Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm
Speaker 1: James Kirkby. Welcome aboard everybody. I notice we haven't had
Speaker 1: many questions about this week's federal budget. That's probably because
Speaker 1: there wasn't an awful lot in it that is compared
Speaker 1: to a conventional budget. Don't be mistaken, though, because there
Speaker 1: was issues in it, right, I mean, keep an eye
Speaker 1: on that. There was a tax cut, Yes it was tiny,
Speaker 1: Yes it was at the lower band, but it was
Speaker 1: a tax cut. Nonetheless, there's a very interesting expansion of
Speaker 1: the plan to have shared home ownership that could be
Speaker 1: really interesting. That's the biggest sort of thing in the
Speaker 1: first home buyers market we've seen for a long time,
Speaker 1: and with anyone can up to one hundred thousand a
Speaker 1: year you can apply for that. So I think that's
Speaker 1: going to be a major feature of the residential property
Speaker 1: market going forward. There was also some very interesting sort
Speaker 1: of side steps inside the budget, in other words, things
Speaker 1: that were not mentioned but were important because they weren't.
Speaker 1: Give you an example, the deming rate. The deming rates unchanged.
Speaker 1: The deming rates is unchanged since twenty twenty. This is remarkable.
Speaker 1: Basically the rate that controls pension access is unchanged since
Speaker 1: twenty twenty. That's a giveaway, folks, it's a giveaway to
Speaker 1: older Australians. On the other hand, the coup, we call
Speaker 1: it notorious. Notorious plan to introduce a new super tax
Speaker 1: of fifteen percent on earnings above three million was nowhere
Speaker 1: mentioned in the budget papers. And I mean anywhere, because
Speaker 1: we were really digging and looking for it, myself and
Speaker 1: my colleagues inside the lock up, and we didn't see
Speaker 1: any mentioned at all. That well, I'm going to infer
Speaker 1: that it means that plan as we know, is never
Speaker 1: going to see the light of day. That doesn't mean
Speaker 1: they won't try something, but I'd like to think they're
Speaker 1: never going to try that. We talk about that in
Speaker 1: a moment with my guest today. One thing just before
Speaker 1: we start. As we speak, news has just come out
Speaker 1: that Trump has introduced a twenty five let me read
Speaker 1: this again. I got to be sure about this. A
Speaker 1: twenty five percent tariff on foreign made automobiles in the US.
Speaker 1: Can you believe this? This is how believable. Imagine if
Speaker 1: it was in Australia. It would be like bring us
Speaker 1: back to a hold and everybody driving a hold in
Speaker 1: or a Ford as we were back in the nineteen eighties.
Speaker 1: This is huge. This Trump tariff play. The big day supposedly,
Speaker 1: if he can stop leaking it before the big day
Speaker 1: is supposed to be Tuesday, April second. That's like the
Speaker 1: tariff day that he's supposed to deliver all the entire package.
Speaker 1: And that is just for our next show, which would
Speaker 1: be ideally timed. My guest will be Cameron Stuart. He's
Speaker 1: the chief international correspondent at the Australia and he's a
Speaker 1: Trump expert. He's covered the Trump elections, He's been at
Speaker 1: those Trump rallies. He really understands this controversial figure who's
Speaker 1: dictating the tempo of world investment markets. So look out
Speaker 1: for that one in a few days time. Now there
Speaker 1: is only one person I talked to about the budget
Speaker 1: each year, and we're going to talk about the budget.
Speaker 1: We're also going to talk about where we are this
Speaker 1: time of the year now that we know what was
Speaker 1: in the budget. It is of course Will Hamilton of
Speaker 1: Hamilton Investment Partners.
Speaker 2: How are you will very well, James, thank you for
Speaker 2: having me.
Speaker 1: You're very welcome. Great to have you. I mentioned the
Speaker 1: issues there on the budget, there was another tax cut.
Speaker 1: We've had a batch of tax cuts from the ALP.
Speaker 1: Now does that to some extent undermine the original ambitious
Speaker 1: multi year tax cut program that Josh Rodenberg and Morrison had.
