Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm
Speaker 1: James Kirkby, editor at The Australian. Welcome aboard everybody. Lots
Speaker 1: happening on the markets as we speak, because it is
Speaker 1: the morning after Donald Trump's resounding, resounding, clear victory, only
Speaker 1: the second time in a century that a US president
Speaker 1: who lost an election came back to win again. And
Speaker 1: what's really interesting from an investment point of view, and
Speaker 1: we're not talking much about this today. If you guys
Speaker 1: want us to do something on this, we will go
Speaker 1: deeper into it another day. But what's really interesting is
Speaker 1: that the US market went up three and a half
Speaker 1: percent last night. And that's all fine and dandy, and
Speaker 1: if you see a day where the US goes of
Speaker 1: three and a half percent, then the ASEX as a
Speaker 1: rule runs up behind it. But it didn't happen this morning.
Speaker 1: The market's only open an hour or so and it
Speaker 1: is flat zero, nothing, no response. And I'll tell you why,
Speaker 1: because there's a certain point which we can't keep going
Speaker 1: up on the back of a market in the US
Speaker 1: which is thriving on the basis that it's going to
Speaker 1: be protectionist and it's going to turn in on itself,
Speaker 1: and it's particularly going to turn hard on China because
Speaker 1: we're a China proxy on the AX and global markets.
Speaker 1: And that is what all the institutional disks around the
Speaker 1: world would say this morning. Don't know about the ASEX anymore,
Speaker 1: don't know about that Under a Trump regime, we will
Speaker 1: be talking about that as we go. But actually, folks,
Speaker 1: I imagine I hope at least that most of you
Speaker 1: have a more burning issue in mind, which is how
Speaker 1: much you have, how much you have in the bank,
Speaker 1: how much you're going to make in your life, and
Speaker 1: how you're going to achieve the elementary what do you
Speaker 1: might on the elementary targets in wealth building, which might be,
Speaker 1: for instance, to own your own home, which might be
Speaker 1: to have some decent amount of super as a start,
Speaker 1: and then to do wider things that you might wish
Speaker 1: to do. And dragging I imagine on that is hex
Speaker 1: Your hex bill now, the average hex bill is twenty
Speaker 1: seven thousand dollars twenty six five hundred. Many people listening
Speaker 1: to this show, I know from the demographic, from the
Speaker 1: demographics that we see, will have hex bills and they
Speaker 1: will be twenty seven thousand dollars or thirty seven or
Speaker 1: forty seven or higher. And we had some really big
Speaker 1: news this week, which I hope didn't get lost in
Speaker 1: our distraction on the US, which is that the government
Speaker 1: has announced quite remarkable I think the biggest thing that's
Speaker 1: happened to Hex for many years. Number One, all HEX
Speaker 1: bills are going to be cut by twenty percent. Number two,
Speaker 1: the way you pay Hex and how much you have
Speaker 1: to pay is going to be as simple as that,
Speaker 1: and a few other things as well. My guest today
Speaker 1: is a regular on the show, is also in the
Speaker 1: top reaches of the top Advisor's list, and one of
Speaker 1: the youngest at the top of that list. I don't
Speaker 1: know if he has a X bill. It's Hugh Robertson
Speaker 1: of Centaur. How are you, Hugh, have you got an
Speaker 1: X bill?
Speaker 2: I do not.
Speaker 3: You paid it off?
Speaker 1: You do not? You paid it off? And now you say,
Speaker 1: why did I pay it off? I could have had
Speaker 1: a twenty percent discount exactly.
Speaker 3: That.
Speaker 1: Yes, I wonder what percentage of the population have paid
Speaker 1: off their expill I wonder that's not a figure I'm
Speaker 1: familiar with. Okay, when people come into you, I'm going
Speaker 1: to talk to you, both as an individual and as
Speaker 1: an advisor. Let's first of all tell people, explain to
Speaker 1: people what is due to happen. Now. This is important
Speaker 1: because the mechanics of how you pay is going to change,
Speaker 1: and the twenty percent discount is due to kick in
Speaker 1: on June one next year. The mechanics of how you
Speaker 1: pay is going to change from July one next year.
Speaker 1: This is a typical complications and there each thing is
Speaker 1: makes sense in and of itself, but the course as
Speaker 1: a whole it looks, as usual ridiculously complicated. In any event,
Speaker 1: that's the plan, but of course the government, that is
Speaker 1: the alp Albanesi government will have to win to implement this.
