1 00:00:10,520 --> 00:00:13,399 Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm 2 00:00:13,440 --> 00:00:16,640 Speaker 1: James Kirby. Welcome aboard everybody. Well, there goes the first 3 00:00:16,760 --> 00:00:20,040 Speaker 1: quarter of calendar twenty twenty six. We won't forget it 4 00:00:20,840 --> 00:00:24,920 Speaker 1: first three months of the year, my O, my Well, Basically, 5 00:00:24,960 --> 00:00:29,560 Speaker 1: since the war broke out in Iran in February, two 6 00:00:29,760 --> 00:00:32,159 Speaker 1: of the three major markets on Wall Street are now 7 00:00:32,200 --> 00:00:34,720 Speaker 1: officially in a correction. You know, a correction is more 8 00:00:34,800 --> 00:00:37,199 Speaker 1: than ten percent fall from the top. A crash is 9 00:00:37,240 --> 00:00:39,960 Speaker 1: more than twenty percent. The only one left hanging on 10 00:00:40,120 --> 00:00:41,680 Speaker 1: is the S and P five hundred, and that's just 11 00:00:41,720 --> 00:00:44,120 Speaker 1: hanging on, folks. It's down nine percent this morning from 12 00:00:44,159 --> 00:00:48,040 Speaker 1: the top. So we are tottering close to correction markets. 13 00:00:48,040 --> 00:00:50,480 Speaker 1: Our own market, the ASX two hundred's a little bit better. 14 00:00:50,479 --> 00:00:52,559 Speaker 1: It's down about three percent this year. But basically all 15 00:00:52,600 --> 00:00:55,320 Speaker 1: the numbers are going the wrong way. And I'm speaking 16 00:00:55,360 --> 00:00:57,560 Speaker 1: to you just before Easter. This will be our Easter 17 00:00:57,640 --> 00:01:00,520 Speaker 1: special show since that rates might have two more lifts 18 00:01:00,600 --> 00:01:01,920 Speaker 1: in them, if you know what I mean, two more 19 00:01:01,960 --> 00:01:05,759 Speaker 1: interest rate increases from the RBA. Lucy ellis former Deputy 20 00:01:05,800 --> 00:01:08,640 Speaker 1: Governor of the RBA, now Chief economists at West pexas 21 00:01:08,800 --> 00:01:13,479 Speaker 1: three more. This morning, HSB chief economist Paul Bloxam says, 22 00:01:13,680 --> 00:01:17,600 Speaker 1: the first quarter to June, that is, the three months 23 00:01:17,600 --> 00:01:22,520 Speaker 1: to June, that quarter will be a recession quarter for Australia. 24 00:01:22,520 --> 00:01:24,360 Speaker 1: That is, by that, I mean it's going to be minus. 25 00:01:24,400 --> 00:01:26,080 Speaker 1: It's a negative number. If we had two of those 26 00:01:26,080 --> 00:01:29,080 Speaker 1: in a row, we're looking at recession. So we need 27 00:01:29,120 --> 00:01:32,160 Speaker 1: to take a helicopter view. We really do what's happening 28 00:01:32,160 --> 00:01:34,440 Speaker 1: first of all, and what signals are we getting from 29 00:01:34,440 --> 00:01:37,840 Speaker 1: the markets and from investors themselves as to what's going 30 00:01:37,880 --> 00:01:39,920 Speaker 1: to happen. I have the ideal candidate for you. He's 31 00:01:39,920 --> 00:01:42,720 Speaker 1: been on the show before. It's David BASSINETI, chief economist 32 00:01:42,800 --> 00:01:44,480 Speaker 1: at Basis Shares. How are you, David? 33 00:01:44,600 --> 00:01:46,200 Speaker 2: Great taberia with the jones? Not too bad? 34 00:01:46,280 --> 00:01:49,520 Speaker 1: Thanks, rapidly revising your numbers day by day. It must 35 00:01:49,520 --> 00:01:53,880 Speaker 1: be quite a period to be an economist, especially at 36 00:01:53,920 --> 00:01:57,200 Speaker 1: the cold face like you are, with people making investment decisions, 37 00:01:57,240 --> 00:01:59,720 Speaker 1: thousands of people making decisions. I suppose, off the back 38 00:01:59,760 --> 00:02:02,760 Speaker 1: of where you're coming from, let's have a look at 39 00:02:02,880 --> 00:02:05,200 Speaker 1: if we would. Let's let's just stand back and say, okay, 40 00:02:05,320 --> 00:02:09,880 Speaker 1: how different was this quarter compared to the quarter that 41 00:02:09,919 --> 00:02:13,080 Speaker 1: perhaps consensus expectations had in January. 42 00:02:13,560 --> 00:02:15,400 Speaker 2: Yeah, well, look, as you mentioned, like a lot of 43 00:02:15,440 --> 00:02:18,320 Speaker 2: markets are are in correction territory. I mean, for the record, 44 00:02:18,360 --> 00:02:20,560 Speaker 2: the year to date numbers for the S and P 45 00:02:20,680 --> 00:02:23,040 Speaker 2: it's down seven and a half percent, the Nasdaq is 46 00:02:23,080 --> 00:02:27,240 Speaker 2: down ten percent, Europe down about six percent. Our market 47 00:02:27,280 --> 00:02:29,360 Speaker 2: is actually it's down, but not as much so. The 48 00:02:29,400 --> 00:02:33,400 Speaker 2: ASEX two hundred year to date is only down three percent. Meanwhile, 49 00:02:33,440 --> 00:02:36,440 Speaker 2: we've had obviously oil prices are up eighty percent over 50 00:02:36,480 --> 00:02:39,119 Speaker 2: that period, have had a big surgeon. All prices, bond 51 00:02:39,160 --> 00:02:41,160 Speaker 2: yields have gone up, So I think, you know, the 52 00:02:41,240 --> 00:02:44,000 Speaker 2: story has been you know, the expectation going into this 53 00:02:44,080 --> 00:02:47,040 Speaker 2: year was markets could continue to grind high. Global growth 54 00:02:47,160 --> 00:02:51,480 Speaker 2: was looking okay, Corporate earnings globally was looking okay. Inflation 55 00:02:51,680 --> 00:02:54,240 Speaker 2: when you strip out tariffs was sort of under control, 56 00:02:54,280 --> 00:02:56,280 Speaker 2: and the FED was looking to cut interest rates, so 57 00:02:56,360 --> 00:03:00,000 Speaker 2: bond yields were supported. With markets, what we were seeing 58 00:03:00,160 --> 00:03:02,320 Speaker 2: was a bit of a rotation. So some of the 59 00:03:02,360 --> 00:03:06,240 Speaker 2: non US markets, Japan emerging markets doing better than the US. 60 00:03:06,280 --> 00:03:08,640 Speaker 2: And you know, prior to the war that the key 61 00:03:08,720 --> 00:03:11,720 Speaker 2: thing was Ai disruption and maybe that being a bit 62 00:03:11,760 --> 00:03:14,160 Speaker 2: more of a headwind for the US market, but not 63 00:03:14,240 --> 00:03:16,720 Speaker 2: one that would see the market fall, but maybe just 64 00:03:16,800 --> 00:03:19,799 Speaker 2: maybe not perform as well as some other markets, which 65 00:03:19,840 --> 00:03:22,079 Speaker 2: has been different from what we've seen in years gone by. 66 00:03:22,120 --> 00:03:25,160 Speaker 2: You know, US has been outperforming for many years, and 67 00:03:25,200 --> 00:03:28,120 Speaker 2: so there's a talk of that great rotation. But you know, 68 00:03:28,360 --> 00:03:31,600 Speaker 2: the war has thrown everything up in the air, and 69 00:03:31,639 --> 00:03:35,360 Speaker 2: it's pushed down equity markets, it's pushed up oil prices, 70 00:03:35,440 --> 00:03:38,600 Speaker 2: it's pushed up bond yields, and yeah, just thrown everything. 