure, it's crush loaded housing. We
Speaker 4: haven't built enough housing to keep up. I think that's
Speaker 4: pretty self evident. So the first best solution is to
Speaker 4: not do that and the slow immigration to make sure
Speaker 4: that your immigration program is a lot better targeted towards
Speaker 4: genuine high skills, not this sort of volume approach. So
Speaker 4: my view on immigration is the government's running a sort
Speaker 4: of quantity over quality program, and we should be running
Speaker 4: a quality over quantity program. And some of that does
Speaker 4: also include ensuring that a higher share of the migrants
Speaker 4: that you get actually work in construction, because at the moment,
Speaker 4: a tiny share of migrants that we bring into Australia
Speaker 4: now actually work in trades working construction. So as a result,
Speaker 4: they're adding more to demand for infrastructure, demand for housing
Speaker 4: than they're actually adding to supply. So that'd be the
Speaker 4: first thing you fix that. There's always the arguments around
Speaker 4: planning and all those sorts of things, but the federal
Speaker 4: government does it can't do a lot about that. It
Speaker 4: could bring in some financial incentives for the states to
Speaker 4: sort of streamline regulations and that sort of thing. There's
Speaker 4: that stuff obviously, the tax policy settings. I think, as
Speaker 4: I said before, I don't I don't disagree with with
Speaker 4: with treating I guess investors into established housing a little
Speaker 4: bit more harshly than they were previously. That should reduce
Speaker 4: some investor demand and obviously help first home buyers a bit.
Speaker 4: But again it's really just tinkered at the margins, like
Speaker 4: that sort of a band aid. It's not fixing the
Speaker 4: underline issues. So yeah, the main thing, the number one thing,
Speaker 4: would be to run a significantly smaller and better target
Speaker 4: immigration program. That should be number one. Number two, you,
Speaker 4: I wouldn't mind seeing the federal government actually provide some
Speaker 4: incentive payments to the states a little bit like they
Speaker 4: used to do with the competition payments for the states
Speaker 4: to actually you know, speed up or get rid of
Speaker 4: red tape and that sort of thing in the building sector,
Speaker 4: not just the building sector, in other sectors across the
Speaker 4: economy as well, because honestly, mate, I think Australia is
Speaker 4: drowning in red and green tape at the moment, and
Speaker 4: it seems that governments always want to add more regulators
Speaker 4: and things. So I've just seen it with the energy system.
Speaker 4: The government is now adding a new energy regulator on
Speaker 4: top of all the energy regulators were already got now
Speaker 4: for you know, solar batteries and this sort of stuff. Well,
Speaker 4: I don't think we need more regulators in this country.
Speaker 4: We probably need less, but we need the regulators. We've
Speaker 4: got to actually you know, streamline regulation and make it
Speaker 4: easier to do business in this country. But we always
Speaker 4: seem to add more and more layers every single year,
Speaker 4: which just makes it even harder to do business, whether
Speaker 4: that's building or infrastructure all this other stuffs.
Speaker 1: But what is that though? I mean, I don't understand.
Speaker 3: I mean, you might have a better concept of this,
Speaker 3: but why do you think we're adding more people to
Speaker 3: answer to that instead of making it as a growth
Speaker 3: style place.
Speaker 1: I mean, what is the deal?
Speaker 2: Yeah?
Speaker 4: Well, I mean, you know, I think part of it
Speaker 4: is once you start employing more and more bureaucrats, which
Speaker 4: are done at both levels, well at both state and
Speaker 4: federal levels government.
Speaker 2: The bureaucrats then need to justify their jobs, so they're
Speaker 2: so in order to justify their.