Speaker 2: No, I don't think it does, because I think what
Speaker 2: you're saying is it's they're calling it the cup of
Speaker 2: coffee tax cut. It doesn't start for sixteen months, and
Speaker 2: then it does come in at five dollars a week,
Speaker 2: and then it goes to ten dollars twelve months after that.
Speaker 2: It's at the lower tax band, and I think this
Speaker 2: goes from sixteen to fifteen and then to fourteen percent.
Speaker 2: So the thing is it doesn't erode bracket creep. That
Speaker 2: the brecker creep at the top end. There's no erosion. Yeah,
Speaker 2: so it we've still got very substantial bracket creep and
Speaker 2: it's a big issue.
Speaker 1: Bracket creep, folks. I hope everyone is across a before
Speaker 1: we go any further. Bracker creep is that if the
Speaker 1: tax rates remain fixed at percentages, then what happens is,
Speaker 1: as you get a pay rise, you graduate into those
Speaker 1: tax bands and that means that you continually pay more tax.
Speaker 1: And actually if you look marvelous couple of slides from
Speaker 1: saul eslike the Independent Economist I saw this morning where
Speaker 1: he showed how the tax revenue year upon year upon
Speaker 1: year and into the future increasingly depends on income tax.
Speaker 1: So bracket creep is this controversy and the only way
Speaker 1: to plug it would be if they indexed the bands.
Speaker 1: Do you think either party whatever index to bands because
Speaker 1: it means either party could never announce the tax cut again.
Speaker 2: Really, I see there's an article in The Australian today
Speaker 2: that Dunton's being urged to do this. I think that
Speaker 2: I know he's been everyone's everyone, everyone's urging him to
Speaker 2: do and I think tax personal taxpayer contribution. When Morrison
Speaker 2: went out of power, I think it was about forty
Speaker 2: eight point three percent. In this budget, it's forecast now
Speaker 2: for twenty eight twenty nine to peak at fifty four percent.
Speaker 2: So that's the effect of bracket crep. Now we need
Speaker 2: major we need tax reform and I think one of
Speaker 2: the things that the Tier member and Wentworth elector Spend
Speaker 2: has been really calling for.
Speaker 1: Is indexation of the bands.
Speaker 2: Eah correct is that? But bigger tax reform and the
Speaker 2: thing is the people listening to this as individuals are
Speaker 2: being urged to contribute more and more to the total
Speaker 2: tax take, and that's wrong. It really is wrong. And
Speaker 2: I think that one of the biggest reasons is because
Speaker 2: there's two sides naturally to a budget. There's the revenue
Speaker 2: side and there's expenditure side, and both sides aren't tackling
Speaker 2: the spending side, and they're spending like drunken sailors.
Speaker 1: They're spending like drunken sailors. Okay, folks, you heard it
Speaker 1: here first from Will Hamilton, and actually I don't disagree
Speaker 1: with that. And the coalition's tactical electoral election policy of
Speaker 1: matching LP giveaways, particularly on the medical side, is well,
Speaker 1: basically it rulls into every time you spend, we spend too.
Speaker 1: So on that three million tax I think we have
Speaker 1: a question later on that, but it was nowhere to
Speaker 1: be seen. Do you think it's dead?
Speaker 2: It's surprising, was probably the number one question we got
Speaker 2: yesterday from people, because you know, look, our client base,
Speaker 2: this is a very relevant proposal that was put forward
Speaker 2: and there was no mention of it, and as we
Speaker 2: all know, it's sort of stuck in the center, killed
Speaker 2: by the Senate at the moment, everyone's expecting they'll have
Speaker 2: a go at it or but there's just no mention
Speaker 2: whatsoever about resurrecting that legislation in the Upper House or
Speaker 2: trying to alter it amend it. So where does it stand?
Speaker 2: And I think that's the big thing as far as
Speaker 2: our clients are concerned. So unless they can change the
Speaker 2: minds of Jackie Lambia at all, this thing's dead.
Speaker 1: Okay, I have to say, will I don't think it's dead.
Speaker 1: And I think they can change the minds of those
Speaker 1: people simply by offering them something that I didn't offer before.
Speaker 1: So for instance, you could package it. This is how
Speaker 1: they do these deals in Senate. You say, Okay, you
Speaker 1: might be crazy about this tax, but we want it through.