Speaker 1: But Hugh, could you first of all, would you explain
Speaker 1: if I came into your office and said, as part
Speaker 1: of my plans, I've got a hex bit of fifty
Speaker 1: grand and there's some big changes. What should I do?
Speaker 1: What would you say?
Speaker 2: The first one is the twenty percent one off. Interestingly,
Speaker 2: it wasn't a recommendation of the University a chord panel,
Speaker 2: so this is comeing independently of that, which probably is
Speaker 2: curious as to the timing. So that's going to cost
Speaker 2: about twelve thirteen billion, might even be as much as
Speaker 2: sixteen billion when I was trying to look at the
Speaker 2: numbers that they're going to give us the one off.
Speaker 2: So if you've got the average hextead of around twenty
Speaker 2: seven and a half thousy twenty seven thousand, six hundred thereabouts,
Speaker 2: that will reduce to twenty two thy eight hundred. So
Speaker 2: the idea of that is to help with to help
Speaker 2: with debt and to help with cost of living pressures.
Speaker 2: So there might not be a direct correlation there, but
Speaker 2: the and that will be applied before the indexation as well,
Speaker 2: So I think that's probably interesting.
Speaker 1: Yeah, that's a very important point. So listeners, I'm sure
Speaker 1: they'd remember there was always this thing, you know, don't
Speaker 1: worry about your hex bill. You don't have to pay interest,
Speaker 1: and that was all fine. That did not mean it
Speaker 1: didn't go up. People thought it did. There was no
Speaker 1: inflation for so many years it didn't matter. Suddenly we've
Speaker 1: had I think it was a seven percent followed by
Speaker 1: a four percent lift in hex and that the way
Speaker 1: we're going this year, I would think it's coming in
Speaker 1: at about three and a half. That really kicks up
Speaker 1: your bill. So when you mentioned the indexation. He's talking
Speaker 1: about the fact that the government have also promised that
Speaker 1: this twenty percent cup will come before they kick in
Speaker 1: the indexation, and the indexation's on June every year, and
Speaker 1: that's why this part of the plant is due to
Speaker 1: coming on June one next year. Okay, So that's the
Speaker 1: big thing.
Speaker 2: So that that comes in the office is going to
Speaker 2: be better by five and a half thousand dollars, which
Speaker 2: is good. And then we've got the change in the
Speaker 2: minimum incun levels, so this is really overdue, coming in
Speaker 2: for a twenty five twenty six financial year, so that's
Speaker 2: going to move up. Everyone's wages have moved up, so
Speaker 2: that's going to go from fifty four, four hundred and
Speaker 2: thirty five thousand up to sixty seven thousand. So if
Speaker 2: you earn less than that sixty seven thousand, you don't
Speaker 2: have to make any repayments.
Speaker 1: You yes, if you are in less than sixty seven
Speaker 1: thousand a year, you don't have to make any repair.
Speaker 1: That doesn't mean that's just kicking your bill down the road, right,
Speaker 1: You make the repayments, but your bill is going to
Speaker 1: keep going on.
Speaker 2: So this is where the financial planning element comes in.
Speaker 2: When you start being given these things. Even thinking about
Speaker 2: this debt reduction that people have been given or not
Speaker 2: needing to make more as much in repayments, people tend
Speaker 2: to treat it as a bonus. And if they treat
Speaker 2: it as a bonus and they spend it and they
Speaker 2: blow it. I was looking at just from our hundred thousand,
Speaker 2: So say you had an income of one hundred thousand
Speaker 2: dollars that currently you'd be paying five thousand, five hundred,
Speaker 2: and with the changes, it's going to be four nine
Speaker 2: hundred and fifty, so five hundred and fifty dollars more
Speaker 2: in your pocket. So really, with then saying what would
Speaker 2: they do with that with an extra ten dollars a week,
Speaker 2: most people probably aren't going to look to do something
Speaker 2: substantial with that. But you've got to really make sure
Speaker 2: that you're not just leaving these debts debts outstanding.
Speaker 1: Okay, And there's another thing which everyone should be aware of.
Speaker 1: I haven't done the maths on this, but hey, I've
Speaker 1: got a think that's advisor on the show, and I'm
Speaker 1: sure he's really numerous. That doesn't mean that's just straight away,
Speaker 1: but here's the thing. The other change is they're introducing
Speaker 1: a system called marginal repayment, which was recommended. And what
Speaker 1: it means is you in the up to now you
Speaker 1: paid what was the interest on your bill, whatever that
Speaker 1: bill might be. From July one next year, you pay
Speaker 1: the interest on your bill above the threshold. So if
Speaker 1: you have a seventy thousand, how does it can can
Speaker 1: you bring us through? It's whatever you're over sixty seven thousand?
