1 00:00:13,520 --> 00:00:16,800 Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm 2 00:00:16,880 --> 00:00:21,079 Speaker 1: James Kirby, the editor at The Australian. Welcome aboard everybody, 3 00:00:21,160 --> 00:00:25,520 Speaker 1: and welcome to the show. If you are active investor 4 00:00:26,320 --> 00:00:29,040 Speaker 1: in property in any fashion, if you're an investor in 5 00:00:29,080 --> 00:00:33,200 Speaker 1: any fashion, or even if you are looking at buying 6 00:00:33,240 --> 00:00:37,280 Speaker 1: a home, it's worth knowing that one of the items 7 00:00:37,360 --> 00:00:40,800 Speaker 1: of news we've been covering so far this year was 8 00:00:40,840 --> 00:00:43,159 Speaker 1: about the buffer. That is, for what it's worth if 9 00:00:43,200 --> 00:00:47,120 Speaker 1: you go into a bank anybody, whatever the interest rate 10 00:00:47,240 --> 00:00:51,240 Speaker 1: number is on the documents that you have got ready 11 00:00:51,320 --> 00:00:54,520 Speaker 1: to get your loan at the bank, they add three percent. 12 00:00:54,600 --> 00:00:56,080 Speaker 1: So if you think you're getting a loan at six 13 00:00:56,120 --> 00:00:58,280 Speaker 1: percent from the bank, they have to assess you on 14 00:00:58,320 --> 00:01:02,840 Speaker 1: the basis of nine. That's called the buffer. Three percent buffer. 15 00:01:03,080 --> 00:01:05,800 Speaker 1: There's been a campaign to try and cut that back 16 00:01:05,920 --> 00:01:08,720 Speaker 1: or eliminate it entirely, and I'm afraid to say APRA, 17 00:01:09,240 --> 00:01:12,520 Speaker 1: the regulator, came out yesterday and said sorry, we're not 18 00:01:12,640 --> 00:01:14,840 Speaker 1: touching that buffer, So we're going to have to struggle 19 00:01:14,880 --> 00:01:18,840 Speaker 1: on with that as investors. That's suppose the news you 20 00:01:18,880 --> 00:01:20,600 Speaker 1: don't want to hear the news. You probably do want 21 00:01:20,640 --> 00:01:23,560 Speaker 1: to hear is that AMP is still a very important 22 00:01:23,600 --> 00:01:27,959 Speaker 1: institutional player in the local market. They've done a fairly 23 00:01:28,720 --> 00:01:34,959 Speaker 1: thorough deep dive into residential property this week and basically 24 00:01:35,000 --> 00:01:37,280 Speaker 1: the message from that report is that nothing is going 25 00:01:37,319 --> 00:01:42,320 Speaker 1: to stop both prices running higher and rents running higher 26 00:01:42,319 --> 00:01:45,759 Speaker 1: in the year ahead, and we could easily see prices 27 00:01:45,760 --> 00:01:49,080 Speaker 1: match where they went last year. They did nine percent 28 00:01:49,160 --> 00:01:51,280 Speaker 1: across the board last year. They've done about four and 29 00:01:51,360 --> 00:01:55,000 Speaker 1: a half this year. Already plenty of time to get 30 00:01:55,040 --> 00:01:57,520 Speaker 1: to that same number. So eight or nine percent again 31 00:01:57,560 --> 00:02:00,040 Speaker 1: this year looking pretty good, I have to say. In 32 00:02:00,160 --> 00:02:03,960 Speaker 1: all markets except one big one Melbourne, second biggest city 33 00:02:04,000 --> 00:02:07,840 Speaker 1: in Australia, and guess what the prices are going down. 34 00:02:08,160 --> 00:02:12,240 Speaker 1: Prices are going down in Melbourne. Go figure there are 35 00:02:12,560 --> 00:02:15,400 Speaker 1: marching steadily forward everywhere else. We may talk about that 36 00:02:15,440 --> 00:02:21,640 Speaker 1: for a moment with my guest today. She has herself 37 00:02:21,680 --> 00:02:25,200 Speaker 1: done some very interesting work in recent times on property 38 00:02:25,240 --> 00:02:28,079 Speaker 1: on an area I never saw before, and she has 39 00:02:28,280 --> 00:02:30,640 Speaker 1: a model if you like what's going on in the 40 00:02:30,680 --> 00:02:35,560 Speaker 1: market post COVID and how as investors we will actually 41 00:02:35,560 --> 00:02:41,760 Speaker 1: be rewarded by buying bigger space that beyond doubt the 42 00:02:41,800 --> 00:02:46,279 Speaker 1: rental growth coming down the line will come on bigger properties. 43 00:02:47,400 --> 00:02:50,320 Speaker 1: Interesting work she's been doing. Her name is Eliza Owen. 44 00:02:50,560 --> 00:02:53,880 Speaker 1: She is at least a research economist at co Logic. 45 00:02:53,960 --> 00:02:55,240 Speaker 1: How are you, Eliza. 46 00:02:55,240 --> 00:02:57,280 Speaker 2: James, I'm going well, thanks for having me. 47 00:02:57,480 --> 00:02:59,720 Speaker 1: Love you to have you on the show. Tell us briefly, 48 00:03:00,000 --> 00:03:01,840 Speaker 1: how about this work you've been doing. What did you 49 00:03:01,919 --> 00:03:05,000 Speaker 1: discover that you didn't already know about the market when 50 00:03:05,040 --> 00:03:09,320 Speaker 1: you started to look at the issue of size, the 51 00:03:09,360 --> 00:03:12,040 Speaker 1: size of a property and the ability to dive rents 52 00:03:12,080 --> 00:03:12,440 Speaker 1: from it. 53 00:03:13,000 --> 00:03:17,320 Speaker 2: So we've been looking at trends in Australia's housing market 54 00:03:17,480 --> 00:03:21,120 Speaker 2: by bedroom. So we're really just starting to scratch the 55 00:03:21,200 --> 00:03:24,680 Speaker 2: surface of this data. But one of the most notable 56 00:03:25,080 --> 00:03:29,400 Speaker 2: differences in trends by bedroom has been rental growth over 57 00:03:29,440 --> 00:03:32,760 Speaker 2: the past few years. So if we look at the 58 00:03:33,200 --> 00:03:38,960 Speaker 2: latest annual growth or rents by bedroom across Australia, it's 59 00:03:39,000 --> 00:03:43,800 Speaker 2: actually larger houses that are attracting higher rates of rent growth. 60 00:03:44,320 --> 00:03:46,720 Speaker 2: In the year to during rent growth in five bedroom 61 00:03:46,760 --> 00:03:50,840 Speaker 2: plus houses we're sitting at eight point seven percent and 62 00:03:50,840 --> 00:03:53,320 Speaker 2: that ranges all the way down to these houses with 63 00:03:53,600 --> 00:03:56,800 Speaker 2: two or fewer bedrooms, where annual growth was seven point 64 00:03:56,840 --> 00:04:00,880 Speaker 2: six percent. In the unit segment, we're still seeing relatively 65 00:04:00,960 --> 00:04:04,320 Speaker 2: smaller units attract the highest rate of growth, two bedroom 66 00:04:04,440 --> 00:04:07,360 Speaker 2: units sitting up seven point nine percent in terms of 67 00:04:07,360 --> 00:04:11,280 Speaker 2: rental growth in the past year. But crucially, these small 68 00:04:11,640 --> 00:04:16,320 Speaker 2: units have seen the rate of annual rate growth decline rapidly, 69 00:04:16,720 --> 00:04:19,760 Speaker 2: so down from about fourteen percent group this time last year. 70 00:04:20,400 --> 00:04:23,760 Speaker 2: Where is the larger units three or four bedrooms and 71 00:04:23,800 --> 00:04:26,400 Speaker 2: that is wall strata properties, so it will include things 72 00:04:26,440 --> 00:04:29,440 Speaker 2: like townhouses as well. Rent growth there has been much 73 00:04:29,440 --> 00:04:31,839 Speaker 2: more steam. So at a very high level, I guess 74 00:04:31,880 --> 00:04:37,760 Speaker 2: you could say larger properties are currently attracting higher or 75 00:04:37,760 --> 00:04:40,200 Speaker 2: more stable growth in rent values. 