Speaker 1: And what we'll do is we'll do a double bill,
Speaker 1: you know. And they took in other goodies with it,
Speaker 1: which the others will find it resistible. That's political. More
Speaker 1: to the point that three m tax three million tax
Speaker 1: aren't super That is still on the agenda, and Jim
Speaker 1: Chalmers has reiterated that he wants to push it through
Speaker 1: put that on the agenda. It's not indexed either, right,
Speaker 1: so bracket creep would kick in there big time, wouldn't it.
Speaker 2: And the transfer balance cap is indexed and like it
Speaker 2: was interesting. Okay, So the transfer balance cap which you
Speaker 2: have will Flagg James is going from one point nine
Speaker 2: to two million a concessional and non concessional contribution, So
Speaker 2: the way to get money into Super has not been altered.
Speaker 1: Yeah, and I think that's really unfair. That was the
Speaker 1: point I'd brought up on budget coverage, even though it
Speaker 1: wasn't in the budget papers, but I wasn't going to
Speaker 1: ignore it, which is folks, I think this is really relevant.
Speaker 1: If you are older and if you have one point
Speaker 1: nine million this is individually per head in Super, and
Speaker 1: you've taxed free earnings on that, that cap is going
Speaker 1: to rise to two million on July one two million, okay. Now,
Speaker 1: but if you are in accumulation stage. Any of our
Speaker 1: listeners who aren't retired, which is a vast majority, let
Speaker 1: me tell you the most they can put into Super
Speaker 1: pre tax each year is thirty thousand dollars. Now, a
Speaker 1: couple of things you could put in thirty thousand dollars
Speaker 1: ten years ago, twenty years ago, and how many years
Speaker 1: would it take to get two million? How many years
Speaker 1: must do the calculation of that. But basically it's loaded
Speaker 1: towards older people, isn't it. Really?
Speaker 2: It isn't the thing that we've argued since from the
Speaker 2: point that Kelly I do ar Alter, this was the
Speaker 2: issue actually is getting money into super and that still
Speaker 2: and what they're doing and not altering these levels is
Speaker 2: making it even harder.
Speaker 1: Yes, that's right. It's really contradictory that you're letting the
Speaker 1: amount you can have tax free swell and you're not
Speaker 1: changing year after year the amount you can put in.
Speaker 1: But we'll put that to one side. But I want
Speaker 1: people to be aware of it. I'm sure listeners are
Speaker 1: aware of it, and it's I think it's crucial in
Speaker 1: terms of again one of these things that the budget
Speaker 1: did not cover. Okay, let's take a short break and
Speaker 1: we want to come back and just pick up one
Speaker 1: or two I think very important pre election issues for investors,
Speaker 1: because we have an election coming up in May, and
Speaker 1: we don't normally have a budget during an election campaign,
Speaker 1: and there is an election campaign on for all intents
Speaker 1: and purposes. I know it hasn't been called yet, but
Speaker 1: it will be called in a matter of days. Okay.
Speaker 1: Back in the moment. Hello, Welcome back to the Australians
Speaker 1: Money Puzzle podcast. James Kirby here talking to Will Hamilton
Speaker 1: of Hamilton Wealth Partners. We cover the budget every year together.
Speaker 1: Often we've so much in the budget we could talk
Speaker 1: for an hour. We're not going to talk for an
Speaker 1: hour on the budget this year we will because really
Speaker 1: there isn't an hour's worth in it. There is barely
Speaker 1: ten minutes worth. I think we've touched off the big issues.
Speaker 1: I just want to zone in one one issue that
Speaker 1: I think our listeners will find very interesting. For first
Speaker 1: home buyers. If you are one, if you want to
Speaker 1: be one, or if anyone related to you wants to
Speaker 1: be one, or a friend of yours wants to one.
Speaker 1: There's a couple of grants you can choose from. The
Speaker 1: most popular is the Home Loan Guarantee Grant Federal. These
Speaker 1: are federal grants where the government will cover will guarantee
Speaker 1: the deposit you don't have, basically so you can have
Speaker 1: a small deposit. This is the most popular off the schemes.
