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Speaker 1: Hi, Mike Boris and this is straight talk, Chris Joy,

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Speaker 1: Well do straight talk.

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Speaker 2: Thanks for having me, mate.

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Speaker 1: So, yeah, you're still there, you know, Like I know

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Speaker 1: you're downplay it, but you know you're a portfolio manager.

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Speaker 1: There's which loads to describe yourself as, amongst many other

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Speaker 1: millions of things that I know you do, which we won't

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Speaker 1: talk about today. Portfolio manager at Cooler Bar. Tell me

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Speaker 1: a little bit of a story about Coolerbart and in

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Speaker 1: terms of what you are doing now, like what's what's

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Speaker 1: Coolerbar doing right now? In terms of intergesters.

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Speaker 2: Yeah, so we run fifteen billion across about fifty portfolios.

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Speaker 2: I have fifty three professionals around the world. We have

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Speaker 2: officers in London, Miami, Auckland, Sydney, in mon I'm smiling

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Speaker 2: because you've known me since I was at university and

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Speaker 2: you you kind of backed me the whole way along.

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Speaker 2: So I really appreciate your support.

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Speaker 1: Mark, But it's got nothing to do with me, mate,

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Speaker 1: But you've done it all on your own. By the way,

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Speaker 1: for those guys who don't know that, this bloke is

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Speaker 1: the most dynamic, hard working basket I've ever met my

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Speaker 1: wife and he's got a million ideas and the actually

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Speaker 1: actually executes on him, which is the reason I backed him.

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Speaker 1: I did a purely out of economics. From my appointment,

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Speaker 1: I did very well out of him. So don't get

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Speaker 1: him wrong, don't miss into it. But but I did

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Speaker 1: back him, and I believe in him, and I've known

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Speaker 1: his family for a long time too. But mate, what

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Speaker 1: are your portfolios covering off now? So originally we didn't

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Speaker 1: enhance cash fund but you have a lot more things

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Speaker 1: going on now.

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Speaker 2: Yeah, So today we run enhanced cash strategies, long short

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Speaker 2: credit strategies. I mean, we do everything in fixed income

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Speaker 2: sovereign strategies. Today. We're the biggest trader of ossie Commonwealth

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Speaker 2: government bonds in the world, so we are about five

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Speaker 2: to six percent of the total market turnover. I think

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Speaker 2: we're bigger than anyone according to my guys estimates. But

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Speaker 2: I have fifty three guys around the world and girls.

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Speaker 2: We have twelve traders, nineteen analysts, and we really specialize

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Speaker 2: in just pricing the correct or fair value interest rate

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Speaker 2: for a bond to pay us Australian assets. Our global global,

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Speaker 2: very global. Yeah, so two thirds of our trading. We

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Speaker 2: trade about a billion a day last year we bought

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Speaker 2: and sold close to one hundred and fifty billion. But

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Speaker 2: our edge is we're highly quantitative, so we have eighty

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Speaker 2: different bond pricing models we use around the world. But

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Speaker 2: really what we're trying to do is conceptually simple, what

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Speaker 2: interest rate should CEBA pay us on a three year

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Speaker 2: seeing bond, or A and Z pay us on a

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Speaker 2: five year subordinated bond, or Australia pass on a ten

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Speaker 2: year government bond? And we do that all around the

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Speaker 2: world all day. And we're incredibly active, very systematic, very

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Speaker 2: quantitative and just very rigorous in figuring out what the

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Speaker 2: fair value interest rate is. And what we really want

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Speaker 2: to do mate is find a bond paying seven percent

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Speaker 2: that only pay six and a half percent, and when

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Speaker 2: that interest rate drops down to our fair value target,

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Speaker 2: we get a little bit of price appreciation and then

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Speaker 2: we rinse and repeat. Yeah capital gate, Yeah, get a

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Speaker 2: capital gain exactly. And then today we do offer strategies

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Speaker 2: that actually have very high yields as well. We use

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Speaker 2: some gearing. So you know our floating at HIG Yield fund,

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Speaker 2: which is also available as an ATF. The ticker is

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Speaker 2: a WYLDDX. It's paying about a seven and a half

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Speaker 2: percent weighted average interestrate on its portfolio, and the portfolio

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Speaker 2: is ostensibly very high grade. So the portfolio is seventy

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Speaker 2: percent major bank senior ranking bonds and thirty percent major

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Speaker 2: bank subordinated bonds. The average credit rating is very higher

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Speaker 2: A plus. It's daily liquid, it's floating rate. But we

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Speaker 2: use about sixty five percent gearing to boost the interest

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Speaker 2: rates to the bonds are paying about five percent and

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Speaker 2: we're getting seven and a half percent because we're using

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Speaker 2: that gearing to boost the interest round the portfolio. But

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Speaker 2: cool by capital Investments we set up in twenty eleven

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Speaker 2: with a lot of help from you and your nephew.

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Speaker 2: Luke still works for me. We were just talking about

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Speaker 2: the fact that, look, if you're listening, made you could

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Speaker 2: emulate your uncle's aesthetic appeal and dress sense. Luke's really

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Speaker 2: struggles the way he presents himself.

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Speaker 1: And that's because if his father is my.

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Speaker 2: Yeah, yeah, Adrian, but Luke's our chief operating officer, a

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Speaker 2: brilliant boy, and so yeah, that's that's kind of what

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Speaker 2: we do. We just trade. We trade more actively in

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Speaker 2: austrain fixed income, I think than any other party locally.

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Speaker 2: But we are one of the most active traders in

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Speaker 2: the world, you know, so over the last twenty four

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Speaker 2: hours we probably traded a billion dollars Aussie in the

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Speaker 2: US and European bond markets. And that's why we need

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Speaker 2: a global team. In global officers. We just opened up

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Speaker 2: the Miami office. We've got ten guys in London, five

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Speaker 2: traders in London, five analysts in London, and no one

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Speaker 2: really does what we do. Like we're very differentiated in

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Speaker 2: terms of our approach. Typically in fixed income, it's just

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Speaker 2: you hold too maturity, you buy a bond, you get

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Speaker 2: the yield on the bond less the fees. You don't

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Speaker 2: trade it around. And if you want more yield, you

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Speaker 2: take more risk, you take more liquidity risk, or more

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Speaker 2: default risk, or more interest rate risk, and we don't

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Speaker 2: do that. We focus on super liquid bonds that are

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Speaker 2: very low volatilely that are floating rate, that really don't

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Speaker 2: have any default risk, and we generate the total return

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Speaker 2: through trading. So in the last twelve months, you know,

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Speaker 2: our fleeing right how you'd found in a long shore

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Speaker 2: credit fun would have returned nine to ten percent after fees,

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Speaker 2: and they're currently paying it was around seven seven and

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Speaker 2: a half percent.

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Speaker 1: So that means by definition, you gotta understand Instagram markets,

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Speaker 1: you and your team. That is, so let's talk about

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Speaker 1: We'll talk about Australia in the middle of an election period,

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Speaker 1: so it's a bit of a bit tricky, but let's

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Speaker 1: let's park the election period to the side. You know, today,

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Speaker 1: on the day we're doing the podcast, we'd we've got

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Speaker 1: as a big board meeting and there's probably no point

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Speaker 1: because by the tom this goes THEEAH, there's probably the

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Speaker 1: decision is already going to be made. But if we

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Speaker 1: look at if I look forward to May, the main meeting,

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Speaker 1: which I think is around seventeenth y May, off the

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Speaker 1: back of the April numbers, which would be the March

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Speaker 1: quarter numbers, which are pretty important to come out. Where

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Speaker 1: do you see, as where you guys seeing the official

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Speaker 1: rate of interest rates in Australia. I'm not on talking

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Speaker 1: about bomb marks, they're not talking about bbs. I'm talking

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Speaker 1: about just the official rate which off the back of

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Speaker 1: which homeline rates get set. Where do you see official

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Speaker 1: rates for the calendar year of twenty five And you

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Speaker 1: could be till his subject to this subject, because of

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Speaker 1: course we will be subjected to data, where's it going.

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Speaker 2: Yeah, So in twenty twenty three and twenty twenty two,

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Speaker 2: we argued rates need to go a lot higher, and

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Speaker 2: I think some folks were calling for rate cuts in

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Speaker 2: twenty twenty three and we said, no, they need to

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Speaker 2: go higher, and the RBA only lifted its cash rate

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Speaker 2: to four point three five percent, pretty much every other

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Speaker 2: developed central bank New Zealand, Canada, the UK US went

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Speaker 2: to five five and a half and in twenty twenty

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Speaker 2: four there were a lot of calls for rate cuts

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Speaker 2: rate hikes. The inflation data was pretty brisk in twenty

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Speaker 2: twenty four and actually got revised up. If they'd had

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Speaker 2: that information the revisions, they almost certainly would have hiked

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Speaker 2: once more in twenty twenty four. But when they had

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Speaker 2: that opportunity to hike, they didn't see that revised data.

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Speaker 2: But they didn't cut in twenty twenty four, and that

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Speaker 2: was that. Our view was they're going to hike in

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Speaker 2: twenty two for again again, or they're not going to cut.

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Speaker 2: And a lot of people the market, for example, the

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Speaker 2: financial market and Mark was pricing in quite big rate

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Speaker 2: cuts from the RBA last year, and we said that's

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Speaker 2: that's all shit. That's not going to happen. You need

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Speaker 2: the beginning of the year. Yeah, you're exactly right, like

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Speaker 2: at the start of the year. And we look at

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Speaker 2: the FED. The start of the year, the market was

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Speaker 2: pricing in one hundred and seventy five bases points of

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Speaker 2: rate cuts from the FED, and we said, that's beast,

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Speaker 2: it's not going to happen. They're going to cut that

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Speaker 2: fraction of that, And the market was pricing the FED

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Speaker 2: starting to cut in March, and then they had the

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Speaker 2: RBA a bit later than that, and of course the

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Speaker 2: RBA didn't cut at all, which was the right decision,

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Speaker 2: and the FED only started cutting in September and they

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Speaker 2: only cut by one hundred and now they're completely on

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Speaker 2: the sidelines. But in December this year we started publishing

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Speaker 2: in my run, a weekly column for the Financial Review.

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Speaker 2: I started saying the AFR that I thought they cut

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Speaker 2: in February.

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Speaker 1: Why what changed your mind?

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Speaker 2: Yeah, so not the data per se. But in December

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Speaker 2: the RBA completely changed the tune and they surprise everyone,

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Speaker 2: they shifted something called a easing bias for no reason.

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Speaker 2: But we thought we figured out why they shifted, and

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Speaker 2: that was because we knew in December. The inflation data

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Speaker 2: the next month in January, and they met in February

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Speaker 2: would be.

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Speaker 1: Soft you're talking about the December quarter, Yeah.

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Speaker 2: December quarter. Yeah, So we the December quarter data on

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Speaker 2: five from me and I think it was very good memory. Yeah,

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Speaker 2: so we knew it was going to print point five. Ye, Well,

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Speaker 2: that was our forecast and we published that number in December,

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Speaker 2: and for statistical reasons, there was good grounds to believe

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Speaker 2: the final quarter of twenty twenty four was going to

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Speaker 2: be a soft print.

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Speaker 1: So just just explain Chris a little bit more about that.

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Speaker 1: So just for our audience sake, because he's one of

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Speaker 1: the fastest talkers I know, because he's one of the

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Speaker 1: fastest things I know. But just to put into context,

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Speaker 1: explain why point five for the December quarter and I

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Speaker 1: was for the last three months of twenty twenty four,

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Speaker 1: giving such an idea, Why is an important relative to

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Speaker 1: where the Reserve Bank wanted to be once a bit

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Speaker 1: between two and three? Why is that the case that quarter?

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Speaker 1: Why is that quarter so important?

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Speaker 2: Well that a point five outcome would imply that, you know,

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Speaker 2: on a short term basis, the core inflation rate in

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Speaker 2: Australia was actually hitting the bottom of the target bad.

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Speaker 1: They ran two, yeah, exactly four times point five.

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Speaker 2: Because they target officially the midpoint of two to three,

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Speaker 2: so they target two and a half and point five

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Speaker 2: is actually at the bottom of that range.

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Speaker 1: Is that correct it? But historically though, they've been only

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Speaker 1: interested on the historical inflation number, which is the point

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Speaker 1: the quarter for the sorry, the point five for that quarter,

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Speaker 1: but every other quarter before that would have given you

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Speaker 1: a three point two correct? Why do they change? Why

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Speaker 1: do you think they changed there?

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Speaker 2: Well, you know, so this is the little puzzle. Yeah, okay, so.

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Speaker 1: This is the puzzle. I ain't get so very easy to.

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Speaker 2: Understand what happened. So Michelle Bullock a few weeks before

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Speaker 2: the December board meeting had said we need at least

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Speaker 2: two quarters of softing fflation data or positive inflation data

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Speaker 2: to be comfortable that we can lower rates. And then

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Speaker 2: in December we all wake up, and she turns around

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Speaker 2: and says in her statement after the board meeting that

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Speaker 2: basically they've adopted an easy bias and they're laying the

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Speaker 2: groundwork we felt to cut in February, and there was

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Speaker 2: only one new data print available between December and the

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Speaker 2: February meeting, which was the generary release, which was the

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Speaker 2: fourth quarter data, So she kind of had busted her

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Speaker 2: own decision making rule that she'd announced only a few

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Speaker 2: weeks prior. So you take the fact that you've got

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Speaker 2: this inconsistency and their messaging why are they so keen

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Speaker 2: to set up the grounds for potential easing in February,

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Speaker 2: and the fact that they knew and we knew that

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Speaker 2: we were forecasting a point five trim mean print and

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Speaker 2: at printed took point five for the fourth quarter, which

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Speaker 2: was implying that it was annualizing around two. But crucially,

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Speaker 2: the trajetory of the data was heading even though the

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Speaker 2: twelve month rate might have been above three, the trajedory

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Speaker 2: of that data was heading towards target. And remember, they

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Speaker 2: think that the normal or neutral interest rate in Australias

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Speaker 2: around three and a half. There have been some recent

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Speaker 2: reassessments of that where it might be closer to three.

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Speaker 2: But if they're at four point three five and they're

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Speaker 2: you know, they think that through the cycle interest rate

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Speaker 2: that is neither stimulitary for the economy or contracting is

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Speaker 2: around three and a half, you can mount the case

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Speaker 2: if you're them, and you want to cut, and near

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Speaker 2: a bit dubbish and maybe you're a bit politically compromised

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Speaker 2: that it would be pretty nice to kind of punch

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Speaker 2: out an interest rate cut in February, knowing that an

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Speaker 2: election would be held after then, and that cutting in

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Speaker 2: the middle of an election in April would be difficult.