76 00:04:40,680 --> 00:04:44,600 Speaker 1: What did I tell you? Is it the shared house movement? 77 00:04:44,640 --> 00:04:47,240 Speaker 1: If you like dominating? Is that what it's about? Yees? 78 00:04:47,320 --> 00:04:50,160 Speaker 2: So, I mean we don't know exactly without going out 79 00:04:50,200 --> 00:04:53,640 Speaker 2: and surveying prospective tenants, right, but I think it would 80 00:04:53,640 --> 00:04:58,120 Speaker 2: make sense that this is in reaction to higher rental 81 00:04:58,160 --> 00:05:02,280 Speaker 2: costs and people trying to scale their rent costs through 82 00:05:02,880 --> 00:05:08,000 Speaker 2: sharing accommodation. So if you look at the overall value 83 00:05:08,120 --> 00:05:11,920 Speaker 2: of weekly rents across Australia, say in the house segment, 84 00:05:11,960 --> 00:05:14,599 Speaker 2: we range from five hundred and forty three dollars a 85 00:05:14,640 --> 00:05:18,440 Speaker 2: week for a house with two bedrooms or less. You 86 00:05:18,520 --> 00:05:21,239 Speaker 2: go up to five bedroom plus houses, your rent values 87 00:05:21,279 --> 00:05:23,920 Speaker 2: are eight hundred and seventy four dollars a week. But 88 00:05:24,040 --> 00:05:26,640 Speaker 2: when you divide this by the number of bedrooms, so 89 00:05:26,720 --> 00:05:30,360 Speaker 2: the small houses by two, the big houses by five, 90 00:05:31,400 --> 00:05:36,720 Speaker 2: what you find is that your rent per room goes down. Interestingly, 91 00:05:36,760 --> 00:05:42,240 Speaker 2: that also means that on a percentage yield basis, your 92 00:05:42,279 --> 00:05:46,560 Speaker 2: gross rent yields are actually higher technically the smaller properties, 93 00:05:46,920 --> 00:05:50,640 Speaker 2: even when the overall rent is higher on larger dwellings. 94 00:05:51,000 --> 00:05:53,920 Speaker 1: But for someone who was an investor, it seems to 95 00:05:53,960 --> 00:05:58,719 Speaker 1: me that in terms of rental grosses what really matters. Yes, 96 00:05:58,760 --> 00:06:01,920 Speaker 1: you know in terms of financing of investment action that 97 00:06:02,160 --> 00:06:05,200 Speaker 1: it has us a standardone properties. We know they are 98 00:06:05,240 --> 00:06:09,680 Speaker 1: the lead level for property investors. They win virtually on 99 00:06:09,760 --> 00:06:13,480 Speaker 1: all accounts because of land value and many other historic reasons. 100 00:06:13,720 --> 00:06:15,279 Speaker 1: And then on top of that, you're telling me that 101 00:06:15,920 --> 00:06:18,799 Speaker 1: these type of properties stand alone if they have multiple bedrooms, 102 00:06:19,080 --> 00:06:21,160 Speaker 1: and that ability to be a shared house would seem 103 00:06:21,160 --> 00:06:24,040 Speaker 1: to be a really strong rental option for investors. 104 00:06:24,440 --> 00:06:27,880 Speaker 2: Yeah, so they're currently attracting higher rental growth and the 105 00:06:28,120 --> 00:06:31,280 Speaker 2: thing too is capital growth, So larded dwellings of time 106 00:06:31,400 --> 00:06:36,080 Speaker 2: tend to accrue a greater amount of capital growth. So 107 00:06:36,360 --> 00:06:38,640 Speaker 2: it really does depend on your strategy. So those who 108 00:06:38,720 --> 00:06:44,320 Speaker 2: are looking for purely red yield positive cash flow, maybe 109 00:06:44,320 --> 00:06:46,760 Speaker 2: it is a cheaper unit that you can get more 110 00:06:46,760 --> 00:06:49,080 Speaker 2: return on from that sense. But for a lot of 111 00:06:49,120 --> 00:06:51,880 Speaker 2: investors in Australia, obviously capital growth is the name of 112 00:06:51,880 --> 00:06:54,919 Speaker 2: the game, and so that's where landed dwellings can be 113 00:06:54,960 --> 00:06:55,800 Speaker 2: a benefit as well. 114 00:06:56,520 --> 00:06:59,880 Speaker 1: Yes, so looking back on this, I had never seen 115 00:07:00,040 --> 00:07:04,000 Speaker 1: this work's been done before. It's really interesting observation that 116 00:07:04,080 --> 00:07:06,240 Speaker 1: you've come out with. If you like the conclusions of 117 00:07:06,279 --> 00:07:09,840 Speaker 1: what you did, do you think it's a one off 118 00:07:10,000 --> 00:07:11,880 Speaker 1: or do you think this is the way we're going. 119 00:07:11,920 --> 00:07:14,040 Speaker 1: Do you think this is going to be part of 120 00:07:14,080 --> 00:07:14,520 Speaker 1: the moan? 121 00:07:15,280 --> 00:07:19,920 Speaker 2: I mean, looking back that pre pandemic there was fairly 122 00:07:20,080 --> 00:07:24,760 Speaker 2: uniform growth in rent values. It's just that the pandemic 123 00:07:24,840 --> 00:07:28,720 Speaker 2: I think has changed a lot of dynamics that influenced 124 00:07:28,720 --> 00:07:33,360 Speaker 2: these markets. So for example, if you look at small bedrooms, 125 00:07:33,720 --> 00:07:38,440 Speaker 2: they're very tied to net overseas migration patterns in terms 126 00:07:38,480 --> 00:07:40,800 Speaker 2: of their brick growth because a lot of that stock 127 00:07:41,040 --> 00:07:45,480 Speaker 2: is located in your most popular migrant destination of inner 128 00:07:45,480 --> 00:07:49,480 Speaker 2: city Sydney melded Brisbane. So there's been a lot of 129 00:07:49,520 --> 00:07:54,160 Speaker 2: fluctuation and deviation in rent growth among that segment. I 130 00:07:54,200 --> 00:07:58,160 Speaker 2: think long term will probably get back to a normalized 131 00:07:58,240 --> 00:08:01,040 Speaker 2: pattern where the growth and rents is a bit more uniform. 132 00:08:01,920 --> 00:08:05,640 Speaker 2: But again, longer term, the capital growth has been higher 133 00:08:05,720 --> 00:08:08,960 Speaker 2: in larger dwellings, so that will be consideration for investors 134 00:08:08,960 --> 00:08:09,400 Speaker 2: as well. 135 00:08:09,520 --> 00:08:12,200 Speaker 1: Okay, very interesting. Now while we're talking on that whole picture, 136 00:08:12,240 --> 00:08:15,679 Speaker 1: the larger picture, you've probably seen that work I mentioned 137 00:08:15,720 --> 00:08:19,400 Speaker 1: about AMP useful because they're not in they're not specialist 138 00:08:19,480 --> 00:08:22,040 Speaker 1: property people. They are they look across the board at 139 00:08:22,080 --> 00:08:26,000 Speaker 1: all types of things and items developments for the economy. 