Speaker 1: Roughly fifty thousand people have used it, maybe more. This
Speaker 1: is the last time I saw the figures. The other
Speaker 1: one is the first Home super Saber scheme. Some of
Speaker 1: our listeners have used that. They are heroes to use
Speaker 1: that because it is the most ghastly complicated scheme I've
Speaker 1: ever come across. However, thirty five thousand people or more
Speaker 1: have used it. They've used it because people will jump
Speaker 1: on anything that gets them into the market. The majority
Speaker 1: of people who don't have rich mom and dads who
Speaker 1: will give them quietly one hundred grand or two hundred
Speaker 1: grand to get them going. Most people don't have that.
Speaker 1: They depend on these grants, or they depend on whatever
Speaker 1: initiatives they can have. So will The point I'm making
Speaker 1: is the government's expanded shared home ownership scheme I think
Speaker 1: will go like hotcakes. I think it will be instantly popular.
Speaker 1: The deal is you can earn up to ninety thousand,
Speaker 1: up to one hundred thousand, and you can buy a
Speaker 1: house up to one point three million, which is quite something.
Speaker 1: That's it's regionally sectoralized. Basically Sydney's the highest makes sense,
Speaker 1: and it drops from there. The government will pay will
Speaker 1: put in thirty percent of an existing house and forty
Speaker 1: percent of a new house, right so you don't have
Speaker 1: to you share ownership. What do you think of the idea.
Speaker 2: Well, look, it's going to get people in. And the
Speaker 2: fact that they've also lifted the single salary cap from
Speaker 2: ninety two hundred thousand, you going to see this allow
Speaker 2: a lot more people in as well. So you're right,
Speaker 2: it's going to assist this market, and it's going to
Speaker 2: assist that you're up to that one point three million,
Speaker 2: it's going to assist it substantially.
Speaker 1: The only forty thousand spots will and that's over the
Speaker 1: budget papers.
Speaker 2: Twenty thousand places initially. Yeah, that's right.
Speaker 1: Yeah, th I notice demand will be strong. The demand
Speaker 1: will be strong, and I noticed real estates a councilors,
Speaker 1: et cetera yesterday asking from more spots already. So I
Speaker 1: think it will be. But let's just look at it
Speaker 1: for a moment. If you did this, so the upside
Speaker 1: would be that you could buy a house that you
Speaker 1: could not have bought previously, and that's substantial. The downside
Speaker 1: is you share, you're in a joint venture, and you're
Speaker 1: a joint venture with a government agency. What could go wrong?
Speaker 1: What could go wrong? A lot of things. What could
Speaker 1: go wrong?
Speaker 2: First one is if if it's reversed, but I don't
Speaker 2: see that happening. They may see if they stop, they
Speaker 2: may stop it. The other thing is is they're going
Speaker 2: to put some effectively interest rate or carry on it.
Speaker 2: I doubt that as well. So I think, what if
Speaker 2: you've got to change your government and they didn't like
Speaker 2: the scheme. I think it would just be worth ceasing it.
Speaker 1: Yeah, it would wither on the vine. But you wouldn't
Speaker 1: care about that if you were in and I noticed that.
Speaker 1: I don't want to preach George, but governments don't necessarily
Speaker 1: do that. Like the ALP got in. They are absolutely
Speaker 1: against using your super for buying a home. The Coalition
Speaker 1: is totally for it. But the first Home super Saver
Speaker 1: scheme which was introduced by the Morrison government was not unwound.
Speaker 1: It wasn't advertised, but it certainly wasn't unwound and continues
Speaker 1: under the EARP. So that's a precedent. I think. One
Speaker 1: of the things that perhaps is an issue with the
Speaker 1: shared ownership scheme, like any joint venture, is how does
Speaker 1: the partnership end. Would you ever actually get to completely
Speaker 1: own the house to be able to buy out that
Speaker 1: part that you that the government owns, and if the
Speaker 1: price went down, you'd be in a terrible pickle, wouldn't you.
Speaker 1: You'd be stuck in a half government own't house for
Speaker 1: who knows how long. How would you say that?
Speaker 2: So is there effectively imagine call we don't know that. Yeah,
Speaker 2: I look, I need to see the fine print.
