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Speaker 1: Doctor Richard Dennis. Welcome to Property Insights, mate, Great to

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Speaker 1: be here. And where am I talking to you from?

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Speaker 1: Where are you now? Canberra today, Camber today we're normally

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Speaker 1: hanging out.

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Speaker 2: Oh you're usually Camberra but travel around. I just just

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Speaker 2: got back from sunny Brisbane, which is this time of

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Speaker 2: year is a bit nicer weather than Camber in the middle.

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Speaker 1: That's for sure, and Sydney for that matter. So you're

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Speaker 1: the executive director and Executive Director of the Australia of

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Speaker 1: the Australian Institute. You're well known economist, a public policy commentator,

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Speaker 1: which by the way, at the moment is really topical,

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Speaker 1: particularly public policy. And you've written quite a few books,

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Speaker 1: which is interesting. Econo babble, I love that name, my God,

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Speaker 1: Curing Affluenza and dead Right, How Neoliberals Neoliberalism made herself

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Speaker 1: and what comes next. You've written recently written in an

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Speaker 1: essay called The Dead Center, how political pragmatism is killing us. Mate.

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Speaker 1: Given the round table is on its way, but I

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Speaker 1: think it's next week. Have you been invited.

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Speaker 2: I haven't been invited, but I've certainly been talking to

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Speaker 2: a lot of people who are going along my idea

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Speaker 2: of hell is sitting in a room listening to other

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Speaker 2: people talk for three days.

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Speaker 1: To kill me too. So what do you think about

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Speaker 1: this round table and what do you think of the

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Speaker 1: major economic issues that need to be solved in our

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Speaker 1: country and do you have any ideas about how we

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Speaker 1: should be approaching them.

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Speaker 2: Yeah, look, I think a round tables a great idea.

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Speaker 2: I think getting people together to talk is really good.

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Speaker 2: But unfortunately in Australia we've kind of made so many

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Speaker 2: conversations so hard to have that it's really hard for

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Speaker 2: people to sit around and sort of ventilate big ideas

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Speaker 2: or new ideas because everyone's kind of stuck in the

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Speaker 2: past a bit saying well, I oppose that in the past,

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Speaker 2: so I have to keep opposing it, Or I've always

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Speaker 2: wanted this, so I have to keep asking for it.

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Speaker 2: So I think it's a good thing. I think bringing

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Speaker 2: people together is good. I think if you've got the

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Speaker 2: patience for it, long conversations with people you disagree with

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Speaker 2: a good But I guess I'm a bit pessimistic that

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Speaker 2: the people that are invited into that room, who are

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Speaker 2: by design come from lots of different perspectives, will be

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Speaker 2: able to agree on too much. But maybe they'll be

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Speaker 2: able to agree on what some of the big problems are.

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Speaker 2: I suspect they won't be able to agree on what

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Speaker 2: the big solutions are.

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Speaker 1: So in terms of the solutions, they probably what you're saying,

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Speaker 1: I guess what you're saying is they're going to agree

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Speaker 1: to disagree in the solutions.

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Speaker 3: Yeah, I think so. I think.

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Speaker 2: You know, we'll hear the kind of property Counsel save,

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Speaker 2: the sort of thing the property business say. We'll hear

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Speaker 2: the Business Council say the things the Business Council say.

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Speaker 2: We'll hear the ACTU say the kind of thing they say.

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Speaker 2: But you know, the reality is we don't really have

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Speaker 2: a shared sense in Australia of what our economy does.

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Speaker 2: We don't have a shared sense of what the problems are.

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Speaker 2: We're kind of blind.

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Speaker 3: To the rest of the world.

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Speaker 2: We really find it hard to admit, for example, that

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Speaker 2: in Europe they collect more tax than we do, but

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Speaker 2: they spend more money on some things than we do.

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Speaker 2: And of course in the US collect less tax than

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Speaker 2: we do, and they spend less government money on some things.

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Speaker 2: Now everyone knows that America looks quite a lot different

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Speaker 2: from Sweden, everyone knows Singapore looks quite a lot different

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Speaker 2: from Norway. But we rarely have a big open on

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Speaker 2: this conversation saying well what are we heading for here?

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Speaker 3: What do most people want?

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Speaker 2: Usually it's people just saying you have to do this

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Speaker 2: or the economy will fall a bit. And I don't

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Speaker 2: think people trust each other enough to go along with

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Speaker 2: that anymore.

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Speaker 1: Do you think Australians need something do all of us

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Speaker 1: and including all the agenda groups, interest groups like property

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Speaker 1: counsel and the business counsel, etcetera, all those groups that

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Speaker 1: represent their own constituencies constituency Do you think that we

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Speaker 1: need all of us, all interesting parties, all stakeholders, need

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Speaker 1: the government to make the decision for us?

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Speaker 3: Ultimately?

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Speaker 2: I do, And I think that democracy kind of it's

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Speaker 2: a strange thing to talk about democracy. Were used to voting,

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Speaker 2: but we don't talk about democracy that much. What we

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Speaker 2: do with the democracy is we elect our representatives. They

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Speaker 2: go to Parliament, they make decisions on our behalf and

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Speaker 2: every three years we get the chance to chuck them

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Speaker 2: out and put some new ones in. I think once

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Speaker 2: people are in there, they should be willing to make

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Speaker 2: hard decisions that they think are best for the country

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Speaker 2: and if they win the election or lose the election,

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Speaker 2: well that shouldn't be the most important thing in their mind.

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Speaker 2: But we've kind of flipped democracy on its head. Now

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Speaker 2: we just know we just takers for granted, it's common sense.

