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Speaker 1: I just finished podcast with Chris Richardson. Here's the former

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Speaker 1: economists that Deloitte access and now he runs his own

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Speaker 1: business called rich Insight, and he's a great economisty, but

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Speaker 1: he's very technical, very very technical. And the reason I

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Speaker 1: want to do that podcast with Chris is because I

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Speaker 1: want someone to unpack the Treasurer's budget for twenty twenty

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Speaker 1: six as it's going to affect twenty seven and beyond

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Speaker 1: more in an economic sense, like how's it going to

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Speaker 1: affect this strain economy, not how it affects individuals has

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Speaker 1: been affected by the capital gains tax, not how it

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Speaker 1: affects people relative to losing their ability to deduct the

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Speaker 1: interest they pay to the banks relative to the rent

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Speaker 1: they pay that is negative gearing. It's not about not

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Speaker 1: about any of those, It's about actually unpacking the fiscal

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Speaker 1: policy of the budget relative to how it affects inflation

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Speaker 1: potentially and therefore, of course all of you know how

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Speaker 1: inflation that will be managed by the reserve banking relations

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Speaker 1: interest rates. So what I'm trying to find out is

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Speaker 1: will interest rates go up after this budget in an

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Speaker 1: general economic sense. I didn't talk to Chris Richardson about

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Speaker 1: a couple of gainst tax per se and or negative

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Speaker 1: gearing or tax on trust. By the way those effect individuals,

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Speaker 1: they are and they were designed by the way, and

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Speaker 1: Chris will say it that they're going to have very

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Speaker 1: little impact on affordability for housing. They're going to have

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Speaker 1: very little impact on new supply of new housing for

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Speaker 1: people to buy. This budget, the narrative around his budget

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Speaker 1: is called intergenerational equity, in other words, looking at the

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Speaker 1: problem that exists for younger people and let's call people

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Speaker 1: under thirty five just for the sake of it. And

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Speaker 1: actually there is, actually is an intergenerational inequity. In other words,

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Speaker 1: the older generation own a lot of assets, and they've

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Speaker 1: enjoyed high price rises through all unusual periods GFC, during

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Speaker 1: and post COVID, but they've also enjoyed high prices or

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Speaker 1: higher prices relative to what they paid for maybe fifteen

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Speaker 1: or twenty years ago. They've enjoyed it because the government

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Speaker 1: has not kept up supply to the levels of immigration

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Speaker 1: and to the levels of population growth. And Chris Richardson

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Speaker 1: will talk about that supply is the key here. It's

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Speaker 1: not that people got rich at the cost of people

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Speaker 1: who didn't get rich. It's not that older generation have

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Speaker 1: sucked all the dollars out of the system. It's because

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Speaker 1: we have not supplied enough properties into the market relative

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Speaker 1: to the demand for those properties. That is, you know,

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Speaker 1: young people becoming of age, and or immigration or both.

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Speaker 1: We just this government has not supplied enough properties, not

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Speaker 1: just the federal government, the federal and the state government

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Speaker 1: and the councils. And Chris goes on to say, to

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Speaker 1: some extent, it's also about us as individuals, because us

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Speaker 1: as individuals, a lot of us don't want any new

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Speaker 1: things to be built in our street because you know,

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Speaker 1: we worked to hard our whole lives to buy this house,

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Speaker 1: which we want to leave to our children or our grandchildren,

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Speaker 1: whatever the case may be, or we want to live

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Speaker 1: there to the day we die. Of course, health has improved,

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Speaker 1: we don't have to be put in a home or

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Speaker 1: a hospital, which is fine. What we should be doing,

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Speaker 1: the government should be doing, is finding new green fields

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Speaker 1: and opening up new areas for younger people to move into.

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Speaker 1: But the narrative is a thing that's wrong. The Treasurer's

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Speaker 1: narrative is wrong. The Treasurer is saying this budget is

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Speaker 1: designed to help younger people is politics. Cos Samaris sat

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Speaker 1: right here last week and said exactly that. He didn't

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Speaker 1: say it was wrong, but what he said was governments

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Speaker 1: or governments. All those people here advisors at least know

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Speaker 1: that there is a massive vote that they're missing out

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Speaker 1: on as going to the Greens that's sitting between young

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Speaker 1: people eighteen through thirty five because they're not like by

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Speaker 1: the party. Some of them may end up moving over

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Speaker 1: to one nation, but there is a huge amount of

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Speaker 1: people sitting there. So this narrative around this budget is

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Speaker 1: directed at trying to make those individuals who vote for

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Speaker 1: governments in the future, and there will be an election

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Speaker 1: in twenty eight. Oh guys, we and our budget, this

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Speaker 1: budget and future budget, we are looking after you. We

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Speaker 1: are trying to mend this intergenerational inequity. In other words,

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Speaker 1: we are trying to get you into a house. We're

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Speaker 1: trying to give you what your parents and grandparents have got. Now,

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Speaker 1: what I am annoyed about is that that narrative is wrong.

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Speaker 1: This budget will not help younger people get into a home.

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Speaker 1: By the way, the very people who are supposed to

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Speaker 1: causes into generational inequity, the older people. They've been protected

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Speaker 1: because effectively, they've been grandfathered on any gains that they've

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Speaker 1: made to date. They're fifty percent discount on the capital

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Speaker 1: game that they're going to make still remains. They will

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Speaker 1: still get that discount. So the government didn't want to

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Speaker 1: punish them because they worry they might lose their votes.

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Speaker 1: So so those people are fine, they're fine, but nothing's

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Speaker 1: happened down the other end of the end of the

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Speaker 1: board like the other you know, the books have been

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Speaker 1: pushed down one end of the shop, but the other

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Speaker 1: end's empty. So you young people are not going to

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Speaker 1: get anything out of this budget. Nothing's going to happen.

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Speaker 1: Nothing's going to change for you. Interest rates aren't going

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Speaker 1: to go down so you can afford to borrow more money.

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Speaker 1: The banks ain't going to end you any more money.

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Speaker 1: The government's not going to give you a deposit. No

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Speaker 1: one's going to supply more housing so that there's more

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Speaker 1: competition in terms of those people are trying to buy

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Speaker 1: these properties. In actual fact, I think this budge is

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Speaker 1: going to create into generational inequity, and I'll tell you why.

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Speaker 1: The exemption. In other words, those people who still will

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Speaker 1: be able to get negative gearing for new purchases post

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Speaker 1: today or post last night. Applies to new housing. So

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Speaker 1: anybody who's got coin and they want to invest in

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Speaker 1: the property market and get negative gearing, which could be

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Speaker 1: you as a younger person, but anybody. Because this is

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Speaker 1: available to everybody across the board. An older person might say, well,

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Speaker 1: instead of buying an existing property now and renting it

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Speaker 1: out and getting negative gearing on that property and getting

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Speaker 1: the capital gains tax discount that, I'm not going to

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Speaker 1: get it anymore. What I'm going to do is I'm

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Speaker 1: going to go and buy new housing. Anything that's new,

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Speaker 1: I'm going to buy that. I'll put in my twenty

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Speaker 1: percent deposit because I've saved a deposit. I'm retired, I've

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Speaker 1: been saving it up. I'll borrow the money from the bank. Oh,

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Speaker 1: negatively gear it. Those people are now exempt. They get

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Speaker 1: the negative gearing, and when I go to buy it,

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Speaker 1: I can afford to pay more than the young person.

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Speaker 1: Those people will outcompete young people every single time. So,

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Speaker 1: as usual, government involvement in an asset class usually all

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Speaker 1: it ever does, that is my experience, is all I've

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Speaker 1: ever seen. Has just happened recently in the five percent

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Speaker 1: deposit Government guarantee scheme. All it does is to increase

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Speaker 1: the price of the asset, which then in a rising

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Speaker 1: interest market interest rate market we are right now, puts

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Speaker 1: that beyond the reach of a younger person. So all

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Speaker 1: of a sudden, those properties, those new properties will be

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Speaker 1: bought by the same people who've been buying properties for

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Speaker 1: the last ten twenty years. They will control that market.

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Speaker 1: They'll be looking for people to rent because they're not

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Speaker 1: going to live there. They own the big house somewhere else.

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Speaker 1: They're going to put it on the market of for rent.

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Speaker 1: When someone young goes along to rent that property, they're

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Speaker 1: going to pay the market price because you know, people

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Speaker 1: have paid a lot of money for it and they

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Speaker 1: want to get a return. Then that will lead into

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Speaker 1: their ability to save a deposit for the future. So

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Speaker 1: this system, these initiatives by in this budget, as far

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Speaker 1: as I own concern and I'm going to call it out,

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Speaker 1: are not going to work. In fact that they're going

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Speaker 1: to have the opposite effect like they always do. It

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Speaker 1: might have a positive effect for a couple of months,

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Speaker 1: but as soon as everyone gets in the market and

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Speaker 1: starts working this arbitrage out, they'll take advantage of it.

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Speaker 1: And by the way, you don't blame it for taking

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Speaker 1: advantage of it. Because it's a free market. People will

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Speaker 1: invest the money where they can and where the demand

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Speaker 1: is that they'll push the prices up. Especially if the

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Speaker 1: supply is low, and the supply will remain low. We're

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Speaker 1: not going to get any great supply. What we should

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Speaker 1: be doing, what governments could be doing. They could be saying,

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Speaker 1: you know what, if you're an employee or you're running

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Speaker 1: a business, and let's say you earn less than one

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Speaker 1: hundred and fifty grand, where you're paying a marginal tax

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Speaker 1: rate of thirty thirty five percent, young person or any person,

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Speaker 1: if you elect to into a scheme, what will allow

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Speaker 1: you to do is only pay twenty percent marginal tax

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Speaker 1: rate on that one hundred and fifty grand. In other words,

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Speaker 1: you can save ten or fifteen percent. But the condition

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Speaker 1: of that saving of tax is that money must be

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Speaker 1: invested into your super fund alongside your compulsory superinnovation that

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Speaker 1: your employee pays. But you are investing this money now,

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Speaker 1: not the So the employee is going to invest his

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Speaker 1: twelve percent. You are, alongside that employee, going to invest

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Speaker 1: this money into your superfund. And you a person earning

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Speaker 1: a lesson hundred and fifty thousand. You can access that

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Speaker 1: money over time at any time if you choose, but

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Speaker 1: only if it is to buy a house or a dwelling.