Speaker 4: Jobs, they create regulations and that sort of thing, And unfortunately,
Speaker 4: I think, you know, too many of our politicians, especially
Speaker 4: at the federal level, but also state and bureaucrats have
Speaker 4: never worked in the private sector, right, They never tried
Speaker 4: to start a business they so as a result they
Speaker 4: have a warped view of how the economy works. And
Speaker 4: I think also having the federal government actually located in
Speaker 4: Canberra probably doesn't help, because it's because Canberra is an
Speaker 4: absolute bubble away from pretty much detached from the rest
Speaker 4: of Australia. So yeah, looks it is certainly a disease
Speaker 4: we've got here where the government just seems to add
Speaker 4: more and more regulations every single year across all areas
Speaker 4: of the economy, and ultimately that just ends up stifling,
Speaker 4: stifling the private sector, which ultimately is what grows the economy. Right,
Speaker 4: the government should be trying to grow the pie, not
Speaker 4: trying to redistribute the pie, and it seems to be
Speaker 4: that the government's just more more interested in how to
Speaker 4: shuffle the deck chairs on the Titanic rather than making
Speaker 4: sure the economy actually floats.
Speaker 3: So just on stimulating the economy relative without I mean
Speaker 3: sort of private sector without sort of I don't mean
Speaker 3: trying to create inflation or agrougod demand just stimulating people
Speaker 3: to stay in business, for people open up business. Can
Speaker 3: we just talk about the couple of games tax for
Speaker 3: a moment. There's been a lot of chat around town,
Speaker 3: particularly here in Sydney about small or startups, and there's
Speaker 3: been a lot of memes around it. Now having Anthony
Speaker 3: Alberniezy become your partner, but he doesn't turn up to
Speaker 3: your partner until you sell the business how to profit
Speaker 3: He's not going to one of the memes I saw,
Speaker 3: he said he's not going to help you at any
Speaker 3: stage during the game, but he's going to put his
Speaker 3: hand out for forty seven percent when you eventually sell
Speaker 3: and make a profit. What do you think about that
Speaker 3: part of the couple of games tax discussion relative to
Speaker 3: business startups?
Speaker 2: Yeah, yeah, absolutely.
Speaker 4: I think it's a massive risk and the last thing
Speaker 4: that you want to do when you have business investment
Speaker 4: at a historical low versus a relative to GDP, Like
Speaker 4: we've got very poor business investment in the country.
Speaker 2: That's another reason why I've got you know, poor proactivity growth.
Speaker 4: But the last thing you want to do is stop
Speaker 4: people from having a go right like you want you
Speaker 4: want people to go you know, what, I'm going to
Speaker 4: take a risk and I'm going to try and start
Speaker 4: So I've got an idea, and I'm going to try
Speaker 4: and start up a new business, no matter what it is,
Speaker 4: because often you know, and I've been there, I know
Speaker 4: you've been there. But when you when you start up
Speaker 4: these things, you take a massive hit to your salary.
Speaker 4: I've never employed other people, but if you did, you
Speaker 4: obviously you know you often can't afford to pay the
Speaker 4: market rate, so you try and pay them through equity
Speaker 4: or whatever. So you know, you you you basically give
Speaker 4: up a lot, right, and you often start off with
Speaker 4: a business valuation of zero, and you work your butt off.
Speaker 4: It often takes takes a toll on your family's riibly stressful.
Speaker 4: You work harder than you ever have before, but you
Speaker 4: earn less than your work previously because you're taking a
Speaker 4: risk in you know, there's a growth phase and that
Speaker 4: sort of thing. You The last thing you want to
Speaker 4: do is stop people from having to go and doing that.
Speaker 4: And I think one of the biggest risks from these
Speaker 4: capital gain tax changes is you actually are actually going
Speaker 4: to stifle entrepreneurs and you're also going to stifle venture capitalists.
Speaker 4: So venture capitalists, Well, while they bother investing in Australia.
Speaker 4: If you've got these sorts of rules, when we've got
Speaker 4: one of the highest capital gains tax you know, regimes
Speaker 4: in the world, you just go and invest somewhere else.
Speaker 4: So ultimately, I think that's one of the biggest risks
Speaker 4: from this budget.
Speaker 2: Now.