140 00:08:26,520 --> 00:08:28,720 Speaker 1: So the point I'm making is it's not a property 141 00:08:29,200 --> 00:08:32,920 Speaker 1: economists making a view, it's an economist who looks at 142 00:08:33,040 --> 00:08:36,640 Speaker 1: national accounts making a view. And that report from AMP 143 00:08:36,920 --> 00:08:40,840 Speaker 1: this week just made that core point that they couldn't 144 00:08:40,880 --> 00:08:46,400 Speaker 1: see anything stopping price rises and rental rises motoring along 145 00:08:46,520 --> 00:08:50,080 Speaker 1: this year. The outstanding point they make, which is the 146 00:08:50,080 --> 00:08:52,720 Speaker 1: point every economist makes, is that there's a lack of supply, 147 00:08:53,480 --> 00:08:56,560 Speaker 1: that there is under supply in most States, and that 148 00:08:56,679 --> 00:09:01,600 Speaker 1: is to some extent compounded by labor shortages, by elevated immigration, 149 00:09:02,280 --> 00:09:06,200 Speaker 1: and those factors all combined will keep pushing the market higher. 150 00:09:07,040 --> 00:09:09,920 Speaker 1: They're talking that we could see something in the order 151 00:09:09,920 --> 00:09:12,880 Speaker 1: of eight or nine percent this year on houses, five 152 00:09:12,920 --> 00:09:17,200 Speaker 1: percent maybe on rental growth. What do you think of that? 153 00:09:17,240 --> 00:09:19,199 Speaker 1: Are you comfortable with that sort of outlook? There's or 154 00:09:19,200 --> 00:09:20,480 Speaker 1: anything you would disagree with there. 155 00:09:21,400 --> 00:09:25,559 Speaker 2: I totally agree with the idea that the persistent undersupply 156 00:09:25,880 --> 00:09:29,840 Speaker 2: of dwellings relative to growth in our population has contributed 157 00:09:29,880 --> 00:09:32,439 Speaker 2: to property values rising long term. 158 00:09:32,520 --> 00:09:33,120 Speaker 1: If you look at. 159 00:09:33,240 --> 00:09:36,960 Speaker 2: Monthly changing home values nationally for the past decade, they've 160 00:09:37,000 --> 00:09:41,679 Speaker 2: spent seventy percent of the time in price growth mode. 161 00:09:41,960 --> 00:09:44,800 Speaker 2: So I think that's spot on. Obviously, there's a lot 162 00:09:44,840 --> 00:09:49,120 Speaker 2: of variations within the housing market at this moment. Looking 163 00:09:49,160 --> 00:09:52,560 Speaker 2: at the range of annual capital growth across the capital cities, 164 00:09:52,600 --> 00:09:55,760 Speaker 2: for example, we haven't seen this level of range in 165 00:09:55,800 --> 00:09:58,320 Speaker 2: at least a decade. So it is very hard to 166 00:09:58,400 --> 00:10:02,120 Speaker 2: describe Australia's housing mone mar is just one market right now. 167 00:10:02,800 --> 00:10:06,920 Speaker 1: But I think it's always hard, right Yeah, Yeah. 168 00:10:06,840 --> 00:10:08,800 Speaker 2: It's always hard, But there's a lot of different dynamics 169 00:10:08,800 --> 00:10:11,840 Speaker 2: so broadly speaking, yes, that under supply sports capital growth 170 00:10:12,000 --> 00:10:13,520 Speaker 2: if you really look at where we are in the 171 00:10:13,559 --> 00:10:16,400 Speaker 2: cycle at the moment now, though, it's clear looking at 172 00:10:16,400 --> 00:10:19,760 Speaker 2: the twenty eight day change in the home value index, 173 00:10:19,800 --> 00:10:22,640 Speaker 2: the daily Home Value Index, we're seeing to slow down 174 00:10:22,800 --> 00:10:25,480 Speaker 2: in the growth rate since the start of the year 175 00:10:25,840 --> 00:10:28,680 Speaker 2: through the month of July. So there are some additional 176 00:10:28,679 --> 00:10:32,120 Speaker 2: headwinds to consider for the market at the moment, namely 177 00:10:32,160 --> 00:10:34,920 Speaker 2: that we're at the point in the interest rate hiking 178 00:10:35,000 --> 00:10:38,880 Speaker 2: cycle now where even if breats don't go up any further, 179 00:10:39,000 --> 00:10:42,160 Speaker 2: they're likely to be higher for longer than first anticipated. 180 00:10:43,200 --> 00:10:46,119 Speaker 2: So people who had previously been pricing in this expectation 181 00:10:46,200 --> 00:10:49,480 Speaker 2: of a rate reduction later this year maybe holding back 182 00:10:49,520 --> 00:10:52,120 Speaker 2: a bit. And we're seeing that twenty eight day change 183 00:10:52,440 --> 00:10:55,440 Speaker 2: slow down through the month, and that could be a 184 00:10:55,440 --> 00:10:58,760 Speaker 2: reflection of weakening economic conditions now as well, because we're 185 00:10:58,840 --> 00:11:01,679 Speaker 2: to point where those high entries rates are starting to 186 00:11:01,760 --> 00:11:06,040 Speaker 2: unwind the labor market, create a slow downing business confidence, 187 00:11:06,080 --> 00:11:09,720 Speaker 2: consumer sentiment. That could all have an impact on creating 188 00:11:09,760 --> 00:11:12,280 Speaker 2: a slower growth rate through to the end of twenty 189 00:11:12,400 --> 00:11:12,920 Speaker 2: twenty four. 190 00:11:13,160 --> 00:11:16,520 Speaker 1: So I'm inferring from that then that we wouldn't get 191 00:11:16,600 --> 00:11:19,760 Speaker 1: nine percent this year because we would needed to keep 192 00:11:19,800 --> 00:11:22,000 Speaker 1: motoring at the pace it was, and you're suggesting it 193 00:11:22,040 --> 00:11:23,760 Speaker 1: won't correct. 194 00:11:23,920 --> 00:11:25,520 Speaker 2: I think it'll storry down. And if you look at 195 00:11:25,520 --> 00:11:27,240 Speaker 2: you to date, at the moment, we're only of about 196 00:11:27,280 --> 00:11:33,000 Speaker 2: four percent through the year anyway, so I think it 197 00:11:33,120 --> 00:11:34,880 Speaker 2: might be a bit of a stretch to say we're 198 00:11:34,880 --> 00:11:36,520 Speaker 2: going to get to nine percent by the end of 199 00:11:36,520 --> 00:11:36,920 Speaker 2: this year. 200 00:11:37,400 --> 00:11:40,040 Speaker 1: Very interesting. Okay, Look, I think we'll take a short break, Eliza. 201 00:11:40,080 --> 00:11:49,640 Speaker 1: We'll be back in a moment. Hello and welcome back 202 00:11:49,679 --> 00:11:53,640 Speaker 1: to the Australians Money Puzzle podcast. I'm James Kirby and 203 00:11:53,679 --> 00:11:55,960 Speaker 1: I'm talking to Eliza Owen. She's a regular on the show. 204 00:11:55,960 --> 00:12:01,120 Speaker 1: She's terrific on how our market is looking nationwide picture. 