1 00:00:10,440 --> 00:00:13,480 Speaker 1: Hello and welcome to The Australian's Money Puzzle podcast. I'm 2 00:00:13,560 --> 00:00:17,160 Speaker 1: James Kirkby. Welcome aboard everybody. Well, the RBA has raised 3 00:00:17,200 --> 00:00:19,840 Speaker 1: interest rates for the second time this year and we're 4 00:00:19,880 --> 00:00:22,800 Speaker 1: now looking at a cash rate of more than four percent. 5 00:00:23,000 --> 00:00:26,079 Speaker 1: Pretty interesting for all investors, but particularly of course for 6 00:00:26,440 --> 00:00:29,920 Speaker 1: property investors. Interesting too. I think if you take a 7 00:00:30,000 --> 00:00:33,000 Speaker 1: close look at the vote, five of the board voted 8 00:00:33,040 --> 00:00:36,559 Speaker 1: to increase, four voted against it. That's pretty close, you know, 9 00:00:36,680 --> 00:00:38,800 Speaker 1: but they went ahead. Anyway. We'll take a look at this. 10 00:00:38,840 --> 00:00:40,440 Speaker 1: We'll take a look at what it means should you 11 00:00:40,600 --> 00:00:44,080 Speaker 1: fix your mortgage and a fascinating look at the changing 12 00:00:44,120 --> 00:00:48,320 Speaker 1: demographics in Australia, which means for Manny, for one in 13 00:00:48,440 --> 00:00:52,239 Speaker 1: three of Australian's the Great Escape older Australians, they're not 14 00:00:52,240 --> 00:00:53,400 Speaker 1: going to be hit half as hard. 15 00:00:53,920 --> 00:00:57,279 Speaker 2: Hi, Stuart, Happy, Saint Patrick's day, James. 16 00:00:57,040 --> 00:00:59,560 Speaker 1: Thank you. I'm wearing my green jacket Acrose. Listeners can't 17 00:00:59,560 --> 00:01:03,000 Speaker 1: see that, but believe me, folks, I am no shamrock actually, 18 00:01:03,040 --> 00:01:06,880 Speaker 1: but it's a fairly becom same partis day being a Tuesday. 19 00:01:07,040 --> 00:01:08,720 Speaker 1: We tend to prefer them to be at the end 20 00:01:08,760 --> 00:01:11,479 Speaker 1: of the week, Thursday, Friday and the weekend. But yes, 21 00:01:11,520 --> 00:01:14,720 Speaker 1: happy same partict day. Everybody law failer podrick, as they 22 00:01:14,760 --> 00:01:17,240 Speaker 1: say in the Irish language. Just in case you didn't 23 00:01:17,360 --> 00:01:21,560 Speaker 1: know that already. All right now, folks, upward pressure on 24 00:01:21,920 --> 00:01:24,399 Speaker 1: interest rates. Gee, things are changing. And of course we 25 00:01:24,480 --> 00:01:27,479 Speaker 1: didn't need it on our sort of finely balanced economy. 26 00:01:27,520 --> 00:01:30,160 Speaker 1: We did not need a petrol shock, which is what 27 00:01:30,200 --> 00:01:33,640 Speaker 1: we've got twenty percent increase at the bowser and that's 28 00:01:33,680 --> 00:01:36,160 Speaker 1: sort of kicking right through and putting inflation pressure as 29 00:01:36,200 --> 00:01:39,119 Speaker 1: we knew across the economy. I think people didn't quite 30 00:01:39,200 --> 00:01:41,040 Speaker 1: know that we only had thirty six days worth of 31 00:01:41,080 --> 00:01:44,200 Speaker 1: petrol in the country, and more than that that we 32 00:01:44,240 --> 00:01:47,039 Speaker 1: had signed an international treaty to say we had ninety days, 33 00:01:47,400 --> 00:01:49,520 Speaker 1: and we were the only country out of thirty two 34 00:01:49,520 --> 00:01:52,720 Speaker 1: countries in that treaty with the international agency, International Energy 35 00:01:52,720 --> 00:01:55,520 Speaker 1: Agency that broke that treaty and didn't fulfill our terms. 36 00:01:55,560 --> 00:01:58,000 Speaker 1: That's really interesting and I think it explained some of 37 00:01:58,040 --> 00:02:00,720 Speaker 1: the panic around the oil. I want to talk about 38 00:02:00,720 --> 00:02:05,080 Speaker 1: the bigger picture to you, Stewart whims Upfrow solutions, and 39 00:02:05,120 --> 00:02:07,840 Speaker 1: I want to talk particularly about what it means for 40 00:02:07,920 --> 00:02:10,919 Speaker 1: investors and the first one. Obviously, the first cab off 41 00:02:10,919 --> 00:02:14,320 Speaker 1: the rank is should we fix? Okay, because suddenly we 42 00:02:14,360 --> 00:02:18,280 Speaker 1: are looking at fixed rates moving up around the six 43 00:02:18,320 --> 00:02:21,280 Speaker 1: percent market and Z moved or ready to do that. 44 00:02:21,720 --> 00:02:23,240 Speaker 1: One of the first is the big four banks to 45 00:02:23,280 --> 00:02:27,720 Speaker 1: do so tell us the investor point of view at 46 00:02:27,720 --> 00:02:31,240 Speaker 1: this level, when the rates start across commercial rates space, 47 00:02:31,320 --> 00:02:33,840 Speaker 1: it's starting to cross, coming up towards six percent, is 48 00:02:33,880 --> 00:02:34,600 Speaker 1: it time to fix? 49 00:02:36,160 --> 00:02:38,880 Speaker 2: Look, it's really funny around the psychology of this, James. 50 00:02:39,160 --> 00:02:43,200 Speaker 2: People tend to have very strong opinions about what interest 51 00:02:43,280 --> 00:02:48,080 Speaker 2: rates might do in the future when contemplating fixed and variable. 52 00:02:48,160 --> 00:02:50,840 Speaker 2: So by that, what I mean is if the fixed 53 00:02:50,960 --> 00:02:54,119 Speaker 2: rate currently you know, for two, three, four, five years, 54 00:02:54,200 --> 00:02:57,760 Speaker 2: whatever the term, is only marginally higher than the current 55 00:02:57,840 --> 00:03:00,520 Speaker 2: variable rate, a lot of people might can include, well, 56 00:03:00,560 --> 00:03:03,600 Speaker 2: we're definitely going to get three rate hikes, so I 57 00:03:03,600 --> 00:03:06,000 Speaker 2: should fix for three years because that's going to protect me. 58 00:03:06,560 --> 00:03:08,280 Speaker 2: And sure, I might pay a little bit of a 59 00:03:08,320 --> 00:03:10,200 Speaker 2: margin for a little bit of time, but I'm probably 60 00:03:10,200 --> 00:03:12,240 Speaker 2: going to be in the money for most of the time. 61 00:03:12,840 --> 00:03:17,519 Speaker 2: The problem with that approach is that interest rate expectations 62 00:03:17,560 --> 00:03:21,239 Speaker 2: can change on a dime. Literally, we could wake up tomorrow, 63 00:03:21,480 --> 00:03:24,480 Speaker 2: and the news could