Speaker 1: Is that how it will actually come to pass?
Speaker 2: The rates are fifteen cents in the dollar up until
Speaker 2: I think it might have been one hundred and twenty
Speaker 2: thousand dollars.
Speaker 3: And then above that, well that no change from that perspective.
Speaker 2: You know, we still want to incentivize people to go
Speaker 2: out there and work, but then in terms of years
Speaker 2: to pay off with the new amounts because of the
Speaker 2: reduction that they're giving. To say, this example of the
Speaker 2: twenty seven thousand dollars average, with the twenty percent discount,
Speaker 2: it's now takes the debt to twenty two two and
Speaker 2: eighty dollars. And on that person for one hundred thousand,
Speaker 2: we know that they're going to be they're going to
Speaker 2: be paying less because of the changes, but now they'll
Speaker 2: get it paid off in four point four to six
Speaker 2: years versus five point oh two years. So because of
Speaker 2: the twenty percent reduction, they're still going to be painted
Speaker 2: off quicker, which I think is important.
Speaker 1: So what do you say to people, have you got
Speaker 1: a defaud position on Hex?
Speaker 2: Yes, it's we've always left let that run in the background,
Speaker 2: and it's usually a matter of paying off the majority
Speaker 2: of people that are coming to see us, or also
Speaker 2: with a debt with a mortgage, and usually we're just saying, look,
Speaker 2: pay that off more quickly if you have additional repayments,
Speaker 2: pay that off at your principal place of residence. Because
Speaker 2: that's not a tax deductible debt. And the interstright volatility's
Speaker 2: been pretty extreme and it just gives you more capability
Speaker 2: when you're paying down your debt. You can either use
Speaker 2: that to reinvest, you can save up for your kids' education,
Speaker 2: you can you know, use the money to.
Speaker 3: Just pay down debt. In it in an absolute term.
Speaker 1: And you're comparing it to to tax deductible debt, which
Speaker 1: is you're saying you had an investment property versus HEX
Speaker 1: at least with the investment properties tax deductible. What about
Speaker 1: the home itself? What about if you have a mortgage.
Speaker 2: Probably the interest rate differential the interstrate is higher on
Speaker 2: your home loan than it is on the indexed amount
Speaker 2: of the debt with HEX. I think that that important
Speaker 2: point that you raised is that people really do need
Speaker 2: to understand that the HEXT does go up and you're
Speaker 2: forced to repay. So with those repayments years gone by,
Speaker 2: you do you remember when they used to be there
Speaker 2: was benefiting pain it off at a quicker rate, the
Speaker 2: government incentivized it.
Speaker 1: Well, yeah, there was in this whole package that was announced.
Speaker 1: There is no incentive whatsoever that I can detect to
Speaker 1: pay it off earlier. And there used to be Was
Speaker 1: it a ten percent discount if you paid early? And
Speaker 1: they dropped that in two o nine and there's no incentive.
Speaker 1: Is there an incentive if I've missed it?
Speaker 3: No?
Speaker 2: And I think for the majority of people they're happy
Speaker 2: just to take on the debt. There's talk about different
Speaker 2: degrees having different costs associated with Obviously, a medical degree
Speaker 2: is going to give you a very clear career pathway,
Speaker 2: and there's conversation that they should pay more, and there's
Speaker 2: people that maybe do an arts degree that probably pay less.
Speaker 2: It's difficult that the advice that you would give someone
Speaker 2: who's going to university is just make sure the degree
Speaker 2: is relevant and it's something that you're going to need.
Speaker 2: Don't take on a debt that you don't need. If
Speaker 2: you're thinking about postgraduate studies and your mid career, make
Speaker 2: sure it's really applicable to you, because it's going to
Speaker 2: be with you a long time.
Speaker 3: The debt.
Speaker 1: It's interesting though the academic see and the studies show
Speaker 1: that essentially what OC code when the Coalition did something
Speaker 1: that had never been done before, which is they tried
Speaker 1: to price education in a fashion that tilted the market
Speaker 1: towards maths and science. And the evidence so far is
Speaker 1: that there is no evidence that people change their mind.
Speaker 1: If I'm going to do medieval art history and someone says, hey,
Speaker 1: accountancy is much better value, you should do that, I'm
Speaker 1: not going to change my mind. And I think that's
Speaker 1: one point I just want to make to listeners. The
Speaker 1: other thing is which or if I was really interesting,
Speaker 1: is someone was doing some modeling on this. This is
Speaker 1: the hex as it stands.