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Speaker 2: Right just now, which is now, that's a situation we

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Speaker 2: sit in. So we did not think they should cut.

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Speaker 2: So I was very clear. I wrote this repeatedly in

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Speaker 2: the Financial Review, and I think everyone understands is we said,

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Speaker 2: we don't think there's any case to cut, but we

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Speaker 2: think but we think they will cut in February, So

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Speaker 2: we forecast the February cut. Yeah, yeah, one hundred percent.

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Speaker 2: We're very very clear. I wrote it repeatedly. We don't

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Speaker 2: think they should cut, but we think they will cut.

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Speaker 2: And people were a bit confused because we've been very

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Speaker 2: hawkish in twenty twenty four seving no cuts and no

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Speaker 2: case for cutting. But I knew people would get confused,

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Speaker 2: so we made it very very explicit that we thought

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Speaker 2: they would cut in February, but we didn't agree with

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Speaker 2: the logic, right because by her own logic, she needed

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Speaker 2: two quarters of data and suddenly she's very comfortable with

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Speaker 2: one quarter of data. And the key point is the

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Speaker 2: point five percent trim MI in print was statistically biased.

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Speaker 2: So all the smart forecasters knew that it was going

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Speaker 2: to print off for some statistical reasons, right, so it

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Speaker 2: wasn't necessarily a high quality signal. And then they cut

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Speaker 2: in February. So then this all bigs a question. The

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Speaker 2: puzzle was, well, why did they cut? You know, if

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Speaker 2: you know what we know, which was maybe it was

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Speaker 2: statistically biased. The cost of living subsidies that Jim Chalmers

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Speaker 2: has given the community, and that the state governments have

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Speaker 2: also replicated, they are sandbagging the inflation data. They're artificially

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Speaker 2: suppressing the inflation data. They're doing that deliberately to try

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Speaker 2: and get the RBA to cut, and lo and behold

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Speaker 2: they've cut. But obviously when they're cost living subsces expired,

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Speaker 2: the data pops back up. And you know, my simple

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Speaker 2: kind of calculus is Charmer's appointed Bill Michelle Bullock. So

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Speaker 2: he single handedly selected her, and it was a controversial

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Speaker 2: appointment in the sense that he was expected to appoint

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Speaker 2: someone outside of the bank and he went for the inside.

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Speaker 2: So he hand selected Michelle Book, he hands selected her

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Speaker 2: deputy Houser, and he's appointed a lot of the board members.

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Speaker 2: And now there's this new committee that will set interest

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Speaker 2: rates that he's also selected.

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Speaker 1: So do you think it was politically Do you think

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Speaker 1: there was? I don't think. I'm not asking you. Did

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Speaker 1: he bring over? So listen, I want to rate reduction,

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Speaker 1: but I.

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Speaker 2: Have to we now know actually the Financial Reviews published

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Speaker 2: a lot of information on this. He's jawbone the heck

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Speaker 2: out of the RBA, like he's absolutely put them under

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Speaker 2: enormous pressure. And you've got to remember he's his idol

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Speaker 2: is Paul Keating. He wrote his phdwn Paul Keating, and

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Speaker 2: Paul Keating was famous for jaw boning and haranguing the RBA.

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Speaker 2: And so I just think he's pulling straight from the

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Speaker 2: por Keating playbook. I actually don't have a huge issue

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Speaker 2: with it at all.

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Speaker 1: Like you know, Castella is to do it against the banks.

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Speaker 2: Yeah, there's you know, people say that the RB he's

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Speaker 2: politically independent, the politicians shouldn't give them heat. I agree

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Speaker 2: that the politicians shouldn't create too much heat for them.

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Speaker 2: But if he wants to have a go and say, hey,

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Speaker 2: here are the reasons I think you should cut I

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Speaker 2: personally think he's entitled to make that case. So if

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Speaker 2: Jim Chalmers is listening, I would just say, dude, I've

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Speaker 2: got no problem with you harassing her. But he did, Like,

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Speaker 2: that's very clear that I was published a lot of

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Speaker 2: stuff showing that. Like you know, mind standing is he

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Speaker 2: put a lot of pressure on the board, and he

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Speaker 2: has an appointee to the board, his Treasury secretary as well.

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Speaker 2: So Steve Kennedy sits on the board.

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Speaker 1: But that board won't do But that board didn't meet

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Speaker 1: at that meeting though the new board didn't meet. It

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Speaker 1: meet the meeting of this meeting at the April meeting.

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Speaker 1: But they didn't. They didn't meet in February meeting.

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Speaker 2: No, no, But Steve Kennedy sits on the board. Yeah, who

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Speaker 2: works for Charmers. Yeah, Charmers has pressured the RBA much

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Speaker 2: more directly than any recent treasures in the nineties. Yeah.

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Speaker 2: But by the way, again, i'd say I have no

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Speaker 2: problem with that.

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Speaker 1: I think it's appropriate.

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Speaker 2: My mate John here the fr he appropriately says that

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Speaker 2: that's inappropriate. I think I can perfectly understand how people

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Speaker 2: think that's inappropriate, But I say fair play to Jim Chalmers,

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Speaker 2: Like if I was in his shoes, I'd probably be

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Speaker 2: putting pressure on the RBA. I've got no problem he

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Speaker 2: can make the intellectual case like it's a you know,

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Speaker 2: we have free speech. Sure we recognize their politically independent,

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Speaker 2: but there's no problem with politicians prosecuting their intellectual agenda.

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Speaker 2: Like you know, I think he should be doing everything

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Speaker 2: possible if he honestly believes, and he probably does believe

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Speaker 2: that rates should be lower. And our mate Stephen Cook

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Speaker 2: Coulis has argued forever and to day rates should be lower.

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Speaker 2: He obviously is very sympathetic to the labor cause.

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Speaker 1: Although he and I disagreed on that February meeting because

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Speaker 1: I said, based on what they've done historically, we should

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Speaker 1: not get we will not get a rate reduction in February.

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Speaker 1: I think we'll get later on in the year. But

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Speaker 1: I didn't know.

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Speaker 2: Well he knows. I was consistently like we published relentlessly

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Speaker 2: from to He.

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Speaker 1: And I discussed it, and I discussed what you're going

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Speaker 1: to publish.

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Speaker 2: Yeah, so we called the February cuver very very clearly.

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Speaker 2: But it come back to I think the interesting thing

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Speaker 2: around the political nexus is what we know as charmers

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Speaker 2: has put a lot of pressure on directly on Bullock

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Speaker 2: and on the board. But I think that's fine, Like

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Speaker 2: they can make their case, but the RBA needs to

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Speaker 2: be big and strong enough, like we're all grown men

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Speaker 2: and women.

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Speaker 1: So we're disappointed in the way she come out in

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Speaker 1: a press conference after because she then sort of looked

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Speaker 1: like she was resolving in a bacular position.

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Speaker 2: It's ridiculous. What I'm disappointed in the I was the RBA.

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Speaker 2: So the RBA made there was no intellectual or evidentiary

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Speaker 2: basis based on their decision making front of it that

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Speaker 2: they set up that we need two quarters of data

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Speaker 2: a couple of weeks before the December meeting, and then

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Speaker 2: suddenly something happened in December where they were laying the

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Speaker 2: foundations for a political cut. It was a political cut

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Speaker 2: because they knew they were going to get that soft

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Speaker 2: print and that was the perfect excuse to cut. And

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Speaker 2: as soon as they went to that easy bias, the

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Speaker 2: market had it like seventy percent priced, and they know

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Speaker 2: that if the market's got a priced then it's very

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Speaker 2: hard for them not to cut because they can then

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Speaker 2: say well, the whole world thinks we should. Yeah. No,

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Speaker 2: but that's that was deliberate because what the RBA says, well,

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Speaker 2: market expectations. You know, every bond trader in the planet

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Speaker 2: thinks we should cut rates. It's obviously the right thing

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Speaker 2: to do. And so they cut rates. And you know,

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Speaker 2: by the time they came to the meeting, I think

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Speaker 2: it was like eighty percent priced, and they could have

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Speaker 2: eviscerated the pricing. Takes thirty seconds for Bullet to stand

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Speaker 2: up in jarring and say, oh, we did she has

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Speaker 2: no problem and numerous occasions, and she did this after

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Speaker 2: the February meeting saying she thought that market pricing was junk.

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Speaker 2: So she could have set up that conversation prior in January.

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Speaker 2: At any point in time, they could have said, and

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Speaker 2: this is another reason why I was very confident they

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Speaker 2: were cutting cutting. They did nothing to dispel market pricing,

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Speaker 2: and they often do.

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Speaker 1: They did no preconditioning.

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Speaker 2: No, well, but they just have to give a speech

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Speaker 2: and say, well, respectfully, we completely disagree with market pricing,

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Speaker 2: and they do that all the time. They didn't engage

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Speaker 2: in any of that rhetoric.

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Speaker 1: So that's Latin.

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Speaker 2: Then, yeah, it was Lad amaze. That's why we were

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Speaker 2: kind of like, that's why I was saying, is laid Almazir.

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Speaker 2: But interestingly, and this is where it gets all the

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Speaker 2: more absurd. After they cut, that's what I'm saying. They

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Speaker 2: never cut more than just once. That's just you know,

390
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Speaker 2: an only ones. Yeah, so they only never cut only once.

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Speaker 2: I think I said more than once. Yeah, so they

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Speaker 2: never only cut once. And after they cut, the most

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Speaker 2: ridiculous narrative was, oh, it's kind of more or less

394
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Speaker 2: one and done. And that market pricing, which was for

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Speaker 2: a very I thought reasonable and cookiin I would I

396
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Speaker 2: think be at one with this market was only pricing

397
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Speaker 2: two and a half more cuts throughout the whole year

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Speaker 2: of twenty twenty five. And she said, you know, market

399
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Speaker 2: pricing was unrealistic, and she and her proxies at the

400
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Speaker 2: RBA had went out on this campaign to completely dismiss

401
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Speaker 2: market pricing. I just think it's madness. So if you're

402
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Speaker 2: going to cut once, presuming with a case like you

403
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Speaker 2: want to move the cash rate meaningfully and materially, and

404
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Speaker 2: twenty five basis points does not mean it's no material

405
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Speaker 2: and does nothing to the inflation data. According to their

406
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Speaker 2: own modeling less.

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Speaker 1: Nothing to promote anything.

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Speaker 2: Oh, it's not so where it's a little complex and

409
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Speaker 2: nuances is. One cut statistically does nothing right. However, I

410
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Speaker 2: argued prior to the cut, the one cut is meaningful.

411
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Speaker 2: I thought they cut more than once, and I think

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Speaker 2: they will cut more than once. I think they'll cut

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Speaker 2: in May. This possibly they cut today. I think it's

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Speaker 2: less than likely that they We're in the middle of

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Speaker 2: a campaign, so they're not going to cut today.

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Speaker 1: But none I've done.

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Speaker 2: I think there's a good chance they cut in May.

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Speaker 1: And can we just look at that just before you

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Speaker 1: go in terms of the rest of you, can we

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Speaker 1: just look at May? What would what do you want

421
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Speaker 1: to see in the April probably comes out twenty seven

422
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Speaker 1: to twenty eighth word the April numbers for the March quarter.

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Speaker 1: What are you looking for? What do you think they're

424
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Speaker 1: going to be looking for more importantly to put to

425
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Speaker 1: justify a cut in May.

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Speaker 2: So the kind of question is does cor inflation print

427
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Speaker 2: at point six or point seven? I think it could

428
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Speaker 2: print either. I think the risk is to a lower print,

429
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Speaker 2: and I think they could cut on either. And I

430
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Speaker 2: think there's a good chance they cut. I don't think

431
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Speaker 2: it's sixty seven percent probability they cut. I think market

432
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Speaker 2: pricing is actually there or thereabouts. I think it's yeah,

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Speaker 2: And I think there's really interesting dynamics to play with

434
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Speaker 2: the AUSY inflation data. But just before we come back

435
00:20:04,800 --> 00:20:07,160
Speaker 2: to that, I just want to square away this point

436
00:20:07,200 --> 00:20:10,040
Speaker 2: on the single cut. The single cut is meaningful in

437
00:20:10,080 --> 00:20:12,920
Speaker 2: this respect. And I wrote this repeatedly. I don't think

438
00:20:12,920 --> 00:20:15,639
Speaker 2: I wrote it twice in the Financial Review in January.