be different. You know, an energy 64 00:03:24,520 --> 00:03:29,240 Speaker 2: price shock, could you know, depress the global economy, and 65 00:03:29,280 --> 00:03:30,959 Speaker 2: all of a sudden we're looking at a recession and 66 00:03:31,120 --> 00:03:34,360 Speaker 2: lower interest rates. That's entirely possible that would happen, maybe 67 00:03:34,360 --> 00:03:37,240 Speaker 2: not overnight, but at least over the coming weeks. And 68 00:03:37,280 --> 00:03:39,560 Speaker 2: then the other thing we've got to think about, and 69 00:03:39,600 --> 00:03:42,240 Speaker 2: that you've got to really consider is that if you're 70 00:03:42,280 --> 00:03:46,040 Speaker 2: contemplating a three year fixed term, what you're mostly interested 71 00:03:46,360 --> 00:03:50,360 Speaker 2: is what will the average, the time weighted average rate 72 00:03:50,400 --> 00:03:53,560 Speaker 2: be over that period. So, yes, we might get a 73 00:03:53,560 --> 00:03:57,600 Speaker 2: few interest rate hikes this year, but it's entirely possible 74 00:03:57,640 --> 00:03:59,840 Speaker 2: they could do their job by the time we get 75 00:03:59,840 --> 00:04:01,839 Speaker 2: to the end of this calendar year, and we're looking 76 00:04:01,920 --> 00:04:06,040 Speaker 2: at pretty extensive cuts next year, for instance. So these 77 00:04:06,040 --> 00:04:09,480 Speaker 2: things are really hard to forecast out, and my view 78 00:04:09,560 --> 00:04:13,000 Speaker 2: would be unless it's absolutely compelling. And remember, the data 79 00:04:13,480 --> 00:04:15,760 Speaker 2: tells us I looked at twenty years worth of data, 80 00:04:15,800 --> 00:04:18,920 Speaker 2: and it tells us that the probability of being better 81 00:04:18,960 --> 00:04:21,320 Speaker 2: off is around about one third of the time, and 82 00:04:21,360 --> 00:04:24,000 Speaker 2: we're worse off around two thirds of the time. History 83 00:04:24,040 --> 00:04:26,920 Speaker 2: tells us. So what we're doing by fixing our rates. 84 00:04:27,000 --> 00:04:29,919 Speaker 2: Is we're betting against the interest rate market, because the 85 00:04:29,960 --> 00:04:33,279 Speaker 2: interest rate market is what sets what forward fixed rates 86 00:04:33,279 --> 00:04:35,440 Speaker 2: look like. And I don't know if that's such a 87 00:04:35,480 --> 00:04:39,000 Speaker 2: wise bet. And I would rather keep my flexibility, typically 88 00:04:39,080 --> 00:04:42,560 Speaker 2: as an investor, because that means that I've got flexibility 89 00:04:42,600 --> 00:04:45,640 Speaker 2: to access equity, to refinance, to go to a lender 90 00:04:45,640 --> 00:04:48,839 Speaker 2: that's got better borrowing capacity over the next two or 91 00:04:48,839 --> 00:04:52,000 Speaker 2: three years, Whereas if I fix, maybe I lose some 92 00:04:52,040 --> 00:04:53,039 Speaker 2: of that flexibility. 93 00:04:53,720 --> 00:04:56,280 Speaker 1: Oh so you're pretty skeptical about fixing it the best 94 00:04:56,279 --> 00:04:59,000 Speaker 1: of times, and you're just as skeptical now, just even 95 00:04:59,400 --> 00:05:01,200 Speaker 1: with red high. That doesn't change your view. 96 00:05:02,560 --> 00:05:06,320 Speaker 2: Well, like I say, James, everyone's opinion or most people's 97 00:05:06,320 --> 00:05:08,960 Speaker 2: opinion at the moment they're talking about will it be 98 00:05:09,040 --> 00:05:12,159 Speaker 2: two or three interest rate hikes maybe four this year? 99 00:05:12,720 --> 00:05:15,239 Speaker 2: That's what the commentary is all about. What I'm saying 100 00:05:15,320 --> 00:05:17,880 Speaker 2: is that can change very quickly. There are some good 101 00:05:17,920 --> 00:05:21,400 Speaker 2: reasons to fix, James. Of course, if your cash flow 102 00:05:21,480 --> 00:05:25,200 Speaker 2: situation is such that if you did experience three or 103 00:05:25,200 --> 00:05:28,919 Speaker 2: four rate hikes, you're going to be in a pressured situation, 104 00:05:29,440 --> 00:05:33,040 Speaker 2: and you want to avoid being that situation. Of course, 105 00:05:33,080 --> 00:05:36,479 Speaker 2: fixing might be the right approach, So you would fix 106 00:05:36,560 --> 00:05:41,279 Speaker 2: because it's appropriate for your circumstances, rather than necessarily playing 107 00:05:41,320 --> 00:05:43,760 Speaker 2: the interest rate market thinking that you're going to be 108 00:05:43,760 --> 00:05:47,360 Speaker 2: better off. I think in that situation, play the probabilities 109 00:05:47,400 --> 00:05:49,880 Speaker 2: and the evidence tells us we're probably not going to 110 00:05:49,880 --> 00:05:53,839 Speaker 2: be better off. And whilst the commentary is pretty firm 111 00:05:53,880 --> 00:05:58,520 Speaker 2: around a heightening interest rate cycle, rising interest rate cycle, again, 112 00:05:58,560 --> 00:06:00,880 Speaker 2: that can change pretty quickly in the matter of months. 113 00:06:01,000 --> 00:06:03,000 Speaker 1: So are you saying for most people most of the time, 114 00:06:03,279 --> 00:06:03,839 Speaker 1: don't bother. 115 00:06:05,120 --> 00:06:07,120 Speaker 2: I mean, except there's a few. There's only been a 116 00:06:07,160 --> 00:06:10,640 Speaker 2: couple of occasions before the GFC. I guess if you're 117 00:06:10,680 --> 00:06:13,640 Speaker 2: able to forecast the GFC, we're all smarter in hindsight. 