205 00:12:01,160 --> 00:12:03,760 Speaker 1: She's in the carnovist, but she's also a specialist and 206 00:12:03,800 --> 00:12:06,480 Speaker 1: she can really give you a flavor of what's going 207 00:12:06,480 --> 00:12:08,600 Speaker 1: on in the property market now. One of the things 208 00:12:08,679 --> 00:12:10,880 Speaker 1: she said, if you remember, in the first segment, was 209 00:12:10,920 --> 00:12:13,920 Speaker 1: about how diverse this market is. And I just wanted 210 00:12:13,960 --> 00:12:16,280 Speaker 1: to doraw out something with you now, Eliza, which is 211 00:12:16,440 --> 00:12:18,839 Speaker 1: I knew that perhaps was the strongest market, and I 212 00:12:18,920 --> 00:12:23,000 Speaker 1: knew Queensland was going very well, and I knew Victoria 213 00:12:23,120 --> 00:12:25,720 Speaker 1: was the weakest market, and I was amazed. Actually, I 214 00:12:25,760 --> 00:12:29,040 Speaker 1: didn't quite realize that it's literally going backwards, right. So 215 00:12:29,559 --> 00:12:33,280 Speaker 1: it's about minus one percent so far this year in Victoria. 216 00:12:33,360 --> 00:12:36,160 Speaker 1: Why the rest of the nation is about four percent. 217 00:12:36,240 --> 00:12:38,719 Speaker 1: But what I didn't know, Eliza was there's actually an 218 00:12:38,720 --> 00:12:42,360 Speaker 1: oversupply of property in Victoria. Is that so could you 219 00:12:42,400 --> 00:12:43,880 Speaker 1: explain what's going on? 220 00:12:44,200 --> 00:12:46,199 Speaker 2: Yeah, I think it's quite safe to say that there 221 00:12:46,240 --> 00:12:49,679 Speaker 2: is an oversupply, especially when you think about the purchasing 222 00:12:49,720 --> 00:12:53,600 Speaker 2: market for residential property. So over the June quarter, our 223 00:12:53,760 --> 00:12:56,959 Speaker 2: values were down point six percent in Melbourne and point 224 00:12:57,040 --> 00:13:00,160 Speaker 2: seven percent in regional Victoria. If you can see of 225 00:13:00,240 --> 00:13:03,600 Speaker 2: the transaction activity in regional Victoria in the Gink quarter, 226 00:13:03,640 --> 00:13:06,920 Speaker 2: for example, there were ten thousand properties added to the 227 00:13:06,960 --> 00:13:11,240 Speaker 2: market for sale in the period, but only about six thousand, 228 00:13:11,440 --> 00:13:15,040 Speaker 2: eight hundred properties were actually bought in that same time. 229 00:13:15,640 --> 00:13:18,640 Speaker 2: So that points to a massive oversupply in the sense 230 00:13:18,679 --> 00:13:20,880 Speaker 2: of more people looking to sell their property, the more 231 00:13:20,920 --> 00:13:25,640 Speaker 2: people looking buy. This note from AMP also spoke to 232 00:13:25,679 --> 00:13:28,360 Speaker 2: the fact that construction levels have been high and relative 233 00:13:28,400 --> 00:13:33,800 Speaker 2: to population growth, obviously, Victoria has suffered a deterioration in 234 00:13:34,120 --> 00:13:38,440 Speaker 2: nets interstate migration through the pandemic. But on top of that, 235 00:13:38,520 --> 00:13:41,520 Speaker 2: the state has just supplied a lot of property and 236 00:13:41,559 --> 00:13:45,520 Speaker 2: that helps to absorb additional demand and keep growth in 237 00:13:45,600 --> 00:13:48,959 Speaker 2: property prices low. So if you look back to dwelling 238 00:13:49,000 --> 00:13:54,560 Speaker 2: completions between twenty ten and twenty twenty three, there were 239 00:13:54,640 --> 00:13:59,480 Speaker 2: about seven hundred and seventy three thousand properties established across 240 00:13:59,559 --> 00:14:04,120 Speaker 2: Victoria completed across Victoria cumulatively in the period. That is 241 00:14:04,160 --> 00:14:07,040 Speaker 2: not only the highest of any of the states and territories, 242 00:14:07,640 --> 00:14:10,640 Speaker 2: but it beats New South Wales, our most populous state, 243 00:14:11,080 --> 00:14:13,920 Speaker 2: by about about one hundred thousand dwellings. 244 00:14:14,360 --> 00:14:17,079 Speaker 1: So they've built one hundred thousand more homes in Victoria 245 00:14:17,120 --> 00:14:17,880 Speaker 1: than to South Wales. 246 00:14:18,200 --> 00:14:21,080 Speaker 2: That's right over that period from the end of twenty 247 00:14:21,280 --> 00:14:22,960 Speaker 2: ten to end of twenty twenty three. 248 00:14:23,400 --> 00:14:25,520 Speaker 1: That's amazing smaller city. 249 00:14:25,920 --> 00:14:30,040 Speaker 2: Yeah, and it says something potentially about the development sector 250 00:14:30,640 --> 00:14:33,040 Speaker 2: in the state. They see maybe a bit more over 251 00:14:33,120 --> 00:14:36,560 Speaker 2: zealous around upswings. Because we know that developers respond to 252 00:14:37,200 --> 00:14:40,280 Speaker 2: periods of high capital growth in terms of establishing your property, 253 00:14:41,320 --> 00:14:43,560 Speaker 2: maybe they don't turn off the taps as quickly when 254 00:14:43,560 --> 00:14:47,400 Speaker 2: the property market goes into decline. But that also points 255 00:14:47,400 --> 00:14:51,280 Speaker 2: to this state of oversupply in the market, which means 256 00:14:51,280 --> 00:14:54,600 Speaker 2: buyers have more negotiating power to bring prices down and 257 00:14:54,640 --> 00:14:56,920 Speaker 2: that lowers the asset value overlying. 258 00:14:57,200 --> 00:14:59,440 Speaker 1: Do that's amazing? Do you think that's going to be 259 00:14:59,600 --> 00:15:01,960 Speaker 1: repli around the country or do you think it's a 260 00:15:02,000 --> 00:15:02,520 Speaker 1: one off? 261 00:15:03,000 --> 00:15:07,720 Speaker 2: I think it's probably a temporary state for Victoria. I 262 00:15:07,760 --> 00:15:10,760 Speaker 2: think in response to this, on top of the constraints 263 00:15:10,800 --> 00:15:12,920 Speaker 2: that we're seeing in the construction industry at the moment, 264 00:15:13,400 --> 00:15:16,440 Speaker 2: we're probably going to see supply peelback quite a bit 265 00:15:16,480 --> 00:15:20,960 Speaker 2: across the state. Not to mention that the additional affordability 266 00:15:20,960 --> 00:15:26,360 Speaker 2: presented across Victoria now will probably also create more people 267 00:15:26,480 --> 00:15:31,440 Speaker 2: staying in the state rather than moving to Southeast Queensland 268 00:15:31,520 --> 00:15:36,080 Speaker 2: or wine Bucks, because that premium between Melbourne and Brisbane 269 00:15:36,080 --> 00:15:39,760 Speaker 2: has been completely eroded. The median house value across Brisbane 270 00:15:39,800 --> 00:15:43,480 Speaker 2: is actually now higher than across Melbourne, saying for typical 271 00:15:43,560 --> 00:15:46,800 Speaker 2: unit values, so that supply and demand will start to 272 00:15:46,840 --> 00:15:50,000 Speaker 2: balance out across the state and I think from that 273 00:15:50,080 --> 00:15:53,440 Speaker 2: perspective it could be a good buying opportunity. I think 274 00:15:53,480 --> 00:15:55,520 Speaker 2: Melbourne is one of the best cities in the world 275 00:15:55,720 --> 00:15:57,800 Speaker 2: and it's currently available at a discount. 