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Speaker 1: That money will be taxed free your super it's deductible

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Speaker 1: to you. You get a deduction for it. You're only

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Speaker 1: and you've made the elections. See, you're only paying twenty

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Speaker 1: percent tax. So you're saving money if you don't touch

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Speaker 1: it and sits there forever. You can pick it up

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Speaker 1: when you turn sixty five. But the only time you

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Speaker 1: can access this money is to buy house. This extra money. Now,

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Speaker 1: maybe this is you've got flaws in it from a

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Speaker 1: tax point of view, and there could be Treasure will

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Speaker 1: run the ruler over it if they ever did. I'm

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Speaker 1: sure there's flaws in it. But point being here is

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Speaker 1: this is the sort of stuff that I would have

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Speaker 1: liked to see in the budget, this sort of real

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Speaker 1: tax reform that actually helps out the younger generation solve

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Speaker 1: this inequity problem. And the only way you're going to

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Speaker 1: do it is to reduce tax give them more net

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Speaker 1: money so it allows them to build a deposit, which

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Speaker 1: allows them them to go into the market and compete

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Speaker 1: with a full deposit. That's what we need to see.

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Speaker 1: That's what I would like to see in this budget.

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Speaker 1: So I'm sorry, Treasurer and Prime Minister. I don't copy it.

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Speaker 1: I think this is unfair. I don't think it's achieved.

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Speaker 1: The thing that your narrative keeps talking about. No doubt

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Speaker 1: you're gonna have lots of arguments with the Greens about

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Speaker 1: this because they're going to say the taxing that you've

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Speaker 1: put in is not enough, the exemptions that you've applied

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Speaker 1: shouldn't be there. So it's going to be hard to

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Speaker 1: get the support of everybody. Hopefully, you know, we don't

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Speaker 1: have some sort of double dissolution this budget doesn't go through. Yeah, Jim,

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Speaker 1: it was courageous, mate, But at the end of the day,

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Speaker 1: it was courageous because I know, I think I can

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Speaker 1: tell you feel that this has not been accepted and

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Speaker 1: it just didn't go the way everybody thought it was

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Speaker 1: going to go. And this is a tough period. We've

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Speaker 1: got interest rate rising, we've got the ram or doesn't

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Speaker 1: look like it's going to get solved too quick. We've

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Speaker 1: got the price crew it oil is going to be

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Speaker 1: a drama. We've got petrol pricing or fuel out the

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Speaker 1: bowers and everywhere else in the country causing inflation. We've

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Speaker 1: got potentially more interest rate rises. We're in a tough period,

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Speaker 1: and what I was hoping for was something that actually

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Speaker 1: will help this country grow. And by the way, in

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Speaker 1: this podcast, Chris Richardson talks about growth and he talks

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Speaker 1: about prosperity. And one thing that Chris is a bit

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Speaker 1: disappointed in is that this is not a prosperity budget

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Speaker 1: and the only way to make things more affordable is

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Speaker 1: put more money in people's pockets, not by government handouts,

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Speaker 1: but by the country growing prosperity, which is what we need. Anyway,

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Speaker 1: Enjoy the podcast. Chris is a very knowledgeable guy, one

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Speaker 1: of the best economists in the country. It does get

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Speaker 1: pretty deep and pretty into the minutia, but like if

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Speaker 1: you're interested in understanding how a budget actually works and

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Speaker 1: the economics of all this stuff, it's worth listening to

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Speaker 1: Chris Ritchers and welcome a straight talk mate.

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Speaker 2: Many many thanks for having me Mart.

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Speaker 1: We would be good today to talk to someone of

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Speaker 1: your expertise about is the economic effects of the budget

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Speaker 1: or perhaps even the economic objectives of the budget, and

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Speaker 1: there and what do you think will be the economic

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Speaker 1: effects of the budget in terms of it being executed objectively?

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Speaker 1: So obviously big worry to our audiences, and you know

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Speaker 1: Australias generally is how do you see this budget looking

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Speaker 1: for the year ahead and perhaps periods after, but just

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Speaker 1: a little about the year ahead relative to inflation? How

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Speaker 1: does it look?

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Speaker 2: Let me just step back for a moment, Because the

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Speaker 2: federal budget is about a quarter of all the money

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Speaker 2: in Australia goes in and back out. You can kind

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Speaker 2: of think of it as is true. You know, every family,

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Speaker 2: every community, every nations has a social compact. The federal

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Speaker 2: budget's a bit of a social compact. You know, we

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Speaker 2: tax workers, we tax businesses. We spend it on the

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Speaker 2: young and the old and the sick and the poor

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Speaker 2: and defense forces and the like. I tend to think

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Speaker 2: of any budget, any social compact, having two big aims,

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Speaker 2: and both of them are part of the backstory to

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Speaker 2: this particular budget. So two aims are to make people

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Speaker 2: better off, to raise the standard of living over time sustainably,

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Speaker 2: so with the sort of prosperity aim, but there's also

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Speaker 2: a fairness aim as we as a group become more

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Speaker 2: prosperous over time. Are we sharing those games well? And

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Speaker 2: the true backdrop to this budget, you know, I don't

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Speaker 2: necessarily think it is the inflation challenge at the moment

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Speaker 2: of the Reserve Bank. I don't necessarily think it is

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Speaker 2: a run. And then the war in the Middle East.

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Speaker 2: I would step back a little further and say, across

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Speaker 2: our lifetimes, Australia has been a magnificent prosperity success story.

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Speaker 2: We spent a long time with our standard of living

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Speaker 2: moving up at times, including decades faster than you saw

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Speaker 2: in the US. But in the past decade our living

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Speaker 2: standards have barely grown. If you look across the rich

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Speaker 2: world as a whole, or the average citizen in that

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Speaker 2: sort of rich world club, the OECD, their living standards

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Speaker 2: have gone up about seventeen percent in the past decade.

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Speaker 2: Now that's their income, but it's disposable income. Now it's

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Speaker 2: inflation adjusted. It's per person. In Australia it's less than

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Speaker 2: a third of that. And because we're not becoming more

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Speaker 2: prosperous at the same rate that we used to do,

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Speaker 2: we are getting grumpier with each other. You're seeing fights

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Speaker 2: over the pie again. A very dominant part of this budget,

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Speaker 2: and you are seeing everything from social media to our

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Speaker 2: voting patterns, we are grumpier with each other, and it

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Speaker 2: does worry me. You know, I actually like a bunch

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Speaker 2: of things in the budget, but it worries me that

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Speaker 2: it hasn't done enough to break us out of that

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Speaker 2: low prosperity trajectory, which means we may stuck stay stuck

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Speaker 2: fighting over fairness, and that's not a great place to be.

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Speaker 1: How does one measure our standard of living so that

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Speaker 1: what is that measurement? Is it a universal one?

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Speaker 2: I just use basic numbers coming out of the Bureau

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Speaker 2: of Stats, the exact same numbers used in the exact

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Speaker 2: same way by the OECD. They look across a bunch

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Speaker 2: of countries. What you are doing is taking your total

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Speaker 2: income from everything from wages, salaries, dividend, interest, you know,

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Speaker 2: profits however you get in the rent, taking out two

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Speaker 2: big things to make it disposable income. One is personal text,

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Speaker 2: the other is interest payments, and then inflation, adjusting it

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Speaker 2: over time, putting it on a per head basis, and

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Speaker 2: at least at the index level. You can then compare

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Speaker 2: across countries as well as across time. In economics, there

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Speaker 2: is one truly great one liner. The Nobel laureate Paul

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Speaker 2: Kubman once said, productivity isn't everything, but in the long

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Speaker 2: run it is almost everything. Australia stopped getting better at

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Speaker 2: doing stuff about a decade ago, and when that happens,

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Speaker 2: your living standards don't increase. And that productivity fail is

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Speaker 2: a prosperity fail. Is what's got us. I think in

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Speaker 2: many ways into this current mess.

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Speaker 1: Is the ultimate outcome very sensitive at tax rates? Or

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Speaker 1: is it more about wage growth? Or is it what

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Speaker 1: is it more about? Or is it not more about anything?

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Speaker 1: Is about everything?

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Speaker 2: Well, it is about something in particular. It is about

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Speaker 2: wages relatives to prices of you know, all nations have

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Speaker 2: a personal tax take ours is relatively high, and you

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Speaker 2: know it has increased a bit over the longer term.

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Speaker 2: But it's not personal tax that has been make or

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Speaker 2: break for our lack of prosperity growth for a long time.

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Speaker 2: It's wages haven't gone faster than prices. And people love

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Speaker 2: to reach for all sorts of conspiracy theories around that,

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Speaker 2: But it goes back to the productivity thing that I said.

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Speaker 2: We are not, you know, making great use of new technologies,

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Speaker 2: we are not investing in stuff. You know, I don't

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Speaker 2: mean the financial investments, I mean the you know, the road,

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Speaker 2: the Riyal, the factory, the computer, the the whatever else

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Speaker 2: and that combination. You know, We're not using our skills

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Speaker 2: as well as we can. Good we are not using

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Speaker 2: our environment built environment out there as well as we could.

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Speaker 2: Means that we are not advancing at the rate that

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Speaker 2: a bunch of other nations are advancing. So you look

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Speaker 2: across the OECD, we're still in terms of the increase

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Speaker 2: in our living standards over the past decade, we're still

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Speaker 2: beating the poems and it always you know, it's nice

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Speaker 2: to do, but they are essentially bottom of the list,

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Speaker 2: right you know, and under us top of the list

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Speaker 2: in terms of games in its living standards. And I

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Speaker 2: do think Australia can and should do better. Our politicians,

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Speaker 2: by the way, aren't make or break around a lot

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Speaker 2: of that. But they can either stand in the way

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Speaker 2: of our productivity gains, our prosperity gains, or they can

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Speaker 2: help them along. And for some decades now, you know,

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Speaker 2: we have been in a nation where our politicians have

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Speaker 2: not challenged us as much as they should, haven't made

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Speaker 2: us change as much as we should, and therefore we

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Speaker 2: haven't had our political classes giving us a boot along

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Speaker 2: on that prosperity front.

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Speaker 1: It's very interesting. So the RBA's mandate sort of also

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Speaker 1: talks about prosperity of all Australians and also the welfare

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Speaker 1: of all Australians, and those two in some respects conflict.