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Speaker 2: The main thing the people we elect want is to

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Speaker 2: stay in there, and rather than thinking what are the

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Speaker 2: best things for the country, we think what are the

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Speaker 2: things that are most likely to keep me here? And

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Speaker 2: obviously that means we just kick most of the big

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Speaker 2: hard decisions down the road, because why pick a big

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Speaker 2: fight that might make some people sad when you can

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Speaker 2: just kind of have another inquiry or have another roundtable

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Speaker 2: and you know, maybe not offend anybody.

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Speaker 1: Well, why do we have an inquiry? Then that's going

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Speaker 1: to be the outcome.

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Speaker 2: Well, I hope I'm wrong. Maybe this time, you know,

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Speaker 2: Labour's just one with a very large majority. Maybe this

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Speaker 2: time they're feeling more emboldened. Maybe this time, after the chat,

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Speaker 2: they'll be willing to go off and make some hard decisions.

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Speaker 2: I hope they would. I think that there's lots of

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Speaker 2: things that we could change about our property market, there's

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Speaker 2: lots of things we could change about attack system, there's

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Speaker 2: lots of things we can change about the way our

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Speaker 2: education system works that would be good for Australia as

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Speaker 2: a whole, and twenty five million Australians won't agree on

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Speaker 2: what those things are. But unless the people we elect

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Speaker 2: to Parliament are brave enough to say, well, I might

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Speaker 2: not have everyone agree with me, but I genuinely think

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Speaker 2: and my party genuinely thinks A is better than B.

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Speaker 2: Unless we're actually electing people that are brave enough to

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Speaker 2: make those big decisions, then yeah, it just circles around

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Speaker 2: and around the drain.

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Speaker 1: Well, in the interest of time, let's just pick two

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Speaker 1: two issues. And I recall and I think it was

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Speaker 1: like two thousand and ninety ninety nine, perhaps John Howard

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Speaker 1: and Petty Costello after the ninety six election introduced the GST,

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Speaker 1: which was pretty unpopular, very courageous, I thought, very brave

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Speaker 1: and I actually think a good policy. Frustrated, do you

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Speaker 1: think GST will get Do you think GST rather should

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Speaker 1: be looked at by the government in this round?

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Speaker 3: Yeah?

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Speaker 2: Look, to be clear, I agree with you. I'm glad

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Speaker 2: we've got a GST. I think no one wants to

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Speaker 2: remove it, which is kind of the proof that it's

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Speaker 2: kind of worked pretty well. I think that there's two

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Speaker 2: things you can do with the GST. You can either

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Speaker 2: broaden it to include things that have been left out.

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Speaker 2: The big things that have been left out are private

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Speaker 2: school fees, private health insurance, and increasingly a lot of

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Speaker 2: people salary sacrifice cars for example. That means they don't

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Speaker 2: pay GST on their car, they don't pay GST on

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Speaker 2: their petrol, they don't pay GST on their tires. So

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Speaker 2: things like salary sacrifice cars, private school fees, private health insurance,

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Speaker 2: that's making a bigger and bigger hole in the GST bucket.

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Speaker 2: And I think it would be a brave government that said, well,

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Speaker 2: you know what, there's GST on McDonald's. I think there

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Speaker 2: should be GFC on your company car. I don't think

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Speaker 2: the government will be up for that fight. The other

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Speaker 2: thing you can do with the GST is increase the

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Speaker 2: rate from ten percent.

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Speaker 3: To eleven or twelve again. I think that would be.

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Speaker 2: A very brave decision, especially if they're not willing to

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Speaker 2: close those loopholes, so to say, to high income owners,

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Speaker 2: your private school fees aren't included, your private health insurance

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Speaker 2: isn't covered, your company cars not covered. But the government

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Speaker 2: needs more revenue, so we're going to increase the rate

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Speaker 2: on the people that are covered. So yeah, I'm glad

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Speaker 2: we've got a GST. I wouldn't get rid of one,

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Speaker 2: but I'd be very surprised to see the government move

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Speaker 2: in that direction.

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Speaker 1: But is it more palatable, Richard, to increase the GC

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Speaker 1: than it is, for example, to increase income tax rates.

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Speaker 2: Look possibly, but I guess I'd say there's a much

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Speaker 2: broader menu of choices than that. I mean, Australia is

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Speaker 2: an incredibly generous country. We give more than half the

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Speaker 2: gas we export away for free. The Saudis get rich

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Speaker 2: out of selling oil, the Kataris get rich out of

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Speaker 2: selling gas, and Norwegians get rich out of selling gas

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Speaker 2: and oil. But in Australia, when the world price of

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Speaker 2: gas and oil goes up, we feel poor and we go,

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Speaker 2: oh no, there's an energy crisis. So I know the

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Speaker 2: price of petrol's gone up. So Australia is the one

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Speaker 2: of the world's well. Austra as the third largest exporter

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Speaker 2: of fossil fuels, where one of the biggest exporters of LNG.

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Speaker 2: We're one of the biggest exporters of coal, but we're

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Speaker 2: very generous to the foreign gas company. So you're right,

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Speaker 2: it's a bit of a dilemma. Should I increase income

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Speaker 2: taxes or should I increase the GST. I'd say there's

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Speaker 2: a much simpler solution. Stop giving half the gas we

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Speaker 2: export away for free. Put a simple royalty on all

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Speaker 2: the gas that's exported by the Commonwealth from Commonwealth waters.

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Speaker 2: You know, the Australian situe. We estimate that it raise around.

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Speaker 3: Twelve billion dollars a year.