Speaker 4: I'm a little bit hardened by the fact that I
Speaker 4: went through some of the budget fact sheet on the
Speaker 4: capital gains tax and the negative gearing. There was a
Speaker 4: paragraph in there saying that they're going to consult with
Speaker 4: the startup business, the venture capitalists, that sort of thing,
Speaker 4: and there has been true sure Charmers and Claire O'Neil,
Speaker 4: the Housing Minister, was quite in the media the last
Speaker 4: few days saying that they're going to consult on that
Speaker 4: and the rules aren't finalized, etc. But I'm really hoping
Speaker 4: that the federal government carves out startups and venture capital
Speaker 4: and that sort of thing from these rules because it's
Speaker 4: the last thing we want, mate, Like, the last thing
Speaker 4: you want to do is to stop people from having
Speaker 4: to go, because if you do that, you're going to
Speaker 4: ultimately stiffle productivity, growth, stiffle new business creation. Staff for
Speaker 4: the economy and that's ultimately going to lead to lower
Speaker 4: living standards. And also I mean that the government probably
Speaker 4: end up collecting lower tacks anyway because a business that's
Speaker 4: not started or creating the first place where you can't
Speaker 4: tax it right, So that that was my biggest fear
Speaker 4: with these capital gains tax rules is actually the impact
Speaker 4: on new startups. And I think they've yeah, I really
Speaker 4: hope they.
Speaker 1: There's a lot of chat. There's a lot of Australians who.
Speaker 3: Set the business up here in Australia, but in order
Speaker 3: to raise money they've had to go off to San
Speaker 3: Francisco to raise money. You know, they're in Silicon Valley
Speaker 3: because that's where all the capital is or that's what
Speaker 3: all the big vcs are.
Speaker 1: Well, we've got them here too, but the really big ones.
Speaker 3: Who probably are as tough on those people raising money
Speaker 3: that they go over the United States. But the chat
Speaker 3: over there and the means that are coming out from
Speaker 3: over there at the moment, because I sort of follow
Speaker 3: this stuff is about flipping out of Australia in terms
Speaker 3: of ownership. Flip your business into the US because the
Speaker 3: tax rate a couple of games in the US is
Speaker 3: only fifteen percent relative to here is forty will be
Speaker 3: forty seven percent, issuing yourself for quite a lot of money,
Speaker 3: which is, by the way, the assumption that all startups make.
Speaker 3: Otherwise that would be business in the first place. They
Speaker 3: are ambitious and they believe in themselves, and they're just
Speaker 3: going to go overseas, which we're going to have a
Speaker 3: brain drain, but we're also going to start, you know,
Speaker 3: redomiciling our intellect into other countries. I just think that's
Speaker 3: bad economic policy, if not just bad policy generally.
Speaker 1: Would you reflect on that?
Speaker 2: Yeah? Absolutely, mate.
Speaker 4: That Again, it's the last thing you want, the last
Speaker 4: thing you want to do, is to stop new business creation,
Speaker 4: to stop you know, entrepreneurs from having to go because
Speaker 4: you know, let's be honest, these rules were around, you know,
Speaker 4: a decade or so ago. We may not have got
Speaker 4: a lession, we may not have got canvor who are
Speaker 4: like great Australian success stories.
Speaker 2: I'm not saying we.
Speaker 4: May have got those things, but you know, you're basically
Speaker 4: less than the chance of having those sorts of companies.
Speaker 4: But not even them, like they're obviously the big ones
Speaker 4: that we know about, right, they're the huge success stories.
Speaker 4: But there are a lot of you know, medium sized
Speaker 4: success stories which most of us have never heard about.
Speaker 4: Like just you know, I met people all the time
Speaker 4: who were successful in business, but they're just not publicly known, right,
Speaker 4: But a lot of those people or businesses start from somewhere,
Speaker 4: and you don't want to stop people from having to
Speaker 4: go because, let's be honest, when you start a business,
Speaker 4: you know that there's a good chance it's not going
Speaker 4: to succeed.
Speaker 2: But you're sort of believing yourself a lot of that.
Speaker 1: I'm serious.
Speaker 4: Yeah, it's very stressful, it is. It's incredibly strong. I
Speaker 4: was there, like I was never in the stage of
Speaker 4: getting divorced. But when I started macro business, I was
Speaker 4: working at Gold and Zachs getting a very good salary
Speaker 4: and I quit that and I took like a two
Speaker 4: third it's maybe not even be three quarter pay cut,
Speaker 4: and I was working out in my bedroom and I
Speaker 4: reckon I was working three times as hard and it
Speaker 4: was incredibly stressful.
Speaker 2: It was a most.