118 00:06:14,040 --> 00:06:16,600 Speaker 2: And of course, during twenty twenty and twenty one, when 119 00:06:16,680 --> 00:06:19,359 Speaker 2: interest rates were you know, cash rates were virtually zero. 120 00:06:20,160 --> 00:06:22,960 Speaker 2: So there are times in history where we go, yeah, 121 00:06:23,000 --> 00:06:24,719 Speaker 2: it's compelling, it's a no brain up. 122 00:06:24,920 --> 00:06:26,680 Speaker 1: But what about this time? 123 00:06:27,320 --> 00:06:30,920 Speaker 2: No, No, I don't think it's compelling to my mind. 124 00:06:31,320 --> 00:06:34,160 Speaker 2: Look the war, what happens to the war and energy 125 00:06:34,160 --> 00:06:38,159 Speaker 2: shocks and inflation? You know, we'll talk about inflation in 126 00:06:38,200 --> 00:06:41,680 Speaker 2: a moment, I'm sure, But what happens who knows, but 127 00:06:41,920 --> 00:06:44,480 Speaker 2: I think, you know, I think that because the RBA 128 00:06:45,320 --> 00:06:47,520 Speaker 2: was quite generous in giving us an interest rate cup 129 00:06:47,520 --> 00:06:51,000 Speaker 2: before a federal election, I think they now look back 130 00:06:51,040 --> 00:06:52,760 Speaker 2: and go, well, that was a mistake. I think to 131 00:06:52,839 --> 00:06:55,159 Speaker 2: do that, U turn, it's going to have a pretty 132 00:06:55,440 --> 00:06:58,160 Speaker 2: it's going to have a pretty significant impact on confidence 133 00:06:58,279 --> 00:07:01,040 Speaker 2: and the property market. So I think they'll do what's 134 00:07:01,080 --> 00:07:04,479 Speaker 2: necessary now. They'll break the back of inflation. I suspect 135 00:07:04,839 --> 00:07:08,360 Speaker 2: relatively quickly, and I wouldn't be surprised then if we're 136 00:07:08,360 --> 00:07:12,080 Speaker 2: looking at cuts next year, if those if they do 137 00:07:12,320 --> 00:07:14,480 Speaker 2: aggressively raised interest rates this year. 138 00:07:14,800 --> 00:07:16,240 Speaker 1: Just one scenario I want to put to you. What 139 00:07:16,240 --> 00:07:19,680 Speaker 1: about the person who always fixes, who consistently fixes twenty 140 00:07:19,760 --> 00:07:23,880 Speaker 1: year mortgage fixes every three years, back to back, unbroken. 141 00:07:25,160 --> 00:07:28,160 Speaker 1: What about that situation where you're consistent? What do you 142 00:07:28,200 --> 00:07:28,960 Speaker 1: how do you view that? 143 00:07:29,720 --> 00:07:32,600 Speaker 2: By my data, you're at least a quarter of a 144 00:07:32,640 --> 00:07:35,240 Speaker 2: percent worse off. Right, If that's all you've done for 145 00:07:35,280 --> 00:07:39,160 Speaker 2: your entire life, You've overpaid. It's like insurance, James. It 146 00:07:39,200 --> 00:07:42,040 Speaker 2: gives you certainty. And you know, if you have car 147 00:07:42,080 --> 00:07:44,200 Speaker 2: insurance for your entire life and you never claim on 148 00:07:44,240 --> 00:07:46,760 Speaker 2: the policy, hasn't been a waste of money. Well maybe, 149 00:07:46,800 --> 00:07:48,240 Speaker 2: but you've had that certainty. 150 00:07:48,440 --> 00:07:51,160 Speaker 1: Okay, so that's already there's a price in it you're seeing. 151 00:07:51,360 --> 00:07:53,080 Speaker 1: I mean, it's not the price. There's some people who 152 00:07:53,200 --> 00:07:56,800 Speaker 1: suit and the security and it's virtually insurance. But there's 153 00:07:56,800 --> 00:07:58,880 Speaker 1: a price. Let just take compare for insurance. Okay, I 154 00:07:58,920 --> 00:08:01,760 Speaker 1: want something really interesting we were talking about for the show, folks. 155 00:08:02,240 --> 00:08:04,720 Speaker 1: This is something Short's drug up and it's very interesting. 156 00:08:04,960 --> 00:08:07,320 Speaker 1: You probably the flip side of this, of course, is 157 00:08:07,360 --> 00:08:10,720 Speaker 1: that cash becomes a bit more attractive. Okay, we can 158 00:08:10,800 --> 00:08:13,400 Speaker 1: get term depossits now and the four and a half 159 00:08:13,520 --> 00:08:17,280 Speaker 1: percent fairly handy out there are call and that it 160 00:08:17,320 --> 00:08:20,600 Speaker 1: may go up from here again, tell us the change, 161 00:08:21,360 --> 00:08:24,400 Speaker 1: Stewart about how Australian society is quite different and the 162 00:08:24,480 --> 00:08:28,360 Speaker 1: number of people who actually benefit from interest rates has 163 00:08:28,400 --> 00:08:31,240 Speaker 1: gone up and the number of people who are negatively 164 00:08:31,280 --> 00:08:33,960 Speaker 1: affected by interstrate hikes have gone down. 165 00:08:34,040 --> 00:08:37,240 Speaker 2: Explain that, well, you know, I've been thinking about why 166 00:08:37,360 --> 00:08:40,200 Speaker 2: is inflation so persistent? Where's it really coming from? And 167 00:08:40,280 --> 00:08:44,040 Speaker 2: we can talk about housing. So rents have risen, the 168 00:08:44,120 --> 00:08:49,360 Speaker 2: cost to constructed dwelling has risen, electricity has risen, Insurance mediical. 169 00:08:49,720 --> 00:08:51,920 Speaker 2: All these sorts of things have risen, but they're all 170 00:08:51,960 --> 00:08:54,800 Speaker 2: non discretionary, right. We all we have to buy insurance. 171 00:08:54,800 --> 00:08:57,040 Speaker 2: If it goes up ten percent, it is what it is. 172 00:08:57,080 --> 00:09:00,800 Speaker 2: We take that higher cost. So interest rates aren't really 173 00:09:00,840 --> 00:09:05,160 Speaker 2: going to move those non discreen discretionary expenses. So then 174 00:09:05,240 --> 00:09:09,800 Speaker 2: why is services inflation so high? For example? And when 175 00:09:09,800 --> 00:09:12,400 Speaker 2: you look at some of the data that's CBA publishers. 176 00:09:12,920 --> 00:09:16,760 Speaker 2: Now you look at recreational culture and hotels and restaurants, 177 00:09:17,400 --> 00:09:20,960 Speaker 2: the increase in spending is huge. So who is doing 178 00:09:20,960 --> 00:09:23,400 Speaker 2: that spending? And that's what made me sort of dig 179 00:09:23,480 --> 00:09:27,400 Speaker 2: down into the numbers and look at two cohorts thirty 180 00:09:27,400 --> 00:09:30,600 Speaker 2: five to fifty five, which is probably, you know, you 181 00:09:30,720 --> 00:09:34,920 Speaker 2: kind of peak mortgage situation. They're people that cohort's probably 182 00:09:34,960 --> 00:09:38,800 Speaker 2: sensitive to interestrates. And then the plus sixty five cohort, 183 00:09:38,880 --> 00:09:42,640 Speaker 2: which you can just call baby boomers, they're quite happy 184 00:09:42,640 --> 00:09:46,480 Speaker 2: when interest rates arise. Of course, funded retirees they get 185 00:09:46,520 --> 00:09:50,199 Speaker 2: more on turn deposits and so forth. So the difference 186 00:09:50,240 --> 00:09:53,320 Speaker 2: over the last twenty years is that around six and 187 00:09:53,320 --> 00:09:57,160 Speaker 2: a half percent of the entire population has become less 188 00:09:57,200 --> 00:10:01,000 Speaker 2: sensitive to interest rates. So the proportion of thirty five 189 00:10:01,080 --> 00:10:05,120 Speaker 2: to fifty five has contracted by about eight percent, and 190 00:10:05,200 --> 00:10:10,040 Speaker 2: the proportion of Australians over sixty five has expanded by 191 00:10:10,040 --> 00:10:12,320 Speaker 2: about thirty five percent, so there's a lot more of 192 00:10:12,360 --> 00:10:15,120 Speaker 2: them and fewer mortgage holders. 