276 00:15:59,200 --> 00:16:02,600 Speaker 1: This completely agree with you. It's very interesting that the 277 00:16:02,760 --> 00:16:05,480 Speaker 1: side point you met there that the traditional view that 278 00:16:05,520 --> 00:16:08,120 Speaker 1: you could pack it up in a Melbourne so moved 279 00:16:08,120 --> 00:16:12,960 Speaker 1: to Queensland better whether cheaper houses not any longer. Look, 280 00:16:13,000 --> 00:16:15,200 Speaker 1: we will take a break and we will be back 281 00:16:15,240 --> 00:16:22,000 Speaker 1: with you in a couple of minutes. Hello and welcome 282 00:16:22,040 --> 00:16:25,400 Speaker 1: back to The Australian's Money Puzzle podcast. I'm James Kirby. 283 00:16:25,400 --> 00:16:28,960 Speaker 1: The well that they're talking to Eliza Owen of core Logic. 284 00:16:29,520 --> 00:16:32,640 Speaker 1: Eliza courses in columnists that core Logic. We talked to 285 00:16:32,680 --> 00:16:35,560 Speaker 1: her rightly on the show. Very interesting as always, and 286 00:16:35,640 --> 00:16:37,360 Speaker 1: what I really like about talking to Eliza is I 287 00:16:37,440 --> 00:16:40,600 Speaker 1: find out things I didn't already know. I didn't know 288 00:16:40,880 --> 00:16:44,440 Speaker 1: that there was an oversupply of property in Melbourne. That 289 00:16:44,520 --> 00:16:47,480 Speaker 1: is really interesting and it really, i think, in a 290 00:16:47,520 --> 00:16:51,480 Speaker 1: way confirms beyond all that that it is not just 291 00:16:51,600 --> 00:16:54,600 Speaker 1: a sort of bargain basement of the nation from property 292 00:16:54,640 --> 00:16:56,840 Speaker 1: investment point of view. But it's going to stay that 293 00:16:56,880 --> 00:17:00,600 Speaker 1: way for some time because over supplies that's something you 294 00:17:00,600 --> 00:17:04,639 Speaker 1: can change very quickly. It's also unique in our market 295 00:17:04,760 --> 00:17:07,960 Speaker 1: because under supply is the big problem and has been 296 00:17:08,000 --> 00:17:10,200 Speaker 1: for so long, and that's what we read about all 297 00:17:10,240 --> 00:17:13,680 Speaker 1: the time. And I think a minor but really interesting 298 00:17:13,760 --> 00:17:17,320 Speaker 1: sort of dimension of what she was alluding to in 299 00:17:17,359 --> 00:17:20,720 Speaker 1: those first segments of the show is that traditionally there's 300 00:17:20,840 --> 00:17:25,959 Speaker 1: always been this net migration out of Victoria to Queensland 301 00:17:26,520 --> 00:17:31,240 Speaker 1: and that may not keep going at anything like the 302 00:17:31,320 --> 00:17:34,520 Speaker 1: levels that did previously, because simply it doesn't make sense 303 00:17:34,760 --> 00:17:38,960 Speaker 1: financially anymore because Brisbane's got dearer or Queensland's got dearer. 304 00:17:39,040 --> 00:17:42,080 Speaker 1: So you sell your house and you move to Queensland 305 00:17:42,080 --> 00:17:44,320 Speaker 1: if it costs the same, then you might be as 306 00:17:44,359 --> 00:17:47,560 Speaker 1: fast to go. The dealer's falling apart from a financial 307 00:17:47,560 --> 00:17:50,919 Speaker 1: point of view. Very interesting, Eliza, really great. Thank you 308 00:17:51,000 --> 00:17:55,000 Speaker 1: very much for those observations, and also what you were 309 00:17:55,000 --> 00:17:58,720 Speaker 1: saying at the start of the show about how the 310 00:17:58,760 --> 00:18:01,760 Speaker 1: big house with the many drums that can become a 311 00:18:01,840 --> 00:18:05,600 Speaker 1: shared house. It's such a rentable opportunity now and has 312 00:18:05,640 --> 00:18:10,560 Speaker 1: that extra dimension that standard one properties tend to do better. Anyway. Okay, 313 00:18:10,760 --> 00:18:13,760 Speaker 1: really interesting. I'm going to do some questions, all right. 314 00:18:13,840 --> 00:18:16,160 Speaker 1: The first is not actually on direct property, but I'll 315 00:18:16,160 --> 00:18:18,639 Speaker 1: read it out. It captures a lot of issues that 316 00:18:18,680 --> 00:18:21,639 Speaker 1: investors face. It's from Warren, would you be able to 317 00:18:21,640 --> 00:18:25,320 Speaker 1: do something on getting exposure to the Australian property markets 318 00:18:25,359 --> 00:18:30,360 Speaker 1: through the ASX. I can think of various building product manufacturers, 319 00:18:31,000 --> 00:18:35,639 Speaker 1: ates and commercial property. There's also less obvious players like 320 00:18:35,720 --> 00:18:38,520 Speaker 1: Harvey norm that own a lot of land. Okay, Warren 321 00:18:38,560 --> 00:18:42,280 Speaker 1: a couple of things. The issue of accessing the property 322 00:18:42,320 --> 00:18:45,200 Speaker 1: market through the stock market is a completely and totally 323 00:18:45,240 --> 00:18:50,080 Speaker 1: different game than only direct property, and what you might 324 00:18:50,160 --> 00:18:52,800 Speaker 1: learn in direct property would not tell you much about 325 00:18:52,800 --> 00:18:55,480 Speaker 1: how to assess a rate or a property trust. That's 326 00:18:55,520 --> 00:18:57,520 Speaker 1: one thing I think I've learned over a long period 327 00:18:57,600 --> 00:19:00,000 Speaker 1: of time. I think it would make it alterra different 328 00:19:00,240 --> 00:19:03,440 Speaker 1: to try and assess companies the property value of companies 329 00:19:03,440 --> 00:19:06,440 Speaker 1: because they own some property like Harvey Norman or loose 330 00:19:06,480 --> 00:19:08,720 Speaker 1: corporate instance, which owns its own buildings. It's very hard 331 00:19:08,720 --> 00:19:11,760 Speaker 1: to assess from a property perspective. It's too complex, I 332 00:19:11,800 --> 00:19:15,720 Speaker 1: think for retail investors. So you're back to what they 333 00:19:15,720 --> 00:19:19,240 Speaker 1: call the reads the property trust. There's a spectrum of them, 334 00:19:19,359 --> 00:19:22,040 Speaker 1: maybe ten or twenty, probably about seven or eight that 335 00:19:22,080 --> 00:19:25,359 Speaker 1: really matter. I think we need someone else on the 336 00:19:25,400 --> 00:19:27,480 Speaker 1: show to talk about them. The only thing I would 337 00:19:27,480 --> 00:19:31,080 Speaker 1: say is over twenty years watching them, Goodman Group is 338 00:19:31,359 --> 00:19:33,480 Speaker 1: just in the league of its own. It's something like 339 00:19:33,520 --> 00:19:36,080 Speaker 1: the common Wild Bank. It's it's just what the others do, 340 00:19:36,160 --> 00:19:39,119 Speaker 1: but it does. It's so much better from a stock perspective, 341 00:19:39,680 --> 00:19:41,600 Speaker 1: and it's been rewarded and doing so. It's now a 342 00:19:41,640 --> 00:19:45,360 Speaker 1: top ten stock. Do you ever look at the property trust, Eliza, 343 00:19:45,400 --> 00:19:48,320 Speaker 1: and do they tell you anything at all in terms 344 00:19:48,359 --> 00:19:52,000 Speaker 1: of informing your daily work and analyzing the residential market. 