Speaker 1: Yes, we don't know the details. One other thing, folks,
Speaker 1: by the way, is in the nature of these things,
Speaker 1: which are so times sort of perverse incentives, or you
Speaker 1: might say disincentives. Sometimes if you earn, if you go
Speaker 1: in let's say you're around ninety eight thousand, and you
Speaker 1: qualify for the scheme, and in the natural course of
Speaker 1: event you are promoted or you make more money as
Speaker 1: the years go buy then there is a close already
Speaker 1: in the proposal that the government will want you to
Speaker 1: buy them out faster than this planned. Under the conventional plan,
Speaker 1: you only have to buy out the government, or at
Speaker 1: least they have to get the money back for their
Speaker 1: stake is when you sell the house. But if you
Speaker 1: get promoted, you have to give them back some of
Speaker 1: their steak faster. That's one of those classic sort of
Speaker 1: disincentive things that you've got to watch that often get
Speaker 1: built into these things by accident.
Speaker 2: And you would expect that the people that weare the
Speaker 2: demand is for this game, they're the ones that will
Speaker 2: get Probably the cealariisers are going to be more rapid
Speaker 2: as well, so.
Speaker 1: They're the very ones, aren't they. Yeah, because they're first
Speaker 1: home buyers, so by definition they are going to ascew younger. Okay,
Speaker 1: very good. We don't know just yet. I don't want
Speaker 1: to talk about the election just yet in terms of
Speaker 1: the choices investors have, because we don't have all the
Speaker 1: details just yet. I noticed a couple of things we're
Speaker 1: coming to you before Dutton gives the budget reply. Budget
Speaker 1: replies are normally completely boring and no one pays attention
Speaker 1: to them. This time, people will pay attention because we
Speaker 1: aren't the middle love it, as I say, a de
Speaker 1: facto election campaign. Also, I notice that there is that
Speaker 1: what's that famous little item in the budget which is
Speaker 1: expenses on There's a phrase for it, but basically it's
Speaker 1: money they've put aside, which they have in details what
Speaker 1: they're going to do with. And there's two billion in
Speaker 1: there still unused, which may well be used yet by
Speaker 1: the government for some last minute election enticements in the
Speaker 1: next month or so. But we'll see where we go
Speaker 1: on that. I've got some terribly good questions I really
Speaker 1: want to get to with Will. In fact, as often
Speaker 1: the case, I've been saving these for a wik because
Speaker 1: they're particularly difficult. Thank you, You're welcome. And also there's
Speaker 1: a question that's about another guest. But that's the nature
Speaker 1: of it. There'll be questions about you Will that another
Speaker 1: guest will have to answer. That's just the nature of
Speaker 1: a rolling show. All right, we'll be back in a
Speaker 1: moment with some questions. Hello, welcome back to the Australians
Speaker 1: Money Puzzle. James Kirby and Will Hamilton here with you. Okay, folks.
Speaker 1: Now the first question is from declan I'm baffled by
Speaker 1: Roger Montgomery suggestion. Now Roger Montgomery was on the show
Speaker 1: two bad if you want to listen to it, very
Speaker 1: good as always. Roger Montgomery suggestion that people should calculate
Speaker 1: dividend heal based on the price they paid to acquire
Speaker 1: their shares, and he used Comewell Bank as an exam
Speaker 1: rather than based on the current value. The question and
Speaker 1: the investors should be asking themselves is would it be
Speaker 1: better off continuing to hold the shares I have or
Speaker 1: should I sell them and invest elsewhere. Okay, I don't
Speaker 1: really argue with that theoretical point brought up by Detton,
Speaker 1: but I don't have a problem either with Rogers. I mean,
Speaker 1: if I buy come Bank shares for thirty dollars, which
Speaker 1: is I think what I paid for them thirty six,
Speaker 1: and they're now nearly one hundred, and the dividend yield
Speaker 1: on paper, when I look at the tables, tellt me
Speaker 1: it's three and a half percent. But my dividend yield
Speaker 1: on those shares is much much higher than that. If
Speaker 1: I bought a property and you said to me, you know,
Speaker 1: the rental yield is only three percent, but I know
Speaker 1: that I bought that property, you know, for half half
Speaker 1: the cost it is today, so the rent is terrific
Speaker 1: on it, It seems to me. I think both points
Speaker 1: are pretty relevant.
Speaker 2: What do you think, will, I think you've got to
Speaker 2: look look what Roger's saying in some respects is right.