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Speaker 1: But we sort of understand when inflation is really high,

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Speaker 1: we've got to look after the welfare of everybody. Therefore

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Speaker 1: we put interest rates up. When inflation is nice and low,

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Speaker 1: we need to grow or be prosperous, and we put

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Speaker 1: interest rates down. Pretty simple. That's very similarly for me

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Speaker 1: to understand when it comes to the government relative to

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Speaker 1: their policies fiscal policy. So RBA's monetary policy for our audience,

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Speaker 1: but when it comes to fiscal policy when the big

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Speaker 1: one is, you know, the budget, the big event is

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Speaker 1: the budget. Does the government also look at those two

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Speaker 1: aspects prosperity therefore growth measured by growth and welfare.

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Speaker 2: To be fair, it does look at all that. But

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Speaker 2: again you raise a really important point around the backdrop.

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Speaker 2: You know, at times people pretend there is a magic

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Speaker 2: wand you know, well, we could all just be more prosperous,

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Speaker 2: if this, if that. Sometimes it's let's just you know,

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Speaker 2: raise everybody's wages, which at one stage Australia in the

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Speaker 2: mid nineteen seventies did that, and of course we've got

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Speaker 2: a lot of inflation and we did not get any

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Speaker 2: change in prosperity. There are all sorts of people out

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Speaker 2: there who will pedal simple solutions for complex problems. If

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Speaker 2: you look at the problem that the Reserve Bank has

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Speaker 2: to juggle, it promises Australians that over time it will

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Speaker 2: stay on top of inflation. And what is inflation, and

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Speaker 2: you know, inflation it crops up when when we have

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Speaker 2: too much money chasing too little stuff, when our spending

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Speaker 2: runs ahead of the ability of the economy to produce

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Speaker 2: the stuff that we're spending on, or in the economist jugge,

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Speaker 2: demand is ahead of supply. And that is a situation

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Speaker 2: that we had before the Iran War. Inflation had you know,

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Speaker 2: it looked as i it was going down for a while,

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Speaker 2: but it had popped its head back up. The Reserve

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Speaker 2: Bank had brought out the hammer and was whacking that nail,

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Speaker 2: and then this war happened. It is worth noting and

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Speaker 2: you're talking about the budget, and you're entirely right, right,

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Speaker 2: it is worth noting that what we are juggling in

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Speaker 2: Australia in the near turn is not that dissimilar to

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Speaker 2: what we juggled back in twenty twenty two. In twenty

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Speaker 2: twenty two, right, there was already inflation like we had

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Speaker 2: before the Iran War, and then Russia's invasion of Ukraine

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Speaker 2: sent energy prices up, and you got off the back

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Speaker 2: of that common I'm worsening in inflation. And again we're

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Speaker 2: getting that worsening in inflation now and governments. So I've

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Speaker 2: mentioned the feeds are about a quarter of the spending

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Speaker 2: in Australia. By the time you add in the States,

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Speaker 2: you're about two fifths forty percent of all the spending

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Speaker 2: in Australia. The politicians essentially reacted to that by giving

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Speaker 2: us money right and lots of subsidies for this and that,

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Speaker 2: And I suspect there was a certain amount of grinding

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Speaker 2: of teeth from the Reserve Bank around that because it

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Speaker 2: sounds good. You know, in a bunch of cases they

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Speaker 2: handed us money in ways that reduced the measured inflation rate,

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Speaker 2: but they still actually worsened inflation because they were giving

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Speaker 2: us extra money at a time when there was already

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Speaker 2: too much money chasing too little stuff.

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Speaker 1: So if I might be able to ask you then

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Speaker 1: in that regard, the Reserve Bank Governor in her post

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Speaker 1: announcement press conference last week did say, I come remember

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Speaker 1: exact words which I remember. One of the words she

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Speaker 1: used exactly. She said Australians could be forgiven for feeling poorer,

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Speaker 1: and that sort of sort of puts a knife straight

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Speaker 1: into how we feel about our standard of living, so

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Speaker 1: we feel poorer. That goes right to the very heard

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Speaker 1: of that. And she has been very as you would

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Speaker 1: expect the government of Reserve Bank or Federal Reserve of

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Speaker 1: any country, been very careful not to be critical of

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Speaker 1: the government relative to fiscal policy, but has made some

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Speaker 1: references to increases by government in spending, for example, the

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Speaker 1: tjoure and fifty bucks that they're going to give to everybody.

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Speaker 1: Not that there's and by the way, it's not coming

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Speaker 1: into twenty twenty eight anyway, but it doesn't matter. She

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Speaker 1: has been sort of made some references to it. And

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Speaker 1: then the Prime Minister has made reference to this being

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Speaker 1: a budget which is with full of labor values. I

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Speaker 1: don't quite know what that means, but I could guess.

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Speaker 1: I guess, I can guess. Do you think that in

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Speaker 1: that context, do you think that this budget is one

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Speaker 1: that is aimed at growth or constraint and or will

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Speaker 1: it have an effect by increasing pressure on inflation by

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Speaker 1: increasing private demand?

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Speaker 2: Yeah? Yeah, and you are setting out I thought of

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Speaker 2: three tests for the budget. One, just briefly, if you like,

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Speaker 2: was insurance in the sense of paying more for fuel

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Speaker 2: really hurts. But running out of fuel, especially these allow

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Speaker 2: our farmers feed the world, our miners make us the money,

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Speaker 2: our transport sector moves everything that you know is our lifeblood.

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Speaker 2: If we were to run out, then that would be

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Speaker 2: a real problem. So the you know, the main asked

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Speaker 2: for the government right now is to make sure that

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Speaker 2: we're getting supplies and that our supplies are secure. The

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Speaker 2: second one, though, and you talked about it, inflation, because

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Speaker 2: back a handful of years ago, when the Reserve Bank

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Speaker 2: was taking money out of the economy, governments and the

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Speaker 2: states were arguably worse than the FEDS. Governments were putting

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Speaker 2: the money back in. And if inflation is too much money,

433
00:26:27,000 --> 00:26:29,560
Speaker 2: you're chasing too little stuff. It was a real problem

434
00:26:31,000 --> 00:26:34,280
Speaker 2: and we had in the week or two leading up

435
00:26:34,320 --> 00:26:40,360
Speaker 2: to this week's budget, some state budgets Victoria or Western Australia,

436
00:26:40,359 --> 00:26:44,280
Speaker 2: and they have So Victoria's got no money, but they

437
00:26:44,320 --> 00:26:48,440
Speaker 2: still spent some more on their punters. Western Australia's got

438
00:26:48,440 --> 00:26:51,680
Speaker 2: heaps and heaps of money, but they spent more on

439
00:26:51,720 --> 00:26:54,840
Speaker 2: their punters. And you could just hear the teeth start

440
00:26:54,960 --> 00:26:58,840
Speaker 2: to grind at the Reserve Bank, you know, the states

441
00:26:58,840 --> 00:27:01,800
Speaker 2: being part of the problem, and their fear would have

442
00:27:02,000 --> 00:27:04,560
Speaker 2: been that maybe the federal government would do as it

443
00:27:04,640 --> 00:27:08,160
Speaker 2: did a handful of years ago, you know, the because

444
00:27:08,200 --> 00:27:11,120
Speaker 2: an energy crisis is one where the budget is better off,

445
00:27:11,119 --> 00:27:14,159
Speaker 2: but families are worse off, families a poorer. As the

446
00:27:14,200 --> 00:27:17,840
Speaker 2: governor pointed out, the temptation for governments to hand over

447
00:27:17,920 --> 00:27:22,119
Speaker 2: some money is very high. To this government's credit, it

448
00:27:22,160 --> 00:27:25,560
Speaker 2: has not extended things like that fuel tax cut. It

449
00:27:25,600 --> 00:27:30,240
Speaker 2: hasn't handed out too much money. But I'm cautious of

450
00:27:31,280 --> 00:27:37,080
Speaker 2: saying that they haven't made life a little more complex

451
00:27:37,160 --> 00:27:40,479
Speaker 2: for the Reserve Bank, or at least I'd say they

452
00:27:40,520 --> 00:27:44,119
Speaker 2: haven't helped the Reserve Bank. So the last big budget

453
00:27:44,200 --> 00:27:47,080
Speaker 2: update we got head of Christmas about five months ago,

454
00:27:48,640 --> 00:27:52,560
Speaker 2: the estimate of spending in the financial year we're just

455
00:27:52,600 --> 00:27:56,240
Speaker 2: about to start was eight hundred and eleven billion dollars.

456
00:27:56,760 --> 00:27:59,400
Speaker 2: Do I hate myself that I know that number? Yes,

457
00:28:00,320 --> 00:28:03,280
Speaker 2: And then the update we got in the budget it

458
00:28:03,359 --> 00:28:05,800
Speaker 2: was no longer eight hundred and eleven billion in spending.

459
00:28:05,800 --> 00:28:08,520
Speaker 2: It was eight hundred and thirty billion in spending. That

460
00:28:08,640 --> 00:28:12,560
Speaker 2: extra eighteen nineteen billion, And you can understand some of it.

461
00:28:12,600 --> 00:28:15,760
Speaker 2: There were policies, there's new policy stuff, some of its defense,

462
00:28:15,840 --> 00:28:19,280
Speaker 2: some of its fuel security, some of its pharmaceutical benefits,

463
00:28:19,359 --> 00:28:22,920
Speaker 2: some of its well, governments do spend more when inflation

464
00:28:23,119 --> 00:28:26,760
Speaker 2: goes up and the economy weakens. Some of it is

465
00:28:26,800 --> 00:28:30,880
Speaker 2: the continuing blowout in the ndis that put the boot

466
00:28:30,920 --> 00:28:33,240
Speaker 2: up the bomb of the government to get more serious

467
00:28:33,280 --> 00:28:37,040
Speaker 2: on reform. Then, but that increase in spending five months ago,

468
00:28:37,119 --> 00:28:39,960
Speaker 2: the expectation was that spending in the year just about

469
00:28:39,960 --> 00:28:42,960
Speaker 2: to start by the federal government would increase by three

470
00:28:43,120 --> 00:28:46,720
Speaker 2: point one percent. As at the budget, they said, well,

471
00:28:46,760 --> 00:28:48,880
Speaker 2: hang on, we now think it's going to be five

472
00:28:48,880 --> 00:28:52,240
Speaker 2: point three percent. And I do think that will have

473
00:28:52,320 --> 00:28:56,760
Speaker 2: raised a couple of eyebrows at the Reserve Bank. So, yes,

474
00:28:56,840 --> 00:28:59,200
Speaker 2: the reserve will be quite happy there wasn't a big

475
00:28:59,280 --> 00:29:04,040
Speaker 2: cost of living package. We have not repeated those mistakes.