193 00:10:15,360 --> 00:10:17,800 Speaker 1: It's the sort of news that isn't going to get aheadlined. 194 00:10:17,880 --> 00:10:22,320 Speaker 1: Is it more people will be better off with higher 195 00:10:22,559 --> 00:10:27,040 Speaker 1: cash deposits than the number of people who will be 196 00:10:27,080 --> 00:10:30,800 Speaker 1: worse off with the higher loan race. That's a killer 197 00:10:30,880 --> 00:10:34,920 Speaker 1: that is really interesting at demographic sort of hotspot there, folks. Okay, 198 00:10:34,920 --> 00:10:44,520 Speaker 1: we'll take a short break. We'll be back in a moment. Hello, 199 00:10:44,559 --> 00:10:47,440 Speaker 1: Welcome back to The Australian's Money Positive podcast. I'm James 200 00:10:47,520 --> 00:10:52,440 Speaker 1: Kirby talking to Stuart Weims Wemyss, a regular on the 201 00:10:52,480 --> 00:10:57,120 Speaker 1: show from the pro Solution Private Clients group. Stuart, I 202 00:10:57,160 --> 00:10:59,679 Speaker 1: want to this. We'll have some terrific questions which I've 203 00:10:59,720 --> 00:11:02,120 Speaker 1: kept you, but I want to just look at one 204 00:11:02,160 --> 00:11:06,240 Speaker 1: particular item which is always of interest to our listeners, 205 00:11:06,520 --> 00:11:09,960 Speaker 1: self managed super funds and the scene there and what's 206 00:11:10,000 --> 00:11:12,720 Speaker 1: going on sort of mixing that's coming from that market 207 00:11:12,920 --> 00:11:16,720 Speaker 1: in that it shrunk for some years and the banks 208 00:11:16,800 --> 00:11:20,400 Speaker 1: pulled out of it. And many people who might have 209 00:11:20,480 --> 00:11:24,320 Speaker 1: planned to be property investors through self managed super funds 210 00:11:24,400 --> 00:11:27,440 Speaker 1: didn't have many places to go. There wasn't much competition 211 00:11:27,520 --> 00:11:29,640 Speaker 1: in the market. They sort of pushed to the margins. 212 00:11:30,080 --> 00:11:33,800 Speaker 1: AMP has more recently come into the frame, which signals 213 00:11:33,840 --> 00:11:36,880 Speaker 1: to us, I think that market is here to stay, 214 00:11:36,960 --> 00:11:40,880 Speaker 1: and the government admittedly of late, has basically met noises 215 00:11:40,920 --> 00:11:43,400 Speaker 1: that they're going to leave it alone. But there was 216 00:11:43,440 --> 00:11:45,720 Speaker 1: a couple of observations you wanted to make about that 217 00:11:45,840 --> 00:11:49,440 Speaker 1: area in the context of rising rates and also the 218 00:11:49,520 --> 00:11:53,280 Speaker 1: new super tax, that is, the very high tax for 219 00:11:53,320 --> 00:11:56,240 Speaker 1: the very high amounts. What was it they wanted to 220 00:11:56,240 --> 00:11:56,600 Speaker 1: tell us. 221 00:11:57,280 --> 00:12:01,000 Speaker 2: Well, one of the attractions for most people to borrow 222 00:12:01,040 --> 00:12:06,400 Speaker 2: to invest inside super into property is that they think, well, 223 00:12:06,440 --> 00:12:08,480 Speaker 2: you know, when I enter into retirement face, I don't 224 00:12:08,480 --> 00:12:10,920 Speaker 2: pay any capital gains tax, and we know that if 225 00:12:10,920 --> 00:12:12,680 Speaker 2: we want to invest in property and we hold it 226 00:12:12,720 --> 00:12:15,920 Speaker 2: for many decades, hopefully we make a really large capital gain. 227 00:12:16,600 --> 00:12:19,360 Speaker 2: The downside though, with super is the negative gearing benefit 228 00:12:19,440 --> 00:12:21,800 Speaker 2: is a lot lower. Of course, it's capped at fifteen percent, 229 00:12:21,920 --> 00:12:25,839 Speaker 2: whereas outside super maybe we get forty seven percent, three 230 00:12:25,920 --> 00:12:29,240 Speaker 2: times as much in terms of a tax break. Outside 231 00:12:29,280 --> 00:12:32,680 Speaker 2: super So when you do those numbers, they negate each 232 00:12:32,679 --> 00:12:35,160 Speaker 2: other pretty much. You know, you might be attracted to 233 00:12:35,240 --> 00:12:39,240 Speaker 2: nil CGT, but what you're doing is foregoing in the 234 00:12:39,240 --> 00:12:43,520 Speaker 2: interim some tax deductions, and in a higher interest rate environment, 235 00:12:43,600 --> 00:12:46,439 Speaker 2: those tax actions are worth more. So I just caution 236 00:12:46,600 --> 00:12:50,440 Speaker 2: people to really be careful about going into something, well 237 00:12:50,480 --> 00:12:55,640 Speaker 2: anything really that is backed purely from taxation consequences. At 238 00:12:55,640 --> 00:12:56,800 Speaker 2: the end of the day, there's got to be a 239 00:12:56,840 --> 00:12:59,160 Speaker 2: lot of reasons why you do it, and maybe taxes 240 00:12:59,559 --> 00:13:02,120 Speaker 2: or tax benefits is only one of them. And then, 241 00:13:02,160 --> 00:13:05,080 Speaker 2: of course the new Div. Two nine six tax, which 242 00:13:05,080 --> 00:13:09,160 Speaker 2: applies for accounts greater than three million dollars. I guess 243 00:13:09,160 --> 00:13:11,839 Speaker 2: if someone is in their twenties or thirties and is 244 00:13:11,880 --> 00:13:13,760 Speaker 2: going to hold a property for you know, thirty or 245 00:13:13,760 --> 00:13:16,360 Speaker 2: forty years, they could be caught up in that. Now, 246 00:13:16,400 --> 00:13:19,160 Speaker 2: I don't want to overemphasize it, because you know, it's 247 00:13:19,240 --> 00:13:22,240 Speaker 2: only the amount in excessive three million dollars that attracts 248 00:13:22,280 --> 00:13:25,080 Speaker 2: thirty percent in terms of tax. So it's still the 249 00:13:25,080 --> 00:13:28,559 Speaker 2: blended tax rate is still pretty attractive. But I guess 250 00:13:28,559 --> 00:13:31,559 Speaker 2: maybe that's something that the government's thinking in the back 251 00:13:31,600 --> 00:13:33,880 Speaker 2: of their mind. Well, at least we've got this other 252 00:13:33,960 --> 00:13:36,120 Speaker 2: tax and for those people, they're going to gear and 253 00:13:36,400 --> 00:13:38,679 Speaker 2: build a lot of wealth. We're going to capture some 254 00:13:38,720 --> 00:13:41,160 Speaker 2: of that tax revenue sort of down the track. But 255 00:13:41,480 --> 00:13:43,320 Speaker 2: there's a lot more lenders. 