71 00:03:38,800 --> 00:03:42,000 Speaker 2: We've shifted gears to a whole new situation. At the moment, I. 72 00:03:42,000 --> 00:03:44,440 Speaker 1: Don't want to go down any sort of tributaries too 73 00:03:44,520 --> 00:03:46,600 Speaker 1: quickly because the listeners would like to get a picture. 74 00:03:46,640 --> 00:03:49,480 Speaker 1: I'm sure of where we are and to what extent 75 00:03:49,520 --> 00:03:52,360 Speaker 1: that is enough where with what we'd be Gold hasn't 76 00:03:52,400 --> 00:03:54,720 Speaker 1: performed at all. In fact, it's had its worst month 77 00:03:54,920 --> 00:03:58,120 Speaker 1: in a decade. So that's another surprise, isn't it. So 78 00:03:58,160 --> 00:03:59,760 Speaker 1: some of these drivers that we were all sort of 79 00:03:59,760 --> 00:04:03,920 Speaker 1: see back with they've changed. I know it's very hard 80 00:04:03,960 --> 00:04:07,800 Speaker 1: to call on these things, but I see some of 81 00:04:07,840 --> 00:04:11,320 Speaker 1: the very top people in the world, you know that 82 00:04:11,880 --> 00:04:14,360 Speaker 1: in terms of finance. The head of Gorman Sacks and 83 00:04:14,400 --> 00:04:17,000 Speaker 1: ahead of other big wall streets that of Parahouse are 84 00:04:17,040 --> 00:04:20,960 Speaker 1: saying they told the market reaction would be worth Do 85 00:04:20,960 --> 00:04:23,320 Speaker 1: you think the market drops so far reflects the problems 86 00:04:23,320 --> 00:04:24,159 Speaker 1: that are emerging. 87 00:04:24,640 --> 00:04:27,000 Speaker 2: Well, I think there's two reasons why the markets haven't 88 00:04:27,000 --> 00:04:30,719 Speaker 2: maybe sold off as much as oil prices, for example, 89 00:04:30,720 --> 00:04:33,960 Speaker 2: are up you know, over one hundred dollars a barrel. 90 00:04:34,080 --> 00:04:35,800 Speaker 2: You know, we've had like a massive shock. You know, 91 00:04:35,839 --> 00:04:38,680 Speaker 2: I've had ten to twenty million barrels a day lost, 92 00:04:38,800 --> 00:04:41,559 Speaker 2: so you know, ten to twenty percent of global oil 93 00:04:41,600 --> 00:04:45,320 Speaker 2: supply has been basically shut off. Now. The thing is 94 00:04:45,360 --> 00:04:47,600 Speaker 2: that will hit markets with a lag because a lot 95 00:04:47,600 --> 00:04:50,560 Speaker 2: of the ships that you know, there's a lag before 96 00:04:50,680 --> 00:04:52,800 Speaker 2: ships leaving the straight up on wards, which has been 97 00:04:52,880 --> 00:04:56,880 Speaker 2: blocked flow through to refineries and affect supplies. So we've 98 00:04:56,880 --> 00:05:00,920 Speaker 2: had a few weeks where ships were still arriving at 99 00:05:00,960 --> 00:05:04,039 Speaker 2: their destinations and delivering oil. The problem will be and 100 00:05:04,080 --> 00:05:06,800 Speaker 2: it's starting to emerge now that there's no new ships 101 00:05:06,800 --> 00:05:09,400 Speaker 2: coming through and so the blockage in the oil market, 102 00:05:09,560 --> 00:05:11,520 Speaker 2: it has had an effect. But the longer this war 103 00:05:11,640 --> 00:05:14,000 Speaker 2: drags on the bigger the effect on the oil market. 104 00:05:14,440 --> 00:05:17,039 Speaker 2: I think the other factor is just simply what's being 105 00:05:17,080 --> 00:05:19,520 Speaker 2: called the taco trade. You know, Trump all wes chickens out. 106 00:05:19,520 --> 00:05:22,440 Speaker 2: I think markets have been anticipating, you know, the worst, 107 00:05:23,680 --> 00:05:26,080 Speaker 2: if there's to the extent the equity market sells off, 108 00:05:26,240 --> 00:05:29,200 Speaker 2: bonyards go higher, all prices go higher, that he's going 109 00:05:29,240 --> 00:05:31,240 Speaker 2: to like look to back out, you know, and we've 110 00:05:31,279 --> 00:05:34,440 Speaker 2: seen some signs of that, and sort of markets are 111 00:05:34,480 --> 00:05:36,320 Speaker 2: now caught in this bind. You know. On the one hand, 112 00:05:36,360 --> 00:05:39,520 Speaker 2: Donald Trump says he's negotiating and talks are going well. 113 00:05:39,880 --> 00:05:42,600 Speaker 2: On the other hand, you know, troops are heading toward 114 00:05:42,640 --> 00:05:44,640 Speaker 2: the Middle East, and he says if they don't strike, 115 00:05:44,640 --> 00:05:47,320 Speaker 2: as I ear, he's going to drop a ton more 116 00:05:47,360 --> 00:05:49,680 Speaker 2: bombs on our arms. So we're in this state of 117 00:05:49,680 --> 00:05:52,560 Speaker 2: flux really at the moment. But again I think why 118 00:05:52,600 --> 00:05:54,760 Speaker 2: the markets haven't sold off as much as firstly, the 119 00:05:54,839 --> 00:05:58,400 Speaker 2: oil shock is still a lagged effect and we yet 120 00:05:58,440 --> 00:06:01,240 Speaker 2: to see the worst of that. Market has been hoping that, yeah, 121 00:06:01,279 --> 00:06:05,080 Speaker 2: Donald Trump would find an exit strategy before got too bad, 122 00:06:05,120 --> 00:06:06,880 Speaker 2: but so far that hasn't happened. 123 00:06:06,720 --> 00:06:10,560 Speaker 1: Right, Okay, So broadly we see that the market obviously 124 00:06:10,640 --> 00:06:13,960 Speaker 1: is down when many people thought it would be tracking well. 125 00:06:14,279 --> 00:06:18,640 Speaker 1: Inflation is higher than we expected. Interest rates have gone 126 00:06:18,720 --> 00:06:21,839 Speaker 1: up and are going to continue going up. The full impact, 127 00:06:21,880 --> 00:06:24,800 Speaker 1: as you see to listeners of the oil shock has 128 00:06:24,839 --> 00:06:27,679 Speaker 1: not been felt, and perhaps that means the markets haven't 129 00:06:27,680 --> 00:06:31,000 Speaker 1: felt it yet. Have you changed your numbers in any 130 00:06:31,000 --> 00:06:34,320 Speaker 1: significant way in terms of outlook for the year. 131 00:06:34,800 --> 00:06:37,360 Speaker 2: Yeah, Look, I think as you mentioned interest rates, I mean, look, 132 00:06:37,480 --> 00:06:39,800 Speaker 2: so this is an oil shock, and so oil stocks 133 00:06:39,839 --> 00:06:43,359 Speaker 2: add upward pressure on inflation through the energy channel, but 134 00:06:43,440 --> 00:06:46,120 Speaker 2: also depress economic growth because you know, if you've got 135 00:06:46,160 --> 00:06:48,400 Speaker 2: to spend more on petrol, which is an essential good, 136 00:06:48,400 --> 00:06:50,800 Speaker 2: people kind of need to spend money on petrol, That 137 00:06:50,880 --> 00:06:53,560 Speaker 2: means I can spend less money elsewhere. So it has 138 00:06:53,600 --> 00:06:56,520 Speaker 2: mixed implications for central banks. Usually they try to look 139 00:06:56,520 --> 00:06:59,200 Speaker 2: through these shocks. But what we're seeing is that markets 140 00:06:59,240 --> 00:07:03,240 Speaker 2: are banks seem to be more worried about the inflationary consequences. 