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Speaker 2: You know, So I think the politics of that would

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Speaker 2: be good, the economics of that would be good, but

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Speaker 2: let's be crystal clear, the gas industry would be a

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Speaker 2: bit sad about that.

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Speaker 1: Well, what do you think is likely happened there? Because

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Speaker 1: you know, obviously that seems like a no brainer to me.

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Speaker 1: But where's the political will that says, no, we shouldn't

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Speaker 1: do it.

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Speaker 2: Yeah, good question. I mean for many years governments have

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Speaker 2: sort of said, oh, we don't need to do that,

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Speaker 2: we don't need to do that. I think this government,

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Speaker 2: with a big mandate, a labor government. The ACTU, the

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Speaker 2: peak body for the unions, has recently come out and said,

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Speaker 2: what if we had a twenty five percent tax on

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Speaker 2: all gas exports. You know, I think that's proof that

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Speaker 2: the politics is shifting. And we've done opinion polling on

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Speaker 2: this and it wouldn't be shocked to learn that most

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Speaker 2: Australians think giving gas away to foreign gas companies is

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Speaker 2: a bit strange. So I think it is the kind

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Speaker 2: of shall I say, left field idea that gives us

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Speaker 2: the potential to break through this kind of political mess because, yeah,

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Speaker 2: the government doesn't want to increase a GST because a

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Speaker 2: lot of owners don't want it. They're reluctant to increase

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Speaker 2: income taxes income tax on individuals for the same reasons.

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Speaker 2: But yeah, there are things we can do, as I said,

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Speaker 2: like putting facts on all gas exports. There's there's subsidies

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Speaker 2: to particular fossil fuels that diesel fuel rebate, you know,

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Speaker 2: overwhelmingly goes to the big mining companies, and even Twiggy Forest,

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Speaker 2: who's one of the major beneficiaries of the diesel fuel rebate,

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Speaker 2: has said I don't need it, you know, why don't

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Speaker 2: you get rid of that? So yeah, if we're stuck

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Speaker 2: in GST or income tax, I don't think we'll get far.

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Speaker 2: But if we're willing to take on some of those

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Speaker 2: powerful companies. I think I think we might achieve something.

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Speaker 1: Well, ossies don't mind sort of being the underdog and

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Speaker 1: slugging the big guy, so I'd say that they wouldn't

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Speaker 1: That would not be unpopular. I don't think that would

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Speaker 1: not be unpopular in Australia.

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Speaker 2: I agree, I agree, But yeah, well we'll have to

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Speaker 2: wait and see. It's two and a half years to

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Speaker 2: the next election. Bit over, But yeah, that's where i'd start.

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Speaker 1: And what about things like bracket creep? Well, yeah, with

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Speaker 1: the way bracket creeps up on your increased income, do

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Speaker 1: you think they should do something with you know, like

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Speaker 1: I saw Westpac recently come out, and Westpac recently came

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Speaker 1: out and said that they should be adjusting the threshold

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Speaker 1: after which bracker creep starts to occur, increase it by

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Speaker 1: five percent proanum. What do you think about that?

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Speaker 2: Look, I mean, it's very hard to argue that any

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Speaker 2: income tax rates, whatever thresholds that we've selected, are perfect.

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Speaker 2: No one would And as you said, with inflation, what

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Speaker 2: happens is people kind of trickle over into higher tax rates.

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Speaker 2: That means their marginal tax rate increases and the political

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Speaker 2: reality is people don't really notice that. So bracket creep

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Speaker 2: is a bit of a tax by stealth, and that's

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Speaker 2: why successive government have kept it there. Because if you're

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Speaker 2: in power, inflations and wage growth is pushing wages up

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Speaker 2: a bit, the amount of tax you collect is just

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Speaker 2: going a little up a little bit. And you know,

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Speaker 2: just like fees on your card when you tap in

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Speaker 2: the petrol station, you probably don't notice those little fees,

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Speaker 2: they all add up for the petrol station. Bracket creep,

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Speaker 2: all these tiny little increases in tax, they really do

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Speaker 2: add up, and governments really like them. Now there's two options.

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Speaker 2: What we've done in Australia is kind of every five years,

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Speaker 2: whenever a treasurer feels like they've got a bit of

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Speaker 2: cash to spare, they come out and they make a

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Speaker 2: big announcement and they say, look, you know, we've had

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Speaker 2: a bit of bracket creep and the budget's looking in

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Speaker 2: good shape, so I'm going to give you a little

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Speaker 2: tax cut.

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Speaker 3: Treasures like that because they get the credit for it.

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Speaker 2: The problem with shifting to bracket creep shifting to indexing.

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Speaker 3: The tax brackets, so we get rid of bracket creep

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Speaker 3: is the treasure.

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Speaker 2: It doesn't get any prey, right because if the tax rates,

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Speaker 2: if the tax thresholds are just kind of going up

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Speaker 2: and beat each year, then the treasure and it never

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Speaker 2: gets to come out and say, hey, look I just

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Speaker 2: stuff the money in your pocket. I did you a

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Speaker 2: solid So vote for me. Yeah, so vote for me.

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Speaker 2: So you know, as an economist, I don't think either

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Speaker 2: makes a big difference. But the reality is the politically,

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Speaker 2: getting to make that announcement every three or five years

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Speaker 2: is so attractive.

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Speaker 3: If you're the treasurer that gets to deliver that message.

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Speaker 2: It's again, i'd say, hard to imagine that the government

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Speaker 2: will get around to doing it, But from an economic

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Speaker 2: point of view, wouldn't be the end of the world

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Speaker 2: if they did, but it would change the politics quite

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Speaker 2: a lot.