439
00:20:15,760 --> 00:20:20,720
Speaker 2: It radically changes the atmospherics, the zeitgeist. And what's amazing

440
00:20:20,800 --> 00:20:22,800
Speaker 2: and I expected this to happen, is if you look

441
00:20:22,800 --> 00:20:25,840
Speaker 2: at the house priss data, dude, if you look at

442
00:20:25,960 --> 00:20:28,119
Speaker 2: if you go to core Logic's website and you go

443
00:20:28,160 --> 00:20:32,360
Speaker 2: to house price indices, if you go to the back

444
00:20:32,400 --> 00:20:34,320
Speaker 2: what is called the back series, and there's a chart,

445
00:20:34,359 --> 00:20:37,640
Speaker 2: it's a dynamic chart, and you can de select all cities,

446
00:20:37,640 --> 00:20:39,800
Speaker 2: all select cities, and if you deselect every city about

447
00:20:39,800 --> 00:20:41,880
Speaker 2: Sydney and you look at the chart, what you'll see

448
00:20:42,119 --> 00:20:46,400
Speaker 2: is house prices fell by about two percent soft but

449
00:20:46,480 --> 00:20:51,560
Speaker 2: like house prices rose in Sydney about eighteen percent from

450
00:20:52,040 --> 00:20:55,640
Speaker 2: January twenty three to September twenty four, massive boom right,

451
00:20:55,920 --> 00:21:00,560
Speaker 2: But from September twenty four through to the RBA meeting

452
00:21:00,560 --> 00:21:03,280
Speaker 2: in February they fell two percent, but more or less

453
00:21:03,280 --> 00:21:05,320
Speaker 2: the week they met, they started rising again and they

454
00:21:05,320 --> 00:21:07,320
Speaker 2: look like a straight line. They're rising quite quickly. Now

455
00:21:07,359 --> 00:21:10,080
Speaker 2: house prices are increasing again and exactly the same thing

456
00:21:10,119 --> 00:21:13,399
Speaker 2: has happened with even greater force in Melbourne. So house

457
00:21:13,400 --> 00:21:16,160
Speaker 2: prices in Melbourne only rose five to six percent, very

458
00:21:16,160 --> 00:21:20,240
Speaker 2: different situation between jan twenty three and about March twenty four,

459
00:21:20,680 --> 00:21:23,159
Speaker 2: but they started falling earlier. I mean, Victoria is a

460
00:21:23,200 --> 00:21:25,640
Speaker 2: bit of a failed state like Basket Kay's lots of problems,

461
00:21:26,359 --> 00:21:28,159
Speaker 2: and so the housing market's been much weaker, and so

462
00:21:28,240 --> 00:21:32,200
Speaker 2: house prices in Melbourne I think, Yeah, they started falling

463
00:21:32,200 --> 00:21:33,720
Speaker 2: in March, and they fell all the way through to

464
00:21:34,520 --> 00:21:37,679
Speaker 2: the RBM meeting in February, but almost perfectly synchronously with

465
00:21:37,680 --> 00:21:39,760
Speaker 2: the RAM meeting. If you look at that chart, it

466
00:21:39,760 --> 00:21:42,919
Speaker 2: looks like they're rising there, risen one percent already just

467
00:21:42,920 --> 00:21:46,199
Speaker 2: since February. So the housing market has reacted instantaneously. And

468
00:21:46,240 --> 00:21:48,959
Speaker 2: that's why one cuts meaningful because it changes the narrative

469
00:21:49,240 --> 00:21:52,640
Speaker 2: rather than people debating about hikes or rates remaining high

470
00:21:52,640 --> 00:21:54,320
Speaker 2: for long. Suddenly we're talking about cuts and how many

471
00:21:54,359 --> 00:21:56,439
Speaker 2: cuts is it? Two? Is three? So your question is

472
00:21:56,440 --> 00:21:58,879
Speaker 2: how many this year? I think they'll try and chisel

473
00:21:58,920 --> 00:22:01,719
Speaker 2: out two or three over the course of the year.

474
00:22:01,800 --> 00:22:03,760
Speaker 2: What I can be looking for, and I think the

475
00:22:03,880 --> 00:22:08,119
Speaker 2: risk is they do more. Yeah, And I think the

476
00:22:08,240 --> 00:22:11,960
Speaker 2: game changer for my view is the election of Donald Trump.

477
00:22:12,600 --> 00:22:14,280
Speaker 2: So I had no strong view on who would win

478
00:22:14,280 --> 00:22:17,480
Speaker 2: the US election. We didn't that's not our wheelhouse. We

479
00:22:17,520 --> 00:22:21,199
Speaker 2: don't do political forecasting, so we just trade, you know,

480
00:22:21,200 --> 00:22:23,639
Speaker 2: the data as it materializes. But once Trump was elected,

481
00:22:23,640 --> 00:22:26,720
Speaker 2: we had very strong views. Those views are first in

482
00:22:26,800 --> 00:22:28,879
Speaker 2: and this was a very contrary view. We told everyone

483
00:22:28,880 --> 00:22:30,359
Speaker 2: who would listen. I've written a million times in the

484
00:22:30,400 --> 00:22:35,560
Speaker 2: AFAR he's dead freaking serious on tariffs. He's not negotiating,

485
00:22:35,560 --> 00:22:38,040
Speaker 2: there's no art of the deal. Bullshit Trump and it's

486
00:22:38,119 --> 00:22:40,040
Speaker 2: quite complicated. And I'll come back to why he's dead

487
00:22:40,040 --> 00:22:42,360
Speaker 2: serious on the tariffs in a second. But there's big

488
00:22:42,400 --> 00:22:45,240
Speaker 2: implications for Australia, mate, because what's going to happen is

489
00:22:45,280 --> 00:22:47,720
Speaker 2: you're going to have these huge walls erected around the

490
00:22:47,800 --> 00:22:50,360
Speaker 2: US economy, and the Chinese ain't going to be able

491
00:22:50,400 --> 00:22:52,080
Speaker 2: to sell jackshit into the US economy. They're going to

492
00:22:52,119 --> 00:22:54,959
Speaker 2: block China from the US economy completely. So what are

493
00:22:54,960 --> 00:22:58,879
Speaker 2: the Chinese? Our biggest supply of goods into Australia is China.

494
00:22:59,359 --> 00:23:01,560
Speaker 2: And if China can't sel byd cars into the US,

495
00:23:01,600 --> 00:23:03,280
Speaker 2: where do you think they're going to dump the cars

496
00:23:03,320 --> 00:23:06,760
Speaker 2: and all the other goods Little Old Australia and the

497
00:23:06,800 --> 00:23:08,320
Speaker 2: EU and other markets. But we're going to get a

498
00:23:08,359 --> 00:23:11,320
Speaker 2: ton of cheap Chinese goods dumped into Australia. Are we

499
00:23:11,359 --> 00:23:13,080
Speaker 2: going to do anything about it? You know, if they

500
00:23:13,119 --> 00:23:15,879
Speaker 2: are in turn eviscerating our manufacturing. Not that we produce

501
00:23:15,920 --> 00:23:18,679
Speaker 2: cars anymore, but you know, if that's impacting our ability

502
00:23:18,720 --> 00:23:21,639
Speaker 2: to compete against the Chinese, is Olbow done going to

503
00:23:21,640 --> 00:23:24,000
Speaker 2: do anything about it? No chance. We've got no spine

504
00:23:24,000 --> 00:23:26,240
Speaker 2: on this stuff, right, So we're going to have actually

505
00:23:26,280 --> 00:23:32,560
Speaker 2: a lot of I think deflationary forces, cheap goods, cheap

506
00:23:32,600 --> 00:23:36,520
Speaker 2: goods the result from the trade war. So it's counterintuitive

507
00:23:36,520 --> 00:23:39,040
Speaker 2: because you think trade war price is going up inflationy,

508
00:23:39,080 --> 00:23:41,119
Speaker 2: it's very inflationing for the US. But if you look

509
00:23:41,119 --> 00:23:43,160
Speaker 2: at the pedinis and the Institute modeling, and we've I've

510
00:23:43,520 --> 00:23:46,000
Speaker 2: written on this six to twelve months ago. She's not.

511
00:23:46,480 --> 00:23:49,399
Speaker 2: After the November election, I wrote on this the Pizza

512
00:23:49,520 --> 00:23:52,320
Speaker 2: Institute modeling. When we tear apart the data as we've done,

513
00:23:52,560 --> 00:23:55,160
Speaker 2: shows you get deflation. In Australia, price is actually four

514
00:23:55,200 --> 00:23:58,159
Speaker 2: because the cheap goods get dumped on us. So what

515
00:23:58,200 --> 00:24:00,320
Speaker 2: does that mean for the RBA. Well, you've got too thinks.

516
00:24:00,440 --> 00:24:02,200
Speaker 2: China's can you say fucked?

517
00:24:03,119 --> 00:24:03,760
Speaker 1: Is there real life?

518
00:24:03,800 --> 00:24:04,000
Speaker 2: Yeah?

519
00:24:04,040 --> 00:24:05,320
Speaker 1: Cool, it's my podcast.

520
00:24:05,400 --> 00:24:09,159
Speaker 2: Just okay cool. China's funks. Their economy is just like

521
00:24:09,520 --> 00:24:12,040
Speaker 2: we've I've said, Chinese is uninvestable for over a decade,

522
00:24:12,200 --> 00:24:15,800
Speaker 2: you know that, probably about fifteen years I've been arguing that.

523
00:24:15,960 --> 00:24:18,280
Speaker 2: And they're going to get so screwed by this right.

524
00:24:18,280 --> 00:24:21,920
Speaker 2: They're going to be blocked from the entire from most

525
00:24:21,920 --> 00:24:24,200
Speaker 2: Western liberal democratic markets. They're going to be blocked from

526
00:24:24,280 --> 00:24:26,680
Speaker 2: and but particularly from the biggest market, which is the US.

527
00:24:28,320 --> 00:24:31,159
Speaker 2: And so that's not good, frustrating. So you don't have

528
00:24:31,200 --> 00:24:33,920
Speaker 2: the Chinese economy, which is already struggling, that's going to

529
00:24:33,920 --> 00:24:37,080
Speaker 2: be amplified and really exacerbated by Trump. He's going for

530
00:24:37,119 --> 00:24:41,879
Speaker 2: the fucking jugular right. Trump is a killer and literally

531
00:24:41,880 --> 00:24:44,480
Speaker 2: and figuratively because he doesn't mind running those special Forces

532
00:24:44,520 --> 00:24:49,920
Speaker 2: operations taking out guys in yearmen or Solomoni, the Republican general,

533
00:24:50,200 --> 00:24:52,840
Speaker 2: the Iranian who was sitting He was leaving at Bagdaddy

534
00:24:52,880 --> 00:24:58,520
Speaker 2: Airport and Trump flew two hell fire missiles into his

535
00:24:58,840 --> 00:25:01,000
Speaker 2: convoy of cars and assass at him. He likes his

536
00:25:01,119 --> 00:25:04,480
Speaker 2: little assassination programs, Old Trumpy. I'm not saying I agree

537
00:25:04,480 --> 00:25:06,119
Speaker 2: on Disagram. I'm just saying he likes that stuff. You know,

538
00:25:06,240 --> 00:25:09,119
Speaker 2: he's he likes it. You know he was sick. He

539
00:25:09,160 --> 00:25:11,560
Speaker 2: gave an interview the other day and he goes, you

540
00:25:11,560 --> 00:25:14,000
Speaker 2: don't understand I am a bad motherfucker. He didn't use

541
00:25:14,000 --> 00:25:17,399
Speaker 2: the word motherfucker. He's like, I'm a bad Man's funny.

542
00:25:17,800 --> 00:25:21,119
Speaker 2: Another story about Trump. Apparently he was sitting with the

543
00:25:21,119 --> 00:25:26,080
Speaker 2: Taliban leadership in person before they evacuated Afghanistan, and he

544
00:25:26,160 --> 00:25:28,720
Speaker 2: looks the head of Taliban in the eye and he says,

545
00:25:29,720 --> 00:25:33,359
Speaker 2: we're gonna leave Afghanistan. But if there's one hair on

546
00:25:33,440 --> 00:25:36,320
Speaker 2: one head of one American soldier that's in any way

547
00:25:36,359 --> 00:25:40,240
Speaker 2: adversely impacted. And he pulls out a photograph. He said,

548
00:25:40,400 --> 00:25:42,199
Speaker 2: this is your home, this is where your wife and

549
00:25:42,359 --> 00:25:45,639
Speaker 2: children live. We're taking them all out and apparently they

550
00:25:45,640 --> 00:25:49,720
Speaker 2: didn't did this squad, So that's a segue.

551
00:25:49,800 --> 00:25:53,600
Speaker 1: But and some people like that, yeah that's shop strength.

552
00:25:53,760 --> 00:25:55,560
Speaker 2: Yeah yeah they do. Yeah, they definitely do.

553
00:25:55,600 --> 00:25:58,919
Speaker 1: An American So you're you're saying that Trump's Trump's norm

554
00:25:58,960 --> 00:26:01,320
Speaker 1: negotiable on the on the tariffs, the Towers is going

555
00:26:01,320 --> 00:26:03,560
Speaker 1: to build a war around America and make everything much

556
00:26:03,600 --> 00:26:04,560
Speaker 1: more expensive in America.

557
00:26:04,760 --> 00:26:06,800
Speaker 2: But for Australia. So you come out to Australia, so

558
00:26:06,880 --> 00:26:10,040
Speaker 2: the Chinese economy is going to really get pounded, and

559
00:26:10,119 --> 00:26:11,240
Speaker 2: that's bad news for Australia.

560
00:26:11,320 --> 00:26:13,320
Speaker 1: Now why is the bad news of everything arrives you're cheaper.

561
00:26:13,800 --> 00:26:17,680
Speaker 2: Well, that's positive. But you know, if we're she's a

562
00:26:17,960 --> 00:26:20,200
Speaker 2: number one trade partner, we have to export. If we're

563
00:26:20,200 --> 00:26:24,760
Speaker 2: exporting commodities to China, then that's not very good.

564
00:26:24,680 --> 00:26:26,560
Speaker 1: For our Seventy percent of our stuff goes to China,

565
00:26:26,600 --> 00:26:29,399
Speaker 1: so resources I'm talking about. So what you're saying is

566
00:26:29,400 --> 00:26:32,520
Speaker 1: that of China's struggling, we will our export will start

567
00:26:32,560 --> 00:26:32,959
Speaker 1: to suffer.

568
00:26:33,200 --> 00:26:36,480
Speaker 2: Correct, Now, she may try and stimulate so present she

569
00:26:36,760 --> 00:26:39,840
Speaker 2: may try and compensate for this, which paradoxally could increase

570
00:26:39,880 --> 00:26:42,680
Speaker 2: demand for commodities. But you know, the way the RBA,

571
00:26:42,760 --> 00:26:44,000
Speaker 2: I think we'll look at this is this is not

572
00:26:44,040 --> 00:26:47,000
Speaker 2: positive for Australia like China, you know, having a quasi

573
00:26:47,040 --> 00:26:51,360
Speaker 2: recession of sorts is can't be positive for Australia. And

574
00:26:51,400 --> 00:26:52,760
Speaker 2: then the other thing is you're going to get a

575
00:26:53,160 --> 00:26:56,520
Speaker 2: deflationary impulse, so the prices of goods will be lower

576
00:26:56,520 --> 00:26:58,440
Speaker 2: than they otherwise would be. And I think it's already

577
00:26:58,440 --> 00:27:02,080
Speaker 2: starting to happen. And so what that means is for

578
00:27:02,119 --> 00:27:06,720
Speaker 2: the IMBA, they could cut in May quite comfortably. The

579
00:27:06,760 --> 00:27:09,320
Speaker 2: inflation data could start surprising on the downside, particularly if

580
00:27:09,320 --> 00:27:11,320
Speaker 2: they extend these costs of living subsces, which they seem

581
00:27:11,359 --> 00:27:15,760
Speaker 2: to be doing. And yeah, you could get a decent

582
00:27:15,840 --> 00:27:17,600
Speaker 2: number of RBO rate cuts, but two to three I

583
00:27:17,600 --> 00:27:19,919
Speaker 2: think as a minimum makes sense for this year in total.