Speaker 3: By the way.
Speaker 1: Her name is Alison Preston. I haven't talked to her.
Speaker 1: She's an economist University of Western Australia, and she says
Speaker 1: that in terms of paying off hets sorry, this is
Speaker 1: post if the government's thing comes through. If the government's
Speaker 1: plan comes through and the twenty percent comes through that men,
Speaker 1: this is interesting. Men on average will have their student
Speaker 1: loans paid off at thirty six, I will have none
Speaker 1: left and women will still be repaying theirs until the
Speaker 1: age of fifty. And if you think about it, if
Speaker 1: you think about it, that's actually instantly explained from an
Speaker 1: economic rational point of view, because A they earn less.
Speaker 2: B the.
Speaker 1: Higher earning some higher earning professions are more dominated by
Speaker 1: men at this point. Still though it's bad. It's a
Speaker 1: hell of a gap. So that's something too to think about.
Speaker 2: That's great research done and interesting. Really got a factor
Speaker 2: in that family. Absolutely how you have some equality there?
Speaker 1: Yeah, it's certainly something that wasn't considered. Just one last thing.
Speaker 1: If I said to you, is there any is there
Speaker 1: anything better than X? Aunts to that, there probably isn't,
Speaker 1: is there? Since at the end of the day it's
Speaker 1: interest free.
Speaker 3: That's right.
Speaker 2: We looked at obviously when I had it, I looked
Speaker 2: at it a lot more detail, and there really isn't it.
Speaker 2: It's one of those necessary evils. I think in some
Speaker 2: ways we're very fortunate the amount the inflation applied to
Speaker 2: our debt has been more generous, and say over in
Speaker 2: the UK or New Zealand or other systems, when in
Speaker 2: America there's very much.
Speaker 3: That family savings or people just borrow money. We're kind
Speaker 3: of lucky.
Speaker 2: You get an interest free loan from the government for
Speaker 2: your education. We're still the lucky country in many ways,
Speaker 2: and there's nothing that we can say about it.
Speaker 3: I'm happy with the income.
Speaker 2: Above the threshold that that was overdue, and that's something
Speaker 2: that when you start your career and you're trying to
Speaker 2: get your wealth creation engine going, that the more money
Speaker 2: you've got, the better you're also combined to that now
Speaker 2: with the cost of rent straight away, when I saw
Speaker 2: maybe an extra couple of bucks ten twenty dollars in
Speaker 2: someone's pocket a week, that helps with the cost of
Speaker 2: living and rent. The one thing that I did question
Speaker 2: when we're allocating sixteen billion in a budget to an area,
Speaker 2: I probably think that we could have helped more people.
Speaker 2: The numbers here is that you're going to help three
Speaker 2: million people, which is great, but I reckon with sixteen
Speaker 2: billion we could have helped more people.
Speaker 1: Yes, And of course anyone who's paid off says, oh,
Speaker 1: you know, I would have liked that, and anyone who's
Speaker 1: coming in the future obviously they just simply get the reset.
Speaker 1: Can I ask you just one thing, one last thing,
Speaker 1: which is just looking at it more generally, Does it
Speaker 1: change your view in any way about the speed at
Speaker 1: which people should do it and should people not bother
Speaker 1: to pay a damn thing till this comes through?
Speaker 3: Why would you one hundred percent? I would hold off.
Speaker 2: And I think if you're looking at debt, it it's
Speaker 2: going to take you.
Speaker 3: You on the average when.
Speaker 2: You look at the average tables, if you had the
Speaker 2: average amount of debt you're looking at the and you
Speaker 2: currently have that I should say six six four and
Speaker 2: a half, six and a half years to pay it down.
Speaker 2: There's no benefit in paying it off quicker than that.
Speaker 2: You'd get a better benefit, better bang for buck paying
Speaker 2: down your home loan or saving a deposit. And no
Speaker 2: benefit for parents to offer to pay down their kids either.
Speaker 1: No, because there's no incentive. As I said at the start,
Speaker 1: that's right now. Yeah, that's a really really glaring error.
Speaker 1: I think in what they did Okay, we'll be back
Speaker 1: in a moment. Folks. Hello, welcome back to The Australian's
Speaker 1: Money Puzzle podcast. I'm talking to Hugh Robertson of The
Speaker 1: Center or ce NTAU or Group Financial Advisor regular on
Speaker 1: the show. Now, Hugh, before we got questions on Trump
Speaker 1: and the election, I did make the point at the
Speaker 1: start that the US markets went out three and a
Speaker 1: half percent and the Australian markets didn't follow that. They
Speaker 1: didn't follow that because why would they. Because this particular
Speaker 1: regime that has been elected is protectionist and is particularly
Speaker 1: so in relation to China. We are seeing as a
Speaker 1: China proxy on global markets. You can see that straight away.