141 00:07:03,279 --> 00:07:06,279 Speaker 2: And so you've seen markets price out the rate cuts 142 00:07:06,320 --> 00:07:08,560 Speaker 2: are expecting in the US and now price in more 143 00:07:08,640 --> 00:07:11,720 Speaker 2: rate hikes in Australia for example. So look in terms 144 00:07:11,720 --> 00:07:15,240 Speaker 2: of macro forecast, yeah, I mean I've lifted my inflation 145 00:07:15,400 --> 00:07:18,960 Speaker 2: numbers for the Dune quarter, So we're looking at just 146 00:07:19,040 --> 00:07:22,720 Speaker 2: over four percent for headline inflation in the June quarter, 147 00:07:22,760 --> 00:07:26,400 Speaker 2: could potentially be five to six percent now and obviously 148 00:07:26,400 --> 00:07:28,600 Speaker 2: that's going to hurt consumer spending, it's going to hurt 149 00:07:28,600 --> 00:07:32,160 Speaker 2: real income. So economic growth was looking to maybe be, 150 00:07:32,400 --> 00:07:34,800 Speaker 2: you know, around the two and a half percent, it's 151 00:07:34,800 --> 00:07:36,600 Speaker 2: probably going to be closer to two and maybe a 152 00:07:36,600 --> 00:07:40,400 Speaker 2: little bit under. So yeah, so the consequence is higher inflation, 153 00:07:40,600 --> 00:07:45,040 Speaker 2: weaker growth. And I'm still of the case that the RBA. 154 00:07:45,200 --> 00:07:47,680 Speaker 2: I think the RBA, even before the war was probably 155 00:07:47,720 --> 00:07:50,640 Speaker 2: planning to raise rates in February and in May because 156 00:07:50,680 --> 00:07:54,040 Speaker 2: we had an inflation problem even before the war began. 157 00:07:54,440 --> 00:07:56,240 Speaker 2: And I think the impact of the war has been 158 00:07:56,280 --> 00:07:58,440 Speaker 2: to add in an extra rate hike, which we did 159 00:07:58,440 --> 00:08:01,600 Speaker 2: get in March. But I think, and maybe naively, I 160 00:08:01,640 --> 00:08:04,600 Speaker 2: think May will be enough. We'll be back well basically, 161 00:08:04,680 --> 00:08:06,600 Speaker 2: that'll be three rate hikes for the year, and it 162 00:08:06,640 --> 00:08:09,160 Speaker 2: will have unwound all of the rate cuts of last year, 163 00:08:09,680 --> 00:08:11,880 Speaker 2: take us back to where we were, and that was 164 00:08:11,880 --> 00:08:14,960 Speaker 2: a time when that level of interstrates helped to slow 165 00:08:15,040 --> 00:08:18,120 Speaker 2: economic growth and bring down inflation in the past. And 166 00:08:18,200 --> 00:08:20,560 Speaker 2: I just don't think the RBA would want to throw 167 00:08:20,600 --> 00:08:24,040 Speaker 2: a lot more. You know, I think the all price 168 00:08:24,080 --> 00:08:26,720 Speaker 2: shock is going to be pretty damaging up in itself 169 00:08:27,040 --> 00:08:28,960 Speaker 2: if it lasts, and I don't think they want to 170 00:08:29,000 --> 00:08:32,240 Speaker 2: sort of be adding to the downside risk to the economy, 171 00:08:32,480 --> 00:08:35,960 Speaker 2: So there is a balancing actor. I recognize some forecasters 172 00:08:35,960 --> 00:08:38,439 Speaker 2: are saying three more rate risers, like you're almost guaranteeing 173 00:08:38,559 --> 00:08:41,280 Speaker 2: recession if you start talking about that, And I don't 174 00:08:41,280 --> 00:08:44,280 Speaker 2: think a recession is warranted at this stage. But yeah, 175 00:08:44,320 --> 00:08:46,080 Speaker 2: so that's how I've been thinking about things. 176 00:08:46,200 --> 00:08:48,360 Speaker 1: That's very clear. So I think what we'll do is 177 00:08:48,400 --> 00:08:49,880 Speaker 1: we take a break and I'll we come back. We're 178 00:08:49,920 --> 00:08:52,440 Speaker 1: going to look at so there are settings, right and 179 00:08:52,520 --> 00:08:55,760 Speaker 1: obviously David's in a position to see the ETF fluws 180 00:08:55,800 --> 00:08:58,280 Speaker 1: particularly so we can get an idea of what other 181 00:08:58,360 --> 00:09:01,200 Speaker 1: investors are doing just now and what signals it gives 182 00:09:01,280 --> 00:09:04,680 Speaker 1: us for investing from here on in for the rest 183 00:09:04,720 --> 00:09:08,240 Speaker 1: of the year. And there are obviously very particular issues 184 00:09:08,280 --> 00:09:10,480 Speaker 1: that are out there now. Energy transition is a totally 185 00:09:10,480 --> 00:09:14,040 Speaker 1: different story than it was. Energy is entirely different story. 186 00:09:14,360 --> 00:09:17,000 Speaker 1: Look at those petrol stocks, they are thirty percent or 187 00:09:17,040 --> 00:09:19,559 Speaker 1: so all of a sudden the software companies are kind 188 00:09:19,559 --> 00:09:21,319 Speaker 1: of down the out more or less the same amount, 189 00:09:21,520 --> 00:09:24,000 Speaker 1: so very different market forming. But we'll come back to 190 00:09:24,040 --> 00:09:37,640 Speaker 1: him in a moment. Hello, Welcome back to The Australian's 191 00:09:37,640 --> 00:09:41,760 Speaker 1: Money Puzzle podcast. James Kirby here with David Bassinetes, the 192 00:09:41,800 --> 00:09:46,280 Speaker 1: chief economist at Better Shares b ETA Shares. That's the 193 00:09:46,440 --> 00:09:49,640 Speaker 1: ETF house. Okay, So you watch those flows of the 194 00:09:49,640 --> 00:09:52,719 Speaker 1: ETFs all the time, and I suppose every year as 195 00:09:52,760 --> 00:09:55,479 Speaker 1: the ETF become more and more important and more reflective 196 00:09:56,040 --> 00:09:59,160 Speaker 1: of investor sentiment and the market, the flows are more important. 197 00:10:00,080 --> 00:10:02,000 Speaker 1: Can you give us a snapshot as to what people 198 00:10:02,000 --> 00:10:04,680 Speaker 1: have been doing in the first quarter, particularly to the 199 00:10:04,679 --> 00:10:06,679 Speaker 1: extent that they vary from what we thought there might 200 00:10:06,679 --> 00:10:07,200 Speaker 1: have been doing. 