584
00:27:20,240 --> 00:27:24,360
Speaker 1: So a lot of people talk about, you know, the

585
00:27:24,840 --> 00:27:28,080
Speaker 1: cash rate, which you mentioned a bit earlier, but like

586
00:27:28,160 --> 00:27:30,160
Speaker 1: sort of cash rate which sort of settles down around

587
00:27:30,160 --> 00:27:33,800
Speaker 1: three and a half percent, you know, and let's say

588
00:27:33,840 --> 00:27:36,320
Speaker 1: inflation is like two and a half percent. In the

589
00:27:36,359 --> 00:27:38,920
Speaker 1: old that used to be a concept of net zero

590
00:27:39,000 --> 00:27:40,680
Speaker 1: or something close to zero. But the difference between the

591
00:27:40,680 --> 00:27:44,639
Speaker 1: inflation rate and the cash rate, and then unemployment is

592
00:27:44,680 --> 00:27:50,080
Speaker 1: sort of around let's say four. Yeah, can you see

593
00:27:50,080 --> 00:27:51,560
Speaker 1: a period like this is a bit weird to me,

594
00:27:51,680 --> 00:27:52,880
Speaker 1: Like it said, a bit weird to me, But then

595
00:27:53,000 --> 00:27:55,520
Speaker 1: wage growth is the same about three point two four

596
00:27:55,520 --> 00:27:57,679
Speaker 1: point two around that territory. It seems to me that

597
00:27:57,720 --> 00:28:00,600
Speaker 1: we've sort of got a restructure of where all our

598
00:28:00,680 --> 00:28:02,439
Speaker 1: numbers are sitting. They're all sitting, They're all going to

599
00:28:02,440 --> 00:28:05,040
Speaker 1: sit somewhere between three and a half and four and

600
00:28:05,040 --> 00:28:11,639
Speaker 1: a half unemployment, wage growth, inflation, cash rate, blah blah blah.

601
00:28:11,680 --> 00:28:13,040
Speaker 1: I mean a cashree might get to do it up,

602
00:28:13,040 --> 00:28:15,840
Speaker 1: but it's going to bounce around a little bit. I've

603
00:28:15,840 --> 00:28:17,240
Speaker 1: never really seen that before in the past. Do you

604
00:28:17,280 --> 00:28:21,199
Speaker 1: think we've as a result of COVID, we will we

605
00:28:21,240 --> 00:28:25,560
Speaker 1: have a restructured statistical environment or is this just a

606
00:28:25,600 --> 00:28:27,639
Speaker 1: reaction to what happened during COVID and we will go

607
00:28:27,760 --> 00:28:30,480
Speaker 1: back to our old system, our our old structure that

608
00:28:30,480 --> 00:28:32,159
Speaker 1: we used to have in the past. So twenty or

609
00:28:32,160 --> 00:28:35,080
Speaker 1: thirty years of inflation on average between two and three

610
00:28:36,560 --> 00:28:39,640
Speaker 1: since since ninety six, I think it was someone around

611
00:28:39,640 --> 00:28:42,520
Speaker 1: that territory we had like nearly twenty five years of

612
00:28:43,280 --> 00:28:44,400
Speaker 1: inflation around that number.

613
00:28:44,920 --> 00:28:50,200
Speaker 2: I definitely feel like we're in a more inflationary environment globally,

614
00:28:51,600 --> 00:28:55,240
Speaker 2: and I think that will actually ultimately reassert itself in Australia.

615
00:28:55,320 --> 00:28:59,640
Speaker 2: So the tariff impact on inflation is temporary, and so

616
00:28:59,680 --> 00:29:03,160
Speaker 2: therefore the deflationing impulse that we've been talking about in

617
00:29:03,160 --> 00:29:05,880
Speaker 2: response to the tariffs could also be temporary. But I

618
00:29:05,880 --> 00:29:09,320
Speaker 2: think it's you know, the prevailing kind of atmospherics for

619
00:29:09,360 --> 00:29:11,840
Speaker 2: twenty twenty five are going to be potentially quite friendly

620
00:29:11,880 --> 00:29:14,280
Speaker 2: for the RBA in the context of giving it the

621
00:29:14,400 --> 00:29:17,320
Speaker 2: capacity to cut rates. But I think what's changed since

622
00:29:17,360 --> 00:29:20,440
Speaker 2: the pandemic is the size of government. Government spending as

623
00:29:20,480 --> 00:29:22,680
Speaker 2: a share of the economy is the biggest since World

624
00:29:22,680 --> 00:29:25,880
Speaker 2: War Two, basically instrope. And you know, if you look

625
00:29:25,920 --> 00:29:30,080
Speaker 2: at jobs, fifty seven percent of jobs growth in Australia

626
00:29:30,960 --> 00:29:33,200
Speaker 2: over the last few years has been accounted for by

627
00:29:33,560 --> 00:29:36,440
Speaker 2: public sector. Yeah, well not just the public secttion. Just

628
00:29:36,480 --> 00:29:40,200
Speaker 2: three sectors within the public sector, health, education and public

629
00:29:40,200 --> 00:29:43,040
Speaker 2: administration alone have powered almost sixty percent of all jobs

630
00:29:43,040 --> 00:29:46,480
Speaker 2: growth and there's no change in that dynamic. So what's fascinating,

631
00:29:46,520 --> 00:29:48,360
Speaker 2: I think for around the world to not just you,

632
00:29:48,600 --> 00:29:51,200
Speaker 2: I mean globally yeah, globally, but what and that's a

633
00:29:51,240 --> 00:29:54,520
Speaker 2: key point. The difference in the US is they've had

634
00:29:54,720 --> 00:29:59,680
Speaker 2: some cathartic crises. They had arguably a tougher pandemic. They

635
00:29:59,680 --> 00:30:02,880
Speaker 2: definitely had a much tougher two thousand and eight crisis

636
00:30:03,880 --> 00:30:06,520
Speaker 2: like that, a huge in cristal unemployment, unemployment barely budge.

637
00:30:06,520 --> 00:30:09,080
Speaker 2: We didn't even have a recession in Australia. They had

638
00:30:09,120 --> 00:30:11,800
Speaker 2: a much, much tougher two thousand and one recession. In

639
00:30:11,840 --> 00:30:14,480
Speaker 2: the US we haven't had a proper recession since twenty one.

640
00:30:14,880 --> 00:30:17,400
Speaker 2: But the key point is Australians, I think, are really

641
00:30:17,440 --> 00:30:19,640
Speaker 2: in the throes of Dutch disease or what it is

642
00:30:19,680 --> 00:30:22,239
Speaker 2: known as moral hazard, which basically means we've been this

643
00:30:22,320 --> 00:30:25,080
Speaker 2: wonder down Under that's been incredibly fortunate for a crazy

644
00:30:25,120 --> 00:30:28,000
Speaker 2: amount of time. And that good fortune has been driven

645
00:30:28,040 --> 00:30:32,840
Speaker 2: by probably three key things. Huge endowments of natural resources

646
00:30:32,840 --> 00:30:35,160
Speaker 2: that have made us very rich because we can sell

647
00:30:35,160 --> 00:30:36,640
Speaker 2: them to the rest of the world for high prices.

648
00:30:36,680 --> 00:30:38,320
Speaker 2: And then at the same time we've been lucky that

649
00:30:38,480 --> 00:30:41,320
Speaker 2: there's been a commodity price boom. Secondly, we've run the

650
00:30:41,360 --> 00:30:44,200
Speaker 2: strongest population growth in the developed world for about thirty years,

651
00:30:44,240 --> 00:30:46,840
Speaker 2: and we continue to run crazy strong population growth, and

652
00:30:46,880 --> 00:30:50,480
Speaker 2: population growth just brings demand in their country initially because

653
00:30:50,520 --> 00:30:54,320
Speaker 2: these guys come with money often and that's a net

654
00:30:54,360 --> 00:30:56,960
Speaker 2: demand shock. In the medium term, the population growth actually

655
00:30:57,000 --> 00:30:59,000
Speaker 2: expands a pool of available workers, and I think this

656
00:30:59,040 --> 00:31:01,680
Speaker 2: is what's happening with the wage In contrast to say

657
00:31:01,680 --> 00:31:04,200
Speaker 2: the US, where they're deporting people and the borders are closing.

658
00:31:04,200 --> 00:31:06,680
Speaker 2: In Australia, we've got people rushing into the country and

659
00:31:06,720 --> 00:31:10,160
Speaker 2: that's actually relieving some of the pressure on labor costs.

660
00:31:10,160 --> 00:31:12,840
Speaker 2: And we needed that because in the pandemic, we'd close

661
00:31:12,920 --> 00:31:15,080
Speaker 2: our borders and you know, the unemployment rate was incredibly low,

662
00:31:15,160 --> 00:31:19,000
Speaker 2: the lowest in half a century or thereabouts. And labour

663
00:31:19,000 --> 00:31:25,320
Speaker 2: costs have obviously accelerated. But resources population growth have been

664
00:31:25,600 --> 00:31:27,800
Speaker 2: the two key drivers of austral and prosperity for a

665
00:31:27,800 --> 00:31:30,440
Speaker 2: long time. But then finally our physical amenity. I mean,

666
00:31:30,480 --> 00:31:32,600
Speaker 2: Australia is the most beautiful country in the world and

667
00:31:32,640 --> 00:31:35,560
Speaker 2: the physical meney is incredible. And then with super now

668
00:31:35,600 --> 00:31:37,800
Speaker 2: taking twalks in our ways is super portus huge amount

669
00:31:37,800 --> 00:31:40,920
Speaker 2: money into infrastructure, as did governments, and the quality of

670
00:31:40,880 --> 00:31:43,520
Speaker 2: oz the infrastructure is like I think coming up to

671
00:31:43,760 --> 00:31:45,600
Speaker 2: you know, it looks second to none. If you look

672
00:31:45,640 --> 00:31:48,880
Speaker 2: at just the Sydney the tunnels, the metro railway, the

673
00:31:48,920 --> 00:31:53,000
Speaker 2: light railway, the way we've equipped our cities, and the

674
00:31:53,040 --> 00:31:55,240
Speaker 2: quality of US cities. You go to America, anyone travels

675
00:31:55,280 --> 00:31:57,640
Speaker 2: to America, you look at the poverty, the crime, the

676
00:31:58,960 --> 00:32:01,120
Speaker 2: just the dilapidated nature of the infrastructure.

677
00:32:01,160 --> 00:32:02,480
Speaker 1: San Francisco is a basketcase.

678
00:32:02,560 --> 00:32:05,920
Speaker 2: Basketcase and this is the point mark in the US

679
00:32:05,960 --> 00:32:08,080
Speaker 2: you've had crisis. So if you look at California, it's

680
00:32:08,120 --> 00:32:12,640
Speaker 2: a failed state, LA and San Francisco increasingly uninhabitable, which

681
00:32:12,640 --> 00:32:12,920
Speaker 2: would be.

682
00:32:12,880 --> 00:32:15,360
Speaker 1: Weird because it's seven large economy in the world as

683
00:32:15,400 --> 00:32:16,680
Speaker 1: a state, and a.

684
00:32:16,840 --> 00:32:21,440
Speaker 2: Huge fiscal crisis like massive budget deficits. Then juxtaposed against that,

685
00:32:21,520 --> 00:32:26,160
Speaker 2: you've got the counterfaction, which is Texas and Florida budget surpluses, thriving,

686
00:32:26,320 --> 00:32:30,600
Speaker 2: low taxes, low taxes, businesses are moving, their population growth

687
00:32:30,640 --> 00:32:35,240
Speaker 2: is strong, low crime. And so I think that that

688
00:32:35,680 --> 00:32:40,200
Speaker 2: contrast between New York, California, the Democrat States, and the

689
00:32:40,240 --> 00:32:44,880
Speaker 2: Republican States has galvanized this this kind of intellectual crisis

690
00:32:44,920 --> 00:32:50,240
Speaker 2: whereby the Trump Musk paradigm is on the ascendency, and

691
00:32:50,280 --> 00:32:54,480
Speaker 2: they amazingly, Musk is probably the only guy in human

692
00:32:54,520 --> 00:32:56,360
Speaker 2: history he could do what he's doing right now because

693
00:32:56,600 --> 00:32:58,720
Speaker 2: he just doesn't give a fuck. It doesn't give a fuck,

694
00:32:58,720 --> 00:32:59,760
Speaker 2: and he's the richest going in the history.

695
00:33:00,120 --> 00:33:00,800
Speaker 1: It doesn't give a fuck.

696
00:33:01,120 --> 00:33:05,719
Speaker 2: Yeah, so was worth over four hundred billion US, but

697
00:33:05,960 --> 00:33:07,800
Speaker 2: he does give a fucking this sense he wants. His

698
00:33:08,000 --> 00:33:09,880
Speaker 2: singular mission is to get to Mars. He wants to

699
00:33:09,920 --> 00:33:14,320
Speaker 2: create an interplanetary species, and he thinks government is the

700
00:33:14,360 --> 00:33:16,680
Speaker 2: key obstacle to getting to Mars. So I think what

701
00:33:16,800 --> 00:33:21,440
Speaker 2: Musks inside has been is government, NASA, everyone, regulation is

702
00:33:21,480 --> 00:33:25,440
Speaker 2: just blocking our progress in our capacity to get the

703
00:33:25,520 --> 00:33:31,160
Speaker 2: human species sort of civilizing Mars. And so therefore, what

704
00:33:31,160 --> 00:33:32,800
Speaker 2: do I need to do. Well, I need to get

705
00:33:32,840 --> 00:33:35,880
Speaker 2: a sympathetic leader, somebody that I'm backing. So he must

706
00:33:35,920 --> 00:33:38,640
Speaker 2: more or less help Trump win the election. And now

707
00:33:38,680 --> 00:33:41,480
Speaker 2: that he looks like he's living in the White House,

708
00:33:41,520 --> 00:33:47,320
Speaker 2: he's permanently appended to Trump's hip, and Musk has the

709
00:33:47,360 --> 00:33:51,440
Speaker 2: solutions to almost all of Trump's policy problems. Trump wants

710
00:33:51,440 --> 00:33:53,400
Speaker 2: to cut taxes, but that costs eight point one trillion

711
00:33:53,520 --> 00:33:57,880
Speaker 2: US over ten years. Now, unless you find revenue to

712
00:33:57,880 --> 00:34:00,160
Speaker 2: pay for the tax cuts. Issuing a point one one

713
00:34:00,160 --> 00:34:03,680
Speaker 2: trillion debt would create a huge debt crisis in the

714
00:34:03,720 --> 00:34:05,920
Speaker 2: sense of just much higher instructs. They can pay the interest,

715
00:34:06,200 --> 00:34:08,279
Speaker 2: but you get a massive increase in US interest rates,

716
00:34:09,239 --> 00:34:12,239
Speaker 2: and that would be potentially catastrophic. So he needs the

717
00:34:12,280 --> 00:34:15,160
Speaker 2: tariffs to pay for the tax cuts. This is what

718
00:34:15,200 --> 00:34:17,719
Speaker 2: people didn't understand. He wasn't bluffing on the tariffs. He's

719
00:34:17,719 --> 00:34:19,640
Speaker 2: dead serious in the Taiks because the tarts he announced

720
00:34:19,640 --> 00:34:22,520
Speaker 2: a date raised about two trillion of revenue.