256 00:13:43,080 --> 00:13:47,319 Speaker 1: Saf batch, superfund, property investment and the whole scene and 257 00:13:47,360 --> 00:13:50,360 Speaker 1: the finance scene which is dormant for a while. Can 258 00:13:50,360 --> 00:13:52,200 Speaker 1: we have more confidence now to do it if we 259 00:13:52,240 --> 00:13:55,319 Speaker 1: want to? And is the market? Am I imagining things? 260 00:13:55,360 --> 00:13:57,160 Speaker 1: It is the market actually coming back in live with 261 00:13:57,280 --> 00:14:00,960 Speaker 1: the broader lift of participation in theirs, which have been 262 00:14:01,000 --> 00:14:04,600 Speaker 1: growing at a fair clip in terms of commencements and performance. 263 00:14:06,000 --> 00:14:08,240 Speaker 2: It's hard to forecast the future, of course, James, but 264 00:14:08,400 --> 00:14:10,720 Speaker 2: I think as we stand here today, I'd have a 265 00:14:10,800 --> 00:14:12,839 Speaker 2: high level of confidence that if you're going to get 266 00:14:12,840 --> 00:14:15,080 Speaker 2: into this sort of arrangement, that you're going to be 267 00:14:15,160 --> 00:14:18,640 Speaker 2: able to refinance if you need to and shop around 268 00:14:18,640 --> 00:14:21,480 Speaker 2: in terms of interest rates, and that there should be 269 00:14:22,080 --> 00:14:25,320 Speaker 2: more competition over the next decade than there was over 270 00:14:25,360 --> 00:14:28,080 Speaker 2: the past decade. So I think we've got some confidence 271 00:14:28,120 --> 00:14:30,520 Speaker 2: there if you want to do something like this, and 272 00:14:30,600 --> 00:14:33,600 Speaker 2: even if you're dealing with lenders that are mortgage managers, 273 00:14:34,040 --> 00:14:36,120 Speaker 2: you know, so they're not eighty i's, they're not banks. 274 00:14:36,480 --> 00:14:38,160 Speaker 2: There's still a lot of them out there. A lot 275 00:14:38,200 --> 00:14:41,640 Speaker 2: of them are reputable Pepper, Bluestone, Latrobe, they've been around 276 00:14:41,640 --> 00:14:44,440 Speaker 2: for a long time and they're active in this space. 277 00:14:44,520 --> 00:14:47,600 Speaker 2: So whilst there might not be household brands, you know, 278 00:14:47,640 --> 00:14:51,040 Speaker 2: there's still very large entities that are that are safe 279 00:14:51,040 --> 00:14:51,600 Speaker 2: to deal with. 280 00:14:51,840 --> 00:14:53,880 Speaker 1: Okay, so that's clear. The are I think folks on 281 00:14:54,360 --> 00:14:56,400 Speaker 1: super fund, So that's we're thinking about that. We had 282 00:14:56,440 --> 00:14:58,560 Speaker 1: some guests on the show who just said, don't use it, 283 00:14:58,800 --> 00:15:00,800 Speaker 1: don't use the self managed to fund as your way 284 00:15:00,800 --> 00:15:03,480 Speaker 1: into property because what they're saying, because the tax benefits 285 00:15:03,480 --> 00:15:06,040 Speaker 1: aren't as good as if you were outside. Then Stewart says, 286 00:15:06,120 --> 00:15:08,760 Speaker 1: don't let the tax benefits drive you. Make up your 287 00:15:08,760 --> 00:15:11,320 Speaker 1: own mind. I'm sure you will, all right. Now, I've 288 00:15:11,400 --> 00:15:14,320 Speaker 1: kept some questions. I do one before the break, which 289 00:15:14,400 --> 00:15:17,760 Speaker 1: is from peace having listened to your show with Hugh 290 00:15:17,840 --> 00:15:21,720 Speaker 1: Robertson on the day Facto Inherrison's tax, which we have 291 00:15:21,840 --> 00:15:24,840 Speaker 1: and super Okay, that's folks, if you recall the seventeen 292 00:15:24,840 --> 00:15:30,200 Speaker 1: percent your estate will pay when you're super transfers to 293 00:15:30,480 --> 00:15:34,480 Speaker 1: your inheritance. Most for most people most of the time, 294 00:15:34,960 --> 00:15:37,320 Speaker 1: given this can be avoided by those who use an 295 00:15:37,360 --> 00:15:40,040 Speaker 1: advisor or those who are unfortunate enough to get a 296 00:15:40,120 --> 00:15:43,600 Speaker 1: terminal illness, says Peace. Should the government just get rid 297 00:15:43,640 --> 00:15:45,560 Speaker 1: of this tax? As far as I can see, removing 298 00:15:45,560 --> 00:15:47,240 Speaker 1: it would be a surefire vote winner. 299 00:15:47,520 --> 00:15:50,760 Speaker 2: What do you think the sole purpose TESTE around when 300 00:15:50,800 --> 00:15:56,400 Speaker 2: they drafted the legislation around super was to accumulate retirement 301 00:15:56,480 --> 00:16:02,240 Speaker 2: savings for ourselves and our dependents. And so the taxation 302 00:16:02,560 --> 00:16:07,640 Speaker 2: that applies to death benefits paid to non dependence just 303 00:16:07,720 --> 00:16:10,080 Speaker 2: captures that higher rate of tax brings it up to 304 00:16:10,080 --> 00:16:13,840 Speaker 2: around thirty percent, because it wasn't meant to provide a 305 00:16:13,920 --> 00:16:17,760 Speaker 2: tax benefit to non beneficiaries. Are non dependence, I should 306 00:16:17,760 --> 00:16:22,000 Speaker 2: say beneficiaries. So I think how the law is behaving 307 00:16:22,120 --> 00:16:24,800 Speaker 2: is right. It's in line with how it was intended. 308 00:16:25,200 --> 00:16:27,720 Speaker 2: Maybe what they need to do. I looked at some 309 00:16:28,440 --> 00:16:31,640 Speaker 2: ASPHE data and they conclude that ninety percent of people 310 00:16:31,720 --> 00:16:37,280 Speaker 2: that died older than eight eighty had no super Yes, right, 311 00:16:37,360 --> 00:16:41,480 Speaker 2: So this clearly means that the people that are dying 312 00:16:41,560 --> 00:16:44,160 Speaker 2: over eighty that still have some super then the minority. 