Speaker 2: I think that and CBA, the dividend you're late late
Speaker 2: last year went down and then it's gone up because
Speaker 2: the share price is adjusted, I mean, and the share
Speaker 2: prices recently it's recently fallen twenty percent. So yeah, it's
Speaker 2: by that nature gone up. But I think you've got
Speaker 2: to look at I have an issue with people just
Speaker 2: purely looking at dividend yield when they look at a stock.
Speaker 2: At equities, you invest in equities for growth, so one
Speaker 2: component of the return is income, the other is growth.
Speaker 2: Now people were scratching their heads when CBA was going up,
Speaker 2: and why is it going up? It's ten year EPs
Speaker 2: growth average has been half a percent. So you look
Speaker 2: at se earnings per share and you look at the yield,
Speaker 2: and I think that's what You've got to look at
Speaker 2: the total return that you're expecting from that and make
Speaker 2: a judgment from it. Right, if you paid thirty six
Speaker 2: dollars for the stock, the dividend you're getting is based
Speaker 2: off that thirty six dollars, So it's relevant.
Speaker 1: I know whatvant of course that there are. People will
Speaker 1: always say that, look at your share portfolio, would you
Speaker 1: buy that stock today? Very powerfuct point, of course, it is.
Speaker 1: I think with dividend machine stock which come bank is
Speaker 1: and all the banks are, that particular point is diluted
Speaker 1: to some extent. That's where I would come from at least.
Speaker 1: But it's a very good question. Thank you. Debt all right, James.
Speaker 2: James asks about six months ago you had an accountant
Speaker 2: on the show, Duncan Perkins tax Time Accountants. I believe
Speaker 2: I found it very informative and with one eye on
Speaker 2: the end of the financial year, I'd love to hear
Speaker 2: more about putting the appropriate structures in place now to
Speaker 2: minimize your tax liabilities down the line. In addition, I'd
Speaker 2: love to hear more about debt recycling and the associated
Speaker 2: tax benefits in additions to the risks involved. I think
Speaker 2: appropriate structures aren't just for one James. You should be
Speaker 2: looking if you're going to put a tax structure in place,
Speaker 2: it's for a long term, not just for one year. Yeah.
Speaker 2: So if you're presently investing in your own name and
Speaker 2: you going forward and looking at a family trust, that's
Speaker 2: you're with that trust for a number of years and
Speaker 2: likewise transferring assets from your name into a trust realizes
Speaker 2: capital gains.
Speaker 1: Yeah, okay, but maybe perhaps you might explain to the
Speaker 1: general listener of what debt recycling is.
Speaker 2: So on debt recycling, it's are you moving debt for
Speaker 2: also from one entity to another?
Speaker 1: Why would you do that.
Speaker 2: Due to tax? So, for instance, your mortgage that you
Speaker 2: have in your own name is being paid in after
Speaker 2: tax dollars. And whereas if you've got debts, this is
Speaker 2: in you know that you put that in a family trust,
Speaker 2: or it's on against an investment portfolio or property in
Speaker 2: your own name that is being paid in pre tax dollars. Debt.
Speaker 1: Yeah, correct, okay, yeah.
Speaker 2: And that's the big thing to ensure that you efficiently run.
Speaker 2: You have your debt structured in an efficient way. We
Speaker 2: have a number we have a number of people, so
Speaker 2: we have a number of people coming in and you
Speaker 2: know that they've got that ability to pay off their
Speaker 2: home loan and look at debt in other vehicles and
Speaker 2: they never thought of it, that hold on that debt
Speaker 2: of my home loan is in after tax dollars and
Speaker 2: therefore there's no efficiency in it.
Speaker 1: So what's the worst sort of debt?
Speaker 2: It is the worst sort of debt if you can
Speaker 2: afford it.
Speaker 1: So is it by definition the first sort of debt
Speaker 1: you should get rid of?
Speaker 2: Correct?
Speaker 1: Yes, So that's absolutely.
Speaker 2: You get rid of that after the debt that's been
Speaker 2: paid off in after tax dollars. And if you wanted
Speaker 2: to take on debt, make sure and you've got the
Speaker 2: ability to make sure that it is therefore in tax
Speaker 2: deductible or pre tax on the repayments.