201 00:10:07,440 --> 00:10:09,559 Speaker 2: Yeah, looking at the numbers, I mean what we've seen 202 00:10:09,600 --> 00:10:12,439 Speaker 2: in terms of flows into ETFs over the past few years, 203 00:10:12,480 --> 00:10:15,160 Speaker 2: is that really the line's share of investment in the 204 00:10:15,200 --> 00:10:17,880 Speaker 2: equity market has been in global equities. You know, people 205 00:10:18,480 --> 00:10:21,040 Speaker 2: mess to see ETFs is a great way of getting 206 00:10:21,040 --> 00:10:24,760 Speaker 2: that international diversification. They might hold a lot of like 207 00:10:24,920 --> 00:10:28,160 Speaker 2: blue chip Australian companies, but just to get that diversification 208 00:10:28,280 --> 00:10:32,280 Speaker 2: they use ETF. So flows into international ETFs equity ETFs 209 00:10:32,440 --> 00:10:34,559 Speaker 2: tended to be larger than for Australia, but so far 210 00:10:34,640 --> 00:10:38,120 Speaker 2: this share we've seen a gravitation towards the Australian market, 211 00:10:38,200 --> 00:10:41,560 Speaker 2: so the flows have been more lineball, so you know, 212 00:10:41,760 --> 00:10:45,120 Speaker 2: equal amount going into the Australian market as into the 213 00:10:45,160 --> 00:10:47,760 Speaker 2: global markets, which is a big ship. So I think, 214 00:10:47,760 --> 00:10:51,120 Speaker 2: you know, people are hunkering down and being closer to home, 215 00:10:51,160 --> 00:10:53,680 Speaker 2: and that's consistent with what I said earlier. Our market 216 00:10:53,760 --> 00:10:56,160 Speaker 2: hasn't it's come off, but hasn't come off as much, 217 00:10:56,240 --> 00:10:59,920 Speaker 2: and I think our mining and energy companies are probably 218 00:11:00,080 --> 00:11:01,640 Speaker 2: you know, helping in that groud. We do have a 219 00:11:01,640 --> 00:11:05,480 Speaker 2: greater exposure to the resources and energy sector, lower exposure 220 00:11:05,520 --> 00:11:08,480 Speaker 2: to the technology sector, which as you pointed out, has 221 00:11:08,559 --> 00:11:12,200 Speaker 2: been hit harder globally. So that's one interest in the 222 00:11:12,200 --> 00:11:15,920 Speaker 2: commodity space. So we're seeing good flows into our crude 223 00:11:15,920 --> 00:11:19,640 Speaker 2: oil ETF triple O. Obviously that sort of tracks the 224 00:11:19,679 --> 00:11:22,960 Speaker 2: futures price of oil and even fuel which is an 225 00:11:23,000 --> 00:11:26,800 Speaker 2: ETIF that tracks global energy companies and so two ways 226 00:11:26,840 --> 00:11:30,280 Speaker 2: to play the oil shock is through either buying the 227 00:11:30,320 --> 00:11:34,439 Speaker 2: crude oil futures price or buying companies that benefit from 228 00:11:34,520 --> 00:11:36,760 Speaker 2: higher oil prices, so we're seeing good flows into that. 229 00:11:37,600 --> 00:11:39,680 Speaker 2: Another thing that people like to look at is the 230 00:11:39,679 --> 00:11:42,480 Speaker 2: balance between geared and bear funds. So we have funds, 231 00:11:42,600 --> 00:11:44,320 Speaker 2: you know, if you think the market's going to go 232 00:11:44,400 --> 00:11:46,440 Speaker 2: down and you want to obviously bet on the market 233 00:11:46,480 --> 00:11:49,280 Speaker 2: going down or protect your portfolio, can buy bear fund 234 00:11:49,760 --> 00:11:53,000 Speaker 2: or we have geared funds. What we have seen is 235 00:11:53,040 --> 00:11:56,000 Speaker 2: more interest in buying the geared funds still, so people 236 00:11:56,080 --> 00:11:59,320 Speaker 2: still have a dip buying mentality rather than looking to 237 00:11:59,559 --> 00:12:02,560 Speaker 2: load up on bear funds fearing, you know, there's worse 238 00:12:02,640 --> 00:12:02,960 Speaker 2: to come. 239 00:12:03,160 --> 00:12:07,079 Speaker 1: Okay, that's interesting, and those geared funds are what happens 240 00:12:07,120 --> 00:12:08,880 Speaker 1: in the effects what you said at the start, which 241 00:12:08,920 --> 00:12:12,679 Speaker 1: is more or less fifty to fifty global local. And 242 00:12:13,280 --> 00:12:17,800 Speaker 1: obviously that particular allocation balance has been fruitful to the 243 00:12:17,800 --> 00:12:21,079 Speaker 1: extent that you lost less in the last file. But 244 00:12:21,120 --> 00:12:23,480 Speaker 1: what I want to ask you is tell me what 245 00:12:23,559 --> 00:12:25,439 Speaker 1: you think of that. Is that just nie jerk stuff 246 00:12:25,559 --> 00:12:27,000 Speaker 1: or is there something more going on? 247 00:12:27,559 --> 00:12:29,760 Speaker 2: Look, I think what we are seeing. You know, again, 248 00:12:29,840 --> 00:12:33,760 Speaker 2: up until last few months, the big trend in ETFs 249 00:12:33,760 --> 00:12:37,800 Speaker 2: has been international equities has been US large cap technology companies. 250 00:12:38,120 --> 00:12:41,160 Speaker 2: The Nasdaq ETF I mean, one of our powerhouse ETFs 251 00:12:41,200 --> 00:12:45,880 Speaker 2: has been the Nasdaq one hundred ETF that holds Google, Amazon, Facebook, 252 00:12:46,160 --> 00:12:48,760 Speaker 2: those sort of companies. But the sort of fervor for 253 00:12:48,840 --> 00:12:52,040 Speaker 2: that area of the market is certainly called at the moment, 254 00:12:52,320 --> 00:12:55,160 Speaker 2: and there's a shift toward more you know, I guess 255 00:12:55,160 --> 00:12:59,920 Speaker 2: we call them value sectors like energy, materials, consumer staples, 256 00:13:00,320 --> 00:13:04,200 Speaker 2: and these are sectors that are more prevalent in countries 257 00:13:04,280 --> 00:13:07,040 Speaker 2: like Europe for example, and Japan to an extent, and 258 00:13:07,080 --> 00:13:11,400 Speaker 2: Australia obviously through energy and materials. And look again, in 259 00:13:11,480 --> 00:13:13,600 Speaker 2: terms of isn't the right call? I mean, I think 260 00:13:13,840 --> 00:13:16,720 Speaker 2: our view had been prior to the war that AI 261 00:13:16,880 --> 00:13:19,440 Speaker 2: disruption was going to become a bit more of a 262 00:13:19,480 --> 00:13:23,000 Speaker 2: headwind for the US tech sector, Whereas you know, since Chat, 263 00:13:23,040 --> 00:13:26,600 Speaker 2: GBT and twenty two anything AI related has been a 264 00:13:26,640 --> 00:13:29,160 Speaker 2: positive for technology. But just in the last three to 265 00:13:29,200 --> 00:13:31,360 Speaker 2: six months it has become a bit more of a negative. 