Speaker 1: That's why the dollar is going the wrong way this morning.
Speaker 1: But what do you say to clients who say, is
Speaker 1: there any broad guidance you can give as to allocation
Speaker 1: for investors in the view of this new presidency?
Speaker 3: Great?
Speaker 2: Yes, the Dow going up three point five point seven
Speaker 2: last night is definitely a pro US story. Are you
Speaker 2: saying there is going to be greater protectionism? Trump's gonna
Speaker 2: implement all the Republicans are going to tax cuts for
Speaker 2: corporate There's going to be higher tariffs, tieder immigration, so
Speaker 2: we're really Trump two point zero is that continuation of
Speaker 2: the anti globalization perspective.
Speaker 3: So from our perspective, it does.
Speaker 2: It's a worry for Australia from that perspective, so you
Speaker 2: really need to take a global outlook when you invest.
Speaker 2: I think we've seen, and I think we've talked about
Speaker 2: it previously, the rise and rise of index funds, not
Speaker 2: giving financial advice, but now we're really looking to go
Speaker 2: from those market cap weighted index funds that have really
Speaker 2: high concentration risk into more of those equal weighted kind
Speaker 2: of opportunities there because you look at America and the
Speaker 2: S and P five hundred, well we've talked spent a
Speaker 2: year talking about just that magnificent seven. There's four hundred
Speaker 2: and ninety three other companies and when you looked at it,
Speaker 2: I was really curious to see if the Dow beat
Speaker 2: the NASDAK and it did, so I think from a clicktic.
Speaker 1: That's and it doesn't very p So you're seeing you're
Speaker 1: seeing you like equal.
Speaker 3: Weighted US I do, and I think you etf to
Speaker 3: strip out. The big take is that it.
Speaker 2: Yeah, and I think from an Australian perspective, the majority
Speaker 2: of clients we see are very overweighting Aussie and that's
Speaker 2: going to be a real challenge. I think Europe is
Speaker 2: coming out of some pretty rough years, so there's opportunity there.
Speaker 2: I think there's still continued opportunity in America outside of
Speaker 2: that top seven. And from the client perspective, it's really
Speaker 2: to sort of don't be scared of going global because
Speaker 2: it might actually be safer than domestic because we are
Speaker 2: a China proxy and the world we're what two or
Speaker 2: three percent of the world market cap. So unless we've
Speaker 2: got resources doing well or banks doing well, if we
Speaker 2: think that the tail wins the technology through AI or
Speaker 2: healthcare through the GLP ones and all those, then we're
Speaker 2: not getting exposed to that in the Australian market.
Speaker 1: Okay, very good, All right, very interesting. Now the first
Speaker 1: question was actually from Peter said, is if Anthony Albanezi
Speaker 1: is going to cut student debt, it's the only point
Speaker 1: in paying off hex's debt early. I think we answered
Speaker 1: that piece. Certainly, isn't any point in rushington pay it
Speaker 1: off early bit before we see whether this whether this
Speaker 1: gets through on June one next year, which would imply
Speaker 1: that the government must somehow be able to get that
Speaker 1: legislation through, which would suggest that this government would have
Speaker 1: to be re elected or at least told power in
Speaker 1: June one next year. Tim, is it normal that income
Speaker 1: protection By that he means income protection insurance is going
Speaker 1: up twenty percent year on year for the older contracts.
Speaker 1: And is any advisor advising to keep the old terms.
Speaker 1: I bet they are, but you can tell.
Speaker 3: Us you it is.
Speaker 2: This is one of the conversation's advisers are having every
Speaker 2: single day with their clients. Tim might be referring to
Speaker 2: and actually an agreed value income protection policy. These are
Speaker 2: ones that were already marked up a little bit more expensive,
Speaker 2: but you agreed to the value of the on the
Speaker 2: terms at the time when you took the insurance policy
Speaker 2: out as oppos to an indemnity one, which is a
Speaker 2: time of claim you prove what you weren't. But if
Speaker 2: you have an income or a salary that's highly volatile,
Speaker 2: then the agreed value is still important. What we are
Speaker 2: seeing though, is people are really due to the income protection.