Speaker 1: What about the reciting part. Is there something more that
Speaker 1: he's alluding to there? Maybe when rates change or whatever.
Speaker 2: That's another thing. Yeah, as well, when you're looking at
Speaker 2: your locking when rates change, and we are going through
Speaker 2: a rate changing at the moment, so you're not wanting
Speaker 2: to know you've had fixed rate loans as interest rates
Speaker 2: go up, as rates go down. You want it to
Speaker 2: have variable but our rates. But the gamble there is
Speaker 2: how farabile rates go.
Speaker 1: You're skeptical about them dropping.
Speaker 2: I think there'll be one more, but I don't one.
Speaker 1: More zero point two five percent cut? That means the
Speaker 1: entire site think cutting is a half a percent.
Speaker 2: Yeah, we didn't go We didn't go up as far
Speaker 2: as others did. James. Yeah, we were one hundred basis
Speaker 2: points less on our aid increases. Yeah.
Speaker 1: Yeah, very interesting. But the economists are still hanging on
Speaker 1: to two or three more cuts. You skeptical about that?
Speaker 2: I am skeptical where if we're going to get more cats,
Speaker 2: it means that the economy is struggling.
Speaker 1: To say, Yeah, I was going to say, why are
Speaker 1: you skeptical because the economy.
Speaker 2: I think it's it's effectively going sideways. I'm just not
Speaker 2: saying that. Yeah, that extreme weakness was I'm not, don't
Speaker 2: get me wrong. I actually think on a relative basis,
Speaker 2: Australia is a under performing the rest of the world,
Speaker 2: and that's a that's for a different podcast. But I
Speaker 2: think that it's effectively flat lining.
Speaker 1: And it's tipping along. And I suppose on the upside,
Speaker 1: unemployment or employment, whichever way you look at it is
Speaker 1: also flat lining in and around four percent, and the
Speaker 1: forecast and the budget leave it there. Okay. I hope
Speaker 1: that's useful to you, James. Now Sam says, I am
Speaker 1: struggling to find had to then there's an answer to
Speaker 1: the following question, Sam and all the Sam's out there.
Speaker 1: We never give advice on the show. This is information only.
Speaker 1: Is interest on a loan taken out to pay a
Speaker 1: sole trader's tax debts tax deductible? Is interested on a
Speaker 1: loan taken out to pay a soul traders tax debts,
Speaker 1: including quarterly payments with bas tax deductible.
Speaker 2: You need to get accountants advice on this one. We can't.
Speaker 2: We're not let your text advice James. Sorry, Sam, that's
Speaker 2: really it's legally we're going down a dangerous pass.
Speaker 1: I made the assumption i'd get an answer there. That's
Speaker 1: all right. Put that on the put that to one side.
Speaker 1: I will come back to you, Sam, don't worry. I
Speaker 1: will be so organized that I will put this back
Speaker 1: into the questions folder that we get all the time.
Speaker 1: Every day we get questions, and I'm delighted to see
Speaker 1: them all right now. Bouncing along to Andrew. If you
Speaker 1: have a loan or loans from a bank, fully offset
Speaker 1: with deposits at the same bank and not paying any interest,
Speaker 1: and the bank goes busted, are you still liable for
Speaker 1: the loan? Oh my, Look two parts to that. Let's
Speaker 1: just answer it straight first of all, and then we'll
Speaker 1: answer it in a more realistic way.
Speaker 2: For the net ad standing balance. You're liable.
Speaker 1: You're liable, yeah, correct. But if the bank went under,
Speaker 1: it would have included your loan, wouldn't it. And it
Speaker 1: still would have gone under.
Speaker 2: And there's a thing that code a receiver or liquid
Speaker 2: ida that will be appointed, and the first thing they'll
Speaker 2: be doing is chasing your date.
Speaker 1: The first thing they do is is chase your date
Speaker 1: if the bank was in receivership. However, in the real world, Andrew,
Speaker 1: and we don't mean to be complacent. Don't be complacent
Speaker 1: at all. However, Number one, there's a bank guarantee, which
Speaker 1: I'm sure you know about, and that's on the positive course,
Speaker 1: two hundred and fifty thousand per person per bank. But
Speaker 1: also there isn't an explicit guarantee about loans, et cetera.