Speaker 4: Stressful year of my life. And it took a couple
Speaker 4: of years to for my salary to sort of catch
Speaker 4: up to where it was. Basically three years to get
Speaker 4: back to even where I was to get close to it,
Speaker 4: so you know, you do the last thing you want
Speaker 4: to do is stop that stop. Well, not everyone's going
Speaker 4: to not do it, but you're on a lesson the
Speaker 4: chance of people giving the crack right, and these rules
Speaker 4: will unfortunately just encourage people to go and work for
Speaker 4: the government, safe job whatever, steady income or large corporation whatever,
Speaker 4: Whereas you want people to actually step out and become
Speaker 4: the next canvas or the next the next big thing,
Speaker 4: or even just a good middle sized business which none
Speaker 4: of us have ever heard of, but it's very profitable.
Speaker 2: You know.
Speaker 4: There's lots of those across the economy as well.
Speaker 1: You know, but also we probably if I got brought
Speaker 1: it out a little bit more. I mean, you want
Speaker 1: people to do it.
Speaker 3: I did in the Wizard days, took the banks on
Speaker 3: and reduced the interest rate that people had to pay
Speaker 3: on their mortgages and made it more competitive, which allowed
Speaker 3: more people to get into the homes or even better,
Speaker 3: even more relevant people who are out there now trying
Speaker 3: to build health tech solutions to dementia or whatever it is.
Speaker 3: And let's say they kick a goal, they don't want
Speaker 3: to have to be paying a ridiculous amount of income tax.
Speaker 3: You've got to incentivize them somehow with a couple of
Speaker 3: games tax discounts that were previously variable.
Speaker 1: That type of thing is important for.
Speaker 3: The benefit of Australia because all Australian are going to
Speaker 3: get the benefit of that.
Speaker 1: I mean, every Australian got the benefit of.
Speaker 3: What Wizard Aussie rams what we did, you know, and
Speaker 3: not everybody went with us, but twenty percent of the
Speaker 3: population did. And probably we could say twenty percent of
Speaker 3: the population end up being able afforded by a home
Speaker 3: which they may not may never have been able to
Speaker 3: afford if we had to come into the game and
Speaker 3: we benefited from as a couple of games tax discounts,
Speaker 3: all of us or all of us three players. I
Speaker 3: just see this as unfair and I actually be talk
Speaker 3: about in the generational inequity. That just means that that
Speaker 3: opportunity is not now not available unless they changes legislation,
Speaker 3: but is not available to the young people who are
Speaker 3: going to come up with the idea that I came
Speaker 3: up with thirty years ago.
Speaker 4: That's not that's right, because yeah, can I co add
Speaker 4: to that, So so obviously you know someone my ag
Speaker 4: you're right. I'm forty eight, I'm assuming, yeah, Stune a
Speaker 4: bit older, but you know we're sort of has been front.
Speaker 2: Yeah yeah.
Speaker 4: So these rules, you know, impact the people who are
Speaker 4: coming up now, right, So it's bad for them. But
Speaker 4: you know to your point, mate, I mean you said
Speaker 4: that yourself and Rams and the others, you know, twenty
Speaker 4: percent of people use you. Well, it's actually one hundred
Speaker 4: percent of Morning Child has benefit from me because you
Speaker 4: put competitive downward pressure on CBA, NAB and all these
Speaker 4: other guys. So even if people took loans through them,
Speaker 4: if you know, if Wizard and Rams and the others
Speaker 4: hadn't come up, they would have charged more on those mortgages.
Speaker 4: So you're the competitive pressure that you applied actually lowered
Speaker 4: mortgage costs for everybody.
Speaker 2: And that's the sort of thing you want.
Speaker 4: You don't want people not having to go and starting
Speaker 4: up businesses, which can then pressure the big boys, right,
Speaker 4: you know, someone comes up and can and can do
Speaker 4: it better than the established players. You want people to
Speaker 4: have a crack at that, because even if customers don't
Speaker 4: end up using those people will then force the big
Speaker 4: boys of town, the beginning of town then offer better deals.