Speaker 2: People are really assessing their needs again. And maybe you
Speaker 2: took out the income protection when you had a higher
Speaker 2: level of dead or kids education expenses, so you can
Speaker 2: ensure yourself for up to seventy five percent of what
Speaker 2: you earn, but you don't have to. You can toggle
Speaker 2: around with your waiting period, whether it be thirty days
Speaker 2: and now you've got more money in your offset account
Speaker 2: in your home, you might be able to go ninety days.
Speaker 2: You might be able to go a couple of six
Speaker 2: months a year without needing to claim on your income protection.
Speaker 2: So you could use your home loan, or you can
Speaker 2: offset account, or you can use sick leave at work.
Speaker 2: So you've got to be clever around building your plan
Speaker 2: onto what your lever is how much financial risk are
Speaker 2: you're going to transfer to you personally and be self
Speaker 2: insured versus the insurance. So that's the things we've changed
Speaker 2: a lot. We look at the waiting period, we look
Speaker 2: at the benefit period. Most people don't need to get
Speaker 2: paid till sixty five. It might only be a two
Speaker 2: year benefit period, and the actual sum insurance you might
Speaker 2: not need a full seventy five percent of what you own.
Speaker 2: We're not seeing people cancel it, but we're definitely modifying
Speaker 2: a lot. And the stuff that we're always cautious of
Speaker 2: is don't just go to something that's cheap, because you know,
Speaker 2: if you get a cheap policy, you might get a
Speaker 2: cheap outcome. We just want to make sure you get
Speaker 2: something that's appropriate to you. So definitely that's a sec
Speaker 2: advice part.
Speaker 1: That's a really good answer. Okay, very interesting. Interesting, isn't
Speaker 1: it that crosses over in all insurances. I did something
Speaker 1: on private insurance, private health insurance that is, and four
Speaker 1: hundred thousand people in the last two years downgraded their
Speaker 1: health insurance from gold to silver or whatever, silver to brands.
Speaker 1: Same thing. They say, Okay, I'm not going to drop it,
Speaker 1: but you know, really look at it and say is
Speaker 1: it applicable to me? Just means that once a year,
Speaker 1: having a damn hard look at it. Okay, Rob says,
Speaker 1: would it make a big difference to government deficiency if
Speaker 1: all public servants traveled economy always? Are they our servants
Speaker 1: or are we the increasingly vexed public there? Yes, okay,
Speaker 1: this is that we're keeping away from politics.
Speaker 3: Rob.
Speaker 1: Yeah, I don't know. They all seem to They all
Speaker 1: like to treat themselves. It seems to me on all
Speaker 1: sides of parliament. That's all I have to say.
Speaker 2: Did I say the Singapore Prime minister recently traveling in
Speaker 2: a planing, he always flies economy.
Speaker 3: Did I say that.
Speaker 1: If economy isn't he great? Reminds me of the wonderful
Speaker 1: Chuck Feeney who was the Atlantic philanthropy's man, who was
Speaker 1: a billionaire, gave all his money to charity later on
Speaker 1: huge benefacture of universities around the world, and he created
Speaker 1: basically he didn't create Judy Free, but he was the
Speaker 1: first billionaire and the free business in the US. Chuck Feeney,
Speaker 1: who died recently, and he always traveled economy and when
Speaker 1: he was asked why, he said, we all arrive at
Speaker 1: the same time. Okay, Now I've got some very good
Speaker 1: questions coming up from doctor Joseph, from and from Augustin
Speaker 1: and we'll be back in a moment. Hello, Welcome back
Speaker 1: to the Australian's Money Puzzle. Hugh Robertson of the Centaur
Speaker 1: Financial Advice Group, speaking on the show today. First question
Speaker 1: is from doctor Joseph. I have exposure to the artificial
Speaker 1: intelligence AI opportunities by being invested in the US megacap
Speaker 1: tech giants as well as Copper. You've thought it through,
Speaker 1: Doctor Joseph, would having exposure to international data centers overkill
Speaker 1: or is this necessary to capture the full opportunity? Okay,
Speaker 1: number one, we don't advise. Number two, We certainly don't
Speaker 1: talk individual advice. It's as information only. But I will
Speaker 1: say that I would include data centers certainly in the
Speaker 1: AI opportunity for sure, and the big super fronts for
Speaker 1: sure are including it. If you think of what they've
Speaker 1: paid for air Trunk recently. You see this CDC auction
Speaker 1: coming up now as well, and obviously the share price
Speaker 1: hot share price of next DC and also Mcquarie that
Speaker 1: is the Mcquarie Technology Group as opposed to Mcquarie Bank.