266 00:13:31,559 --> 00:13:34,440 Speaker 1: Okay, So yeah, listeners who would have tuned into the 267 00:13:34,480 --> 00:13:36,440 Speaker 1: last show, which was with Ben James, who was the 268 00:13:36,480 --> 00:13:40,680 Speaker 1: top advisor his CEO of a Scalar Partners, we put 269 00:13:40,720 --> 00:13:44,280 Speaker 1: it to him what he thought people should start doing 270 00:13:44,320 --> 00:13:47,120 Speaker 1: now in terms of our location, and particularly inside the 271 00:13:47,160 --> 00:13:50,880 Speaker 1: market and inside the share market I'm talking about, and 272 00:13:50,920 --> 00:13:53,960 Speaker 1: he mentioned that he thought, first of all, he thought 273 00:13:54,040 --> 00:13:57,559 Speaker 1: gold was still a very valid call. He then talked 274 00:13:57,600 --> 00:14:05,400 Speaker 1: about energy transition infrastructure, particularly because of the built in 275 00:14:06,040 --> 00:14:10,600 Speaker 1: inflection hedge there, and even retail reads. Would you believe, 276 00:14:11,120 --> 00:14:14,920 Speaker 1: he mentioned, So, what's the story on that? I imagine, let's 277 00:14:14,920 --> 00:14:16,480 Speaker 1: take them one by one if you're able to do. 278 00:14:16,640 --> 00:14:18,240 Speaker 1: But I don't know what you've got. You're doing very 279 00:14:18,240 --> 00:14:20,560 Speaker 1: well considering I know that you are actually on the road, 280 00:14:20,760 --> 00:14:23,120 Speaker 1: not in the confident of your office. How about gold, 281 00:14:23,280 --> 00:14:25,840 Speaker 1: what's the floor? Have you any call on the flows there? 282 00:14:26,120 --> 00:14:29,080 Speaker 2: Yeah, it suffice to say the flows are being more 283 00:14:29,160 --> 00:14:32,160 Speaker 2: choppy this year. So there's been no net you know, 284 00:14:32,320 --> 00:14:36,080 Speaker 2: significant inflows into gold, but obviously there have been up 285 00:14:36,200 --> 00:14:39,200 Speaker 2: until recently, I mean just on gold. I mean it 286 00:14:39,280 --> 00:14:41,400 Speaker 2: is a bit surprising that gold was taken a hit 287 00:14:41,480 --> 00:14:44,560 Speaker 2: because you would have thought with war inflation, gold would 288 00:14:44,600 --> 00:14:47,000 Speaker 2: be a safe haven. But I think what we're seeing 289 00:14:47,080 --> 00:14:49,520 Speaker 2: is that people are cashing up. What's tended to do 290 00:14:49,640 --> 00:14:51,920 Speaker 2: worse since the war has been the things that we're 291 00:14:51,920 --> 00:14:54,200 Speaker 2: doing well just before the war. I think people are 292 00:14:54,600 --> 00:14:57,280 Speaker 2: having to cash up some of their winning trades to 293 00:14:57,320 --> 00:14:59,240 Speaker 2: fund some of their losing trades, or just go to 294 00:14:59,320 --> 00:15:02,000 Speaker 2: cash and se Some examples like the Bank of Turkey 295 00:15:02,040 --> 00:15:04,880 Speaker 2: for example, Central Bank of Turkey sold a lot of 296 00:15:04,960 --> 00:15:08,120 Speaker 2: gold to basically help defend its currency. So we're seeing 297 00:15:08,440 --> 00:15:11,800 Speaker 2: central banks sell gold to shore up their currencies because 298 00:15:11,800 --> 00:15:14,640 Speaker 2: they've been weakening in this environment. So you know, again 299 00:15:14,680 --> 00:15:17,680 Speaker 2: the fundamental underpinnings of goal I think is still in place, 300 00:15:17,720 --> 00:15:22,600 Speaker 2: but we're just getting some portfolio reallocations during this period 301 00:15:22,640 --> 00:15:25,920 Speaker 2: of uncertainty and needing to fund you know, selling your 302 00:15:25,920 --> 00:15:28,640 Speaker 2: profitable trades to fund other trades at the moment, which 303 00:15:28,680 --> 00:15:29,240 Speaker 2: is wrong. 304 00:15:29,560 --> 00:15:34,360 Speaker 1: That's a trading, it's not structure. Yes, coming towards all right. 305 00:15:34,360 --> 00:15:36,600 Speaker 1: And what about the other path that I mentioned there 306 00:15:36,760 --> 00:15:40,800 Speaker 1: in terms of any signs in the flows into ETFs 307 00:15:40,880 --> 00:15:44,200 Speaker 1: on people looking for infrastructure for instance, they're looking for 308 00:15:44,200 --> 00:15:48,320 Speaker 1: that inflation heads, looking for that built in CPI buffer. 309 00:15:48,440 --> 00:15:51,280 Speaker 2: Yes, I mean definitely like infrastructure. I think. I mean 310 00:15:51,280 --> 00:15:56,400 Speaker 2: this is interesting because infrastructure has been doing well even 311 00:15:56,440 --> 00:16:00,000 Speaker 2: before the war because basically when you think about infrastructu 312 00:16:00,040 --> 00:16:02,280 Speaker 2: so you know, it's ports and rere ports, and these 313 00:16:02,320 --> 00:16:05,680 Speaker 2: are real assets that are unlikely to be disrupted by 314 00:16:05,720 --> 00:16:10,040 Speaker 2: AI or less likely. So infrastructure has become popular simply 315 00:16:10,080 --> 00:16:13,000 Speaker 2: because it's got less AI disruption risk. And certainly the 316 00:16:13,040 --> 00:16:16,960 Speaker 2: returns in global infrastructure over recent months has been very good. 317 00:16:17,000 --> 00:16:18,480 Speaker 2: Over the past year have been very good. 318 00:16:18,680 --> 00:16:20,240 Speaker 1: Yeah, why is that, David? Do you think? 319 00:16:20,560 --> 00:16:24,000 Speaker 2: Well? For example, so infrastructure wins from my own in 320 00:16:24,040 --> 00:16:28,400 Speaker 2: two ways. Firstly, the energy companies because AI demands a 321 00:16:28,400 --> 00:16:31,640 Speaker 2: lot of energy, so the energy producers that are within 322 00:16:31,800 --> 00:16:36,200 Speaker 2: infrastructure been benefiting. Secondly, as I said, it's a safe 323 00:16:36,200 --> 00:16:38,480 Speaker 2: haven if you like, in a world that's been disrupted 324 00:16:38,520 --> 00:16:42,000 Speaker 2: by AI. So I think there's been the other trend there. 