345 00:19:52,359 --> 00:19:55,000 Speaker 2: I think we're very lucky, Ecologic that we've got the 346 00:19:55,640 --> 00:19:58,640 Speaker 2: comprehensive view of the property market from decades of down 347 00:19:58,640 --> 00:20:02,600 Speaker 2: A collection coverage. So it's not something I've really had 348 00:20:02,600 --> 00:20:06,480 Speaker 2: to look into before. Sorry, Warren, I'm glad you said 349 00:20:06,480 --> 00:20:08,560 Speaker 2: it was a pretty different ballgame, James, because it's not 350 00:20:08,560 --> 00:20:09,880 Speaker 2: something referring very closely. 351 00:20:12,240 --> 00:20:15,200 Speaker 1: Do you, guys or are your services used by those 352 00:20:15,200 --> 00:20:17,600 Speaker 1: property trusts? I observe they're not because they're all office 353 00:20:17,640 --> 00:20:21,240 Speaker 1: and industrial that there's literally almost no residential except maybe 354 00:20:21,359 --> 00:20:22,679 Speaker 1: some developers like Morvak. 355 00:20:22,840 --> 00:20:25,199 Speaker 2: It would be some of these groups, i'd say, who 356 00:20:25,760 --> 00:20:28,320 Speaker 2: buy our data. I've also had a lot of interest 357 00:20:28,440 --> 00:20:32,280 Speaker 2: recently from institutional investors looking to play in the build 358 00:20:32,320 --> 00:20:35,720 Speaker 2: to rent space, so superannuation funds and things like so, 359 00:20:36,240 --> 00:20:39,560 Speaker 2: that's been an interesting dimension to the market. Clearly it's 360 00:20:39,600 --> 00:20:42,560 Speaker 2: modernizing and I need to I need to get across it. 361 00:20:43,200 --> 00:20:46,480 Speaker 1: Yes, No, they're definitely keen, and they make the talking 362 00:20:46,520 --> 00:20:49,399 Speaker 1: big numbers, some of the big funds, that is, the 363 00:20:49,400 --> 00:20:54,080 Speaker 1: big industry super funds. Folks are making arrangements and statements 364 00:20:54,160 --> 00:20:56,200 Speaker 1: to the effect that they will be involved in build 365 00:20:56,200 --> 00:20:59,600 Speaker 1: to rent, But the actual activity underground it's pretty slim 366 00:20:59,640 --> 00:21:03,200 Speaker 1: so far. But I wouldn't rule it out as being 367 00:21:03,240 --> 00:21:06,480 Speaker 1: a factor in the market in the future. Okay, Karen asks, 368 00:21:06,560 --> 00:21:08,880 Speaker 1: if I can reduce the running cost of my mortgage 369 00:21:08,880 --> 00:21:12,000 Speaker 1: by extending the term, what is the longest mortgage in 370 00:21:12,040 --> 00:21:17,199 Speaker 1: the market. That's a great question, Karen. Most mortgages at 371 00:21:17,200 --> 00:21:20,400 Speaker 1: twenty five or thirty years there are. By the way, 372 00:21:20,400 --> 00:21:23,400 Speaker 1: I did some work for you, Karen, and I went 373 00:21:23,560 --> 00:21:28,200 Speaker 1: to one of the financial product companies that look at 374 00:21:28,240 --> 00:21:33,080 Speaker 1: mortgages just to see what the situation was in relation 375 00:21:33,200 --> 00:21:38,720 Speaker 1: to this. It turns out that there are some banks 376 00:21:38,760 --> 00:21:42,760 Speaker 1: and finance companies in the market that will offer a 377 00:21:42,840 --> 00:21:47,919 Speaker 1: forty year mortgage, and that be very useful because if 378 00:21:47,960 --> 00:21:51,920 Speaker 1: you're thinking that you might extend your mortgage, then if 379 00:21:51,960 --> 00:21:55,159 Speaker 1: you could do that, if you could extend, say a 380 00:21:55,200 --> 00:21:58,640 Speaker 1: thirty year mortgage to a forty year mortgage, it would 381 00:21:58,640 --> 00:22:02,920 Speaker 1: be very useful for you. Dave Mickenbecker, who has been 382 00:22:02,960 --> 00:22:06,800 Speaker 1: on the show in the past, he's very good on 383 00:22:06,840 --> 00:22:10,040 Speaker 1: this whole area and this whole issue. He's from the 384 00:22:10,119 --> 00:22:13,960 Speaker 1: can Star Group. Karen I asked him particularly about this, 385 00:22:14,160 --> 00:22:19,480 Speaker 1: and he says, thirty year mortgages remain dominant. Only a 386 00:22:19,560 --> 00:22:23,480 Speaker 1: handful of lenders offer longer, and half of those are 387 00:22:23,560 --> 00:22:26,880 Speaker 1: for first home buyers. Okay, and he says only one 388 00:22:26,960 --> 00:22:30,240 Speaker 1: lender in the past two years has gone over the 389 00:22:30,359 --> 00:22:36,560 Speaker 1: thirty year mark. But there are it's very small. There's 390 00:22:36,600 --> 00:22:42,159 Speaker 1: only four lenders offering nine different products on a forty 391 00:22:42,240 --> 00:22:45,840 Speaker 1: year basis. On a thirty year basis, there are eighty 392 00:22:45,840 --> 00:22:48,960 Speaker 1: eighth lenders offering three hundred and sixty. So there you go. There, 393 00:22:49,000 --> 00:22:51,359 Speaker 1: you can see they're out there. They're out there, but 394 00:22:51,400 --> 00:22:54,640 Speaker 1: it's very rare. Are you familiar with this, that people 395 00:22:54,720 --> 00:22:58,280 Speaker 1: are extending their mortgages to bring the brggage, the monthly 396 00:22:58,320 --> 00:23:01,640 Speaker 1: mortgage built down, Eliza, Yeah, I. 397 00:23:01,640 --> 00:23:03,520 Speaker 2: Think it is a strategy we are getting to the 398 00:23:03,560 --> 00:23:06,919 Speaker 2: kind of pointy end again with high interest rates, rising 399 00:23:06,960 --> 00:23:09,720 Speaker 2: mortgage costs and cost of living pressures. So you're really 400 00:23:09,760 --> 00:23:12,280 Speaker 2: seeing that come through the data in terms of lower 401 00:23:12,280 --> 00:23:16,760 Speaker 2: household savings rates, people working more hours, and people restructuring 402 00:23:16,760 --> 00:23:20,359 Speaker 2: their mortgage payments so less going into offset and redraw 403 00:23:20,440 --> 00:23:22,520 Speaker 2: facilities and more having to go to the principle of 404 00:23:22,600 --> 00:23:25,840 Speaker 2: interest payment. Forty years is also the lowest term that 405 00:23:25,960 --> 00:23:30,960 Speaker 2: I've seen flirting around, but again, like you say, it 406 00:23:30,960 --> 00:23:33,440 Speaker 2: can be harder for older Australians to take on those 407 00:23:33,440 --> 00:23:36,520 Speaker 2: longer loan terms. These tend to be the non bank 408 00:23:36,840 --> 00:23:39,760 Speaker 2: lenders as well that take on those more unique terms. 