476
00:29:04,440 --> 00:29:07,160
Speaker 2: The stakes, though, are still throwing some money around, and

477
00:29:07,240 --> 00:29:11,719
Speaker 2: the fids are spending more than they had said they

478
00:29:11,720 --> 00:29:13,960
Speaker 2: were going to do last time they updated us.

479
00:29:14,320 --> 00:29:18,240
Speaker 1: I'm imagining you remember the Costello years, and let's go

480
00:29:18,320 --> 00:29:22,480
Speaker 1: back to the mid two thousand's early period, and Peter

481
00:29:22,560 --> 00:29:27,240
Speaker 1: Costello did talk about intergenerational equity in those days. This

482
00:29:27,760 --> 00:29:31,720
Speaker 1: has been an ongoing conversation and you know treasurers post him,

483
00:29:31,760 --> 00:29:36,000
Speaker 1: you know Hockey, did you know Swan did, et cetera.

484
00:29:36,520 --> 00:29:39,160
Speaker 1: So it's not something new, and it probably is an

485
00:29:39,200 --> 00:29:42,720
Speaker 1: intergenerational problem in that all the wealth seems to be

486
00:29:42,720 --> 00:29:44,720
Speaker 1: at one end of the table and the younger people

487
00:29:44,800 --> 00:29:48,320
Speaker 1: are struggling to get there. That makes sense. What's interesting

488
00:29:48,360 --> 00:29:55,840
Speaker 1: about this is that Costello's thesis about fixing intergenerational inequity,

489
00:29:56,080 --> 00:29:59,840
Speaker 1: if that's the way we put it, is that instead

490
00:29:59,840 --> 00:30:04,480
Speaker 1: of running deficits, we should run surpluses. And the reason

491
00:30:04,560 --> 00:30:07,200
Speaker 1: we should run surpluses is so that we can reduce

492
00:30:08,040 --> 00:30:11,120
Speaker 1: national debt. Of course, he wasn't talking about state debt.

493
00:30:11,120 --> 00:30:14,640
Speaker 1: He's talking about the federal debt, and the justification for

494
00:30:14,680 --> 00:30:17,960
Speaker 1: that was we don't want our kids and grandkids and

495
00:30:18,200 --> 00:30:25,440
Speaker 1: future generations to have to pay either an interest or

496
00:30:25,480 --> 00:30:28,760
Speaker 1: alternatively in extra at tax the debts that say, my

497
00:30:28,880 --> 00:30:33,560
Speaker 1: generation and perhaps your generation have accumulated for them. But today,

498
00:30:33,760 --> 00:30:39,480
Speaker 1: if we fast forward, that the intergenerational inequity still exists

499
00:30:41,040 --> 00:30:43,320
Speaker 1: and in the same format that existed in the mid

500
00:30:43,320 --> 00:30:45,680
Speaker 1: two thousands. I actually remember in two thousand and one

501
00:30:45,720 --> 00:30:49,840
Speaker 1: election when John Howard was going for election affordability housing

502
00:30:49,880 --> 00:30:53,560
Speaker 1: affordability was his mainstay policy and he launched it in Adelaide.

503
00:30:53,800 --> 00:30:56,360
Speaker 1: I remember him launching and Chris Joey, who was where

504
00:30:56,360 --> 00:30:59,080
Speaker 1: I first met him. Chris Joey wrote a paper for

505
00:30:59,240 --> 00:31:02,440
Speaker 1: Malcolm Turber when Malcolm was a chair of Goldbinzachs. I

506
00:31:02,480 --> 00:31:05,840
Speaker 1: remember the event very well. So we haven't really solved affordability.

507
00:31:06,080 --> 00:31:10,360
Speaker 1: We have, and we haven't as solved intergenerational inequity. We've tried,

508
00:31:10,720 --> 00:31:14,640
Speaker 1: we haven't solved it. The thesis for solving that today

509
00:31:14,720 --> 00:31:17,360
Speaker 1: seem to be a lot different As an economist. How

510
00:31:17,360 --> 00:31:19,920
Speaker 1: do you feel about solving for this problem as an

511
00:31:19,920 --> 00:31:21,880
Speaker 1: economist relative to fiscal policy?

512
00:31:21,880 --> 00:31:27,720
Speaker 2: For example, So there are three standout things that you

513
00:31:27,760 --> 00:31:30,080
Speaker 2: can do. You mentioned one of them. That's to have

514
00:31:30,120 --> 00:31:34,080
Speaker 2: a better, a stronger long term budget so that we're

515
00:31:34,120 --> 00:31:38,920
Speaker 2: handing on less debt to the generations that follow. To

516
00:31:39,000 --> 00:31:42,200
Speaker 2: be fair to this budget, it does that to be

517
00:31:42,320 --> 00:31:46,680
Speaker 2: less fair. It gets there over the longer term by

518
00:31:47,400 --> 00:31:50,720
Speaker 2: assuming we'll be able to make some pretty big savings

519
00:31:50,760 --> 00:31:54,080
Speaker 2: in the NDIS and that's going to be hard to do.

520
00:31:54,480 --> 00:31:57,240
Speaker 2: And certainly the speed of the turnaround that the government

521
00:31:57,280 --> 00:31:59,920
Speaker 2: is looking for on the spend on the NDIS is

522
00:32:00,120 --> 00:32:03,520
Speaker 2: pretty fast, so it's hard to find too many people

523
00:32:04,800 --> 00:32:08,440
Speaker 2: here in Canberra who think that that will be achievable.

524
00:32:08,960 --> 00:32:14,680
Speaker 2: But so yes, you can improve fairness over generations by

525
00:32:14,720 --> 00:32:18,080
Speaker 2: being more careful with the longer term budget. There's been

526
00:32:18,120 --> 00:32:21,840
Speaker 2: a bit of that in this budget. You can be

527
00:32:22,400 --> 00:32:25,880
Speaker 2: fair to younger Australians if you give and you've mentioned

528
00:32:25,920 --> 00:32:28,680
Speaker 2: it a few times, if you give a greater potential

529
00:32:28,720 --> 00:32:33,640
Speaker 2: around growth. I've called it prosperity. You don't get growth

530
00:32:33,680 --> 00:32:36,640
Speaker 2: in living standards without growth in the economy. The growth

531
00:32:36,640 --> 00:32:40,400
Speaker 2: in prosperity it is, it's essentially all the same. And

532
00:32:40,440 --> 00:32:42,440
Speaker 2: there are some things right of the bi all sorts

533
00:32:42,440 --> 00:32:46,640
Speaker 2: of changes around artificial intelligence and the like, and that

534
00:32:47,080 --> 00:32:51,160
Speaker 2: chopping and changing in the economy will create some some

535
00:32:51,320 --> 00:32:53,560
Speaker 2: problems on the way through, but it will also give

536
00:32:53,640 --> 00:32:58,200
Speaker 2: us a more prosperous economy. We will get greater prosperity

537
00:32:58,200 --> 00:33:00,800
Speaker 2: out of those technology changes in the law. Like what

538
00:33:00,960 --> 00:33:06,280
Speaker 2: worries me is that we are not getting enough of

539
00:33:06,320 --> 00:33:08,840
Speaker 2: a push from our political classes and haven't done for

540
00:33:08,880 --> 00:33:12,480
Speaker 2: decades around the everything else of prosperity. There are all

541
00:33:12,520 --> 00:33:16,400
Speaker 2: sorts of things we do in the federal budget and

542
00:33:16,480 --> 00:33:20,080
Speaker 2: outside the federal budget that are astoundingly stupid and that

543
00:33:20,160 --> 00:33:25,280
Speaker 2: holds us back on the prosperity front. I am a

544
00:33:25,400 --> 00:33:29,120
Speaker 2: sad said human being. Mark. I love tax right, you know,

545
00:33:29,320 --> 00:33:31,440
Speaker 2: and I think we can and we should do better

546
00:33:31,440 --> 00:33:33,680
Speaker 2: in text. But you look at some of the biggest

547
00:33:33,680 --> 00:33:38,160
Speaker 2: tax reforms we can make in Australia. I mean you

548
00:33:38,200 --> 00:33:42,040
Speaker 2: look at well, you know what's the economic models that

549
00:33:42,120 --> 00:33:45,840
Speaker 2: people like me and others run. You know what's the

550
00:33:45,920 --> 00:33:48,840
Speaker 2: boost to prosperity we get out of something. You may

551
00:33:48,880 --> 00:33:53,680
Speaker 2: be surprised to hear that the you know, tax I

552
00:33:53,720 --> 00:33:55,360
Speaker 2: love it to death, We can and we should do

553
00:33:55,400 --> 00:33:58,600
Speaker 2: it better, but it's not make or break around prosperity.

554
00:33:58,880 --> 00:34:03,360
Speaker 2: There is a little known push by the federal government

555
00:34:04,280 --> 00:34:09,759
Speaker 2: to change non compete clauses. That's you know, you get

556
00:34:09,760 --> 00:34:11,360
Speaker 2: a new job, you sign the bit of paper that

557
00:34:11,440 --> 00:34:14,439
Speaker 2: says as and when you leave that job, you can't

558
00:34:14,440 --> 00:34:19,160
Speaker 2: do this, you can't do that. And here in Australia

559
00:34:19,200 --> 00:34:22,680
Speaker 2: about one and every four workers signs those and they're

560
00:34:22,719 --> 00:34:25,880
Speaker 2: way too restrictive. As I like to say, the clue

561
00:34:25,960 --> 00:34:29,719
Speaker 2: is in the name right non compete clauses. We are

562
00:34:29,719 --> 00:34:33,920
Speaker 2: stopping competition, and competition is a grand thing. If we do,

563
00:34:35,160 --> 00:34:38,040
Speaker 2: you know, really wind back the scope of those clauses

564
00:34:38,400 --> 00:34:42,120
Speaker 2: or even get rid of them and protect intellectual property directly,

565
00:34:43,440 --> 00:34:46,719
Speaker 2: you can have as big an impact on prosperity as

566
00:34:46,719 --> 00:34:49,360
Speaker 2: some of the you know, the huge tax fights that

567
00:34:49,600 --> 00:34:51,359
Speaker 2: you know, changes out of tax that we can get.