Speaker 1: But there is a de facto, extremely strong historical priests
Speaker 1: in this country that banks are not allowed to go under.
Speaker 1: And anytime banks have been in trouble right back, you
Speaker 1: can go as far back as you like. Stay in
Speaker 1: Bank of Victoria I think late nineteen eighties. Was it
Speaker 1: Bank West in the GFC that comeback basically had to
Speaker 1: takeover I think bank I say, sure, all the state
Speaker 1: banks really, once upon a time, bank I say, spectacular one,
Speaker 1: once upon a time. But the point I'm making is
Speaker 1: that it doesn't happen. The government ensures that the big
Speaker 1: four banks will take over a bank that's in trouble.
Speaker 1: If one of the big four banks is in trouble,
Speaker 1: another bank will take it over. If they don't, the
Speaker 1: government will step in. If the banking system collapses, the
Speaker 1: economy collapses. They don't let it happen. In the historical
Speaker 1: precedent is that separately, there's a government guarantee on deposits. However,
Speaker 1: strictly to answer your question, Andrew, you bet they will
Speaker 1: be chasing you further loan if there was a receiver
Speaker 1: appointed to the biggest receivership imaginable, which would be Big
Speaker 1: four bank. But there have been times, haven't there will?
Speaker 1: I mean Westpacland very close to the line, very close?
Speaker 1: When was that ninety one two?
Speaker 2: Yeah, Peka came in and bailed them out.
Speaker 1: There you go, you see, But somebody will invariably come in.
Speaker 1: Because the other thing is, of course, that there is
Speaker 1: an oligopoly in the Australian banking system. There's four banks.
Speaker 1: They don't even try to expand outside Australia. They're completely
Speaker 1: domestically focused. It's a mortgage machine, it's government guaranteed. Really,
Speaker 1: it's a pretty good.
Speaker 2: Business on the dead side. Now they're a lot more
Speaker 2: conservative than there were, especially even compared to the GFS.
Speaker 1: Yes, because the capital adequacy rules have continually been ramped
Speaker 1: up by APPRA, the regulator, the Australian prudential with Australian
Speaker 1: Prudential Regulation Authority. Worth knowing all that, Andrew, what a
Speaker 1: good question, which is in a way a theoretical question.
Speaker 1: All right, terrific. Hey, thank you, Will.
Speaker 2: You're welcome, James. You started the podcast in talking on terror. Yes,
Speaker 2: And I found a great quote by Ivan Calhoun. Well,
Speaker 2: Ivan Cahoune.
Speaker 1: Posted remind our listens who he is.
Speaker 2: He was a NAB but before that he was the
Speaker 2: chief economist at Deutsche Bank, and he posted a quote
Speaker 2: from David Kelly, the JP Morgan Asset Management Global Chief strategist,
Speaker 2: and he said, the trouble with tariffs, to be descind
Speaker 2: is that they raise prices, slow economic growth, cut profits,
Speaker 2: increase unemployment, worseen inequality, diminished productivity, and increase global tensions.
Speaker 2: Other than that, they're fine.
Speaker 1: That's right. I used that quote about three weeks ago
Speaker 1: on the weekend. I saw it somewhere and I said,
Speaker 1: oh boy, that's a corker. But more than that, it's
Speaker 1: not just that it's a corker, it's who it's from,
Speaker 1: the heart of Wall Street, the heart of Wall Street
Speaker 1: JP Morgan, and one of the biggest jobs in that
Speaker 1: investment bank take it on board folks. A lot more
Speaker 1: more coming on that one, and we will be talking
Speaker 1: about that with Cameron Stewart in a few days. Okay,
Speaker 1: thank you. Keep the emails rolling. You're very shy on
Speaker 1: the voice memos. It's very easy, you know, it's very easy,
Speaker 1: and we'd love to hear you. But we're always happy
Speaker 1: to read you out of course, what we'd love to
Speaker 1: hear you too, So think about that. Here's the email
Speaker 1: the money puzzle at the Australian dot com dot Au.
Speaker 1: Today's show was produced by Leah Samuel Gluuke. Talk to
Speaker 1: you soon,