313 00:16:44,760 --> 00:16:46,760 Speaker 1: Well, we wouldn't expect that to be the case. In 314 00:16:46,880 --> 00:16:50,120 Speaker 1: thirty years time because those people SUC wasn't around right 315 00:16:50,160 --> 00:16:51,280 Speaker 1: when they're well younger. 316 00:16:51,360 --> 00:16:54,240 Speaker 2: Yeah, potentially, but you look at the average superbalance, it 317 00:16:54,280 --> 00:16:56,320 Speaker 2: isn't huge even today, and it's going to take a 318 00:16:56,360 --> 00:16:58,720 Speaker 2: little bit of time to get up there. So maybe 319 00:16:58,760 --> 00:17:01,160 Speaker 2: what they need to do is close this loophole, this 320 00:17:01,240 --> 00:17:05,919 Speaker 2: recontribution loophole, and they could probably do that by reducing 321 00:17:05,960 --> 00:17:09,399 Speaker 2: the age, the contribution age, so you can make concessional 322 00:17:09,440 --> 00:17:13,359 Speaker 2: contributions as long as you're seventy five or younger, well 323 00:17:13,480 --> 00:17:16,080 Speaker 2: up to seventy five. Maybe if they make that, bring 324 00:17:16,080 --> 00:17:18,560 Speaker 2: that down to seventy or sixty five, it leaves less 325 00:17:18,560 --> 00:17:22,560 Speaker 2: of a gap to actually implement a recontribution strategy. And 326 00:17:22,640 --> 00:17:24,640 Speaker 2: I guess the answer is that if you haven't got 327 00:17:24,640 --> 00:17:28,360 Speaker 2: the money in super within a few years after you retire, 328 00:17:29,040 --> 00:17:32,399 Speaker 2: then that probably deals with most people. And they're people 329 00:17:32,440 --> 00:17:36,320 Speaker 2: that keep making non concessional contributions for a long time 330 00:17:36,359 --> 00:17:39,000 Speaker 2: after they retire. They're the ones that are probably using 331 00:17:39,040 --> 00:17:41,480 Speaker 2: the loophole. Now. I hope they don't change it because 332 00:17:41,520 --> 00:17:43,760 Speaker 2: for people, it's for people that are able to do it. 333 00:17:43,800 --> 00:17:46,120 Speaker 2: Of course, there's that a tax advantage there, and that's 334 00:17:46,160 --> 00:17:47,800 Speaker 2: the law and then you can play the law to 335 00:17:47,840 --> 00:17:52,000 Speaker 2: your advantage. But I don't think it's really benefit a 336 00:17:52,119 --> 00:17:55,560 Speaker 2: large cohort. And I think keeping the tax so that 337 00:17:55,640 --> 00:17:58,080 Speaker 2: it's not used as a way to sort of avoid 338 00:17:58,560 --> 00:18:02,399 Speaker 2: paying tax or misuse to really accumulate wealth so that 339 00:18:02,480 --> 00:18:06,920 Speaker 2: your independent adult children are better off, that's what super 340 00:18:06,960 --> 00:18:09,119 Speaker 2: wasn't intended for that purpose. So I don't think that's right. 341 00:18:09,200 --> 00:18:12,000 Speaker 1: Okay, well that is a common argument, yes, but it's 342 00:18:12,240 --> 00:18:14,280 Speaker 1: a debate. Shall we say? All right, We'll be back 343 00:18:14,320 --> 00:18:15,960 Speaker 1: in a moment. I have some really good questions from 344 00:18:16,119 --> 00:18:22,720 Speaker 1: Eric and Kerry and more. Hello, Welcome back to The 345 00:18:22,760 --> 00:18:25,680 Speaker 1: Australian's Money Puzzled podcast. I'm James Kirby and I'm talking 346 00:18:25,680 --> 00:18:29,399 Speaker 1: to Stuart Weems, regular contributor to the wealth section of 347 00:18:29,440 --> 00:18:32,520 Speaker 1: The Australian, which I'm sure you are familiar with, very 348 00:18:32,680 --> 00:18:36,480 Speaker 1: richly populated. Just now, we have a new wealth calculator 349 00:18:36,520 --> 00:18:38,959 Speaker 1: which we have released which is well worth a look at, 350 00:18:39,119 --> 00:18:41,919 Speaker 1: called are You Rich? That's what's seeing folks. And we 351 00:18:42,040 --> 00:18:45,640 Speaker 1: also have our rich lists, the Rich two fifty coming 352 00:18:45,640 --> 00:18:48,479 Speaker 1: out this week and we're starting to issue elements of 353 00:18:48,520 --> 00:18:52,760 Speaker 1: that all through the week. Some very really terrific stories 354 00:18:52,760 --> 00:18:56,240 Speaker 1: in there as always. Okay, a question from Eric, longtime listener. 355 00:18:56,280 --> 00:18:58,760 Speaker 1: Thank you, Eric, he says, thanks for all the work 356 00:18:58,800 --> 00:19:01,879 Speaker 1: you do on financially to see. Thank you general advice 357 00:19:01,920 --> 00:19:05,080 Speaker 1: of course, yes, this is never advised. This is information only. 358 00:19:05,480 --> 00:19:07,840 Speaker 1: Eric says, I was wondering if you could please talk 359 00:19:07,880 --> 00:19:11,159 Speaker 1: a bit about insurance. Most of the information online is 360 00:19:11,160 --> 00:19:14,480 Speaker 1: written by insurers, who obviously say everyone needs to be insured. 361 00:19:14,720 --> 00:19:18,840 Speaker 1: What are your thoughts on the key insurance areas disability, life, 362 00:19:18,840 --> 00:19:23,360 Speaker 1: income protection? Does everyone need them? I also had a question, Stuart, 363 00:19:23,480 --> 00:19:25,840 Speaker 1: because this reflects something we did talk about recently, but 364 00:19:26,000 --> 00:19:28,240 Speaker 1: also had a question which maybe we'll do with f 365 00:19:28,280 --> 00:19:31,640 Speaker 1: us when someone asked what does self insurance actually mean? 366 00:19:32,560 --> 00:19:34,240 Speaker 1: We were sort of blithe about it on the show, 367 00:19:34,240 --> 00:19:35,919 Speaker 1: and so that you could self insurre self insured just 368 00:19:36,000 --> 00:19:38,800 Speaker 1: means you take the risk yourself. It's as simple as 369 00:19:38,800 --> 00:19:42,240 Speaker 1: it sounds. You don't have insurance. Let's say you don't 370 00:19:42,280 --> 00:19:44,600 Speaker 1: have life insurance, right, but you say to yourself, well, 371 00:19:44,600 --> 00:19:46,800 Speaker 1: I own my house and I have so much in 372 00:19:46,920 --> 00:19:51,280 Speaker 1: super and that will be enough for anyone that's in 373 00:19:51,359 --> 00:19:54,280 Speaker 1: my world that will need money later. I forgot that 374 00:19:54,320 --> 00:19:55,240 Speaker 1: more or less correct. 