Speaker 2: What do you think you the idea Yes, yes, says
Speaker 2: over exposure, but yeah, you're investing in that thematic and
Speaker 2: there is a diversification benefit there. I do like the
Speaker 2: concept of when everyone's digging for gold, sell the shovels,
Speaker 2: and I think our data centers are that sor it's
Speaker 2: a nice little infrastructure play. You're not going to get
Speaker 2: the same returns that you're going to get in a
Speaker 2: AI leading kind of invention like a chat GPT of
Speaker 2: the world. But it's appropriate whether you be in all
Speaker 2: three of those. Again, if it's I do think that
Speaker 2: AI is going to be that once in a generation
Speaker 2: opportunity that we get from an investment perspective, and you
Speaker 2: just don't know which area is going to hit. I
Speaker 2: was just spent time at M I, T, and Harvard
Speaker 2: a couple of months ago, and hearing them talk about
Speaker 2: how they're what they're doing with AI just absolutely blew
Speaker 2: my mind. And some people have spent over a billion
Speaker 2: dollars and they've made never made a dollar of revenue.
Speaker 2: So depends where you're at what you want from your
Speaker 2: from your investment.
Speaker 1: Did did though, I'm sure it was all wonderful. Did
Speaker 1: you come away with any specific investment lessons?
Speaker 2: No, there's out of AI. It's going to be there's
Speaker 2: going to be a lot of failures. There's going to
Speaker 2: be a lot that are commercializing. You're going to hear
Speaker 2: a lot of really good star stories and good narratives
Speaker 2: that just won't come through. So for me, it's still
Speaker 2: allocate money to it, but know the risks that you're
Speaker 2: taking in that area. I think a lot of the
Speaker 2: really great ones are going to be via private equity.
Speaker 2: They won't be public for some time, so I'd rather
Speaker 2: take something that's a little bit more established, like the
Speaker 2: data centers, for example. I think that's appropriate.
Speaker 1: Yeah, okay, it's interesting. I covered a corresponds upon a time,
Speaker 1: the dot com boom, and I was actually technology editor
Speaker 1: of a business of what was then Business Review weekly magazine,
Speaker 1: and I must have met, I don't know, fifty one
Speaker 1: hundred dot com companies. They were just queuing off basically,
Speaker 1: and as you say, they are great stories, marvelous stories,
Speaker 1: great ideas, and three three came through in the end.
Speaker 1: There are only three that I know of that are
Speaker 1: still there today. One completely went onto the radar and
Speaker 1: I missed it completely, and most people did, which was
Speaker 1: car Sales, which is a leader to the readestate dot
Speaker 1: com dot U Norea, part of NewsCorp, Disclosure and Seek.
Speaker 1: The Bassett brothers, I can remember them coming in and
Speaker 1: talking and they were just another They were just another
Speaker 1: couple of young guys jumping around the office, excited about
Speaker 1: what they were planning. And I had seen so many,
Speaker 1: but they were one. But they were one for everyone
Speaker 1: that worked. There was thirty forty that that didn't work,
Speaker 1: So keep that in mind.
Speaker 2: But AI, this is how I always talk about Mark
Speaker 2: Zuckerberg and you think, okay, he made Facebook, but there
Speaker 2: was a million people trying to do exactly what he did,
Speaker 2: so you go. So it's not I want to be
Speaker 2: the next Mark Zuckerberg. There was hundreds and thousands of
Speaker 2: people trying to do that exact same thing. So there's
Speaker 2: always the element of luck. And that's why you don't
Speaker 2: go into just one. You diversify. And if you think, okay,
Speaker 2: like that venture capital world, that AI world, that's really risky.
Speaker 3: I think if you can just come back a few.
Speaker 2: Degrees of risk, you just need to let the risk
Speaker 2: takers go for it.
Speaker 3: But you can still pick it up.
Speaker 2: And if even if you had a got sick ten
Speaker 2: years ago, real estate dot com ten years ago, you're
Speaker 2: going to be pretty happy with the return that you've got.