568
00:34:51,680 --> 00:34:55,600
Speaker 2: So I do worry that sometimes we row down rabbit

569
00:34:55,640 --> 00:35:00,560
Speaker 2: holes rather than chasing some of the easier means that

570
00:35:00,640 --> 00:35:01,400
Speaker 2: we could achieve.

571
00:35:02,080 --> 00:35:04,359
Speaker 1: In the context of that, then Chris, maybe you get

572
00:35:04,400 --> 00:35:09,040
Speaker 1: explained to me and our audience why over the last

573
00:35:09,120 --> 00:35:13,759
Speaker 1: tour months we've had changes to super which probably at

574
00:35:13,760 --> 00:35:16,520
Speaker 1: the margin don't make much difference relative to the budget,

575
00:35:17,400 --> 00:35:22,160
Speaker 1: changes to trust tax, the way that we tax trust,

576
00:35:23,080 --> 00:35:26,320
Speaker 1: and all those capital gains and you know, the elimination

577
00:35:26,320 --> 00:35:30,200
Speaker 1: of negative gearing or the changes to negative gearing. Why

578
00:35:30,800 --> 00:35:34,160
Speaker 1: do we have that as such a big deal if

579
00:35:34,239 --> 00:35:37,759
Speaker 1: in relation to growth and or prosperity, they're not going

580
00:35:37,800 --> 00:35:40,120
Speaker 1: to have that much of an impacts. What's that all about?

581
00:35:40,120 --> 00:35:42,319
Speaker 2: Then? Yeah, and they're not going to have that much

582
00:35:42,360 --> 00:35:45,319
Speaker 2: of an impact. And let me add because I do

583
00:35:45,480 --> 00:35:50,360
Speaker 2: worry about so I'm broadly happy in particular with the

584
00:35:50,360 --> 00:35:53,960
Speaker 2: capital gains tax change, but I do worry that it's

585
00:35:54,000 --> 00:35:59,760
Speaker 2: being marketed, it's being spun. As you know, the soul's

586
00:35:59,760 --> 00:36:06,759
Speaker 2: how affordability in Australia and the good academic work in

587
00:36:06,760 --> 00:36:10,480
Speaker 2: this area has never claimed that. And you know the

588
00:36:10,600 --> 00:36:14,480
Speaker 2: simple illustration, over the next five years, the changes to

589
00:36:15,400 --> 00:36:18,759
Speaker 2: cattle gains tax and to negative gearing will raise an

590
00:36:18,800 --> 00:36:22,319
Speaker 2: extra three point six billion dollars in tax. Now that's

591
00:36:22,360 --> 00:36:25,600
Speaker 2: a lot of money. I would bend down and pick

592
00:36:25,640 --> 00:36:29,960
Speaker 2: it up. But across the same five years, we will

593
00:36:30,320 --> 00:36:34,960
Speaker 2: as a nation pay about six hundred billion in terms

594
00:36:35,000 --> 00:36:40,920
Speaker 2: of mortgage interest payments, not principal, just mortgage interest payments.

595
00:36:41,560 --> 00:36:44,440
Speaker 2: So three point six versus six hundred Or look at

596
00:36:44,560 --> 00:36:49,080
Speaker 2: the total size of Australian housing currently valued at twelve

597
00:36:49,200 --> 00:36:53,680
Speaker 2: point three prillion. These sort of changes will have an

598
00:36:53,800 --> 00:36:57,080
Speaker 2: overall impact on housing. But if you think of housing

599
00:36:57,120 --> 00:36:59,400
Speaker 2: as a big rock and we are moving the lever

600
00:36:59,520 --> 00:37:02,960
Speaker 2: there um we've got a tiny lever and this is

601
00:37:03,000 --> 00:37:06,480
Speaker 2: Australia's largest rock, I would take you back to twenty

602
00:37:06,520 --> 00:37:09,760
Speaker 2: twenty one, around twenty twenty two. Even at that stage,

603
00:37:09,800 --> 00:37:13,560
Speaker 2: before interest rates started rising in Australia, you could have

604
00:37:13,640 --> 00:37:19,600
Speaker 2: made two relatively reasonable arguments about why Australian housing was

605
00:37:19,640 --> 00:37:24,200
Speaker 2: so unaffordable. One was, well, infrastrates had been falling for

606
00:37:24,200 --> 00:37:27,680
Speaker 2: a long time during the pandemic. They fail to essentially nothing.

607
00:37:28,960 --> 00:37:31,960
Speaker 2: And when money is cheap as chips, no wonder, housing

608
00:37:32,000 --> 00:37:36,000
Speaker 2: prices had gone up. And when infrastrates in Australia rose,

609
00:37:36,000 --> 00:37:39,480
Speaker 2: you would think, well, hey, presto, house prices will come down,

610
00:37:39,520 --> 00:37:46,120
Speaker 2: they'll become more affordable. The alternative argument said, well, look,

611
00:37:46,239 --> 00:37:50,560
Speaker 2: you know, for decades the Australian housing policy has been

612
00:37:50,560 --> 00:37:53,640
Speaker 2: the word no, you know, no, you can't build it, No,

613
00:37:53,760 --> 00:37:56,320
Speaker 2: you really can't build it there and that leafy suburb

614
00:37:56,400 --> 00:37:59,919
Speaker 2: because older and richer people don't want you to. If

615
00:38:00,080 --> 00:38:04,120
Speaker 2: in the rare occasions we say yes, you know, we

616
00:38:04,200 --> 00:38:06,799
Speaker 2: put all these rules of regulations that make it stunningly

617
00:38:06,840 --> 00:38:10,440
Speaker 2: expensive to do, and if you roll on to today,

618
00:38:10,600 --> 00:38:14,239
Speaker 2: our infrastrates have risen a lot over that period. And

619
00:38:14,880 --> 00:38:21,600
Speaker 2: it is the equivalent of the Reserve Bank abolishing negative

620
00:38:21,600 --> 00:38:27,080
Speaker 2: gearing and the entirety of capital gains tax discounts of

621
00:38:27,080 --> 00:38:31,600
Speaker 2: any kind many times over, right, whether you're talking about

622
00:38:31,600 --> 00:38:36,160
Speaker 2: interest rates, capital gains, negative gearing, you are talking about

623
00:38:36,600 --> 00:38:40,319
Speaker 2: the cost of money going into property. Right, we've done

624
00:38:40,320 --> 00:38:43,800
Speaker 2: the equivalent of all this stuff around negative gearing and

625
00:38:43,800 --> 00:38:46,120
Speaker 2: on capital gains taxes and it did not stop a

626
00:38:46,120 --> 00:38:50,319
Speaker 2: big rise in house prices in Australia. We now know, right,

627
00:38:50,360 --> 00:38:54,720
Speaker 2: we have great evidence that the way to fix housing

628
00:38:54,719 --> 00:38:58,120
Speaker 2: in Australia is going to be the political fight of

629
00:38:58,320 --> 00:39:02,360
Speaker 2: the rest of our lives. You know. It is convincing

630
00:39:02,400 --> 00:39:06,759
Speaker 2: older and richer Australians who don't want change in and

631
00:39:06,800 --> 00:39:10,360
Speaker 2: around the suburb where they live that if population is

632
00:39:10,360 --> 00:39:13,560
Speaker 2: going to grow this much, we need to change a lot.

633
00:39:13,920 --> 00:39:16,120
Speaker 1: If I can interpret that, I think what you're saying

634
00:39:16,200 --> 00:39:21,560
Speaker 1: is the rules and regulations are not conducive or are

635
00:39:21,600 --> 00:39:27,200
Speaker 1: not encouraging any more supply in those particular areas for example,

636
00:39:27,800 --> 00:39:31,279
Speaker 1: and because of Australia is such an unusual nation with

637
00:39:31,920 --> 00:39:34,200
Speaker 1: fifty five percent of its population whatever it is living

638
00:39:34,239 --> 00:39:37,959
Speaker 1: in three capital cities and they're surrounded by mountains and sea.

639
00:39:39,120 --> 00:39:41,600
Speaker 1: That's very hard to go beyond those places. So supply

640
00:39:41,719 --> 00:39:44,759
Speaker 1: is a problem. Supply is a huge problem. Did you

641
00:39:44,800 --> 00:39:46,640
Speaker 1: see anything in the budget that's going to help us

642
00:39:46,680 --> 00:39:51,000
Speaker 1: with supply therefore help us with perhaps access for younger

643
00:39:51,000 --> 00:39:53,920
Speaker 1: people to buy their own place and or affordability.

644
00:39:55,239 --> 00:39:57,240
Speaker 2: Yes, I did, very happy to see it. I also

645
00:39:57,280 --> 00:40:00,319
Speaker 2: fair to say, you know, it's again not a big

646
00:40:00,400 --> 00:40:03,680
Speaker 2: enough leaver. So the budget has an extra two billion

647
00:40:03,760 --> 00:40:09,359
Speaker 2: dollars essiectually going into infrastructure around housing, all the you know,

648
00:40:09,680 --> 00:40:12,640
Speaker 2: the seige and the rest of it. And that is

649
00:40:12,680 --> 00:40:17,640
Speaker 2: great because we haven't been spending enough. But the ultimate

650
00:40:18,040 --> 00:40:22,360
Speaker 2: supply in Australia requires street by straight, suburb by suburb,

651
00:40:22,400 --> 00:40:25,600
Speaker 2: council by council. We've got to say yes where for

652
00:40:25,680 --> 00:40:28,120
Speaker 2: decades we've said no. And the people who said no,

653
00:40:28,400 --> 00:40:30,560
Speaker 2: they're not in my backout. It's the nimbis who said

654
00:40:30,560 --> 00:40:32,759
Speaker 2: no thought they were doing the right thing. But here

655
00:40:32,800 --> 00:40:35,640
Speaker 2: we are forty years later and we know we have

656
00:40:35,800 --> 00:40:39,960
Speaker 2: killed the prospects of a generation by continuing to say no.