721
00:34:22,360 --> 00:34:25,560
Speaker 1: Which allows him to give tax cuts to the wages.

722
00:34:25,640 --> 00:34:27,880
Speaker 2: So two trillions of revenue means he's only if the

723
00:34:27,880 --> 00:34:29,680
Speaker 2: tax cuts cost that's over ten years. And if the

724
00:34:29,680 --> 00:34:31,840
Speaker 2: tax cuts only cost eight point one trillion over ten years,

725
00:34:32,000 --> 00:34:35,439
Speaker 2: he only needs to now find six trillion's cut costs. Yeah,

726
00:34:35,440 --> 00:34:38,400
Speaker 2: but the tariffs are important for another reason. Basically, I

727
00:34:38,440 --> 00:34:41,920
Speaker 2: think the US judges that over the last thirty years,

728
00:34:42,520 --> 00:34:45,600
Speaker 2: the Western world took the view of there was a

729
00:34:45,600 --> 00:34:48,560
Speaker 2: lot of vaninglorious, hubrious post World War two, which was

730
00:34:48,800 --> 00:34:53,520
Speaker 2: democracy's defeated socialism, and we have the dominant political and

731
00:34:53,560 --> 00:34:55,160
Speaker 2: business model, and everyone in the world is going to

732
00:34:55,160 --> 00:34:57,319
Speaker 2: bind to that. Model, and they're going to embrace it,

733
00:34:57,360 --> 00:35:00,239
Speaker 2: and they're just going to become accolytes of our belief system.

734
00:35:00,520 --> 00:35:04,160
Speaker 2: So the idea was, we'll trade, We'll do free trade

735
00:35:04,160 --> 00:35:07,719
Speaker 2: with everybody, well, reduce tariffs, we'll get rid of protectionism.

736
00:35:08,200 --> 00:35:10,880
Speaker 2: And the Russians and the Chinese, when they look at

737
00:35:10,880 --> 00:35:14,680
Speaker 2: the prosperity in Europe, the UK, US, Australia, New Zealand, Canada,

738
00:35:15,120 --> 00:35:17,879
Speaker 2: there's no way in the world they can't embrace that prosperity.

739
00:35:18,280 --> 00:35:19,759
Speaker 2: So they're going to trade with us, they're going to

740
00:35:19,800 --> 00:35:22,239
Speaker 2: reduce trade barriers, and they're going to ultimately migrate their

741
00:35:22,280 --> 00:35:26,880
Speaker 2: political systems away from authoritarianism to democracies. Well, the Russians

742
00:35:26,880 --> 00:35:30,880
Speaker 2: and Chinese, basically, I think thought we were pretty gullible,

743
00:35:31,120 --> 00:35:34,680
Speaker 2: and so they just used those free trade opportunities to

744
00:35:34,719 --> 00:35:40,959
Speaker 2: appropriate intellectual property, to use state subsidized firms to build

745
00:35:41,040 --> 00:35:47,839
Speaker 2: market share, control markets, build national champions companies like Hai, Huawei, Byd, etc.

746
00:35:48,239 --> 00:35:52,120
Speaker 2: And basically Western manufacturing shifted to China. The supply chain

747
00:35:52,160 --> 00:35:54,719
Speaker 2: shifted to China. Remember we talk about outsourcing. Outsourcing was

748
00:35:54,719 --> 00:35:56,719
Speaker 2: great for Western companies because you could build it in

749
00:35:56,760 --> 00:35:58,640
Speaker 2: low cost China and bring it back to the US

750
00:35:59,160 --> 00:36:02,120
Speaker 2: and everyone benefit of the Chinese benefit and US consumers

751
00:36:02,120 --> 00:36:05,320
Speaker 2: benefit through lower costs. But at some point the penny

752
00:36:05,360 --> 00:36:07,960
Speaker 2: dropped that the Chinese weren't going to sign up to

753
00:36:08,040 --> 00:36:11,479
Speaker 2: the Western liberal democratic business model softly, and they weren't

754
00:36:11,480 --> 00:36:13,200
Speaker 2: actually playing by the rules they had agreed to play,

755
00:36:13,280 --> 00:36:16,440
Speaker 2: because you know, the Chinese government was giving their firms

756
00:36:16,480 --> 00:36:20,560
Speaker 2: all these unfair competitive advantages. And Musk is the best example.

757
00:36:20,600 --> 00:36:24,200
Speaker 2: He builds a factory or factories in China, assuming he's

758
00:36:24,200 --> 00:36:26,759
Speaker 2: going to sell zillions of Tesla's to the Chinese, the

759
00:36:26,800 --> 00:36:31,280
Speaker 2: biggest consumer market numerically in the world, and the Chinese

760
00:36:31,320 --> 00:36:33,880
Speaker 2: are still the IP and create a bigger, bad, stronger

761
00:36:33,920 --> 00:36:39,200
Speaker 2: EV company called BYD that starts decimating Tesla's market share.

762
00:36:40,000 --> 00:36:44,200
Speaker 2: So Mask's Navy created this monster in the form of BYD.

763
00:36:44,719 --> 00:36:47,920
Speaker 2: So the Americans basically realized, actually, we need to reshare

764
00:36:48,400 --> 00:36:50,960
Speaker 2: or domesticate all of our manufacturing. We need to bring

765
00:36:51,000 --> 00:36:53,200
Speaker 2: back all the supply chains because now there's also security

766
00:36:53,239 --> 00:36:55,879
Speaker 2: dependencies on the Chinese. I mean, the Chinese are making

767
00:36:55,920 --> 00:36:58,200
Speaker 2: things that we use in our military kit and we

768
00:36:58,239 --> 00:37:00,680
Speaker 2: actually now recognize we have man man up in a

769
00:37:00,719 --> 00:37:04,160
Speaker 2: serious connectic conflict with the Chinese. So Trump's plan with

770
00:37:04,200 --> 00:37:07,040
Speaker 2: the taros is probably if you don't believe in free trade,

771
00:37:07,080 --> 00:37:09,560
Speaker 2: it's the right plan. And the other reason it's the

772
00:37:09,600 --> 00:37:12,120
Speaker 2: right plan, and nobody understands this is the US economy

773
00:37:12,160 --> 00:37:14,160
Speaker 2: is an autarchy, and what that means is doesn't really

774
00:37:14,160 --> 00:37:15,440
Speaker 2: trade with the rest of the world aside from the

775
00:37:15,520 --> 00:37:21,600
Speaker 2: Chinese and their proxies like Mexico. So the US we

776
00:37:21,680 --> 00:37:24,800
Speaker 2: have a statistic called trade intensity, which is exports plus

777
00:37:24,840 --> 00:37:28,919
Speaker 2: imports divided by your economy or GDP, and US trade

778
00:37:28,920 --> 00:37:31,400
Speaker 2: intensity is only about twenty five percent. The average advanced

779
00:37:31,440 --> 00:37:33,600
Speaker 2: economy is sixty to seventy percent, the EU is one

780
00:37:33,680 --> 00:37:36,279
Speaker 2: hundred to one hundred and ten percent. And so the

781
00:37:36,400 --> 00:37:38,000
Speaker 2: US doesn't really need to trade with the rest of

782
00:37:38,040 --> 00:37:41,160
Speaker 2: the world if they bring their manufacturing back, which is

783
00:37:41,160 --> 00:37:42,719
Speaker 2: what they want to do, and Musk has proven with

784
00:37:42,760 --> 00:37:45,960
Speaker 2: SpaceX and Tesla, you can manufacture in the US, particularly

785
00:37:46,000 --> 00:37:48,560
Speaker 2: now that everything's robotic. Labor costs are not such a

786
00:37:48,560 --> 00:37:51,479
Speaker 2: big deal anymore because it's all automated. So that's the plan.

787
00:37:51,520 --> 00:37:53,560
Speaker 2: It's the right plan because the US is the heart

788
00:37:53,640 --> 00:37:57,640
Speaker 2: and harb of all the research, innovation and genuine sort

789
00:37:57,680 --> 00:38:02,560
Speaker 2: of entrepreneurship and commercial and business inside and so it

790
00:38:02,560 --> 00:38:04,080
Speaker 2: makes sense that if you can't trust the Chinese, you

791
00:38:04,160 --> 00:38:06,560
Speaker 2: got to bring your manufacturing back that'll net benefit the US.

792
00:38:06,880 --> 00:38:09,120
Speaker 2: And then basically so they bring up all these tariffs

793
00:38:09,160 --> 00:38:11,399
Speaker 2: and they say the rest of the world, if you

794
00:38:11,480 --> 00:38:15,280
Speaker 2: produce a good in a country outside of the US,

795
00:38:15,800 --> 00:38:17,480
Speaker 2: you won't be able to import it into the US,

796
00:38:17,520 --> 00:38:20,920
Speaker 2: will make you cost ineffective or cost will put you

797
00:38:20,920 --> 00:38:24,200
Speaker 2: in a competitive disadvantage. So I think companies have now

798
00:38:24,239 --> 00:38:27,400
Speaker 2: signed up to two trillion dollars of manufacturing spending in

799
00:38:27,480 --> 00:38:27,879
Speaker 2: the US.

800
00:38:28,000 --> 00:38:29,359
Speaker 1: Now wads move their business to the US.

801
00:38:29,560 --> 00:38:31,799
Speaker 2: They're going to bring all those businesses back to the US.

802
00:38:32,080 --> 00:38:34,600
Speaker 1: Blue Scope is a good example. They produced steel in

803
00:38:34,600 --> 00:38:37,440
Speaker 1: the US US plant so they're not importing or exporting

804
00:38:37,440 --> 00:38:37,719
Speaker 1: to them.

805
00:38:37,800 --> 00:38:39,760
Speaker 2: Yeah, so everyone's going to do that because the tariff

806
00:38:39,880 --> 00:38:42,120
Speaker 2: is going to Otherwise the tariffs will kill their businesses.

807
00:38:42,520 --> 00:38:47,399
Speaker 2: Now so smart, I'm stand super smart. So they're going

808
00:38:47,400 --> 00:38:50,120
Speaker 2: to trade with themselves, erect these huge trade barriers, rebuild

809
00:38:50,120 --> 00:38:54,480
Speaker 2: all the manufacturing capacity. And then at the same time,

810
00:38:54,560 --> 00:38:57,640
Speaker 2: novel the Chinese, which is geostrategically important because the Chinese

811
00:38:57,680 --> 00:39:00,640
Speaker 2: were growing big and powerful because they were stealing Western

812
00:39:00,640 --> 00:39:04,600
Speaker 2: market share and stealing Western clients and innovation and IP.

813
00:39:05,200 --> 00:39:08,200
Speaker 2: Now the final piece of the puzzle is Musk. So

814
00:39:09,200 --> 00:39:10,600
Speaker 2: at the same time, one of the big problems we

815
00:39:10,600 --> 00:39:13,880
Speaker 2: have in society is just the growth of government. Again,

816
00:39:13,920 --> 00:39:15,759
Speaker 2: there's been more jobs growth in Australia the last few

817
00:39:15,800 --> 00:39:19,160
Speaker 2: years in the government sector than the private sector. And

818
00:39:19,800 --> 00:39:23,680
Speaker 2: Musk realizes that there's this massive corruption inside these bureaucracies,

819
00:39:23,960 --> 00:39:27,600
Speaker 2: and there's huge overreach which is crushing innovation. It's crushing entrepreneurship,

820
00:39:27,640 --> 00:39:32,360
Speaker 2: it's crushing idea generation, and it's basically crushing productivity and prosperity.

821
00:39:33,040 --> 00:39:35,000
Speaker 2: So Musk is the only guy in the world, probably

822
00:39:35,040 --> 00:39:37,000
Speaker 2: in human history, got the ability to go in there

823
00:39:37,040 --> 00:39:39,399
Speaker 2: and he did it with x or Twitter. He cut

824
00:39:39,440 --> 00:39:42,440
Speaker 2: apercent of their workforce instantaneously, and he built a better product.

825
00:39:43,600 --> 00:39:46,120
Speaker 2: So because he's the richest man in the world, he

826
00:39:46,280 --> 00:39:47,919
Speaker 2: rocks up and he says, I want to get to Mars,

827
00:39:47,920 --> 00:39:50,680
Speaker 2: but I've got to remove the public obstacles. At the

828
00:39:50,680 --> 00:39:52,480
Speaker 2: same time, I mate Trump has promised a point one

829
00:39:52,560 --> 00:39:55,320
Speaker 2: trillion tax cuts. Well, if I just reduce government spending,

830
00:39:55,360 --> 00:39:57,960
Speaker 2: this is Musk's model. If I reduce government spending by

831
00:39:58,040 --> 00:40:00,480
Speaker 2: fifteen percent, which is not that much. You and I

832
00:40:00,480 --> 00:40:03,000
Speaker 2: have run business. We run businesses. You know, if we

833
00:40:03,000 --> 00:40:06,439
Speaker 2: have to cut costs by fifteen percent, done, done, easy, right,

834
00:40:06,520 --> 00:40:09,560
Speaker 2: if we need to. Now, in the US you've had

835
00:40:09,719 --> 00:40:15,839
Speaker 2: untraveled untraveled, you know, historic unprecedented government growth for decades, right,

836
00:40:16,200 --> 00:40:18,600
Speaker 2: but particularly since the pandemic. So you cut it by

837
00:40:18,600 --> 00:40:22,759
Speaker 2: fifteen percent, you raise a trillion a year of savings. Now,

838
00:40:22,760 --> 00:40:25,160
Speaker 2: the US budget deficit is less than two trillion, so

839
00:40:25,200 --> 00:40:28,160
Speaker 2: you have the budget deficit. So over ten years, you're

840
00:40:28,280 --> 00:40:32,400
Speaker 2: basically generating ten trillion of savings. So Musk's cost cutting

841
00:40:32,440 --> 00:40:36,279
Speaker 2: program alone pays for all the tax cuts and something right.