Speaker 4: And you know this is again, the biggest risk from
Speaker 4: these capital gains tax changes. And look, I am somewhat
Speaker 4: hopeful that the government's going to backtrack on this because
Speaker 4: I think the pushback has been big enough and the
Speaker 4: fact that they've at least flagged that they're going to
Speaker 4: consult et cetera. I think they will end up, I'm
Speaker 4: hoping carving out startups, et cetera from it, which if
Speaker 4: they do, that's great.
Speaker 3: Is there anything else that you would like to call
Speaker 3: out and from this budget that we haven't covered off
Speaker 3: because you're the economists and I'm not and what else?
Speaker 2: Yeah?
Speaker 4: So yeah, So I think also the thirty percent minimum
Speaker 4: CGT is a bit of bits coming as well. So
Speaker 4: that was clearly target itself under retirees. So the reason
Speaker 4: why I think is a bit scummy is if because
Speaker 4: because it doesn't apply if you're on a part pension.
Speaker 4: So if you receive some sort of government benefit, you're
Speaker 4: excluded from those rules. But if you're someone who's just
Speaker 4: above the part pension levels, you're not a uber rich retiree,
Speaker 4: but you're self funded. Basically, you know, if you're a
Speaker 4: self phone retiring, you've got a shared portfolio and you
Speaker 4: want to sell some of that portfolio every year to
Speaker 4: help fund your retirement. Now, if you sell and you're
Speaker 4: not working, right, So if you sell under forty five
Speaker 4: thousand dollars worth of that portfolio, you'll pay you know,
Speaker 4: about a sixteen percent capital gains tax because you're under
Speaker 4: the thirty percent threshold. So thirty percent threshold kicks in
Speaker 4: at forty five k. So you know that there would
Speaker 4: be a lot of self phune or retirees you just
Speaker 4: want to sell off parcels of shares every year to
Speaker 4: help fund their retirement. But under these rules, they now
Speaker 4: help me charge the minimum thirty percent tax rate. Wow,
Speaker 4: which I think is a bit scummy.
Speaker 1: That's as one, Yeah, it is, it is.
Speaker 4: And look that that wasn't communicated. So before the budget
Speaker 4: night we all pretty much in the week late up,
Speaker 4: we pretty much knew what the rules is going to be.
Speaker 4: But that thirty percent minimum capital gains tax I thought
Speaker 4: was a bit scummy, And that was clearly designed just
Speaker 4: to have a go at the cell phone of retirees.
Speaker 4: And it just means that again, if you're self phone retiring,
Speaker 4: you want to sell off twenty grand of shares every
Speaker 4: year to help funder your retirement. We're now you going
Speaker 4: to tax at thirty percent on that rather than your marginals.
Speaker 4: That's very unfair, it is. Yeah, they has sort of
Speaker 4: come out when they're not looking.
Speaker 3: And these are people to pay the taxes their whole lives,
Speaker 3: people who, as you say, aren't rich, they're just they've
Speaker 3: got enough, They've accumulated enough, They've probably made a whole
Speaker 3: lot of sacrifices to get to that point. These people
Speaker 3: probably don't vote for the right party either. So, I mean,
Speaker 3: how much of this is Do you think he is
Speaker 3: vote driven? Like in terms of research?
Speaker 4: Yeah, yeah, I mean I think so. I think there
Speaker 4: it was obviously groundswell to make the tax rules fairer
Speaker 4: and that sort of thing. And again with residential property,
Speaker 4: you know the negative gear in on established hous and stuff.
Speaker 2: I get it.
Speaker 4: But there's just a few little, few little quirks like
Speaker 4: this one, which I think is a bit dodgy. And
Speaker 4: there's also highpothetical cases whereby if you're if you're a
Speaker 4: couple and you're saving up for a home and you
Speaker 4: say two people modest incomes, you know, you could have
Speaker 4: two people earning forty five ish thousand dollars whatever a
Speaker 4: year or just under that, and they're you know, but
Speaker 4: they have a dream of buying home eventually like it,
Speaker 4: maybe even just a small apartment or something, and they
Speaker 4: have a shared portfolio while they're hoping to buy in
Speaker 4: ten years time or something, and they're putting money in
Speaker 4: the share market. Well, now if they sell, they're going
Speaker 4: to be charging more than thirty percent, which I think
Speaker 4: is also a bit dodgy. Now, some people say, oh,
Speaker 4: you can use one of those first home home by
Speaker 4: savings accounts or whatever, but it's not the point. I
Speaker 4: don't know why they've just brought in a thirty percent
Speaker 4: minimum tax rate on capital gains when they could have
Speaker 4: just left it at your marginal tax rate, which I
Speaker 4: think would have been fairer.