657
00:40:40,560 --> 00:40:44,120
Speaker 2: And the Feds it's hard for that. You know, the

658
00:40:44,160 --> 00:40:46,960
Speaker 2: Feds have leavers that can have an impact on the States,

659
00:40:47,000 --> 00:40:49,360
Speaker 2: the States have leavers that can have an impact on

660
00:40:49,520 --> 00:40:52,799
Speaker 2: local council. But at the end of the day, this

661
00:40:52,960 --> 00:40:58,640
Speaker 2: is still a fight where older, richer Australians who are

662
00:40:58,719 --> 00:41:02,680
Speaker 2: already there don't want change around them. And that is

663
00:41:03,360 --> 00:41:07,440
Speaker 2: the ugliest political fight you can ever imagine. I've always

664
00:41:07,520 --> 00:41:11,239
Speaker 2: liked there was a Speaker of Congress over in the

665
00:41:11,880 --> 00:41:15,040
Speaker 2: US many years ago, Tip O'Neill. He said, all politics

666
00:41:15,080 --> 00:41:20,480
Speaker 2: is local, and all our housing problems are local, and

667
00:41:20,520 --> 00:41:22,120
Speaker 2: it's hard for the feeds to fix it.

668
00:41:22,400 --> 00:41:28,360
Speaker 1: Could you explain the connection or the dynamic between public

669
00:41:28,440 --> 00:41:32,840
Speaker 1: spending and private demand? So when the reserve band government

670
00:41:32,840 --> 00:41:39,520
Speaker 1: talks about aggregate private demand has been increasing outside of

671
00:41:39,520 --> 00:41:42,920
Speaker 1: fuel prices, I'm talking about and she often says it,

672
00:41:43,600 --> 00:41:46,879
Speaker 1: where does public spending, money spent by the government fit

673
00:41:46,960 --> 00:41:50,279
Speaker 1: in governments, not just federal states as well, fit into that.

674
00:41:51,160 --> 00:41:53,760
Speaker 2: So feeds are about a quarter and in the States

675
00:41:53,760 --> 00:41:58,680
Speaker 2: are about forty percent of all spending in Australia. But

676
00:41:58,760 --> 00:42:01,880
Speaker 2: of course you know they tax and they spend sometimes

677
00:42:01,920 --> 00:42:04,920
Speaker 2: what they do is give a tax cut or give

678
00:42:04,960 --> 00:42:08,040
Speaker 2: a subsidy. You know, you're seeing that with fuel taxes

679
00:42:08,480 --> 00:42:12,280
Speaker 2: at the moment. You've seen it recently with electricity costs.

680
00:42:12,840 --> 00:42:17,040
Speaker 2: There was another tax cut announced in the budget. So

681
00:42:17,160 --> 00:42:20,680
Speaker 2: sometimes even if governments aren't spending more, they are giving

682
00:42:21,080 --> 00:42:28,960
Speaker 2: families or perhaps businesses the money to spend more. Inflation

683
00:42:29,040 --> 00:42:32,399
Speaker 2: doesn't care if you like, whether an extra dollar got

684
00:42:32,400 --> 00:42:36,800
Speaker 2: spent by a federal government, of state government, a family,

685
00:42:36,920 --> 00:42:43,399
Speaker 2: a business, whatever. All that inflation cares about is how

686
00:42:43,520 --> 00:42:47,600
Speaker 2: much spending in total we're getting relative to our ability

687
00:42:47,640 --> 00:42:51,840
Speaker 2: to supply that spending. Again, I'd go back to that

688
00:42:51,880 --> 00:42:56,000
Speaker 2: basic equation, too much money chasing too little stuff. And

689
00:42:56,680 --> 00:42:59,920
Speaker 2: that's I think some of the frustrated I'm not want

690
00:43:00,040 --> 00:43:03,279
Speaker 2: of those people who thinks the Reserve Bank can or

691
00:43:03,280 --> 00:43:07,000
Speaker 2: should jump up and down about governments. That's not their role.

692
00:43:07,120 --> 00:43:11,719
Speaker 2: They are there to fight inflation, and the politicians, to

693
00:43:11,800 --> 00:43:13,600
Speaker 2: be fair to them, they have a different role, and

694
00:43:14,360 --> 00:43:17,520
Speaker 2: politics being what it is, sometimes you know they are

695
00:43:17,560 --> 00:43:20,520
Speaker 2: going to make the task of inflation fighting harder with

696
00:43:20,600 --> 00:43:23,399
Speaker 2: their decisions. That's what it is. You know. I don't

697
00:43:23,640 --> 00:43:26,719
Speaker 2: expect the governor of the day or the Reserve Bank

698
00:43:26,800 --> 00:43:29,360
Speaker 2: to be jumping up and down about what governments do.

699
00:43:29,680 --> 00:43:33,560
Speaker 2: That's not how it works. If you want an assessment

700
00:43:33,600 --> 00:43:36,439
Speaker 2: of what governments are or aren't doing, you know, there's

701
00:43:36,440 --> 00:43:39,520
Speaker 2: plenty of people out there who can give opinions. You

702
00:43:39,560 --> 00:43:42,120
Speaker 2: can't necessarily expect the Reserve Bank to be the one,

703
00:43:42,239 --> 00:43:44,440
Speaker 2: you know, the part of government to be jumping up

704
00:43:44,480 --> 00:43:46,480
Speaker 2: and down about the rest of government.

705
00:43:47,040 --> 00:43:50,839
Speaker 1: We often talk, and it's in the media all the time,

706
00:43:50,880 --> 00:43:55,640
Speaker 1: about the national debt being nine hundred and let's call

707
00:43:55,640 --> 00:44:00,440
Speaker 1: it sixty billion, close enough to a trillion, maybe also

708
00:44:00,560 --> 00:44:03,680
Speaker 1: explaining to our audience that's not the end of it,

709
00:44:03,719 --> 00:44:08,880
Speaker 1: because I think the debt of Victoria alone is a

710
00:44:08,920 --> 00:44:12,719
Speaker 1: couple one hundred billion. Does that fit into the national debt?

711
00:44:12,800 --> 00:44:14,480
Speaker 1: Or is that in addition to the national debt? So,

712
00:44:14,640 --> 00:44:16,239
Speaker 1: and what would our national debt look like when you

713
00:44:16,280 --> 00:44:17,000
Speaker 1: add everything up?

714
00:44:17,480 --> 00:44:19,960
Speaker 2: A couple of thoughts for you, best way to measure

715
00:44:20,040 --> 00:44:23,080
Speaker 2: debt is not gross dead it's net debt. If I've

716
00:44:23,120 --> 00:44:25,160
Speaker 2: got a big housing loan, but I've got a bunch

717
00:44:25,200 --> 00:44:27,040
Speaker 2: of money in the bank, I'm better off than somebody's

718
00:44:27,040 --> 00:44:30,120
Speaker 2: got the same loan but no money in the bank.

719
00:44:30,400 --> 00:44:34,759
Speaker 2: The net of our financial assets is important. So the

720
00:44:34,800 --> 00:44:37,400
Speaker 2: feeds are close to our trillion dollars, as you know

721
00:44:38,000 --> 00:44:41,200
Speaker 2: in debt, but net debt, once you allow for the

722
00:44:41,239 --> 00:44:43,960
Speaker 2: money they've got stashed away in various places, is about

723
00:44:44,400 --> 00:44:51,080
Speaker 2: six hundred billion. Second thought is, you know, well, whether

724
00:44:51,080 --> 00:44:53,759
Speaker 2: I've got a big housing loan and whether or not

725
00:44:53,760 --> 00:44:56,040
Speaker 2: I've got money in the bank. What's also reallemant is

726
00:44:56,120 --> 00:44:59,360
Speaker 2: my way how much I'm earning. And the same is

727
00:44:59,400 --> 00:45:02,120
Speaker 2: true for government. So you look at the nation as

728
00:45:02,120 --> 00:45:06,040
Speaker 2: a whole, and you look at that six hundred billion

729
00:45:07,000 --> 00:45:09,600
Speaker 2: in federal debt, you kind of need to compare it

730
00:45:09,640 --> 00:45:14,960
Speaker 2: to national income. And I suspect this will come as

731
00:45:14,960 --> 00:45:19,120
Speaker 2: a surprise to you and to many people if you're

732
00:45:19,160 --> 00:45:23,360
Speaker 2: looking at net federal debt as a share of Australian

733
00:45:23,520 --> 00:45:27,640
Speaker 2: national income that is below where it was before COVID.

734
00:45:28,560 --> 00:45:32,800
Speaker 2: You know, yes, COVID was expensive, but it was temporary

735
00:45:33,320 --> 00:45:36,960
Speaker 2: and our national income has grown a lot, and we've

736
00:45:37,000 --> 00:45:40,480
Speaker 2: had a burst of inflation which has boosted the size

737
00:45:40,520 --> 00:45:44,040
Speaker 2: of national income, but it hasn't boosted the debt. So

738
00:45:44,440 --> 00:45:47,440
Speaker 2: I am less worried about federal debt that a bunch

739
00:45:47,480 --> 00:45:50,600
Speaker 2: of people are. What has changed over the past decade

740
00:45:50,640 --> 00:45:53,719
Speaker 2: and you mentioned it, you know, the Victoria with its

741
00:45:53,719 --> 00:45:56,360
Speaker 2: two hundred billion debt, A bunch of others states have

742
00:45:56,440 --> 00:45:59,680
Speaker 2: also got debt. They also have less financial assets, so

743
00:45:59,719 --> 00:46:05,239
Speaker 2: that the the reduction to net is more of an

744
00:46:05,239 --> 00:46:09,560
Speaker 2: issue for them. To the extent that Australia has a

745
00:46:09,719 --> 00:46:15,480
Speaker 2: public sector debt problem, it is more the states than

746
00:46:15,680 --> 00:46:17,400
Speaker 2: the feeds these days.

747
00:46:17,560 --> 00:46:21,160
Speaker 1: Thank you. Are there any insights you can offer around

748
00:46:21,200 --> 00:46:24,640
Speaker 1: something that rarely has discussed, but the off budget budget

749
00:46:25,320 --> 00:46:29,520
Speaker 1: some in other words, things that weren't disclosed in the

750
00:46:29,560 --> 00:46:32,839
Speaker 1: income expenditure budget that are more in the capital side

751
00:46:32,840 --> 00:46:34,400
Speaker 1: of the budget or what we're going to spend what

752
00:46:34,440 --> 00:46:36,720
Speaker 1: Australian government's going to spend on capital items.