375 00:19:56,160 --> 00:19:58,360 Speaker 2: Yeah, that's right, And I guess the question is can 376 00:19:58,400 --> 00:20:01,720 Speaker 2: you self insurer that? The next question do I have 377 00:20:01,760 --> 00:20:05,320 Speaker 2: the appetite to wear that risk? And if the risk eventuated, 378 00:20:05,359 --> 00:20:07,720 Speaker 2: what would happen? What would I do about it? And 379 00:20:08,000 --> 00:20:10,040 Speaker 2: because I think what you want to do is just 380 00:20:10,080 --> 00:20:12,760 Speaker 2: avoid regrets, so you might make a decision go, I 381 00:20:12,760 --> 00:20:15,280 Speaker 2: don't I'm quite happy with no insurance, and then if 382 00:20:15,440 --> 00:20:17,800 Speaker 2: something was to happen, you go, well, you know I 383 00:20:17,920 --> 00:20:20,920 Speaker 2: made that decision. But the problem occurs when people don't 384 00:20:20,960 --> 00:20:21,760 Speaker 2: really think about it. 385 00:20:21,960 --> 00:20:24,439 Speaker 1: But I'm just wondering, do you agree with their ex 386 00:20:24,520 --> 00:20:28,600 Speaker 1: basic contention that the coverage of insurance that we get 387 00:20:28,840 --> 00:20:31,439 Speaker 1: is driven by insurance who tell us we must ensure everything, 388 00:20:31,480 --> 00:20:33,240 Speaker 1: and maybe we could be a bit more skeptical. 389 00:20:34,359 --> 00:20:37,840 Speaker 2: I think of the twenty years that I've been in 390 00:20:37,880 --> 00:20:42,520 Speaker 2: the industry, typically when I see someone that's received advice 391 00:20:42,640 --> 00:20:47,359 Speaker 2: from an advisor or an insurance specialist, I would say 392 00:20:47,400 --> 00:20:50,680 Speaker 2: probably ninety ninety five percent of the time, in my view, 393 00:20:51,240 --> 00:20:53,800 Speaker 2: they've got too much cover. Yeah, so it goes too 394 00:20:53,880 --> 00:20:56,880 Speaker 2: far the other way, but I think so I definitely 395 00:20:56,920 --> 00:20:59,760 Speaker 2: agree with that. And of course, you know they're in 396 00:21:00,040 --> 00:21:02,399 Speaker 2: a device to sell more insurance because they get paid more. 397 00:21:02,800 --> 00:21:05,840 Speaker 2: But I don't think that then necessarily means that insurance 398 00:21:05,920 --> 00:21:07,920 Speaker 2: is a complete waste of money and we shouldn't have any, 399 00:21:08,440 --> 00:21:10,120 Speaker 2: you know. I think that we've got to think really 400 00:21:10,160 --> 00:21:12,640 Speaker 2: carefully about it. And you know, one of the key 401 00:21:12,640 --> 00:21:16,199 Speaker 2: assumptions in any or most financial strategies is that I'm 402 00:21:16,200 --> 00:21:17,359 Speaker 2: going to be able to get out of bed and 403 00:21:17,400 --> 00:21:19,760 Speaker 2: go to work tomorrow and do that for the next 404 00:21:19,800 --> 00:21:23,200 Speaker 2: twenty years and make a contribution to my living expenses 405 00:21:23,200 --> 00:21:26,480 Speaker 2: for my dependence and then also make a contribution towards 406 00:21:26,880 --> 00:21:30,440 Speaker 2: saving for retirement. And so therefore, if I can't get 407 00:21:30,480 --> 00:21:32,119 Speaker 2: out of bed and go to work tomorrow, you know 408 00:21:32,160 --> 00:21:35,000 Speaker 2: what's going to happen. And if it's short term in capacity, 409 00:21:35,119 --> 00:21:37,560 Speaker 2: not a big deal. You've got, you know, savings, and 410 00:21:38,119 --> 00:21:40,840 Speaker 2: you'll leave sick leave, you'll get through it. But if 411 00:21:40,880 --> 00:21:44,160 Speaker 2: it's a longer period of time, maybe one or two years, 412 00:21:44,200 --> 00:21:47,080 Speaker 2: you know, that could really leave a big dint, put 413 00:21:47,320 --> 00:21:50,680 Speaker 2: dependence at risk, and put your whole retirement at risk. 414 00:21:50,800 --> 00:21:53,680 Speaker 2: So one answer to that situation is go and get 415 00:21:53,680 --> 00:21:57,879 Speaker 2: yourself some insurance. And I would say James, that the 416 00:21:57,920 --> 00:22:00,240 Speaker 2: more the less insurance you have, the law or the 417 00:22:00,280 --> 00:22:02,240 Speaker 2: cost of course, and the more you have to invest, 418 00:22:02,720 --> 00:22:05,280 Speaker 2: so there is a bit of tension here. Of course, 419 00:22:05,320 --> 00:22:07,760 Speaker 2: the more you invest in, the stronger asset base, the 420 00:22:07,840 --> 00:22:10,720 Speaker 2: less you need insurance you need so yeah, So, really, 421 00:22:10,760 --> 00:22:14,000 Speaker 2: in your twenties and thirties, when insurance is relatively cheap, 422 00:22:14,040 --> 00:22:16,840 Speaker 2: and it is relatively cheap because you're ensuring the next 423 00:22:16,880 --> 00:22:20,520 Speaker 2: thirty years of income, you should probably have it. But 424 00:22:20,640 --> 00:22:24,159 Speaker 2: then you should be probably working at making sure you 425 00:22:24,200 --> 00:22:26,200 Speaker 2: get yourself into a position where you need less and 426 00:22:26,280 --> 00:22:29,159 Speaker 2: less of it as you get closer into your forties 427 00:22:29,200 --> 00:22:31,560 Speaker 2: and fifties, and hopefully at some point in your fifties 428 00:22:31,600 --> 00:22:34,879 Speaker 2: you have none, and that's when it becomes expensive. 429 00:22:35,080 --> 00:22:37,480 Speaker 1: Okay, So if you manage it right, you ensure when 430 00:22:37,480 --> 00:22:41,080 Speaker 1: you're younger many people don't, and then when you're older, 431 00:22:41,119 --> 00:22:44,000 Speaker 1: where many people find themselves paying exorbitant amounts of insurance, 432 00:22:44,040 --> 00:22:46,560 Speaker 1: you actually have managed your first point that you need 433 00:22:46,560 --> 00:22:51,280 Speaker 1: is less obviously individual circumstances every time, Eric, But I 434 00:22:51,280 --> 00:22:53,000 Speaker 1: think you're on the right track that the amount of 435 00:22:53,000 --> 00:22:57,199 Speaker 1: insurance we need is overestimated regularly because the amount we 436 00:22:57,240 --> 00:23:00,439 Speaker 1: read about are from calculators, which creative insurance companies who 437 00:23:00,520 --> 00:23:03,119 Speaker 1: are selling it and we're not actually selling anything. I'm 438 00:23:03,119 --> 00:23:06,360 