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Speaker 1: So let's just change lanes for a moment. Does this

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Speaker 1: train institute and or you or both of you? What

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Speaker 1: do you guys think about the housing crisis and population growth?

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Speaker 2: Well, I'll be a bit cheeky here. I don't think

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Speaker 2: we're having a housing crisis. I think the houses are fine.

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Speaker 2: The houses are very happy. The houses are going up

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Speaker 2: a record rates. That the houses are fine. The crisis

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Speaker 2: we have is an inequality crisis because young people just

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Speaker 2: can't catch up. The maths of this is pretty simple.

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Speaker 2: If house prices are growing faster than wages, then if

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Speaker 2: you've finished UNI and it's trying to save up for

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Speaker 2: your deposit, if the house prices are rising faster than

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Speaker 2: your wages, then the odds of you ever catching up

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Speaker 2: on the deposit are very very low, unless you know

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Speaker 2: the bank of mom and Dad, or some form of

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Speaker 2: other windfall lands in your lap. So what we call

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Speaker 2: a housing crisis is an absolute bonanza for people who

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Speaker 2: already own two or more houses. It's an absolute bonanza

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Speaker 2: for the banks who are lending against these assets that

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Speaker 2: are just going ah up, and you know, their profits

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Speaker 2: rise with the size of the.

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Speaker 3: Loans they write.

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Speaker 2: So I kind of think it's a bit misleading to

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Speaker 2: talk about the housing crisis because most people are happy

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Speaker 2: with it. Okay, older people are happy seeing their house

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Speaker 2: prices go up. They're sad their grandkids can't afford a house,

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Speaker 2: but they're happy watching theirs go up. So they're happy.

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Speaker 2: People who bought a house and are paying it off,

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Speaker 2: they want to see house prices go up. The banks

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Speaker 2: want to see house prices go up. So yeah, we

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Speaker 2: keep saying there's a housing crisis. What there really is

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Speaker 2: is a crisis for a third of the population who

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Speaker 2: are really struggling to get into Australia's very expensive housing market.

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Speaker 2: So it's a crisis for them, but it's just kind

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Speaker 2: of a bit cute for the people that own two

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Speaker 2: or more houses, you know, to pretend they're worried about

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Speaker 2: the housing crisis. I think house prices are too high.

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Speaker 2: I'd be happy house prices went down. Just to be clear,

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Speaker 2: I only own one, so if it went down, I'd

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Speaker 2: lose the money. But the house I buy next it'd

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Speaker 2: be cheaper, so I don't really care. I think house

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Speaker 2: prices are too high when you look at it compared

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Speaker 2: to other countries, when you look at it compared to history,

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Speaker 2: there's lots of reasons I think they're too high.

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Speaker 3: But I'm in the minority.

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Speaker 2: And again, you don't stay in power in Australia by

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Speaker 2: telling two thirds of the people you want to drive

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Speaker 2: down the price of their house.

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Speaker 1: So what do you think, Well, what would you do

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Speaker 1: for those people who are say twenty to thirty, who

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Speaker 1: are not in housing but have aspirations to be housing.

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Speaker 3: Well, I think that.

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Speaker 2: You know, if we look around the world, what most

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Speaker 2: countries do is invest a lot more money in public housing,

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Speaker 2: and in most countries they don't stigmatize public housing the

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Speaker 2: way we do in Australia. So in Australia, you only

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Speaker 2: live in public housing if you know, everything's rarely gone

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Speaker 2: to hell in a handbasket. Young people in Australia don't

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Speaker 2: think for a minute that maybe they might get affordable

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Speaker 2: public housing while they're saving up for a deposit. But

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Speaker 2: that's not what happens in France, that's not what happens

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Speaker 2: in Germany, that's not what happens in Sweden or Denmark

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Speaker 2: or Norway. So other countries just take investment in public

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Speaker 2: housing a lot more seriously. And an example I like

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Speaker 2: to use in Australia, we have something called the Defense

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Speaker 2: Housing Authority. It's really complicated. It's an authority that provides

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Speaker 2: housing to people who work in defense. It's a property

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Speaker 2: developer that's owned by the Commonwealth government. The Defense Housing

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Speaker 2: Authority makes a profit right, it buys land, it builds houses,

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Speaker 2: it rents the houses out the soldiers and pretty much

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Speaker 2: like every other property developer in Australia, it.

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Speaker 3: Makes good money doing that.

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Speaker 2: Well, imagine if we had the nurses Housing Authority or

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Speaker 2: the teacher's Housing Authority, or stick.

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Speaker 3: With me, the housing authority.

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Speaker 2: How come the only people in Australia that think there

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Speaker 2: isn't a buck to be made in housing are the government.

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Speaker 2: They can borrow at the cheapest interest rates, they can

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Speaker 2: rezone land. There's all sorts of reasons to think governments

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Speaker 2: would be good developers of housing. But in Australia, you know,

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Speaker 2: we're embarrassed for people to live in public housing, and

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Speaker 2: that's a real problem for young people in Australia who

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Speaker 2: are stuck between there's no way, you know, if your

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Speaker 2: kids have decided to go into age care or nursing

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Speaker 2: or all these really important jobs look after us. Going

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Speaker 2: into one of those jobs really means not buying a

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Speaker 2: house ever, so we know they're not going to get

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Speaker 2: a house, and at the same time we're not going

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Speaker 2: to help them with low rents and nice places to

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Speaker 2: live near where they work.

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Speaker 1: What sounds appealing to them about that too, is you're

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Speaker 1: not dealing with a single landlord who's going to kick

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Speaker 1: you out after six months or jack the rent up exactly.