325 00:16:42,080 --> 00:16:44,960 Speaker 2: So I'm not across the flows. We have a new 326 00:16:45,040 --> 00:16:48,400 Speaker 2: Global Infrastructure ETF, but it's pretty new, so I wouldn't 327 00:16:48,560 --> 00:16:51,000 Speaker 2: say we've seen a lot of flow into that as yet, 328 00:16:51,040 --> 00:16:53,240 Speaker 2: and I couldn't really speak to the other ones out 329 00:16:53,280 --> 00:16:55,440 Speaker 2: in the market at the moment, but definitely the price 330 00:16:55,520 --> 00:16:56,840 Speaker 2: performance has been very good. 331 00:16:57,000 --> 00:17:00,920 Speaker 1: Yes, okay, So tell us what your call is now, 332 00:17:01,080 --> 00:17:04,119 Speaker 1: looking at what those flows are, what would you say 333 00:17:04,119 --> 00:17:08,119 Speaker 1: that Australian investors seem to be doing. Having watched the 334 00:17:08,240 --> 00:17:12,400 Speaker 1: markets really take a kicking in the first quarter calendar 335 00:17:12,400 --> 00:17:13,400 Speaker 1: of twenty twenty six. 336 00:17:13,760 --> 00:17:16,280 Speaker 2: Yeah, I mean, I think maybe staying closer to home, 337 00:17:16,400 --> 00:17:19,080 Speaker 2: closer to what they know tending to be, they says. 338 00:17:19,080 --> 00:17:20,880 Speaker 2: I said, if you look at the balance of flows 339 00:17:20,920 --> 00:17:23,320 Speaker 2: between geared and bear funds, they tend to be more 340 00:17:23,359 --> 00:17:25,440 Speaker 2: inclined to buy the dips. So there's still a view 341 00:17:25,480 --> 00:17:28,320 Speaker 2: that the war could be over soon and the markets 342 00:17:28,359 --> 00:17:30,720 Speaker 2: are going to bounce back. So there's been some buying 343 00:17:30,720 --> 00:17:34,600 Speaker 2: into the geared funds, but also just buying outside of 344 00:17:34,640 --> 00:17:38,000 Speaker 2: the US technology sector and so closest you know, Australian 345 00:17:38,200 --> 00:17:42,800 Speaker 2: going toward value, going toward energy as a play over technology. 346 00:17:42,960 --> 00:17:46,159 Speaker 2: I think that's been the key theme the flows overall, 347 00:17:46,200 --> 00:17:48,760 Speaker 2: I mean maybe still overall cautious. I mean, I think 348 00:17:48,800 --> 00:17:52,240 Speaker 2: the radar flows into equities for example, has slowed a little. 349 00:17:52,520 --> 00:17:55,760 Speaker 2: We've seen maybe more going into cash for example, even 350 00:17:55,760 --> 00:18:00,120 Speaker 2: cash ETF's been cashed up. So yeah, cautious and gravitating 351 00:18:00,119 --> 00:18:02,919 Speaker 2: away from the technology sector towards the more of the 352 00:18:03,000 --> 00:18:03,760 Speaker 2: value sectors. 353 00:18:03,840 --> 00:18:07,560 Speaker 1: And when you say that in this quarter we'd seeing 354 00:18:07,560 --> 00:18:11,879 Speaker 1: fifty to fifty flows local and offshore. What was it 355 00:18:11,960 --> 00:18:13,960 Speaker 1: running at before this quarter. 356 00:18:14,160 --> 00:18:16,400 Speaker 2: It'd probably be seventy thirty you know as. 357 00:18:16,320 --> 00:18:17,960 Speaker 1: Far as that you know, yeah, I had rolled up 358 00:18:18,000 --> 00:18:18,560 Speaker 1: to that peak. 359 00:18:18,640 --> 00:18:22,880 Speaker 2: Well yeah, in terms of global total flows into equity ETFs, 360 00:18:23,280 --> 00:18:28,119 Speaker 2: the line's share still tends to go toward the global ETFs, 361 00:18:28,200 --> 00:18:31,640 Speaker 2: just to provide that, you know, global diversification. But yeah, 362 00:18:32,040 --> 00:18:33,800 Speaker 2: so far this share it's been a more of an 363 00:18:33,840 --> 00:18:34,439 Speaker 2: even split. 364 00:18:34,560 --> 00:18:37,440 Speaker 1: Yes, it's that interesting safety at home. But as you say, 365 00:18:37,440 --> 00:18:41,000 Speaker 1: it's a couple of things. There is energy exposure. There's 366 00:18:41,040 --> 00:18:46,000 Speaker 1: many exposure commodity, gold, copper, yes, aluminium being this morning's 367 00:18:46,000 --> 00:18:49,160 Speaker 1: hot commodity. And also you have the dividend player, which 368 00:18:49,160 --> 00:18:51,960 Speaker 1: we didn't mention, but there is the dividend aspect in 369 00:18:52,040 --> 00:18:55,760 Speaker 1: place on the Essex, which isn't common offshore, particularly in 370 00:18:55,840 --> 00:18:58,720 Speaker 1: the US. Okay, very good, We'll be back in one moment, folks. 371 00:18:58,720 --> 00:19:00,399 Speaker 1: I have kept some questions for they, but I just 372 00:19:00,400 --> 00:19:12,520 Speaker 1: want him to talk to back in one second. Hello, 373 00:19:12,600 --> 00:19:17,000 Speaker 1: Welcome back to The Australian's Money Puzzle podcast Easter Special folks. 374 00:19:17,080 --> 00:19:19,040 Speaker 1: We would just have one show this week. I wanted 375 00:19:19,080 --> 00:19:21,720 Speaker 1: to do something in the order of a review of 376 00:19:21,800 --> 00:19:25,080 Speaker 1: the quarter, which was much more interesting, that's for sure, 377 00:19:25,280 --> 00:19:27,560 Speaker 1: than we might have expected. When we all came back 378 00:19:27,600 --> 00:19:31,240 Speaker 1: after our summer holidays in January. David, My first question 379 00:19:31,280 --> 00:19:35,480 Speaker 1: is from James. Recent reports suggest the government is considering 380 00:19:35,560 --> 00:19:40,560 Speaker 1: reducing or eliminating the CGT discount under the banner of fairness. 381 00:19:41,040 --> 00:19:44,479 Speaker 1: What evidence is there that such changes would genuinely improve 382 00:19:44,520 --> 00:19:48,760 Speaker 1: fairness without worsening rents and investment in capital flight big 383 00:19:48,800 --> 00:19:52,239 Speaker 1: debate there. The consensus, David, which could be wrong, but 384 00:19:52,480 --> 00:19:54,600 Speaker 1: it seems to be the consensus just now is they 385 00:19:54,640 --> 00:19:58,040 Speaker 1: will change CGT. They will change the discount. It's currently 386 00:19:58,080 --> 00:20:00,800 Speaker 1: at fifty percent. After one year they will change that 387 00:20:00,920 --> 00:20:04,199 Speaker 1: to maybe twenty five percent or thirty three percent. And 388 00:20:04,400 --> 00:20:08,600 Speaker 1: also there will grandfather that that's a huge one, obviously, 389 00:20:09,640 --> 00:20:10,280 Speaker 1: what do you think. 390 00:20:10,440 --> 00:20:13,520 Speaker 2: Look, if that's the case, is probably the minimum change 391 00:20:13,600 --> 00:20:15,920 Speaker 2: that you know we would be expecting. The big one 392 00:20:16,000 --> 00:20:18,040 Speaker 2: is not to grandfather because you know a lot of 393 00:20:18,040 --> 00:20:20,240 Speaker 2: people who already got a lot of investment properties and 394 00:20:20,280 --> 00:20:22,480 Speaker 2: it will be changing the goalposts. I guess after the 395 00:20:22,560 --> 00:20:25,080 Speaker 2: fact that they brought the properties on a certain expectation. 396 00:20:25,240 --> 00:20:27,320 Speaker 1: Everything is grandfathered these days, isn't it. Can you think 397 00:20:27,320 --> 00:20:29,960 Speaker 1: of anything that was brought in it wasn't grandfather? And 398 00:20:30,000 --> 00:20:32,200 Speaker 1: by the way, for story, I sorry and we'll explain 399 00:20:32,359 --> 00:20:34,080 Speaker 1: just in case someone doesn't know what we're talking about. 