409 00:23:40,200 --> 00:23:42,600 Speaker 2: And of course, as Karen would probably know, this is 410 00:23:42,640 --> 00:23:46,680 Speaker 2: going to increase your mortgage interest costs over time as well, 411 00:23:46,880 --> 00:23:48,320 Speaker 2: so that's something to be conscious of. 412 00:23:49,280 --> 00:23:51,720 Speaker 1: Yeah, the very valid point, so current your monthly a 413 00:23:51,760 --> 00:23:56,240 Speaker 1: bid will come down both your mortgage that is the 414 00:23:56,240 --> 00:24:00,959 Speaker 1: amounty or the bank will rise. I think we had 415 00:24:00,960 --> 00:24:03,520 Speaker 1: these figures on the show a few weeks ago. On 416 00:24:03,560 --> 00:24:09,120 Speaker 1: an average mortgage, if you changed out say twenty five 417 00:24:09,160 --> 00:24:12,639 Speaker 1: to thirty years, your bill might come down by one 418 00:24:12,720 --> 00:24:15,520 Speaker 1: hundred and twenty dollars a month something of that order, 419 00:24:15,960 --> 00:24:19,240 Speaker 1: But what you would owe the bank would actually lift 420 00:24:19,240 --> 00:24:22,080 Speaker 1: by over one hundred thousand dollars. So that's how it works, 421 00:24:22,080 --> 00:24:24,000 Speaker 1: so keep that in mind. It's very much a case 422 00:24:24,040 --> 00:24:27,080 Speaker 1: of buy now, pay later on a grand scale. If 423 00:24:27,080 --> 00:24:29,440 Speaker 1: someone's right up against it, and it really makes sense 424 00:24:29,480 --> 00:24:32,280 Speaker 1: to pay off the mortgage rather than losing an investment property, say, 425 00:24:32,800 --> 00:24:35,879 Speaker 1: it's certainly something worth exploring if you can do it, okay, 426 00:24:36,080 --> 00:24:39,440 Speaker 1: finding questions from Andrew, it would be great to hear 427 00:24:39,560 --> 00:24:44,760 Speaker 1: a hypothetical discussion about who inflation and deflation could then 428 00:24:45,400 --> 00:24:51,240 Speaker 1: be more effectively handled by raising or lowering the GST 429 00:24:51,920 --> 00:24:56,199 Speaker 1: rather than interest rates. This would evenly spread out the 430 00:24:56,200 --> 00:25:01,280 Speaker 1: pain and incentivize people during tough times all products, rather 431 00:25:01,359 --> 00:25:05,560 Speaker 1: than just pounding those with outstanding mortgages. This comes up 432 00:25:05,600 --> 00:25:08,879 Speaker 1: all the time. Is there any other way to steer 433 00:25:08,880 --> 00:25:12,880 Speaker 1: the economy than this terribly blunt instrument of mortgage rates 434 00:25:13,119 --> 00:25:17,399 Speaker 1: interest rates, which hit those in the property market, particularly 435 00:25:17,400 --> 00:25:22,720 Speaker 1: owner occupiers and to that extent, investors. You're an economist, 436 00:25:23,119 --> 00:25:28,240 Speaker 1: well credentialed, Aliza, what do you say to experiments beyond 437 00:25:29,800 --> 00:25:30,439 Speaker 1: rate setting? 438 00:25:31,160 --> 00:25:33,840 Speaker 2: Yeah, I'm also a recent first home buyer. I love 439 00:25:33,920 --> 00:25:36,439 Speaker 2: this question. Yeah, really good point from Andrew, But at 440 00:25:36,480 --> 00:25:38,720 Speaker 2: the end of the day, I think interest rates is 441 00:25:38,720 --> 00:25:42,640 Speaker 2: still the best mechanism for targeting inflation. So a few 442 00:25:42,720 --> 00:25:46,720 Speaker 2: issues with trying to use fiscal policy and taxation or 443 00:25:46,800 --> 00:25:50,159 Speaker 2: even other suggestions like suberannuation to do this. The first 444 00:25:50,280 --> 00:25:53,920 Speaker 2: is that monetory policy works a lot faster than fiscal policy. 445 00:25:54,440 --> 00:25:56,280 Speaker 2: You think about some of the debates we've had around 446 00:25:56,320 --> 00:25:59,640 Speaker 2: GST in recent years, or even the Stage three tax cuts. 447 00:26:00,359 --> 00:26:02,360 Speaker 2: These issues are debated for a long time, They take 448 00:26:02,359 --> 00:26:04,640 Speaker 2: a long time to actually pass through parliament and take 449 00:26:04,640 --> 00:26:10,800 Speaker 2: effect in people's cost of living and take pain and 450 00:26:10,840 --> 00:26:12,600 Speaker 2: things like that. At the end of the day, monetary 451 00:26:12,640 --> 00:26:15,040 Speaker 2: policy has been used for a long time because it's 452 00:26:15,119 --> 00:26:18,800 Speaker 2: much more responsive to economic conditions than the fiscal policy. 453 00:26:19,200 --> 00:26:21,760 Speaker 2: I would challenge the idea that an increase in the 454 00:26:21,880 --> 00:26:26,520 Speaker 2: DST spreads pain equally famously, GST can actually act as 455 00:26:26,520 --> 00:26:29,560 Speaker 2: a bit of a regressive tax, because a ten percent 456 00:26:29,600 --> 00:26:31,919 Speaker 2: increase in the cost of goods and services means more 457 00:26:32,080 --> 00:26:35,959 Speaker 2: to low income households than it doesn't feel high income households. 458 00:26:36,000 --> 00:26:39,560 Speaker 2: So unless you're actually taking that GST money and giving 459 00:26:39,600 --> 00:26:42,439 Speaker 2: it that directly to lower income households to make it 460 00:26:42,600 --> 00:26:48,159 Speaker 2: more progressive. It's not necessarily equally affecting households. And the 461 00:26:48,240 --> 00:26:53,200 Speaker 2: other thing I would say is beyond the household sector, 462 00:26:53,640 --> 00:26:58,240 Speaker 2: where we are actually seeing a decline in discretionary spending. 463 00:26:58,960 --> 00:27:02,040 Speaker 2: More people curve, they're spending struggling with the cost of living. 