753
00:46:37,480 --> 00:46:43,200
Speaker 2: Yeah, and the distinction is a different one. So if

754
00:46:44,120 --> 00:46:46,800
Speaker 2: there's a given measure of the budget that the media

755
00:46:47,000 --> 00:46:52,080
Speaker 2: and analysts concentrate on, then the politicians have an incentive

756
00:46:52,160 --> 00:46:54,759
Speaker 2: to put money that it doesn't show up in a

757
00:46:54,800 --> 00:47:00,440
Speaker 2: measure that's been concentrated on. And until that Charter Budget

758
00:47:00,480 --> 00:47:05,680
Speaker 2: honesty back in nineteen ninety eight, we used to look

759
00:47:05,760 --> 00:47:10,000
Speaker 2: at a number that was made better when governments sold

760
00:47:10,000 --> 00:47:12,360
Speaker 2: an asset, when they privatized.

761
00:47:12,000 --> 00:47:14,000
Speaker 1: For example, like Comworth Bank or Telstra.

762
00:47:14,520 --> 00:47:16,920
Speaker 2: Yeah, you know, and indeed you saw a lot of

763
00:47:16,920 --> 00:47:21,520
Speaker 2: privatizations at the state level, and just before change of

764
00:47:21,560 --> 00:47:26,000
Speaker 2: government from Keating to Howard Jeff Kennett was privatizing some

765
00:47:26,080 --> 00:47:28,640
Speaker 2: things that led him payback some debt to the Feds.

766
00:47:29,880 --> 00:47:36,120
Speaker 2: The repayment of some Victorian government loans allowed the federal

767
00:47:36,160 --> 00:47:40,000
Speaker 2: government to say at that stage, or the budget is

768
00:47:40,000 --> 00:47:43,960
Speaker 2: in good nick, you know, whereas it was being propped

769
00:47:44,000 --> 00:47:50,359
Speaker 2: up by one off privatization receipts effectively, and so economists,

770
00:47:50,360 --> 00:47:52,239
Speaker 2: including me, said well, hang on, you know, we need

771
00:47:52,280 --> 00:47:53,960
Speaker 2: to fix that, and then we had a chart of

772
00:47:54,000 --> 00:47:57,600
Speaker 2: budget honesty. Our problem is that when we changed what

773
00:47:57,680 --> 00:48:02,399
Speaker 2: we look at, we simply changed the incentives for the politicians.

774
00:48:02,400 --> 00:48:04,719
Speaker 2: And don't get excited by one side or the other,

775
00:48:04,840 --> 00:48:09,400
Speaker 2: right I. If you think one side of politics are

776
00:48:09,480 --> 00:48:12,640
Speaker 2: genius and the other side are incompetent and evil, then

777
00:48:12,680 --> 00:48:17,000
Speaker 2: you are a deep disappointment to your primary school maths teacher.

778
00:48:17,440 --> 00:48:20,440
Speaker 2: You know, they are all flawed human beings and they

779
00:48:20,520 --> 00:48:24,200
Speaker 2: are dealing with flawed incentives that we as a nation

780
00:48:24,320 --> 00:48:28,040
Speaker 2: have given them. And as soon as we change the incentives,

781
00:48:28,040 --> 00:48:30,560
Speaker 2: as soon as we said, well, you know, we're now

782
00:48:30,600 --> 00:48:33,359
Speaker 2: going to concentrate on this budget measure, not that one.

783
00:48:34,800 --> 00:48:38,600
Speaker 2: It gave them an incentive to put different money instead

784
00:48:38,600 --> 00:48:41,560
Speaker 2: of privatizing. We we're sort of nationalizing suddenly. We had

785
00:48:41,600 --> 00:48:44,080
Speaker 2: all sorts of funds, you know, We've got funds around housing,

786
00:48:44,719 --> 00:48:49,880
Speaker 2: We've got funds around climate change. We've got everything from

787
00:48:50,280 --> 00:48:54,440
Speaker 2: the NBN to snowy hydro to student debt. All sorts

788
00:48:54,440 --> 00:48:56,840
Speaker 2: of things sit off budget.

789
00:48:57,440 --> 00:48:58,680
Speaker 1: They're not in the current budget.

790
00:48:59,400 --> 00:49:01,640
Speaker 2: They are not in the measure that we look at

791
00:49:01,680 --> 00:49:05,799
Speaker 2: the most. And the sort of punter way to think

792
00:49:05,840 --> 00:49:09,719
Speaker 2: about it is, I don't mind if something goes off budget.

793
00:49:10,520 --> 00:49:13,239
Speaker 2: If if that's just a money is going to go out,

794
00:49:13,280 --> 00:49:14,880
Speaker 2: but it's going to earn a bit of a return

795
00:49:14,920 --> 00:49:17,279
Speaker 2: and that money will come back in. I don't care.

796
00:49:17,520 --> 00:49:19,520
Speaker 2: I don't need to look at that closely. It can

797
00:49:19,560 --> 00:49:23,879
Speaker 2: go off budget. That's fine. A travel is that our

798
00:49:24,000 --> 00:49:26,719
Speaker 2: rules and our reporting mean that effectively stuff goes off

799
00:49:26,760 --> 00:49:31,040
Speaker 2: budget and then we stop caring about it so increasingly

800
00:49:31,080 --> 00:49:34,560
Speaker 2: over time, that's where the trash goes, you know, and

801
00:49:34,880 --> 00:49:37,839
Speaker 2: that money goes dark. We don't look at it enough,

802
00:49:38,520 --> 00:49:43,239
Speaker 2: and so you you know, for example, when you have

803
00:49:43,480 --> 00:49:46,200
Speaker 2: debt right offs as we did recently with student debt.

804
00:49:47,080 --> 00:49:50,640
Speaker 2: It doesn't show up in or not immediately. It only

805
00:49:50,680 --> 00:49:53,600
Speaker 2: shows up very slowly in the main measures that we

806
00:49:53,680 --> 00:49:56,320
Speaker 2: look at, right, you know, So there's a real incentive

807
00:49:56,480 --> 00:50:01,120
Speaker 2: for our governments to put trash off. I mean to

808
00:50:01,200 --> 00:50:04,239
Speaker 2: forgive that debt, you know, because the system sort of

809
00:50:04,320 --> 00:50:06,959
Speaker 2: lets them get away with that. It's not, by the way,

810
00:50:07,080 --> 00:50:12,000
Speaker 2: the only way in which they do things. They tend to.

811
00:50:13,600 --> 00:50:16,360
Speaker 2: Any given budget gives you some numbers over ten years,

812
00:50:16,360 --> 00:50:19,200
Speaker 2: but it gives you detailed numbers over four years. So

813
00:50:19,239 --> 00:50:21,120
Speaker 2: they try to be careful in the four years, and

814
00:50:21,200 --> 00:50:25,200
Speaker 2: mysteriously years five and six are suddenly much worse. Right,

815
00:50:25,280 --> 00:50:29,160
Speaker 2: you know, there's that dodge, there's all sorts of things

816
00:50:29,520 --> 00:50:32,920
Speaker 2: we do need, and I would it is an incredibly

817
00:50:33,040 --> 00:50:35,560
Speaker 2: neude and niche point forgive me, right, But if we

818
00:50:35,640 --> 00:50:41,120
Speaker 2: give our politicians such terrible reporting rules, of course they

819
00:50:41,120 --> 00:50:43,800
Speaker 2: are going to vault them. And I'm desperate to change

820
00:50:43,840 --> 00:50:49,680
Speaker 2: those rules. We are letting our politicians consistently pull the

821
00:50:49,719 --> 00:50:50,960
Speaker 2: wall over our eyes.

822
00:50:51,920 --> 00:50:53,640
Speaker 1: I think what you're sort of saying here is that

823
00:50:53,680 --> 00:50:57,760
Speaker 1: there are a number of items that have effectively been

824
00:50:58,000 --> 00:51:02,360
Speaker 1: classed as assets for under the in this environment and

825
00:51:02,440 --> 00:51:06,840
Speaker 1: don't appear in the expense column or the income column.

826
00:51:06,920 --> 00:51:09,040
Speaker 1: The income column being that the tax they collect and

827
00:51:09,080 --> 00:51:11,880
Speaker 1: other things, the expense column being the thing that they

828
00:51:11,920 --> 00:51:14,200
Speaker 1: spend day to day on the government, that is in

829
00:51:14,280 --> 00:51:16,560
Speaker 1: terms of the budget. But there's another column over here

830
00:51:16,560 --> 00:51:20,640
Speaker 1: called assets. Snowy Hydro for example, or NBN Snowy Hydro,

831
00:51:20,760 --> 00:51:23,399
Speaker 1: by the way, is not even completed heads. In fact,

832
00:51:23,400 --> 00:51:25,520
Speaker 1: they stopped doing some work on it recently because there

833
00:51:25,560 --> 00:51:27,520
Speaker 1: was a cave in or something. But they're going to

834
00:51:27,560 --> 00:51:30,280
Speaker 1: keep throwing money at it. But that's money that's coming

835
00:51:30,280 --> 00:51:34,319
Speaker 1: from it's either borrowed money or alternatively, it's coming out

836
00:51:34,360 --> 00:51:36,640
Speaker 1: of the tax pool. It's got to come from somewhere

837
00:51:37,040 --> 00:51:38,040
Speaker 1: because you've got to spend it.

838
00:51:38,280 --> 00:51:43,160
Speaker 2: Yeah, and the acceleration in the amount of money that's

839
00:51:43,200 --> 00:51:48,320
Speaker 2: headed off budget is spectactical. To be fair, this week

840
00:51:48,920 --> 00:51:51,640
Speaker 2: it didn't throw you know, threw an extra five billion

841
00:51:51,680 --> 00:51:56,200
Speaker 2: in over four years, and I'm not that excited. It

842
00:51:56,280 --> 00:51:59,880
Speaker 2: was only five billion, but there has been a truly

843
00:52:00,200 --> 00:52:04,040
Speaker 2: massive amount. We are currently looking across a five year

844
00:52:04,080 --> 00:52:08,400
Speaker 2: period at one hundred and fifteen billion dollars that sits

845
00:52:08,480 --> 00:52:12,080
Speaker 2: off budget. Again, I hate myself for knowing that number

846
00:52:12,120 --> 00:52:16,319
Speaker 2: without having to check it. But yeah, you know, Australians

847
00:52:16,320 --> 00:52:20,399
Speaker 2: deserve better, and it's such a nude thing. We would

848
00:52:20,480 --> 00:52:26,799
Speaker 2: be outraged if businesses were raughting their accounts, you know,

849
00:52:26,880 --> 00:52:30,000
Speaker 2: if the auditors were failing to jump up and down

850
00:52:30,080 --> 00:52:33,280
Speaker 2: about all this sort of stuff. The behavior is bad

851
00:52:33,400 --> 00:52:35,000
Speaker 2: because we let it be bad.