Speaker 1: just sure that's why we can talk like this, Okay, Kerry, Kay, 439 00:23:06,600 --> 00:23:09,560 Speaker 1: or Ry. We've had all this talk over the last 440 00:23:09,640 --> 00:23:12,320 Speaker 1: few years that the IRBA would look through things like 441 00:23:12,359 --> 00:23:16,159 Speaker 1: the electricity rebits and its impact on inflation. Wherever the 442 00:23:16,240 --> 00:23:20,600 Speaker 1: largest contributor to the last quarter CPI was housing twenty 443 00:23:20,640 --> 00:23:25,000 Speaker 1: four percent increase in electricity costs? Am I missing something here? 444 00:23:25,040 --> 00:23:27,000 Speaker 1: Of what the RBA has to look through and shouldn't 445 00:23:27,040 --> 00:23:30,960 Speaker 1: look through is pretty tricky stuff, Kerry, And to some extent, 446 00:23:31,040 --> 00:23:33,840 Speaker 1: some of that argument has been overtaken by the fact that, oh, 447 00:23:33,880 --> 00:23:35,520 Speaker 1: it's gone up twenty percent in the blink of an 448 00:23:35,520 --> 00:23:37,720 Speaker 1: eye and we haven't seen anything like that for a 449 00:23:37,720 --> 00:23:40,399 Speaker 1: long time. But what did you think of Carry's question. 450 00:23:40,240 --> 00:23:43,760 Speaker 2: Stuart, Well, they look at the trim mains, they do 451 00:23:43,840 --> 00:23:47,359 Speaker 2: look at through energy rebates, but energy still rose about 452 00:23:47,400 --> 00:23:50,240 Speaker 2: four and a half percent, so it's still contributed to 453 00:23:50,280 --> 00:23:54,360 Speaker 2: a higher rate and rents and construction are really housing 454 00:23:54,400 --> 00:23:58,680 Speaker 2: what makes up housing. Probably no surprises forgetting that Melbourne 455 00:23:58,760 --> 00:24:03,159 Speaker 2: has the fastest grow rents according to SQM, and that 456 00:24:03,160 --> 00:24:06,520 Speaker 2: would probably just be a response because there's probably fewer 457 00:24:07,119 --> 00:24:10,200 Speaker 2: or at least fewer new investors coming into the Melbourne market, 458 00:24:10,320 --> 00:24:13,479 Speaker 2: so that obviously puts pressure on rents. And so when 459 00:24:13,520 --> 00:24:18,000 Speaker 2: you're tightened tendency laws and increase taxes. You only need 460 00:24:18,080 --> 00:24:20,680 Speaker 2: to look to the UK as an example of how 461 00:24:20,720 --> 00:24:24,680 Speaker 2: that just increases rents. Last year they had twenty applicants 462 00:24:24,760 --> 00:24:28,359 Speaker 2: for every rental property in the UK last year. And 463 00:24:28,880 --> 00:24:30,879 Speaker 2: if you have that sort of dynamics, that sort of 464 00:24:31,280 --> 00:24:34,639 Speaker 2: shortage of excessive demand and shortage of supply, you're going 465 00:24:34,720 --> 00:24:37,199 Speaker 2: to get rising rents. But this is the problem I 466 00:24:37,200 --> 00:24:40,320 Speaker 2: think with monetary policy. It's a very blunt instrument. And 467 00:24:40,440 --> 00:24:42,840 Speaker 2: essentially what they need to do is they need to 468 00:24:42,880 --> 00:24:47,240 Speaker 2: create disinflation in discretionary categories. So they absolutely need to 469 00:24:47,320 --> 00:24:51,959 Speaker 2: smash restaurants and domestic travel, these sorts of things in 470 00:24:52,040 --> 00:24:57,119 Speaker 2: order to offset the rising cost of nondiscretionary items like 471 00:24:57,800 --> 00:25:00,879 Speaker 2: rents and fuel and and interstrates. 472 00:25:00,880 --> 00:25:02,920 Speaker 1: Of course, is just so blunt, it doesn't do that. 473 00:25:03,800 --> 00:25:06,560 Speaker 2: It's terrible. Yeah, it's going to force the cohort into 474 00:25:06,600 --> 00:25:08,800 Speaker 2: a lot of pain for them to be able to 475 00:25:08,840 --> 00:25:11,240 Speaker 2: achieve their aim. Of course, the other side of the 476 00:25:11,280 --> 00:25:14,199 Speaker 2: coin is we've got a very tight labor market and 477 00:25:14,280 --> 00:25:18,159 Speaker 2: so the government can help the RBA and help Australians 478 00:25:18,200 --> 00:25:22,240 Speaker 2: by stopping by reducing their spending and employment growth, but 479 00:25:22,760 --> 00:25:25,879 Speaker 2: there doesn't seem many signs that are happening. If anything, 480 00:25:25,960 --> 00:25:28,080 Speaker 2: they're just going to raise more tax revenues so they 481 00:25:28,119 --> 00:25:32,359 Speaker 2: can keep spending. So unfortunately they're working against really what 482 00:25:32,480 --> 00:25:35,560 Speaker 2: the RBA is doing. And I guess the picture at 483 00:25:35,560 --> 00:25:39,520 Speaker 2: this stage, James, is probably a really challenging twenty twenty 484 00:25:39,560 --> 00:25:40,560 Speaker 2: six for a lot of people. 485 00:25:40,840 --> 00:25:43,679 Speaker 1: I think so, and I think property place estimates are 486 00:25:43,680 --> 00:25:47,800 Speaker 1: probably looking a bit bullish and market share market returns 487 00:25:47,800 --> 00:25:50,200 Speaker 1: are looking a bit bullish. But we'll be back on 488 00:25:50,240 --> 00:25:52,159 Speaker 1: this and we will cover this very carefully as we 489 00:25:52,200 --> 00:25:54,280 Speaker 1: go forward. Hey, Stuart Williams, thank you very much for 490 00:25:54,320 --> 00:25:56,159 Speaker 1: being on the show today. Great to have you, my 491 00:25:56,280 --> 00:26:00,320 Speaker 1: pleasure and great to see our YouTube videos going off. Folks. 492 00:26:00,359 --> 00:26:02,320 Speaker 1: Have a look at them on YouTube. The Money Puzzle 493 00:26:02,400 --> 00:26:05,000 Speaker 1: channel is up now. When the first couple of videos 494 00:26:05,040 --> 00:26:06,720 Speaker 1: are off there if you'd like to see us all, 495 00:26:07,200 --> 00:26:09,639 Speaker 1: and we'll have more as we go. We'll be putting 496 00:26:09,720 --> 00:26:12,560 Speaker 1: them out on a regular basis. Today's show was produced 497 00:26:12,560 --> 00:26:15,199 Speaker 1: by Leah Samma Glue and do keep those emails and 498 00:26:15,240 --> 00:26:18,240 Speaker 1: questions running the really interesting ones today the money puzzle 499 00:26:18,280 --> 00:26:21,400 Speaker 1: at the Australian dot com dot au. Talk to you soon.