400 00:20:34,080 --> 00:20:36,520 Speaker 1: Grandfather He means the people who are already doing it 401 00:20:36,560 --> 00:20:38,800 Speaker 1: are left alone. It's on new people that get hit 402 00:20:38,840 --> 00:20:39,440 Speaker 1: with the new loan. 403 00:20:39,640 --> 00:20:44,159 Speaker 2: Yes, now, ironically, I mean the argument against grandfather. I mean, 404 00:20:44,200 --> 00:20:47,480 Speaker 2: you are right most things are grandfather because people will say, 405 00:20:47,640 --> 00:20:50,879 Speaker 2: you know, we we it doesn't have to be grandfathered. 406 00:20:50,920 --> 00:20:52,560 Speaker 2: But I mean, I think it just seems to be, 407 00:20:52,760 --> 00:20:56,760 Speaker 2: you know, people have been invested on a certain more 408 00:20:57,240 --> 00:21:00,159 Speaker 2: than to change the more retrospectively, if you like, is 409 00:21:00,160 --> 00:21:03,159 Speaker 2: a bit unfair. So one aspect though of this is 410 00:21:03,200 --> 00:21:06,680 Speaker 2: that if they do grandfather it actually hurts younger investors 411 00:21:06,680 --> 00:21:08,159 Speaker 2: that are not need in the market. 412 00:21:08,240 --> 00:21:12,680 Speaker 1: Of course, it kind of ring fences the aldis right, Yeah, yeah. 413 00:21:12,320 --> 00:21:16,080 Speaker 2: Yeah, So that's one consequence of grandfathering it is it 414 00:21:16,160 --> 00:21:20,359 Speaker 2: really reduces that incentive that exists for younger investors that 415 00:21:20,480 --> 00:21:22,560 Speaker 2: might have wanted to invest in the property market or 416 00:21:22,600 --> 00:21:25,399 Speaker 2: even like what's been called rent vesting. Yes, younger people 417 00:21:25,400 --> 00:21:27,399 Speaker 2: are looking to rent where they want to live, but 418 00:21:27,520 --> 00:21:31,280 Speaker 2: buy an investment property somewhere else. And so there'll still 419 00:21:31,320 --> 00:21:33,600 Speaker 2: be advantages in doing that, but there'll be just less, 420 00:21:34,000 --> 00:21:37,160 Speaker 2: but look, if that's the minimum, probably wouldn't affect things 421 00:21:37,160 --> 00:21:39,240 Speaker 2: too much. To be honest. If there have been changes 422 00:21:39,280 --> 00:21:41,480 Speaker 2: in New Zealand and the UK where they have cut 423 00:21:41,520 --> 00:21:43,919 Speaker 2: back on investor incentives in property, and what we have 424 00:21:44,040 --> 00:21:47,520 Speaker 2: tended to see in those countries has been the share 425 00:21:47,520 --> 00:21:51,760 Speaker 2: of investors in the market falling modestly, not collapsing, but 426 00:21:51,800 --> 00:21:55,800 Speaker 2: there's been a small fall, more moderate fall. And say 427 00:21:55,840 --> 00:21:58,919 Speaker 2: the case of New Zealand, again the policy changes are 428 00:21:58,920 --> 00:22:01,480 Speaker 2: probably more signals in New Zealand, but the share of 429 00:22:01,520 --> 00:22:04,600 Speaker 2: investors went from you know, one third to one quarter 430 00:22:04,640 --> 00:22:05,240 Speaker 2: for example. 431 00:22:05,320 --> 00:22:08,120 Speaker 1: And do you know did they go further in those locations. 432 00:22:08,359 --> 00:22:11,360 Speaker 2: What they did was they cut back on your ability 433 00:22:11,400 --> 00:22:14,040 Speaker 2: their negative gear going forward. So that's a more significant 434 00:22:14,080 --> 00:22:16,960 Speaker 2: one if they were And in the UK, and look 435 00:22:17,000 --> 00:22:19,439 Speaker 2: I'm not across all the details in the UK, but 436 00:22:19,520 --> 00:22:22,679 Speaker 2: they did announce some changes in twenty fifteen and the 437 00:22:22,760 --> 00:22:26,000 Speaker 2: share of investor lending did fall from about sixteen percent 438 00:22:26,040 --> 00:22:28,679 Speaker 2: to ten percent, So the investors weren't as significant in 439 00:22:28,720 --> 00:22:32,080 Speaker 2: the UK. Obviously in Australia it's a lot higher, something 440 00:22:32,119 --> 00:22:35,240 Speaker 2: like thirty odd percent of the marketers or investors. So 441 00:22:35,400 --> 00:22:38,040 Speaker 2: look at the margin that would probably drop a little, 442 00:22:38,040 --> 00:22:41,960 Speaker 2: and you probably see first time buyers increasing their share 443 00:22:42,000 --> 00:22:45,040 Speaker 2: a little, but probably isn't going to affect house prices 444 00:22:45,080 --> 00:22:48,040 Speaker 2: all that much. Some estimates suggested two percent hit two 445 00:22:48,119 --> 00:22:52,159 Speaker 2: house prices relative to your baseline. But yeah, so if 446 00:22:52,240 --> 00:22:55,160 Speaker 2: that is all that happens, that would probably be the minimum. 447 00:22:55,600 --> 00:22:57,480 Speaker 2: I think, you know, a lot of property investors would 448 00:22:57,480 --> 00:23:00,280 Speaker 2: probably sire have a sigh of relief if that's all 449 00:23:00,280 --> 00:23:01,040 Speaker 2: what we did get. 450 00:23:01,160 --> 00:23:03,880 Speaker 1: Okay, yes, and we had Sam Wiley on the show. 451 00:23:03,880 --> 00:23:07,800 Speaker 1: You might know docorm Wiley University, and he has talked 452 00:23:07,800 --> 00:23:11,159 Speaker 1: about how behavior will change and people will hang out 453 00:23:11,160 --> 00:23:15,919 Speaker 1: to properties for longer. The economic theory. Yeah, okay, just 454 00:23:15,920 --> 00:23:19,320 Speaker 1: find a question from Susie s u z. There was 455 00:23:19,359 --> 00:23:23,360 Speaker 1: a lot of fanfare around the productivity summers. Who remembers that, 456 00:23:23,760 --> 00:23:27,520 Speaker 1: but productivity growth remain sluggish. It's one of the weakest 457 00:23:27,520 --> 00:23:30,080 Speaker 1: in the world, Susie. The positive focus seems to have 458 00:23:30,080 --> 00:23:34,760 Speaker 1: moved out to capital gains, tax and other priorities. Did 459 00:23:34,760 --> 00:23:37,359 Speaker 1: this come out of the productivity summers or was it 460 00:23:37,480 --> 00:23:40,760 Speaker 1: just a chat fest? Thank you, Susie. And obviously this 461 00:23:40,880 --> 00:23:44,639 Speaker 1: is information only, not advice, but just on the CGT. 462 00:23:45,240 --> 00:23:47,040 Speaker 1: When you answer the question, you said that was the 463 00:23:47,119 --> 00:23:49,440 Speaker 1: least we expect. What would be the most you expect? 464 00:23:49,920 --> 00:23:51,840 Speaker 1: If the least you expect is you know, just this 465 00:23:52,000 --> 00:23:55,560 Speaker 1: kind of nip and talk around the discount, what what 466 00:23:55,600 --> 00:23:56,719 Speaker 1: would be the most you expect? 