Speaker 3: You're right, I don't think it's enough been talked about this.
Speaker 3: From now on, the lowest amount of tax to pay
Speaker 3: on the caprial gains is thirty percent.
Speaker 4: Yeah, but it is on the real gain, right, so
Speaker 4: it'd be the inflation adjusted gain. So yeah, you've got
Speaker 4: a net out inflation.
Speaker 3: But even so, inflation is not that high, So, like
Speaker 3: you know, over a short period of time, it is
Speaker 3: probably still going to be nearly going to be it's
Speaker 3: going to be quite high. So as opposed to I
Speaker 3: think what you're saying is that that income, just that
Speaker 3: gain should just be added to my income. And if
Speaker 3: I'm on one of the low rates of tax, so
Speaker 3: I'm sort of down in the seventeen percent bracket or
Speaker 3: the twenty percent bracket, I should really be paying twenty
Speaker 3: percent tax.
Speaker 2: No more.
Speaker 3: I shouldn't be getting penalised because of absolute capital game.
Speaker 3: Before we used to get a discount when we made
Speaker 3: a capri gan. Now we're going to get penalized on
Speaker 3: this rule when we make a capital gain. If we
Speaker 3: are in the lower tax bracket already, which means we're
Speaker 3: not a high income person, we're probably a battler doing
Speaker 3: it tough. And by the way, self under retires the
Speaker 3: very people we should be encouraging because they have less
Speaker 3: drag on the economy because we're not paying him a pension,
Speaker 3: they're not getting anything. I mean, you should encouraging those people.
Speaker 3: Are actually holding them up and putting them on our
Speaker 3: shoulders seeing how wonderful they are relative to the you know,
Speaker 3: the dragon fiscal policy in the country.
Speaker 2: Yeah. Absolutely.
Speaker 4: And the thing that is, it does make being in
Speaker 4: that part pension range. I think it's I think it's
Speaker 4: currently about if you've got under one point two million
Speaker 4: dollars of assets, I think you still qualify for part pension.
Speaker 2: That's what it was a few years ago.
Speaker 4: Might have changed, so my data mightn't be quite a
Speaker 4: totally up to date, but it makes that very valuable
Speaker 4: because if you if you receive a government payment of
Speaker 4: some sort like a part pension, you don't qualify for
Speaker 4: that thirty percent.
Speaker 2: That's my reading of the rules.
Speaker 4: So it means that if you're if you've got to
Speaker 4: say one point one million dollars of assets, and you're
Speaker 4: getting in a small part pension where you can sell
Speaker 4: your shares off and pay your marginal tax rate without
Speaker 4: the thirty percent minimum. So it doesn't mean that you
Speaker 4: have this big effective marginal tax rate kicking in once
Speaker 4: you go off that part pension level, and.
Speaker 3: It could be over over the one point one million
Speaker 3: or whatever the number is, by a dollar, and all
Speaker 3: of a sudden you're penalize for no real logical reason.
Speaker 2: Least.
Speaker 3: Look, there's been fantastic by the way, I'm I'm going
Speaker 3: to take that up with the media myself. Thanks very
Speaker 3: much for your honesty, like as usual yours. Your views
Speaker 3: on these things are obviously well accepted by most Australians,
Speaker 3: particularly myself, but you're you're honesty in the way you've
Speaker 3: broken this down and I feel like I'm listening to
Speaker 3: you on Saturday afternoons on two GB with Luke. Yeah,
Speaker 3: and actually, you know, I don't know who else listens
Speaker 3: to it, but I listened to it and which where
Speaker 3: I got the idea about talking to you again, because
Speaker 3: I just like the sort of frankness and the practical
Speaker 3: stuff and the simplicity in terms of the way you
Speaker 3: explain things. And I think I really want to thank
Speaker 3: you for it. It's been great, fantastic. I've enjoyed it mate.
Speaker 2: Yeah, thanks marketing Ton