Speaker 1: Yes, yes, absolutely, yes, very true, very true. So you're
Speaker 1: saying to me, let other people make the mistakes first,
Speaker 1: aren't you. Yeah, of course that's right. The innovators don't
Speaker 1: always aren't always the ones that make all the money,
Speaker 1: as we know. Okay, final question, Augustin, amazing podcast. I
Speaker 1: never miss it. Thank you, Augustin. I read your article
Speaker 1: in The Australian about the This was actually an article
Speaker 1: I commissioned on four oh one K plans and whether
Speaker 1: the Angus Taylor, the opposition finance person, had floated in
Speaker 1: a single sentence to me I see in an address
Speaker 1: a few weeks ago the single the words US style
Speaker 1: four oh one K plans, and he rattled a few
Speaker 1: cages and some of the industry funds were instantly saying, no,
Speaker 1: we can't have four oh one ks. But Auguston asks
Speaker 1: how do they work? And why are they being considered
Speaker 1: for Australia's superannuation system. Now it's the extent that they're
Speaker 1: being considered. All Anger Sailor said was that our superannuation
Speaker 1: system should be more aligned to global systems such as
Speaker 1: four oh one K. There's all sorts of aspects of
Speaker 1: four oh one K, one of which is that it's
Speaker 1: voluntary and that's very different than our system, which is mandatory. However,
Speaker 1: it does have some really interesting things, and one of
Speaker 1: them is that you don't pay taxes. You accumulate, you
Speaker 1: pay tax that you start to tap it. And I
Speaker 1: like that because it gives everyone a fair chance. If
Speaker 1: I inherit a whole bag of money and I just
Speaker 1: drop it into super every year, it just kind of stagnates.
Speaker 1: I think in terms of wealth building and entrepreneurialism. But
Speaker 1: if as I accumulate, if I in my working life,
Speaker 1: if I am able to put more into SUPER, that's
Speaker 1: when I want the tax bricks more. And I think
Speaker 1: our system is tilted towards older Australians, and most older
Speaker 1: Australians if we put them in a room and interrogated
Speaker 1: them hard with a big bright lamp over their head,
Speaker 1: would probably eventually say, yeah, it's true. Have you ever
Speaker 1: looked at for a one case do you what do
Speaker 1: you think of them?
Speaker 3: Yeah? The nuances there's different.
Speaker 2: Usually you've got employers match the contributions as well. So
Speaker 2: I like the idea if you're going to pay welfare
Speaker 2: to someone at the end of the day because they
Speaker 2: don't accumulate enough capital, then it's worth giving up the
Speaker 2: fifteen percent tax on earnings now so they can have
Speaker 2: that self determination.
Speaker 3: So I feel we've always said.
Speaker 2: That supers a concessionally tax vehicle versus starting to seed
Speaker 2: as the wealth creation vehicle, and then you could tax
Speaker 2: it at the end when there is a big bulk
Speaker 2: of money. I think the four to one case probably
Speaker 2: a bit better from the tax advantage there because if
Speaker 2: I have, if we've got clients that generate one hundred
Speaker 2: thousand dollars er income out of their pension, would they
Speaker 2: mind paying tax? Not really, they want they want Australia's
Speaker 2: future better for their kids and grandkids, and they're happy
Speaker 2: to pay the tax.
Speaker 3: I just listen to.
Speaker 2: Your point there around do we feel the systems more
Speaker 2: built for those nearing retirement? That's one hundred percent sure,
Speaker 2: and I think it would be great.
Speaker 1: Well in retirement. I think you in it. Yeah. The
Speaker 1: the issue that the amount you can put into super
Speaker 1: now on a tax efficient basis is more or less
Speaker 1: back only back to where it was about ten years ago,
Speaker 1: I think I certainly. I think that's that should be reviewed.
Speaker 1: I hope that was in some way useful to you, Augustin,
Speaker 1: and I hope it puts it into context as well.
Speaker 1: I think that there could be a lot more review
Speaker 1: of how it all works, and there could be there
Speaker 1: could be your review of our big super works as well.
Speaker 1: Because if the r b A and the and ASSIC
Speaker 1: and the IMF are all lining up with the things
Speaker 1: they want to check and examine investigate, I think it's
Speaker 1: time for a broader review of how big super works,
Speaker 1: particularly in the context of some big funds. Okay, terrific,
Speaker 1: Thanks very much, Hugh. Great to have you on. I
Speaker 1: knew it would be good, it always is.
Speaker 3: Thank you very much.
Speaker 1: He picked a good day to come on.
Speaker 2: Yes, excited and you know we could have gone before
Speaker 2: the Melbourne Cups. We could have got some tips. You've
Speaker 2: kind of covered off on everything this week.
Speaker 1: Yeah, yeah, it's been a it's been a it's a
Speaker 1: been a curious week. But thanks very much for coming
Speaker 1: on the show, and thank you everybody for listening. Let's
Speaker 1: have some more emails the Money Puzzle at the Australian
Speaker 1: dot com dot au. Talk to you soon.