467 00:23:57,080 --> 00:23:59,639 Speaker 2: I mean they could like not Grandfather for example. I mean, 468 00:23:59,680 --> 00:24:02,760 Speaker 2: that would be an immediate revenue boost, you know, if 469 00:24:02,880 --> 00:24:05,000 Speaker 2: they cut it from fifty to twenty five. The other 470 00:24:05,000 --> 00:24:07,359 Speaker 2: thing is negative gearing, you know, limiting the number of 471 00:24:07,359 --> 00:24:10,600 Speaker 2: properties you can negatively gear, or call limiting the amount 472 00:24:10,680 --> 00:24:13,960 Speaker 2: that you can negatively gear. I mean that's something New Zealand. 473 00:24:13,960 --> 00:24:16,040 Speaker 2: Did you know they kind of cut back on the 474 00:24:16,040 --> 00:24:18,520 Speaker 2: degree to which it can a negatively gear property. So 475 00:24:19,359 --> 00:24:21,639 Speaker 2: that's one area that could be touched that you know, 476 00:24:21,680 --> 00:24:23,800 Speaker 2: at the moment doesn't seem like it will be touched, 477 00:24:23,840 --> 00:24:24,880 Speaker 2: but yeah, they could. 478 00:24:24,760 --> 00:24:26,760 Speaker 1: And they are modeling it, of course to be you know, 479 00:24:26,880 --> 00:24:30,800 Speaker 1: we do know that Treasury is modeling around negative view. 480 00:24:31,000 --> 00:24:34,680 Speaker 1: So they are actively it is actively under consideration, regardless 481 00:24:34,720 --> 00:24:37,200 Speaker 1: of what the headlines might be saying to us, yes exactly, 482 00:24:37,359 --> 00:24:38,520 Speaker 1: which is often half surprised. 483 00:24:38,520 --> 00:24:44,240 Speaker 2: There's another David, Yeah, lookin on the productivity summit. As 484 00:24:44,240 --> 00:24:46,240 Speaker 2: you mentioned, I mean, look, it was largely a talk. 485 00:24:46,320 --> 00:24:48,840 Speaker 2: Best things did come out of it, I mean in 486 00:24:48,920 --> 00:24:51,920 Speaker 2: terms of tax nothing concrete. It was really just motherhood 487 00:24:52,000 --> 00:24:55,080 Speaker 2: statements about need to improve fairness of the tax system. 488 00:24:55,280 --> 00:24:58,679 Speaker 2: Maybe one consequence of that is the charmer's decision to 489 00:24:59,280 --> 00:25:02,000 Speaker 2: do something about out the negative deering or the capital 490 00:25:02,000 --> 00:25:05,040 Speaker 2: gains tax discounts. So maybe that is one, yes, consequence, 491 00:25:05,080 --> 00:25:07,800 Speaker 2: although it wasn't. There was a number of things touted 492 00:25:07,880 --> 00:25:10,480 Speaker 2: in the summer. That was one of them by some groups, 493 00:25:10,520 --> 00:25:12,040 Speaker 2: but you know, that seems to be one that he's 494 00:25:12,080 --> 00:25:14,679 Speaker 2: latched onto. There was a lot of talk about cutting 495 00:25:14,720 --> 00:25:18,040 Speaker 2: red tape though apparently they identified four hundred areas where 496 00:25:18,160 --> 00:25:21,040 Speaker 2: red tape could be cut. So again we'll see to 497 00:25:21,080 --> 00:25:23,760 Speaker 2: what extent that flows through. Yeah, a few bits and 498 00:25:23,800 --> 00:25:26,560 Speaker 2: pieces that flowed from the summit, But look, in large 499 00:25:26,600 --> 00:25:29,320 Speaker 2: part these things are usually just to talk best but 500 00:25:29,400 --> 00:25:31,520 Speaker 2: you know, to the extent businesses come to the table 501 00:25:31,560 --> 00:25:35,639 Speaker 2: and highlight areas of red tape that are probably unnecessary 502 00:25:35,720 --> 00:25:37,920 Speaker 2: that you know that can be good sources of information 503 00:25:38,040 --> 00:25:40,240 Speaker 2: for governments. You know that feedback, yeah, I expect. 504 00:25:40,280 --> 00:25:42,080 Speaker 1: So it's just not a headline graver when you do 505 00:25:42,119 --> 00:25:44,800 Speaker 1: those changes. Okay, very good, very good to talk to you. 506 00:25:45,359 --> 00:25:49,440 Speaker 1: Very different quarter than we were expecting. Your outlook for 507 00:25:49,480 --> 00:25:51,719 Speaker 1: the year ahead, I asked you during the show, but 508 00:25:51,760 --> 00:25:54,000 Speaker 1: to what extent has your outlook during the for the 509 00:25:54,080 --> 00:25:56,840 Speaker 1: year head been disturbed by this quarters? Final question for you? 510 00:25:57,240 --> 00:25:59,840 Speaker 2: Look, yeah, I mean growth, unfortunately is going to be weaker, 511 00:26:00,080 --> 00:26:02,800 Speaker 2: Unemployment more likely now to be getting up to four 512 00:26:02,800 --> 00:26:05,119 Speaker 2: and a half percent or so. I've only got the 513 00:26:05,200 --> 00:26:08,199 Speaker 2: RBA raising rates once more in May. I'm still hopeful 514 00:26:08,200 --> 00:26:10,000 Speaker 2: that this war will end in the next few weeks. 515 00:26:10,040 --> 00:26:12,000 Speaker 2: I think the pressure on Donald Trump will be that 516 00:26:12,640 --> 00:26:16,160 Speaker 2: he will want to get an exit, either some form 517 00:26:16,200 --> 00:26:19,160 Speaker 2: of face saving exit rather than putting boots on the ground. 518 00:26:19,240 --> 00:26:22,880 Speaker 2: That's my judgment. But obviously everything hinges. A lot of 519 00:26:22,920 --> 00:26:26,239 Speaker 2: the economic outlook hinges on his decision on that, and 520 00:26:26,320 --> 00:26:29,399 Speaker 2: so we're in the hands of one man essentially, so 521 00:26:29,440 --> 00:26:32,400 Speaker 2: it makes forecasting difficult. 522 00:26:32,480 --> 00:26:34,720 Speaker 1: Good on you for trying and coming on the shell. 523 00:26:34,880 --> 00:26:38,600 Speaker 1: That was David Bassinezi, the chief economist at Basis Shares. 524 00:26:38,600 --> 00:26:41,600 Speaker 1: Thanks David, talk to you now, and I do wish 525 00:26:41,600 --> 00:26:44,159 Speaker 1: you all a good easter, prosperous rest of the year. 526 00:26:44,200 --> 00:26:46,119 Speaker 1: It's going to get more difficult to do that, but 527 00:26:46,160 --> 00:26:48,760 Speaker 1: I'm sure you can. And also, folks, thank you very 528 00:26:48,840 --> 00:26:52,960 Speaker 1: much for those reviews on the app for the podcast, 529 00:26:53,080 --> 00:26:55,480 Speaker 1: especially on the Apple app. I really do appreciate that. 530 00:26:55,480 --> 00:26:57,120 Speaker 1: That was great. Thank you. I did a call out 531 00:26:57,160 --> 00:26:58,720 Speaker 1: and it was great to freshen them up and bring 532 00:26:58,760 --> 00:27:01,720 Speaker 1: them up to deed the correspondence rolling. I'm very keen 533 00:27:01,760 --> 00:27:04,840 Speaker 1: to answer your questions the money Puzzle at the Australian 534 00:27:04,920 --> 00:27:07,560 Speaker 1: dot com dot au. Have a good Easter, talk to 535 00:27:07,560 --> 00:27:07,920 Speaker 1: you soon.