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Speaker 1: It sort of makes it like you've got a bit

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Speaker 1: more of a friendly authority where you can st there

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Speaker 1: from the age of twenty to thirty. For argument's sake,

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Speaker 1: why are you saving up for your own deposit talking

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Speaker 1: about Yeah, and.

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Speaker 2: Also like imagine, like think about Sydney. It's now a

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Speaker 2: very large, sprawling city. There's aged care centers, there's childcare

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Speaker 2: centers in really expensive suburbs in the eastern suburbs. The

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Speaker 2: idea that someone who works full time caring for kids

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Speaker 2: and caring for elderly people, the idea that they should

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Speaker 2: also spend two and a half hours on a bus

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Speaker 2: or a train getting there every day. You know, that's

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Speaker 2: a that's a big choice for a society to make.

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Speaker 2: So I think there's not only the opportunity to help

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Speaker 2: young people, but I think that if we're going to

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Speaker 2: pay aged care workers and nurses and childcare workers salaries

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Speaker 2: that we know mean they'll never be able to afford

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Speaker 2: to live near the people they care for. I think

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Speaker 2: having public house and creates the opportunity that we can

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Speaker 2: say to those essential workers, well the wages might not

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Speaker 2: be great, but at least we can get you somewhere

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Speaker 2: to live nearby that really important job that you're doing

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Speaker 2: for us.

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Speaker 1: Yeah, that's very interesting. So what would you call it

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Speaker 1: if you in order to take the stigma away, because

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Speaker 1: the stigma still exists, so that your nurse who's working,

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Speaker 1: you know, is so looking after someone who's old. We're

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Speaker 1: in an old an aged home care type situation, who

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Speaker 1: now moves into one of these public housing environment because

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Speaker 1: they can't afford to buy in that particular area. In fact,

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Speaker 1: probably can't afford to buy it all. What would you

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Speaker 1: call this type of housing nurse's housing authority, Well, you.

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Speaker 2: Have the nurse's housing authority. We could just have the

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Speaker 2: housing authority. We could call it key worker housing, you know,

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Speaker 2: we could. I'm sure we could come up with something

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Speaker 2: that helps.

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Speaker 3: Remove the stigma.

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Speaker 2: But again, no soldier feels embarrassed that they live in

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Speaker 2: public housing. No vice chance y university that comes with

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Speaker 2: a house feels embarrassed that they live in a publicly

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Speaker 2: funded house. And I don't think our prime ministers up

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Speaker 2: in Kirribilly have ever felt too nervous about living in

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Speaker 2: public housing either. So yeah, I just think we need

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Speaker 2: and once upon a time, you know, people living in

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Speaker 2: regional areas police stations, hospitals. You know, once upon a

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Speaker 2: time it was quite common that, you know, when you

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Speaker 2: took a public sector job out in a small town. Yeah,

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Speaker 2: you know, the police station and the hospital all kind

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Speaker 2: of had some housing either on site or nearby.

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Speaker 3: It just just makes a lot of sense.

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Speaker 2: But we've spent decades kind of privatizing all that, selling

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Speaker 2: off those assets. We've lost a lot of money. Imagine

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Speaker 2: if we'd have hung on with all that housing that

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Speaker 2: we sold off. Wow, but there's no reason we can't

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Speaker 2: build it back up over time.

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Speaker 1: Well, we're going to we should sumit all. We should

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Speaker 1: smit this video to the government that don't need to

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Speaker 1: hold around table once. Do that and I will. But

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Speaker 1: what could I should this? We're given that we're talking

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Speaker 1: on some broad subjects, but what do you think about

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Speaker 1: as a matter of public policy, This government's big government policy?

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Speaker 1: And in terms of the economy generally, you know, fifty

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Speaker 1: percent of incomes of individuals have some origination from government spending,

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Speaker 1: whether they're a public servant employee, or they're working on NDIS,

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Speaker 1: working to NDIS or for NDIS, not as an employee

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Speaker 1: but as a contractor, or whether they might be working

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Speaker 1: on one of the many, many thousands of government projects,

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Speaker 1: but the federal or state What do you think about

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Speaker 1: the big government policy that sort of seems to be existing.

436
00:23:50,440 --> 00:23:52,520
Speaker 1: It seems to have crept into our system over the

437
00:23:52,600 --> 00:23:53,240
Speaker 1: last few years.

438
00:23:54,000 --> 00:23:56,520
Speaker 2: Look, I guess I'm not as worried about it as some.

439
00:23:56,880 --> 00:24:00,399
Speaker 2: If we look at the international data, if we compare

440
00:24:00,520 --> 00:24:06,120
Speaker 2: Australia with other countries in the OECD, the Organization Economic

441
00:24:06,200 --> 00:24:10,040
Speaker 2: Cooperation Development, basically the rich countries of the world. If

442
00:24:10,080 --> 00:24:14,000
Speaker 2: we compare Australia to the OECD, we are still a

443
00:24:14,119 --> 00:24:17,520
Speaker 2: very low tax country with a very small public sector.

444
00:24:17,920 --> 00:24:20,840
Speaker 2: Now I know that's kind of heresy to say in Australia,

445
00:24:20,960 --> 00:24:25,200
Speaker 2: but according to the pinco lefties at the International Monetary

446
00:24:25,240 --> 00:24:29,480
Speaker 2: Fund and the World Bank and the OECD who compare countries.

447
00:24:29,040 --> 00:24:32,600
Speaker 3: That's what they see. So I mean, really, what's.