842
00:40:36,640 --> 00:40:38,839
Speaker 2: And the truth is, like I reckon, they could cut

843
00:40:38,840 --> 00:40:41,840
Speaker 2: government spending by thirty percent, like if they really went hard.

844
00:40:42,000 --> 00:40:44,239
Speaker 2: So fifteen percent is probably just the beginning. Now, the

845
00:40:44,280 --> 00:40:46,600
Speaker 2: problem for the global economy, the problem for interest rates,

846
00:40:46,600 --> 00:40:50,200
Speaker 2: and the problem for Australians is this, and you fear superbalances.

847
00:40:51,000 --> 00:40:53,399
Speaker 2: They've got to do the government spending cuts fast and hard,

848
00:40:53,400 --> 00:40:57,040
Speaker 2: because they've got to do them before the midterm elections

849
00:40:57,040 --> 00:40:59,200
Speaker 2: in November twenty six, because otherwise at that point they

850
00:40:59,200 --> 00:40:59,839
Speaker 2: could lose control.

851
00:41:00,120 --> 00:41:02,439
Speaker 1: Unless you get an extended period, but yeah, they're working

852
00:41:02,440 --> 00:41:02,960
Speaker 1: on that now.

853
00:41:03,080 --> 00:41:06,040
Speaker 2: So they want to the third term. No, this is

854
00:41:06,040 --> 00:41:07,040
Speaker 2: the midterm election, so.

855
00:41:07,400 --> 00:41:09,480
Speaker 1: Yeah, I'm sorry. They've got a short period to get

856
00:41:09,480 --> 00:41:09,879
Speaker 1: all this done.

857
00:41:10,080 --> 00:41:11,719
Speaker 2: As your point out, Yeah, exactly, So they want to

858
00:41:11,760 --> 00:41:14,080
Speaker 2: get it done hard and fast. So the government spinning cuts,

859
00:41:14,080 --> 00:41:18,000
Speaker 2: they've already done one hundred and thirty five billion, and

860
00:41:18,080 --> 00:41:20,359
Speaker 2: so there's obviously a lot more coming. So that comes

861
00:41:20,400 --> 00:41:23,800
Speaker 2: hard and fast. The trillions of dollars a new manufacturing investment,

862
00:41:23,840 --> 00:41:27,400
Speaker 2: which will credit a huge growth engine that's going to

863
00:41:27,400 --> 00:41:30,840
Speaker 2: come later. So you've got this asynchronicity in the timing

864
00:41:30,880 --> 00:41:33,840
Speaker 2: of you get to demand a negative demand shock, So

865
00:41:33,960 --> 00:41:37,640
Speaker 2: they're destroying public spending on the one hand immediately, but

866
00:41:37,719 --> 00:41:40,799
Speaker 2: on the other hand, the growth engine comes later. And

867
00:41:40,840 --> 00:41:42,200
Speaker 2: so what that means you probably get a bit of

868
00:41:42,200 --> 00:41:45,120
Speaker 2: a recession in the US in the next couple of quarters,

869
00:41:45,160 --> 00:41:48,319
Speaker 2: or at least a growth air pocket, and that at

870
00:41:48,320 --> 00:41:51,440
Speaker 2: the same time probably emboldens the FED to start thinking

871
00:41:51,480 --> 00:41:55,080
Speaker 2: about cutting rates. You will get this temporary inflation shock,

872
00:41:55,120 --> 00:41:58,360
Speaker 2: but it is temporary. Yes, consumer inflation expectation is relevated,

873
00:41:58,360 --> 00:42:01,839
Speaker 2: but I think the FED will probably continue cutting rates

874
00:42:01,840 --> 00:42:04,239
Speaker 2: particularly when they see the negative growth data from the

875
00:42:04,320 --> 00:42:07,359
Speaker 2: DOGE initiative run by Musk. And then the other thing

876
00:42:07,400 --> 00:42:09,600
Speaker 2: is the trade wards creating mayhem in markets. So US

877
00:42:09,640 --> 00:42:13,799
Speaker 2: equities have drop ten percent, NOWSAX dropped thirteen percent. People

878
00:42:13,880 --> 00:42:16,480
Speaker 2: are very risk averse, very nervous. So you might say, well,

879
00:42:16,480 --> 00:42:18,600
Speaker 2: what about his tax cuts. Well, chances are people are

880
00:42:18,600 --> 00:42:19,840
Speaker 2: going to save a lot of those tax cuts and

881
00:42:19,840 --> 00:42:22,719
Speaker 2: they won't spend them. So I think in the short

882
00:42:22,800 --> 00:42:25,160
Speaker 2: term this is very bad for markets because markets can't

883
00:42:25,160 --> 00:42:27,400
Speaker 2: see pass their nose. Market's going to focus on the

884
00:42:27,440 --> 00:42:30,440
Speaker 2: growth shock, the fact that companies that service governments are

885
00:42:30,480 --> 00:42:31,960
Speaker 2: not going to be earning nearly as much money. All

886
00:42:31,960 --> 00:42:35,839
Speaker 2: those consulting firms, all those building contractors, I mean, all

887
00:42:35,840 --> 00:42:37,960
Speaker 2: the service providers to the US government are going to

888
00:42:38,000 --> 00:42:42,319
Speaker 2: get but bashed by my Musk. And that's short term

889
00:42:42,400 --> 00:42:44,440
Speaker 2: very negative. But in the long term it's super positive

890
00:42:44,440 --> 00:42:47,880
Speaker 2: because you're going to get this massively revitalized US manufacturing

891
00:42:47,880 --> 00:42:51,200
Speaker 2: industry and trillions of dollars a new investment in productive

892
00:42:51,200 --> 00:42:54,400
Speaker 2: equipment that's going to create a lot of autonomy for

893
00:42:54,440 --> 00:42:56,400
Speaker 2: the US. US won't be relying on anyone by the

894
00:42:56,480 --> 00:42:57,320
Speaker 2: end of this problem.

895
00:42:57,120 --> 00:43:00,960
Speaker 1: So given that, what would you say to Jim Charmers,

896
00:43:02,480 --> 00:43:05,800
Speaker 1: who may well end up getting re elected along with

897
00:43:06,320 --> 00:43:08,759
Speaker 1: his party and what inform of government? Is one question?

898
00:43:08,800 --> 00:43:11,480
Speaker 1: Would Chris Joey asked Jim Chalmers that you would like

899
00:43:11,520 --> 00:43:13,759
Speaker 1: to hear Jim's Chalmers address public? He because Jim is

900
00:43:13,760 --> 00:43:16,320
Speaker 1: going to be here next week and I'm going to ask.

901
00:43:16,200 --> 00:43:20,640
Speaker 2: Him, well, I mean the hard question. The question, of

902
00:43:20,680 --> 00:43:23,759
Speaker 2: course hard questions for Charmers is does he actually care

903
00:43:23,840 --> 00:43:27,040
Speaker 2: about reform or is he really just interested in power?

904
00:43:27,480 --> 00:43:29,719
Speaker 2: He wrote a PhD, but not on economics. He wrote

905
00:43:29,719 --> 00:43:33,400
Speaker 2: a PhD on Paul Keating's politics, his power politics. So

906
00:43:33,400 --> 00:43:36,600
Speaker 2: the first question is does he really care about reform?

907
00:43:36,960 --> 00:43:38,960
Speaker 2: And I think if you judge them on their actions,

908
00:43:39,000 --> 00:43:42,520
Speaker 2: they've massively increased government spending. The budgets lurts from surplus

909
00:43:42,520 --> 00:43:45,160
Speaker 2: to deficit. We have a problem in Australia with government

910
00:43:45,160 --> 00:43:48,359
Speaker 2: spending is now the high since World War Two, and

911
00:43:48,880 --> 00:43:50,839
Speaker 2: interest rates paradoxically would be a hell of a lot

912
00:43:50,920 --> 00:43:53,600
Speaker 2: lower in Australia. We're not for all of this government

913
00:43:53,600 --> 00:43:58,000
Speaker 2: spending correct And the problem here's the really kind of

914
00:43:58,000 --> 00:43:58,719
Speaker 2: far reaching.

915
00:43:58,560 --> 00:44:01,719
Speaker 1: You should you should just because effectively the massive government

916
00:44:01,760 --> 00:44:04,160
Speaker 1: expenders propped up the propped up the economy, which makes

917
00:44:04,160 --> 00:44:05,840
Speaker 1: you look a lot better than it really is.

918
00:44:05,480 --> 00:44:08,000
Speaker 2: If the public sector wasn't accounting for most of the

919
00:44:08,080 --> 00:44:11,000
Speaker 2: jobs growth, then unemployment would be much higher, wage growth

920
00:44:11,000 --> 00:44:13,880
Speaker 2: would be much weaker, inflation would be low. But the

921
00:44:13,960 --> 00:44:17,279
Speaker 2: demand I mean obviously economic growth has for the in

922
00:44:17,360 --> 00:44:19,920
Speaker 2: recent years been mostly accounted, if not one hundred percent,

923
00:44:20,000 --> 00:44:24,160
Speaker 2: driven by public spending. So the problem for Australians is

924
00:44:24,160 --> 00:44:27,879
Speaker 2: we have no productivity and Charmas has no solutions as

925
00:44:27,880 --> 00:44:29,600
Speaker 2: to how he's going to grow productivity and what is

926
00:44:29,600 --> 00:44:36,040
Speaker 2: productivity because productivity sounds like economist jargon. Productivity is just entrepreneurship, innovation,

927
00:44:36,920 --> 00:44:40,680
Speaker 2: idea generation. Productivity is just doing business smarter.

928
00:44:40,840 --> 00:44:42,320
Speaker 1: Encourage you people to take risks.

929
00:44:43,280 --> 00:44:46,719
Speaker 2: It's basically producing more with fewer resources. That's what productivity

930
00:44:46,760 --> 00:44:50,000
Speaker 2: is and one hundred percent encouraging people to take risks

931
00:44:50,000 --> 00:44:54,000
Speaker 2: to establish a disruptive business that's going to produce more

932
00:44:54,120 --> 00:44:57,000
Speaker 2: or the same amount that other people's less for less.

933
00:44:57,200 --> 00:44:59,920
Speaker 2: So therefore you can produce more cheaply, and therefore you

934
00:45:00,000 --> 00:45:03,239
Speaker 2: you can undercut your competitors and appropriate market share. So

935
00:45:03,600 --> 00:45:06,400
Speaker 2: the problem that Charmers has is he has no solution

936
00:45:06,640 --> 00:45:09,279
Speaker 2: to the fact that we have the worst productivity in

937
00:45:09,320 --> 00:45:18,000
Speaker 2: decades and Australia is mired in a massive productivity problem

938
00:45:18,040 --> 00:45:20,960
Speaker 2: and in the long run that's disastrous. It's kind of

939
00:45:21,000 --> 00:45:24,400
Speaker 2: like Dan Andrews. Dan Andrews, and Victoria spends crazy amounts

940
00:45:24,400 --> 00:45:26,840
Speaker 2: of money. In twenty nineteen, just before the pandemic, the

941
00:45:26,880 --> 00:45:29,319
Speaker 2: Victorians only owed the West of the world fifty to

942
00:45:29,360 --> 00:45:31,520
Speaker 2: sixty billion. Today or within a few years they were

943
00:45:31,719 --> 00:45:35,839
Speaker 2: close to three hundred billion. Well back in twenty twenty,

944
00:45:35,840 --> 00:45:39,400
Speaker 2: when Victorians borrowed money as a government, they paid an

945
00:45:39,440 --> 00:45:41,160
Speaker 2: interest rate that was very similar to what the cokmalp

946
00:45:41,200 --> 00:45:42,960
Speaker 2: pays today. They now pay one hundred basis points in

947
00:45:43,000 --> 00:45:45,439
Speaker 2: extra interest. Because no one wants to buy Victorian government

948
00:45:45,480 --> 00:45:47,560
Speaker 2: bonds and they're likely to be downgraded. Queensland is likely

949
00:45:47,600 --> 00:45:49,480
Speaker 2: to be a dangrade in our view. New said, Wales

950
00:45:49,600 --> 00:45:51,759
Speaker 2: is likely to be dangraded. And because we haven't had

951
00:45:51,800 --> 00:45:54,279
Speaker 2: a cathetic crisis, because we don't have yet a California,

952
00:45:54,320 --> 00:45:57,359
Speaker 2: although Victoria is heading that way, or a San Francisco,

953
00:45:58,239 --> 00:46:01,760
Speaker 2: there's no counterfactuals. And because there's so much public spending,

954
00:46:01,880 --> 00:46:05,240
Speaker 2: the government of the day is actually conflicting economically the

955
00:46:05,360 --> 00:46:09,439
Speaker 2: voters by sharing them with all this cash. But they're

956
00:46:09,480 --> 00:46:12,400
Speaker 2: making Australians very complacent, very very lazy. And this is

957
00:46:12,440 --> 00:46:14,879
Speaker 2: the Dutch disease that we're talking about earlier. The fact

958
00:46:14,880 --> 00:46:17,520
Speaker 2: that we've got really dumb growth in the form of

959
00:46:17,719 --> 00:46:24,960
Speaker 2: huge commodity exports coupled with really very primitive population growth.

960
00:46:25,400 --> 00:46:28,080
Speaker 2: None of that is productivity, and productivity is the only

961
00:46:28,120 --> 00:46:30,000
Speaker 2: thing that can grow wealth. And again I don't even

962
00:46:30,040 --> 00:46:35,600
Speaker 2: like the word productivity in entrepreneurship and innovation is what

963
00:46:35,719 --> 00:46:38,279
Speaker 2: drives prosperity, and we don't have that in Australia. Tax

964
00:46:38,360 --> 00:46:40,720
Speaker 2: rates are going up, not down, arguably at the margin,

965
00:46:40,760 --> 00:46:45,640
Speaker 2: particularly once you're adjust for indexation or bracket creep, and

966
00:46:47,920 --> 00:46:50,680
Speaker 2: I think what you'll see over the next few decades

967
00:46:50,760 --> 00:46:53,600
Speaker 2: is that Australian businesses will leave Australia because we're going

968
00:46:53,640 --> 00:46:55,439
Speaker 2: to become so uncompetitive to the rest of the world.