464 00:27:02,680 --> 00:27:06,119 Speaker 2: It's not just a question of households spending. Let's we 465 00:27:06,160 --> 00:27:09,720 Speaker 2: also need the government to be spending less, winding back 466 00:27:09,760 --> 00:27:13,119 Speaker 2: infrastructure projects. We are seeing that comes from in fiscal 467 00:27:13,119 --> 00:27:17,760 Speaker 2: policy as well. So there's definitely things that the government 468 00:27:17,800 --> 00:27:21,080 Speaker 2: can do to help reduce inflation. But I don't think 469 00:27:21,119 --> 00:27:24,880 Speaker 2: that looks like a change in tax settings or superannuation 470 00:27:25,000 --> 00:27:26,200 Speaker 2: settings or anything like that. 471 00:27:26,480 --> 00:27:28,520 Speaker 1: Okay, that's clear to you, Andrew, and thank you for 472 00:27:28,560 --> 00:27:32,600 Speaker 1: the question. Just witting back to where we started, actually, Eliza, 473 00:27:32,760 --> 00:27:35,960 Speaker 1: we mentioned at the very start that after this week 474 00:27:36,040 --> 00:27:39,680 Speaker 1: had reiterated that they're not going to change the buffer. 475 00:27:40,240 --> 00:27:43,000 Speaker 1: That means that everyone who goes in and gets a loan, 476 00:27:43,080 --> 00:27:45,520 Speaker 1: whatever a percentage loan they get, if it's six percent, 477 00:27:45,720 --> 00:27:48,400 Speaker 1: they're going to get assessed at nine percent. They're going 478 00:27:48,400 --> 00:27:50,879 Speaker 1: to keep that three percent buffer in there, which is 479 00:27:50,920 --> 00:27:53,879 Speaker 1: a block, of course for many people. Especially investors. But 480 00:27:54,119 --> 00:27:57,240 Speaker 1: that is macro predential policy, isn't it. That's halfway house 481 00:27:57,280 --> 00:28:01,760 Speaker 1: between rates or fiscal policy. That is actually a regulatory 482 00:28:01,840 --> 00:28:04,920 Speaker 1: move to try and massage the economy, isn't it by 483 00:28:04,920 --> 00:28:08,520 Speaker 1: the RBA or by this by the regulators the opera? 484 00:28:08,680 --> 00:28:11,280 Speaker 2: Yeah? Yeah, the banking regulator APER so APPA is more 485 00:28:11,320 --> 00:28:15,760 Speaker 2: concerned with financial stability in the lending space and pregnent 486 00:28:15,840 --> 00:28:19,400 Speaker 2: lending than they are necessarily with macroeconomic targets and things 487 00:28:19,480 --> 00:28:22,760 Speaker 2: like that. And I do think though that the three 488 00:28:22,800 --> 00:28:24,800 Speaker 2: percent buffer is going to be in place for a 489 00:28:24,840 --> 00:28:28,560 Speaker 2: long time. I think it potentially could be in place 490 00:28:28,600 --> 00:28:30,680 Speaker 2: when the cash rate starts to move lower as well, 491 00:28:31,200 --> 00:28:35,760 Speaker 2: because the Council of Financial Regulators may be conscious of 492 00:28:35,800 --> 00:28:39,800 Speaker 2: the effect of a rate reduction in reinvigorating house price 493 00:28:39,880 --> 00:28:42,240 Speaker 2: growth and the ef that could have in terms of 494 00:28:42,320 --> 00:28:46,280 Speaker 2: wealth effects and inflationary pressures as well. So I think 495 00:28:46,320 --> 00:28:48,880 Speaker 2: as long as we're getting to this kind of sticky 496 00:28:49,000 --> 00:28:53,440 Speaker 2: last leg of our high inflation journey, and by the way, 497 00:28:53,520 --> 00:28:56,800 Speaker 2: high interest rates have been working to bring that inflation down, 498 00:28:56,880 --> 00:29:00,560 Speaker 2: it's just the final leg is a little bit trickier. 499 00:29:01,120 --> 00:29:03,520 Speaker 2: I think they're going to want to keep lending conditions 500 00:29:03,640 --> 00:29:07,120 Speaker 2: pretty conservative while that is happening, and while we get 501 00:29:07,120 --> 00:29:10,560 Speaker 2: an adjustment to interest rates. So that's my guess. I 502 00:29:10,600 --> 00:29:14,600 Speaker 2: don't have any particular inside knowledge or anything like that. 503 00:29:14,480 --> 00:29:17,280 Speaker 1: But we wouldn't want to be waiting for those buffers 504 00:29:17,320 --> 00:29:20,520 Speaker 1: to be removed. We wouldn't start. It might be a 505 00:29:20,560 --> 00:29:22,840 Speaker 1: mistake to think that they are temporary, even though they 506 00:29:22,840 --> 00:29:23,960 Speaker 1: are supposed to be temporary. 507 00:29:24,240 --> 00:29:26,440 Speaker 2: Look, I think they may be temporary. I just think 508 00:29:26,480 --> 00:29:29,040 Speaker 2: it's longer that they may be in place on the 509 00:29:29,120 --> 00:29:34,320 Speaker 2: other side of the rate hiking cycles. Because lending has 510 00:29:34,360 --> 00:29:38,280 Speaker 2: already been incredibly resilient. Property prices have already been incredibly 511 00:29:38,320 --> 00:29:42,200 Speaker 2: resilient to high interest rates. Once those interest rates move lower, 512 00:29:42,680 --> 00:29:45,800 Speaker 2: there could be some risk of a resurgence in housing 513 00:29:46,600 --> 00:29:49,400 Speaker 2: implications for wealth as X, and so I think they'll 514 00:29:49,400 --> 00:29:53,960 Speaker 2: want to keep lending growth pretty contained while that change 515 00:29:54,000 --> 00:29:55,000 Speaker 2: is made in the cash rate. 516 00:29:55,320 --> 00:29:58,400 Speaker 1: The temporary position of a buffer of three percent, folks, 517 00:29:58,800 --> 00:30:01,840 Speaker 1: it could be temporary for a long time. Interesting. Okay, Hey, 518 00:30:01,880 --> 00:30:03,000 Speaker 1: thank you very much. 519 00:30:03,560 --> 00:30:06,080 Speaker 2: Eliza, absolutely, thank you so much for having me. 520 00:30:07,800 --> 00:30:09,760 Speaker 1: Great to have you, always, great to have you, and 521 00:30:09,800 --> 00:30:13,600 Speaker 1: great to have you folks on board. We were hoping 522 00:30:13,720 --> 00:30:16,160 Speaker 1: on the show today just to ask you something. Perhaps 523 00:30:16,200 --> 00:30:18,800 Speaker 1: you might think about this, and we get lots of 524 00:30:19,120 --> 00:30:22,480 Speaker 1: correspondents and we get all sorts of praise through the system, 525 00:30:22,480 --> 00:30:26,440 Speaker 1: which is lovely to have. What we'd like is if 526 00:30:26,440 --> 00:30:29,479 Speaker 1: you would mention the show to one other person. If 527 00:30:29,520 --> 00:30:31,360 Speaker 1: you want to support the show. This is how we'd 528 00:30:31,400 --> 00:30:33,320 Speaker 1: like you to do it. Just mention the show to 529 00:30:33,360 --> 00:30:36,000 Speaker 1: one other person. Very simple, Okay, keep that in mind. 530 00:30:36,200 --> 00:30:39,480 Speaker 1: Keep in mind that we have an email for all correspondents. 531 00:30:39,600 --> 00:30:43,200 Speaker 1: It's the Money Puzzle at the Australian dot com dot 532 00:30:43,200 --> 00:30:47,840 Speaker 1: a you and today's show was produced by Leah Samangli. 533 00:30:48,120 --> 00:30:48,760 Speaker 2: Talk to you soon.