448
00:24:32,400 --> 00:24:37,800
Speaker 2: Happening is and there has been significant growth in, for example,

449
00:24:37,960 --> 00:24:41,880
Speaker 2: programs like the National Disability Insurance Game. To be clear,

450
00:24:41,920 --> 00:24:45,200
Speaker 2: I think there's there's some inefficiency in there that needs

451
00:24:45,240 --> 00:24:49,080
Speaker 2: to be ironed out. There's been significant growth in, for example,

452
00:24:49,240 --> 00:24:57,080
Speaker 2: health expenditure, but frankly that's because rich old people want

453
00:24:57,160 --> 00:25:01,119
Speaker 2: a lot of money spent on their health. Okay, we

454
00:25:01,280 --> 00:25:04,840
Speaker 2: live in a society where most of the wealth is

455
00:25:04,960 --> 00:25:08,720
Speaker 2: concentrated in the hands of elderly Australians. I promise you

456
00:25:08,840 --> 00:25:11,320
Speaker 2: it's the elderly that are getting more than their fair

457
00:25:11,359 --> 00:25:12,960
Speaker 2: share of money spent on their health.

458
00:25:13,359 --> 00:25:14,000
Speaker 3: I promise you.

459
00:25:14,160 --> 00:25:17,080
Speaker 2: It's the elderly that are getting more than their fair

460
00:25:17,160 --> 00:25:22,520
Speaker 2: share spent on a whole bunch of services, and no

461
00:25:22,640 --> 00:25:25,080
Speaker 2: one seems to have complained too much about that. So

462
00:25:25,760 --> 00:25:28,920
Speaker 2: if we look at, for example, unemployment benefits in Australia,

463
00:25:28,960 --> 00:25:33,240
Speaker 2: they're very very low by world standards. But when we

464
00:25:33,359 --> 00:25:37,280
Speaker 2: look at things like the way our health system works,

465
00:25:37,440 --> 00:25:41,200
Speaker 2: or indeed our private health system works, we literally subsidize

466
00:25:41,240 --> 00:25:43,800
Speaker 2: the private insurance of older Australians.

467
00:25:43,920 --> 00:25:45,680
Speaker 3: So I hear what you're saying.

468
00:25:46,000 --> 00:25:48,159
Speaker 2: I think a lot of people are saying, well, are

469
00:25:48,200 --> 00:25:50,440
Speaker 2: we really happy with this kind of growth in the

470
00:25:50,520 --> 00:25:53,880
Speaker 2: size of the public sector. I'd just make two points. One,

471
00:25:54,160 --> 00:25:57,480
Speaker 2: it's still quite small compared to most rich countries. But two,

472
00:25:58,160 --> 00:26:03,480
Speaker 2: the major beneficiaries of that older and wealthier Australians. We're

473
00:26:03,480 --> 00:26:06,960
Speaker 2: still pretty nasty to the unemployed. The unemployment benefit is

474
00:26:07,240 --> 00:26:10,480
Speaker 2: very very low. It's way below the poverty line. But

475
00:26:10,720 --> 00:26:15,359
Speaker 2: our superannuation tax concessions, our age pension, our public health system,

476
00:26:16,080 --> 00:26:19,600
Speaker 2: our system of subsidies for private health insurance. Yeah, we're

477
00:26:19,640 --> 00:26:22,639
Speaker 2: doing all right to help the highest income Australians, the

478
00:26:22,720 --> 00:26:26,800
Speaker 2: wealthiest Australians who happened to be older Australians.

479
00:26:27,080 --> 00:26:28,000
Speaker 3: They need a lot of care.

480
00:26:29,119 --> 00:26:31,560
Speaker 1: So and it just finally, Richard, if you don't might

481
00:26:31,600 --> 00:26:34,680
Speaker 1: have been loved to get your comment on this. This

482
00:26:34,840 --> 00:26:38,160
Speaker 1: week the RBA governor reduced the interest rates by another

483
00:26:38,200 --> 00:26:41,600
Speaker 1: twenty five base points, which was sort of expected by

484
00:26:41,920 --> 00:26:46,000
Speaker 1: majority of the market. Where do you and you would

485
00:26:46,040 --> 00:26:50,000
Speaker 1: have listened to her conference call an hour later you

486
00:26:50,080 --> 00:26:54,360
Speaker 1: probably met her, it would have read her release. Where

487
00:26:54,400 --> 00:26:57,200
Speaker 1: do you think interest rates are likely to go? Given

488
00:26:58,119 --> 00:27:00,119
Speaker 1: how you listen to her language and what you and

489
00:27:01,000 --> 00:27:02,960
Speaker 1: not on knew how her language, but sort of the

490
00:27:03,040 --> 00:27:07,119
Speaker 1: way she's positioning the economy at the moment. Yeah, do infation.

491
00:27:07,600 --> 00:27:11,480
Speaker 2: Yeah, I think we'll see further interest rate cuts. I

492
00:27:11,600 --> 00:27:14,760
Speaker 2: mean to be cleary, I think they made a mistake

493
00:27:15,040 --> 00:27:18,240
Speaker 2: not cutting last time. I think they had to cut

494
00:27:18,359 --> 00:27:21,800
Speaker 2: this time. It was obvious a month ago or a

495
00:27:21,840 --> 00:27:23,440
Speaker 2: bit over a month ago they should have cut. I

496
00:27:23,520 --> 00:27:26,879
Speaker 2: think the data that subsequently came out sort of proved

497
00:27:26,920 --> 00:27:29,280
Speaker 2: that point, so they had to cut this time. I

498
00:27:29,359 --> 00:27:33,200
Speaker 2: think it's almost inevitable that they'll cut next time, that

499
00:27:33,359 --> 00:27:37,040
Speaker 2: they'll certainly cut again. So I think there's another half

500
00:27:37,080 --> 00:27:39,440
Speaker 2: a percent to be cut. I don't think that's a

501
00:27:39,720 --> 00:27:42,840
Speaker 2: I don't think that's a unique view. I think a

502
00:27:42,920 --> 00:27:45,320
Speaker 2: lot of people see it that way. And look, the

503
00:27:45,480 --> 00:27:47,959
Speaker 2: RBA have put forward put out quite a lot more

504
00:27:48,080 --> 00:27:50,959
Speaker 2: forward guidance than that, sort of showing people how they

505
00:27:50,960 --> 00:27:52,880
Speaker 2: think the economy will shape up in the next couple

506
00:27:52,920 --> 00:27:55,840
Speaker 2: of years. I'd take all that with a grain of salt.