969
00:46:55,800 --> 00:46:58,200
Speaker 2: You'd be much better setting up in Singapore to buy

970
00:46:58,440 --> 00:47:03,040
Speaker 2: Abu Dhabi, Italy, Portugal, all these ascendant countries are doing

971
00:47:03,160 --> 00:47:06,440
Speaker 2: tax deals to attract the best and brightest businesses and

972
00:47:06,560 --> 00:47:10,560
Speaker 2: brains and people are moving like you know, Nico Okaine,

973
00:47:10,560 --> 00:47:11,920
Speaker 2: I think his name is. He was the top guy

974
00:47:11,920 --> 00:47:14,920
Speaker 2: at mcquarybank. They paid him over fifty million a year.

975
00:47:15,880 --> 00:47:18,680
Speaker 2: He resigned to take a job in Dubai. Why because

976
00:47:18,800 --> 00:47:20,920
Speaker 2: presumably he can get much better economic and send him

977
00:47:20,960 --> 00:47:24,360
Speaker 2: in Dubai. So the top McQuary banker doesn't want to

978
00:47:24,360 --> 00:47:27,319
Speaker 2: live in Australia, notwiderstanding. He's a presumably a very proud

979
00:47:27,320 --> 00:47:29,239
Speaker 2: Astraian who loves, like we all do, the amenity of

980
00:47:29,239 --> 00:47:31,719
Speaker 2: living in Australia.

981
00:47:32,400 --> 00:47:33,960
Speaker 1: And I know a lot of people doing exactly the

982
00:47:34,040 --> 00:47:36,600
Speaker 1: same thing. And by the way, you can always buy

983
00:47:36,640 --> 00:47:38,880
Speaker 1: astrain assets too, so it doesn't make much difference. Astrain

984
00:47:38,920 --> 00:47:40,840
Speaker 1: assist with you to buy, but you're operating in a

985
00:47:40,880 --> 00:47:42,560
Speaker 1: different vironm where he paid his tax is much more

986
00:47:42,560 --> 00:47:45,200
Speaker 1: efficient loss, so that's regulated and you have access to

987
00:47:45,239 --> 00:47:47,680
Speaker 1: many other parts of the world as a market economist.

988
00:47:48,480 --> 00:47:50,200
Speaker 1: Just something I was struck me whilst I was talking

989
00:47:50,760 --> 00:47:54,840
Speaker 1: whilst he's talking, was as you know, the regulator in

990
00:47:54,840 --> 00:47:59,120
Speaker 1: Australia requires landers. In Australia, it doesn't require, but suggest

991
00:47:59,160 --> 00:48:01,960
Speaker 1: to lenders Ausralia that a threshold of three percent over

992
00:48:01,960 --> 00:48:05,200
Speaker 1: the prevailing over the lending rate when they're assessing a

993
00:48:05,200 --> 00:48:08,960
Speaker 1: borrower to buy a house, and the suggestion is that, like,

994
00:48:09,000 --> 00:48:11,000
Speaker 1: if you do what we say, then you will have

995
00:48:11,000 --> 00:48:12,960
Speaker 1: to hold less capital. If you don't do what we

996
00:48:13,000 --> 00:48:15,960
Speaker 1: say and your portfolio is you know, you're learning your threshold,

997
00:48:16,000 --> 00:48:17,840
Speaker 1: the extra amount that you look at in terms of

998
00:48:17,880 --> 00:48:20,279
Speaker 1: person's ability to service that loan is so you if

999
00:48:20,320 --> 00:48:22,759
Speaker 1: you only apply two percent, then NUEB As a result

1000
00:48:22,800 --> 00:48:24,160
Speaker 1: of that, you know, we might ask you to hold

1001
00:48:24,160 --> 00:48:25,880
Speaker 1: a little bit more capital. I guess that because we

1002
00:48:25,880 --> 00:48:28,439
Speaker 1: think that loan might be more risky. Whether portfolio loans

1003
00:48:28,840 --> 00:48:32,319
Speaker 1: more risky. One of the things I don't really don't like,

1004
00:48:33,040 --> 00:48:36,400
Speaker 1: and I know I have a kindred thought process with

1005
00:48:36,480 --> 00:48:40,040
Speaker 1: you on this is to some extent that plays right

1006
00:48:40,080 --> 00:48:43,360
Speaker 1: into the hands of elitism in Australia because only the

1007
00:48:43,360 --> 00:48:47,239
Speaker 1: elite can afford and the elite's kids can afford, which,

1008
00:48:47,280 --> 00:48:49,960
Speaker 1: by the way, are our kids to borrow those amounts

1009
00:48:49,960 --> 00:48:52,840
Speaker 1: of money because we have to top them up. You know,

1010
00:48:52,880 --> 00:48:54,560
Speaker 1: we're always going to be topping them up, which you

1011
00:48:54,600 --> 00:48:56,239
Speaker 1: know you expect parents to do if they have a

1012
00:48:56,280 --> 00:48:58,439
Speaker 1: capacity to do it. But the problem is, in terms

1013
00:48:58,480 --> 00:49:01,280
Speaker 1: of affordability, pability is not just the price of property

1014
00:49:01,320 --> 00:49:03,360
Speaker 1: but the ability to pay for the property. You always

1015
00:49:03,360 --> 00:49:04,919
Speaker 1: borrow the money to buy the probuct because most people

1016
00:49:04,920 --> 00:49:08,640
Speaker 1: borrow anyway. So given the market interest rates at the moment,

1017
00:49:09,440 --> 00:49:11,200
Speaker 1: and they're more likely to come down and go up.

1018
00:49:11,360 --> 00:49:15,360
Speaker 1: What do you think about the the three percent threshold

1019
00:49:15,480 --> 00:49:20,320
Speaker 1: sitting on top of people's ability to borrow and or

1020
00:49:20,360 --> 00:49:24,719
Speaker 1: servicing our servicing assessment? I see the Dunton's command set

1021
00:49:24,840 --> 00:49:27,200
Speaker 1: is unfair. What do you think about that three percent?

1022
00:49:27,239 --> 00:49:30,480
Speaker 2: Listen? I think it's a good example of a situation

1023
00:49:30,520 --> 00:49:35,319
Speaker 2: where there are probably much better models that regulators, and

1024
00:49:35,360 --> 00:49:38,960
Speaker 2: our regulators have not covered themselves in glory recently, particularly APRO,

1025
00:49:39,040 --> 00:49:42,920
Speaker 2: which is responsible for this regulation. There's many more dynamic

1026
00:49:43,000 --> 00:49:45,160
Speaker 2: models that could apply that would result in better outcomes

1027
00:49:45,160 --> 00:49:49,120
Speaker 2: for everybody. So you know, three percent as an extra

1028
00:49:49,400 --> 00:49:54,160
Speaker 2: interest rate buffer the banks apply on your serviceability test

1029
00:49:54,200 --> 00:49:56,080
Speaker 2: when figuring out what you can afford to repay?

1030
00:49:56,120 --> 00:49:57,640
Speaker 1: How much and how much will lend you therefore?

1031
00:49:57,800 --> 00:49:59,880
Speaker 2: Yeah, how much will lend you therefore? And therefore what

1032
00:50:00,239 --> 00:50:02,759
Speaker 2: you know? Property you can you can buy purchase. That

1033
00:50:02,840 --> 00:50:04,320
Speaker 2: made a lot of sense when the cash rate was

1034
00:50:04,320 --> 00:50:06,879
Speaker 2: a zero percent, yeah, because obviously the cash rate could

1035
00:50:06,880 --> 00:50:09,600
Speaker 2: have easily increased by as it did. It did, and

1036
00:50:09,600 --> 00:50:13,440
Speaker 2: with benefit findsight it increased by four hundred and twenty

1037
00:50:13,640 --> 00:50:16,359
Speaker 2: five basis points. But when the cash rates of four

1038
00:50:16,400 --> 00:50:18,120
Speaker 2: hundred and twenty five basis points, or at the time

1039
00:50:18,120 --> 00:50:21,439
Speaker 2: it was four thirty five, it made no sense, right,

1040
00:50:21,560 --> 00:50:23,960
Speaker 2: or very little sense. So it should be dynamic, you

1041
00:50:24,000 --> 00:50:27,279
Speaker 2: know that serviceability Baffer. I think should be dynamic, and

1042
00:50:27,280 --> 00:50:29,560
Speaker 2: it should be calibrated according to whether the cash rate

1043
00:50:29,680 --> 00:50:31,960
Speaker 2: is at any point in time. So I definitely think

1044
00:50:31,960 --> 00:50:34,640
Speaker 2: at this point in time there's scope to lower it. Yeah,

1045
00:50:34,719 --> 00:50:37,799
Speaker 2: I mean, you know here and now you say prudently

1046
00:50:37,840 --> 00:50:39,440
Speaker 2: at least by one hundred basis points.

1047
00:50:39,520 --> 00:50:42,160
Speaker 1: Right. They used to do that, but I don't know

1048
00:50:42,160 --> 00:50:44,960
Speaker 1: why we haven't changed for so long. And the only

1049
00:50:45,000 --> 00:50:46,439
Speaker 1: other question I have for you, But.

1050
00:50:46,360 --> 00:50:48,000
Speaker 2: By the way, on that note, I mean, I think

1051
00:50:49,680 --> 00:50:54,160
Speaker 2: Jim Charmers and Dunnan should they control a prom and

1052
00:50:54,200 --> 00:50:56,880
Speaker 2: they can absolutely say, hey, we don't agree with the

1053
00:50:56,040 --> 00:50:58,440
Speaker 2: serviceability Buffy, you should change it.

1054
00:50:58,840 --> 00:51:01,920
Speaker 1: We're done. Has said that said, yeah, I start off.

1055
00:51:01,800 --> 00:51:06,120
Speaker 2: But opera, you know, sometimes THEA and apron ibe it's

1056
00:51:06,120 --> 00:51:07,759
Speaker 2: a little bit different because they are meant to be

1057
00:51:07,760 --> 00:51:12,320
Speaker 2: about the independent of the government oppera artists, but certainly

1058
00:51:12,360 --> 00:51:15,000
Speaker 2: acic and but app in particular of Lad's made some

1059
00:51:15,120 --> 00:51:18,560
Speaker 2: funny decisions, some odd decisions like facing out the hybrid

1060
00:51:18,560 --> 00:51:20,520
Speaker 2: market is one which has never been done before anyone

1061
00:51:20,600 --> 00:51:23,640
Speaker 2: in the world. And yeah, if I was a smart politician,

1062
00:51:23,680 --> 00:51:25,759
Speaker 2: I just say, dude, you know it makes no sense

1063
00:51:25,840 --> 00:51:27,759
Speaker 2: to whack three hundred based points on top of a

1064
00:51:27,800 --> 00:51:30,640
Speaker 2: four thirty five cash rate. You know, we're going to

1065
00:51:30,640 --> 00:51:32,799
Speaker 2: cut it to two hundred see see how things go,

1066
00:51:32,920 --> 00:51:34,880
Speaker 2: and potentially will cut it a little bit loud, you know,

1067
00:51:34,880 --> 00:51:36,680
Speaker 2: maybe down to one hundred and fifty because.

1068
00:51:36,719 --> 00:51:38,400
Speaker 1: If it all of a sudden increases a massive amount

1069
00:51:38,440 --> 00:51:42,200
Speaker 1: of borrowing and house prices, I'm changing it again. You

1070
00:51:42,239 --> 00:51:43,239
Speaker 1: can keep put it up to two and a half

1071
00:51:43,280 --> 00:51:45,120
Speaker 1: hegaus say you can calibrate. And the only other question

1072
00:51:45,120 --> 00:51:46,960
Speaker 1: I had for you is if you don't mind if

1073
00:51:46,960 --> 00:51:48,960
Speaker 1: I just grabbed you before before you because I know

1074
00:51:49,080 --> 00:51:50,680
Speaker 1: you're busy and I've got to know the podcast as well.

1075
00:51:50,680 --> 00:51:51,560
Speaker 2: But like, is.

1076
00:51:53,400 --> 00:51:57,120
Speaker 1: You talked about policy? You talk about you know, has

1077
00:51:57,200 --> 00:51:59,480
Speaker 1: Jim got serious policy? Does he really want to make

1078
00:51:59,560 --> 00:52:02,719
Speaker 1: reform and have changes make changes? What do you think

1079
00:52:02,719 --> 00:52:04,239
Speaker 1: about the concept of and a lot of people talking

1080
00:52:04,239 --> 00:52:05,920
Speaker 1: about it, and Matt Common has been talking about it.

1081
00:52:05,920 --> 00:52:07,000
Speaker 1: I mean a lot of people been talk about for

1082
00:52:07,000 --> 00:52:10,200
Speaker 1: a long time. I have to about having an adjustment

1083
00:52:10,200 --> 00:52:15,520
Speaker 1: in the GST from ten to say fifteens. But that's

1084
00:52:15,560 --> 00:52:18,400
Speaker 1: assume it. It never goes above or below. But you

1085
00:52:18,760 --> 00:52:21,840
Speaker 1: adjust the t in lockstep with the RBA making changes

1086
00:52:21,880 --> 00:52:26,080
Speaker 1: so that up or down so that everybody gets affected

1087
00:52:26,120 --> 00:52:28,560
Speaker 1: and or everybody gets the benefit of it. So you know,

1088
00:52:28,640 --> 00:52:30,600
Speaker 1: during a period when we're trying to you know, damp

1089
00:52:30,600 --> 00:52:33,840
Speaker 1: and spending, instead of just putting the RBA of the

1090
00:52:33,920 --> 00:52:36,359
Speaker 1: RBA putting up the cash rate, which puts up your

1091
00:52:36,360 --> 00:52:39,640
Speaker 1: mortgage rate. On top of that, whoever it is, puts

1092
00:52:39,719 --> 00:52:43,200
Speaker 1: up the GST rate five base points, two base points,

1093
00:52:43,239 --> 00:52:45,160
Speaker 1: twenty base points, what it is trying to make sure

1094
00:52:45,160 --> 00:52:47,040
Speaker 1: that they affect everybody, because you know, we have these

1095
00:52:47,040 --> 00:52:49,760
Speaker 1: conflicting markets. You know, we have all the people mortgages

1096
00:52:49,760 --> 00:52:52,480
Speaker 1: who are paying more. And then say someone like you know,

1097
00:52:53,000 --> 00:52:55,200
Speaker 1: your parents who might be so alive, don't have a mortgage.

1098
00:52:55,239 --> 00:52:56,839
Speaker 1: You know, I have money in the super fund. Blah

1099
00:52:56,880 --> 00:53:00,239
Speaker 1: blah blah. They're not they're not affected, and they're they're

1100
00:53:00,280 --> 00:53:02,120
Speaker 1: out spending like drunken sales and taking the trips to

1101
00:53:02,160 --> 00:53:04,120
Speaker 1: Ballin and Bali and spending money in.

1102
00:53:04,080 --> 00:53:07,240
Speaker 2: Restaurants makes a lot of sense. The RBA was doing it, Yeah.

1103
00:53:07,120 --> 00:53:09,319
Speaker 1: RBA should do it. Yeah, what do you think about

1104
00:53:09,320 --> 00:53:11,840
Speaker 1: that as a charmer potential charmers policy.

1105
00:53:11,920 --> 00:53:14,160
Speaker 2: Yeah, thing's great. Ay, Like, if the RBA was doing it,

1106
00:53:14,239 --> 00:53:18,120
Speaker 2: it just gives them more tools, more levers, it would

1107
00:53:18,200 --> 00:53:20,560
Speaker 2: be more board based. It probably reduced the amount of

1108
00:53:20,600 --> 00:53:22,520
Speaker 2: which they had to increase interest rates create to give

1109
00:53:22,560 --> 00:53:25,719
Speaker 2: an impact. I do think that, like we would be

1110
00:53:25,719 --> 00:53:28,400
Speaker 2: better off with a higher GST and lower income taxes.

1111
00:53:28,440 --> 00:53:32,600
Speaker 2: We're better at having a fair flat, flatter tax regime

1112
00:53:32,640 --> 00:53:37,080
Speaker 2: where the guy that works harder than his contemporary chooses

1113
00:53:37,120 --> 00:53:40,439
Speaker 2: not to work hard doesn't end up paying He'll always

1114
00:53:40,480 --> 00:53:43,080
Speaker 2: pay more taxes, he's earning more income. But how's it

1115
00:53:43,120 --> 00:53:45,799
Speaker 2: fair that he actually pays a higher percentage of his

1116
00:53:45,880 --> 00:53:48,720
Speaker 2: income in the former tax than the guy that's choosing

1117
00:53:48,760 --> 00:53:52,360
Speaker 2: not to work hard. That's kind of perverse. So this

1118
00:53:52,360 --> 00:53:57,520
Speaker 2: this tax regime where we get taxed proportionally more the

1119
00:53:57,560 --> 00:53:58,520
Speaker 2: harder we work.

1120
00:53:58,440 --> 00:54:00,480
Speaker 1: And it was with progressive system.

1121
00:54:00,560 --> 00:54:04,879
Speaker 2: Yeah, it is a massive disincentive for innovation. Entrepreneurship and

1122
00:54:05,200 --> 00:54:08,120
Speaker 2: productivity and prosperity. So coming back to Charmers, I think

1123
00:54:08,719 --> 00:54:10,520
Speaker 2: the problem in Australia have got a huge model, has it.

1124
00:54:10,680 --> 00:54:12,880
Speaker 2: I feel like there's a lot of complacency in the community.

1125
00:54:14,080 --> 00:54:18,279
Speaker 2: Young kids, you have incredible lives. You know, there's no unemployment,

1126
00:54:19,080 --> 00:54:24,360
Speaker 2: wages are very healthy, there's massive amounts of public support.

1127
00:54:24,480 --> 00:54:30,480
Speaker 2: NDIS is supporting one in ten kids. And I think

1128
00:54:30,680 --> 00:54:32,560
Speaker 2: the problem will be twenty or three years hence, and

1129
00:54:32,560 --> 00:54:34,640
Speaker 2: I think there's a little echo of this in Dan

1130
00:54:34,719 --> 00:54:38,399
Speaker 2: Andrews in Victoria. So Dan Andrews decides to spend more

1131
00:54:38,400 --> 00:54:40,760
Speaker 2: money than any Victorian has in the history of the state,

1132
00:54:41,440 --> 00:54:45,120
Speaker 2: and government's a solution to every problem. But now increasingly

1133
00:54:45,120 --> 00:54:46,719
Speaker 2: it's looking like a failed state. No one wants to

1134
00:54:46,719 --> 00:54:49,319
Speaker 2: live in Victoria and people are leaving. Businesses don't want

1135
00:54:49,360 --> 00:54:52,600
Speaker 2: to operate in Victoria. Bauxes taxes are high and rising

1136
00:54:52,640 --> 00:54:55,600
Speaker 2: everywhere because they're having to pay for the debt. You know,

1137
00:54:55,680 --> 00:54:58,160
Speaker 2: Victoria will shortly be paying about twelve bin a year

1138
00:54:58,360 --> 00:55:02,760
Speaker 2: or circle five three to five hospitals worth in interest

1139
00:55:02,840 --> 00:55:05,000
Speaker 2: payments align on their debts. So they've gone from again

1140
00:55:05,040 --> 00:55:06,600
Speaker 2: fifty to sixty billion a debt to close to three

1141
00:55:06,640 --> 00:55:10,760
Speaker 2: hundred million a debt. And yeah, none of these guys

1142
00:55:10,760 --> 00:55:12,799
Speaker 2: seem to have any solutions for the long term. They

1143
00:55:12,800 --> 00:55:15,640
Speaker 2: just seem to be optimizing for I want to win

1144
00:55:15,680 --> 00:55:17,840
Speaker 2: the next selection, I want to become prime minister. I

1145
00:55:17,880 --> 00:55:21,040
Speaker 2: want to be maximize my personal power. I think a

1146
00:55:21,040 --> 00:55:24,520
Speaker 2: lot of these there's a self selection bias in politics

1147
00:55:24,520 --> 00:55:29,759
Speaker 2: where you get a lot of narcissistic individuals who are

1148
00:55:29,760 --> 00:55:33,640
Speaker 2: not actually genuinely interested in policy reform. Even the smart guys.

1149
00:55:34,960 --> 00:55:39,920
Speaker 2: We don't need to mention him. But but I wasn't

1150
00:55:40,000 --> 00:55:41,920
Speaker 2: talking about my mate Malcolm Terrible just to the evouence

1151
00:55:41,960 --> 00:55:45,320
Speaker 2: a doubt. There's others on the left side of politics

1152
00:55:45,360 --> 00:55:48,640
Speaker 2: that probably fall into that coor. But it's funny. You

1153
00:55:48,680 --> 00:55:50,719
Speaker 2: know many more politicians than I do. But I know

1154
00:55:50,840 --> 00:55:53,120
Speaker 2: a lot of politicians, and finding the guys that are actually,

1155
00:55:53,760 --> 00:55:58,040
Speaker 2: you know, really earnestly committed to making the world a

1156
00:55:58,080 --> 00:56:02,040
Speaker 2: better place, it's hard, Jacko. You know, all these guys

1157
00:56:02,040 --> 00:56:04,319
Speaker 2: are the kids who are at UNI, who are doing

1158
00:56:04,320 --> 00:56:08,080
Speaker 2: student politics, yapping around trying to kind of self promote

1159
00:56:08,080 --> 00:56:15,680
Speaker 2: themselves to advance their personal power and control and influence.

1160
00:56:16,120 --> 00:56:18,719
Speaker 2: So I think politics is a funny, funny business, like

1161
00:56:18,760 --> 00:56:19,919
Speaker 2: I would never want to go into pot.

1162
00:56:19,960 --> 00:56:22,839
Speaker 1: I think it's yeah, I think it's wanting.

1163
00:56:22,960 --> 00:56:26,520
Speaker 2: Yeah, the choice of candidates as well, Like you just

1164
00:56:26,640 --> 00:56:30,320
Speaker 2: think that there'd be more opportunities. It's not like the

1165
00:56:30,360 --> 00:56:33,360
Speaker 2: American system has necessarily generated, you know, super compelling candidates.

1166
00:56:33,360 --> 00:56:35,120
Speaker 2: And it seems like the compelling candidates in the US

1167
00:56:35,120 --> 00:56:39,720
Speaker 2: system are also for whatever reason, you know, they there's

1168
00:56:39,719 --> 00:56:41,680
Speaker 2: a lot of attrition, Like guys that want to you know,

1169
00:56:42,200 --> 00:56:44,680
Speaker 2: the people that seem to have a lot of ability,

1170
00:56:44,840 --> 00:56:47,000
Speaker 2: they seem to flame out for one reason or other.

1171
00:56:47,000 --> 00:56:51,560
Speaker 2: You get these highly bificied, bifurcated, polarized environments where you

1172
00:56:51,600 --> 00:56:53,800
Speaker 2: get a Biden versus a Trump. But I think Trump's

1173
00:56:54,360 --> 00:56:56,279
Speaker 2: I think the difference with Trump this time around. Mate.

1174
00:56:56,360 --> 00:57:00,680
Speaker 2: My final comment is, and you know, I'm not politically parties,

1175
00:57:00,719 --> 00:57:04,080
Speaker 2: and I don't think myself and I thought Trump Mark

1176
00:57:04,200 --> 00:57:09,080
Speaker 2: one was pretty mercurial and campricious and hyperbolic and everything

1177
00:57:09,120 --> 00:57:11,279
Speaker 2: that people criticize him for being. But this dude is

1178
00:57:11,560 --> 00:57:14,560
Speaker 2: is a year shot off and he's had multiple assassination attempts.

1179
00:57:14,600 --> 00:57:17,360
Speaker 2: He's coming up towards eighty, He's only got one term.

1180
00:57:17,600 --> 00:57:21,160
Speaker 2: There's no third term at this point. He's not kind

1181
00:57:21,160 --> 00:57:24,480
Speaker 2: of doing this to win another election. This is all

1182
00:57:24,520 --> 00:57:26,200
Speaker 2: a legacy trade and that's why I think he's going

1183
00:57:26,200 --> 00:57:28,960
Speaker 2: for the jugular. He's really serious, and that's why there's

1184
00:57:28,960 --> 00:57:30,800
Speaker 2: been no Trump put option for the market. If the

1185
00:57:30,800 --> 00:57:32,600
Speaker 2: market keeps on thinking he's going to acquiesce and he's

1186
00:57:32,640 --> 00:57:34,320
Speaker 2: going to bend the there and say, oh, it's all okay,

1187
00:57:34,760 --> 00:57:36,960
Speaker 2: I'm just trying to negotiate a good deal. But he

1188
00:57:37,120 --> 00:57:40,480
Speaker 2: I think, is really really focused on far reaching reform

1189
00:57:40,920 --> 00:57:42,880
Speaker 2: that's going to be his personal legacy. He wants to

1190
00:57:42,960 --> 00:57:44,760
Speaker 2: change the US. He does want to make the US

1191
00:57:44,840 --> 00:57:48,160
Speaker 2: great again, and so I think it could be a

1192
00:57:48,280 --> 00:57:54,919
Speaker 2: very turbulent, volatile time and it's certainly an extremely uncertain time.

1193
00:57:55,400 --> 00:58:00,360
Speaker 2: So yeah, policy uncertainty is heightened and that makes decision

1194
00:58:00,400 --> 00:58:03,680
Speaker 2: making hard. So I think for markets tough for the

1195
00:58:03,720 --> 00:58:07,040
Speaker 2: next six to twelve months. At some point that manufacturing

1196
00:58:07,440 --> 00:58:10,560
Speaker 2: miracle will assert itself and the markets will start focusing

1197
00:58:10,560 --> 00:58:12,120
Speaker 2: on that, and that's where I think you can see

1198
00:58:12,120 --> 00:58:15,120
Speaker 2: a recovery. But I think in summary, in twenty twenty five,

1199
00:58:15,240 --> 00:58:19,320
Speaker 2: rate cuts from the FED and the RBA, disinflation in

1200
00:58:19,320 --> 00:58:22,680
Speaker 2: Australia high inflation in the US. I do think we're

1201
00:58:22,960 --> 00:58:24,920
Speaker 2: in the medium term in a higher for longer environment,

1202
00:58:24,920 --> 00:58:28,720
Speaker 2: particularly when the manufacturing investment starts coming online. So I

1203
00:58:28,720 --> 00:58:31,240
Speaker 2: don't see massive rate cuts. I do think that people

1204
00:58:31,280 --> 00:58:34,640
Speaker 2: that are struggling under the weight of high interstrate burdens,

1205
00:58:34,680 --> 00:58:38,120
Speaker 2: businesses and households, the marginal borrows are probably going to

1206
00:58:38,200 --> 00:58:41,160
Speaker 2: continue to struggle. We've got record high insolvencies in Australia,

1207
00:58:41,160 --> 00:58:42,520
Speaker 2: but we also see the same thing in the UK,

1208
00:58:43,200 --> 00:58:45,240
Speaker 2: US and New Zealand, and I don't think that's really

1209
00:58:45,280 --> 00:58:48,120
Speaker 2: going to change fundamentally. I think we're still living in

1210
00:58:48,160 --> 00:58:50,840
Speaker 2: an inflationary world. But there's these cross currents now because

1211
00:58:50,840 --> 00:58:51,560
Speaker 2: of the trade Will.

1212
00:58:51,440 --> 00:58:54,720
Speaker 1: And where can people follow your updates?

1213
00:58:55,560 --> 00:58:59,440
Speaker 2: On Twitter? At cjoy on LinkedIn, we publish our macro

1214
00:58:59,520 --> 00:59:02,960
Speaker 2: strategies here and Davies publishes on Live one and then

1215
00:59:03,000 --> 00:59:04,040
Speaker 2: I published weekly in the.

1216
00:59:04,200 --> 00:59:06,280
Speaker 1: So Lovey dot com is a it's a free service

1217
00:59:07,120 --> 00:59:09,960
Speaker 1: because I subscribe to that Coulibar, you had a publication

1218
00:59:10,000 --> 00:59:10,480
Speaker 1: at Kolibar.

1219
00:59:10,800 --> 00:59:13,919
Speaker 2: We've got that website cool abocapital dot com. And then

1220
00:59:14,080 --> 00:59:18,760
Speaker 2: in the Financial Review that article that Columba write publishes

1221
00:59:18,800 --> 00:59:21,240
Speaker 2: on Friday and then appiece on the paper on Saturday's

1222
00:59:21,240 --> 00:59:21,960
Speaker 2: most weekends.

1223
00:59:22,160 --> 00:59:24,040
Speaker 1: Chris Joy, thanks for much made Thanks nice