507
00:27:55,880 --> 00:27:58,000
Speaker 2: As an economist, I know what we know, I know

508
00:27:58,080 --> 00:28:02,159
Speaker 2: what we don't know. But yeah, I think now is

509
00:28:02,200 --> 00:28:04,200
Speaker 2: a good time to be cutting rates. I think that's

510
00:28:04,359 --> 00:28:08,879
Speaker 2: good for people with mortgages. I think it's good for businesses.

511
00:28:09,040 --> 00:28:12,280
Speaker 2: I think it's what the economy needs. Yeah, I think

512
00:28:12,760 --> 00:28:17,440
Speaker 2: fifty basis points pretty likely after that. Yeah, I just

513
00:28:17,520 --> 00:28:20,840
Speaker 2: think no one's got a crystal ball, especially the.

514
00:28:20,920 --> 00:28:25,160
Speaker 1: RBA, thinking there could be another couple of rate cuts

515
00:28:25,720 --> 00:28:28,159
Speaker 1: in the next six months, So I speak.

516
00:28:27,920 --> 00:28:30,080
Speaker 2: I think it's far more likely than not that we'll

517
00:28:30,119 --> 00:28:33,159
Speaker 2: see one. If and I assume two more rate cuts.

518
00:28:33,280 --> 00:28:37,800
Speaker 2: But yeah, certainly the Reserve Bank surprised everyone last month,

519
00:28:38,080 --> 00:28:41,760
Speaker 2: so people have to make their own minds up there.

520
00:28:41,840 --> 00:28:44,880
Speaker 2: But I think that's both likely and what's needed. It's

521
00:28:44,880 --> 00:28:45,640
Speaker 2: a good combination.

522
00:28:46,440 --> 00:28:48,600
Speaker 1: Well, Richard, most of our listeners are going to love

523
00:28:48,680 --> 00:28:54,680
Speaker 1: hearing that because they're getting a little bit jaundice trying

524
00:28:54,760 --> 00:28:56,880
Speaker 1: to predict and or work out where they should go

525
00:28:56,960 --> 00:28:59,880
Speaker 1: and actually trying to plan. A lot of people believe

526
00:29:00,040 --> 00:29:02,120
Speaker 1: not a lot of people actually plan off of rate reduction,

527
00:29:02,760 --> 00:29:05,520
Speaker 1: because it's quite important to most people who have a mortgage,

528
00:29:05,560 --> 00:29:08,480
Speaker 1: that is, especially younger people who have a mortgage. And

529
00:29:09,080 --> 00:29:12,160
Speaker 1: whereas you know, the Reserve Bank doesn't anyone to give

530
00:29:12,200 --> 00:29:13,680
Speaker 1: us much anymore. And I was only talking to someone

531
00:29:13,720 --> 00:29:16,480
Speaker 1: the other day about it. I remember Glenn Stevens was

532
00:29:16,480 --> 00:29:20,560
Speaker 1: always very preemptive with his rate cuts and rate rises

533
00:29:20,600 --> 00:29:23,960
Speaker 1: for that matter, whereas this Reserve Bank seems to be

534
00:29:24,720 --> 00:29:28,200
Speaker 1: reserved and more. Just give me the data and I'll

535
00:29:28,240 --> 00:29:31,880
Speaker 1: give you the answer. Yeah, is that a change you've seen?

536
00:29:32,640 --> 00:29:34,640
Speaker 2: Yeah, I think there's been a big change in culture.

537
00:29:34,720 --> 00:29:35,680
Speaker 3: I mean, you're right.

538
00:29:35,720 --> 00:29:38,640
Speaker 2: I think it was easier to interpret what Glenn Stevens

539
00:29:38,800 --> 00:29:39,880
Speaker 2: was going to do that's it.

540
00:29:40,040 --> 00:29:40,320
Speaker 3: I think.

541
00:29:40,720 --> 00:29:43,160
Speaker 2: You know, he made a couple of big errors there

542
00:29:43,320 --> 00:29:46,360
Speaker 2: telling people rates wouldn't go up just before they went

543
00:29:46,480 --> 00:29:46,880
Speaker 2: up a lot.

544
00:29:47,760 --> 00:29:51,120
Speaker 3: But at least he told us what he thought. I think.

545
00:29:51,680 --> 00:29:54,080
Speaker 2: I think the current RBA has probably over learnt the

546
00:29:54,160 --> 00:29:57,840
Speaker 2: lessons of the past, and now they're erring on the

547
00:29:57,920 --> 00:30:00,200
Speaker 2: side of saying too little rather than too much much.

548
00:30:00,320 --> 00:30:03,440
Speaker 2: But you know, I guess that gives us all something

549
00:30:04,160 --> 00:30:06,880
Speaker 2: to think about and speculate about. But I think the

550
00:30:06,960 --> 00:30:09,640
Speaker 2: economy needs lower rates. I think the RBA sees that,

551
00:30:09,840 --> 00:30:11,560
Speaker 2: and I think that's what we're going to expect in

552
00:30:11,600 --> 00:30:12,120
Speaker 2: the short term.

553
00:30:12,640 --> 00:30:14,440
Speaker 1: Do you think there's too much reliance in this country,

554
00:30:14,600 --> 00:30:17,440
Speaker 1: especially with the media or the way the media plays

555
00:30:17,440 --> 00:30:20,280
Speaker 1: it out, too much reliance on interest rates and the

556
00:30:20,320 --> 00:30:22,040
Speaker 1: DISCUSSI around interest rates and inflation.

557
00:30:22,480 --> 00:30:23,480
Speaker 3: Oh absolutely I do.

558
00:30:23,680 --> 00:30:25,680
Speaker 2: And again, if you look around the world, you see

559
00:30:25,720 --> 00:30:27,960
Speaker 2: that Australia kind of sticks out like a saw thumb

560
00:30:28,200 --> 00:30:31,280
Speaker 2: in this regard. There's a number of reasons for that,

561
00:30:31,480 --> 00:30:35,360
Speaker 2: one of which is so many Australians have variable rate mortgages,

562
00:30:36,480 --> 00:30:39,120
Speaker 2: and in a lot of countries that's just not the case.

563
00:30:39,600 --> 00:30:42,000
Speaker 2: So when you've got people on twenty or thirty year

564
00:30:42,080 --> 00:30:45,200
Speaker 2: mortgages with fixed rates. No one really cares that much

565
00:30:45,240 --> 00:30:49,160
Speaker 2: about interest rates, Whereas in Australia we've got a dangerous

566
00:30:49,200 --> 00:30:54,840
Speaker 2: combination of very very large debts that are overwhelmingly variable.

567
00:30:55,000 --> 00:30:59,800
Speaker 2: So I think that politically that means we're far more

568
00:31:00,360 --> 00:31:03,680
Speaker 2: to what's happening to interest rates. But economically I also

569
00:31:03,760 --> 00:31:07,440
Speaker 2: think that makes us more volatile than is desirable.

570
00:31:07,920 --> 00:31:09,320
Speaker 1: I think that's right. I was tring to mate of

571
00:31:09,360 --> 00:31:12,080
Speaker 1: mind from America the other day last week and he

572
00:31:12,200 --> 00:31:15,480
Speaker 1: told me that during COVID he fixed his mortgage for

573
00:31:15,560 --> 00:31:20,120
Speaker 1: thirty years or two percent yep. And he just says,

574
00:31:20,160 --> 00:31:22,960
Speaker 1: I feel no pressure whatsoever. And you're right. We ninety

575
00:31:23,080 --> 00:31:25,760
Speaker 1: five percent of Australians take veriable rate and therefore we

576
00:31:25,960 --> 00:31:31,040
Speaker 1: much more acutely vulnerable to changes up or down to

577
00:31:31,160 --> 00:31:34,360
Speaker 1: interest rates, which probably haunts for a house price volatility

578
00:31:34,400 --> 00:31:36,480
Speaker 1: as well, and just.

579
00:31:36,520 --> 00:31:39,000
Speaker 2: The sense of insecurity that comes with that, you know,

580
00:31:39,800 --> 00:31:43,520
Speaker 2: and especially when people first buy a house, you know,

581
00:31:43,680 --> 00:31:46,840
Speaker 2: they've usually stretched themselves as far as they can the

582
00:31:46,920 --> 00:31:49,760
Speaker 2: first couple of years after they buy a mortgage, buy

583
00:31:49,800 --> 00:31:52,800
Speaker 2: a house, buy a mortgage, same thing. Yeah, it can

584
00:31:52,840 --> 00:31:56,200
Speaker 2: be a very very high pressure time if interest rates

585
00:31:56,240 --> 00:31:59,720
Speaker 2: start to rise soon after you've purchased your first time.

586
00:32:00,280 --> 00:32:03,479
Speaker 1: Which is sort of what happened post COVID. A lot

587
00:32:03,480 --> 00:32:06,160
Speaker 1: of people did borrow a two point one percent variable

588
00:32:06,240 --> 00:32:10,920
Speaker 1: or one ninety nine fixed for three years and then

589
00:32:11,000 --> 00:32:13,880
Speaker 1: they saw thirty eight rises hit them pretty quickly, and

590
00:32:13,920 --> 00:32:16,320
Speaker 1: that was actually quite devastating, which is quite interesting because

591
00:32:16,360 --> 00:32:19,720
Speaker 1: probably prices didn't go down, they went up. Somehow everybody

592
00:32:19,800 --> 00:32:22,400
Speaker 1: managed their way through it. That's the strange syche. You

593
00:32:22,440 --> 00:32:25,600
Speaker 1: always paying mortgage off no matter what, Whereas in America

594
00:32:25,600 --> 00:32:26,680
Speaker 1: they're behanding the keys back.

595
00:32:27,080 --> 00:32:27,640
Speaker 3: Yeah, and.

596
00:32:29,360 --> 00:32:33,360
Speaker 1: Exactly here's the case EL had. Nothing happens, Dr Richard Dennis,

597
00:32:33,360 --> 00:32:35,840
Speaker 1: Thanks very much, Dr Richard Ennis from the Australian Institute.

598
00:32:35,880 --> 00:32:37,360
Speaker 1: I really appreciate time, but that was great.

599
00:32:37,760 --> 00:32:38,040
Speaker 3: Thank you,