852
00:52:35,480 --> 00:52:37,279
Speaker 1: I think what you're saying there too, Chris, is that

853
00:52:38,239 --> 00:52:42,400
Speaker 1: it's really our responsibility, or perhaps more the responsibility professionals

854
00:52:42,440 --> 00:52:46,480
Speaker 1: like yourself, because most punters wouldn't understand this, but there

855
00:52:46,600 --> 00:52:50,799
Speaker 1: is a level of obligation or responsibility for people in

856
00:52:50,840 --> 00:52:54,120
Speaker 1: this country to hold the government to account for these

857
00:52:54,160 --> 00:52:56,960
Speaker 1: sorts of things. So we talk about hundreds of billions.

858
00:52:56,960 --> 00:53:00,440
Speaker 1: We're talking about seriously big dollars, and the question comes,

859
00:53:00,800 --> 00:53:03,080
Speaker 1: will the so called assets actually one day make us

860
00:53:03,120 --> 00:53:06,439
Speaker 1: money or at least we get some utility utility out

861
00:53:06,440 --> 00:53:08,440
Speaker 1: of them? At some stage we don't know the answer

862
00:53:08,440 --> 00:53:11,560
Speaker 1: to that. There was anything about the NBN the other day.

863
00:53:12,160 --> 00:53:16,759
Speaker 1: You know, the NBN great, But you know, when you

864
00:53:16,800 --> 00:53:21,520
Speaker 1: look at Muss Starlink, I mean like I mean, if

865
00:53:21,560 --> 00:53:22,880
Speaker 1: you've got a farm for examp or even good of

866
00:53:22,880 --> 00:53:27,080
Speaker 1: you had house, Starlink works really well, and it costs

867
00:53:27,120 --> 00:53:29,799
Speaker 1: the consumer, you know, three or four hundred bucks, and

868
00:53:30,040 --> 00:53:33,200
Speaker 1: we've yet, we're spending billions on the NBN, and I

869
00:53:33,239 --> 00:53:35,160
Speaker 1: know it's valuaboard, we use it here.

870
00:53:35,600 --> 00:53:38,520
Speaker 2: Yeah, the technology changed, so you might have thought that

871
00:53:38,600 --> 00:53:41,320
Speaker 2: the NBN was a you know, good and safe investment.

872
00:53:41,440 --> 00:53:43,960
Speaker 2: You could set it off off budget there because it

873
00:53:44,000 --> 00:53:46,120
Speaker 2: was going to be okay. But the technology changed and

874
00:53:46,440 --> 00:53:50,480
Speaker 2: we've lost money. You look at the snowy hydro turns

875
00:53:50,520 --> 00:53:55,759
Speaker 2: out that there was a lot harder to dig, a

876
00:53:55,840 --> 00:53:58,319
Speaker 2: lot more expensive, and a lot slower to dig than

877
00:53:58,360 --> 00:54:01,359
Speaker 2: we thought. So it might have been reasonable to put

878
00:54:01,400 --> 00:54:03,799
Speaker 2: it off budget to begin with. But here we are.

879
00:54:03,840 --> 00:54:06,759
Speaker 2: We now know we've lost a fortune. There are all

880
00:54:06,840 --> 00:54:11,000
Speaker 2: sorts of things or you know, some of our money

881
00:54:11,000 --> 00:54:14,879
Speaker 2: these days, props up at aminium smelters because there are

882
00:54:15,360 --> 00:54:19,840
Speaker 2: votes in it. Although props up the production of Tim Tams.

883
00:54:19,880 --> 00:54:23,239
Speaker 2: And I love Tim Tams, but I don't want, you know,

884
00:54:23,400 --> 00:54:29,080
Speaker 2: my taxpayer dollars supporting it at the cost of everything else.

885
00:54:29,880 --> 00:54:34,040
Speaker 2: We let crap happen. That's on us much more than

886
00:54:34,080 --> 00:54:35,800
Speaker 2: it is on the politicians.

887
00:54:35,880 --> 00:54:39,200
Speaker 1: I thinks that's that's a very clear answer on that.

888
00:54:39,280 --> 00:54:43,480
Speaker 1: Thanks very much that the one that wasn't the word

889
00:54:43,520 --> 00:54:46,560
Speaker 1: that was not used, I don't think in everything that

890
00:54:46,600 --> 00:54:49,160
Speaker 1: I read in a relation to the budget, and I

891
00:54:49,200 --> 00:54:52,360
Speaker 1: did use AI to help me, the word that didn't

892
00:54:52,360 --> 00:54:56,120
Speaker 1: come up was immigration. Do you reckon? You could just

893
00:54:57,040 --> 00:55:00,440
Speaker 1: sort of sort of drill down a little bit on

894
00:55:01,280 --> 00:55:09,600
Speaker 1: immigration relative to fiscal policy, relative to inflation, and probably

895
00:55:09,719 --> 00:55:12,479
Speaker 1: finally the standard of living, our standard of living, because

896
00:55:12,520 --> 00:55:13,440
Speaker 1: that's where we started.

897
00:55:13,840 --> 00:55:17,200
Speaker 2: Yeah, yeah, and it is worth going back a couple

898
00:55:17,200 --> 00:55:23,600
Speaker 2: of decades when migration was a clear positive for Australia.

899
00:55:24,200 --> 00:55:27,359
Speaker 2: But because we have not built, or when we're built,

900
00:55:27,400 --> 00:55:29,440
Speaker 2: we haven't built in the right place, or when we're built,

901
00:55:29,480 --> 00:55:31,839
Speaker 2: we haven't you know, the rules and regulations have made

902
00:55:31,840 --> 00:55:35,080
Speaker 2: it stunningly expensive. But that isn't the fault of the migrants,

903
00:55:35,160 --> 00:55:38,759
Speaker 2: right again, that's on us. We've screwed up. But the

904
00:55:38,800 --> 00:55:43,359
Speaker 2: worst that housing has become, the more of a complication

905
00:55:43,560 --> 00:55:48,280
Speaker 2: that the pace of our migration has been. Now migration,

906
00:55:48,680 --> 00:55:51,920
Speaker 2: the government has been tightening up, but we have a

907
00:55:51,960 --> 00:55:55,319
Speaker 2: system that lets you appeal this appeal that meaning that

908
00:55:56,080 --> 00:55:59,920
Speaker 2: the slow down in migration is occurring more slowly than

909
00:56:00,120 --> 00:56:04,200
Speaker 2: the government had expected this financial year. In the budget

910
00:56:04,200 --> 00:56:07,920
Speaker 2: the other day the government just revised up the expected

911
00:56:08,040 --> 00:56:11,840
Speaker 2: net migration this year about thirty five thousand people. I

912
00:56:11,880 --> 00:56:16,120
Speaker 2: think twenty thousand next year to be fair. That number

913
00:56:16,200 --> 00:56:19,560
Speaker 2: is coming down to be really fair. If we want

914
00:56:19,600 --> 00:56:23,520
Speaker 2: to get back to a society that can be much

915
00:56:23,560 --> 00:56:26,279
Speaker 2: more welcoming as we should be, we have to be

916
00:56:26,360 --> 00:56:29,160
Speaker 2: doing better on housing and a range of other fronts.

917
00:56:29,920 --> 00:56:35,000
Speaker 2: We've made the migration equation for Australia much more complex

918
00:56:35,840 --> 00:56:37,760
Speaker 2: and we can or we should do better.

919
00:56:38,040 --> 00:56:41,319
Speaker 1: Did you think there's a mismatch or there has been

920
00:56:41,360 --> 00:56:46,920
Speaker 1: a mismatch relative to policy on immigration into Australia And

921
00:56:46,960 --> 00:56:49,319
Speaker 1: we're talking about net immigration, so with the people leaving

922
00:56:49,400 --> 00:56:55,680
Speaker 1: this people coming relative to the policy relative in relation

923
00:56:55,800 --> 00:56:59,400
Speaker 1: to housing these people, has there been a mismatch?

924
00:57:00,320 --> 00:57:02,960
Speaker 2: Yeah, and again that's on us. We should be much

925
00:57:03,000 --> 00:57:05,839
Speaker 2: better at building housing than we are and we're not.

926
00:57:06,239 --> 00:57:11,000
Speaker 2: There are other complications though, right when migrants arrive. Federal

927
00:57:11,080 --> 00:57:13,880
Speaker 2: governments tend to make money. They get the taxes. State

928
00:57:13,920 --> 00:57:16,400
Speaker 2: governments tend to lose money. They've got to build the

929
00:57:16,480 --> 00:57:19,640
Speaker 2: roads and the schools and the hospitals and the like.

930
00:57:20,560 --> 00:57:24,200
Speaker 2: But it's the feds who get to make the decisions,

931
00:57:24,480 --> 00:57:27,600
Speaker 2: so they tend to make money out of it, and

932
00:57:29,120 --> 00:57:31,440
Speaker 2: you know that has a bit of an impact. They

933
00:57:31,480 --> 00:57:36,240
Speaker 2: also like net migration to be higher, partly because it

934
00:57:36,320 --> 00:57:40,600
Speaker 2: makes it less likely that the economy ever tips into recession.

935
00:57:41,360 --> 00:57:45,680
Speaker 2: Politicians hate headlines about recessions. More people means that's less

936
00:57:45,840 --> 00:57:48,640
Speaker 2: likely to happen. To be clear, right, you know, the

937
00:57:48,880 --> 00:57:55,640
Speaker 2: the politics of migration are made much more complex, not

938
00:57:55,840 --> 00:57:59,400
Speaker 2: just by those things, but by our policy failings on

939
00:57:59,520 --> 00:58:03,120
Speaker 2: everything else. And most policy failings on everything else have

940
00:58:03,280 --> 00:58:08,800
Speaker 2: lasted for so many decades, right, that responsibility lies clearly

941
00:58:08,840 --> 00:58:11,200
Speaker 2: with us to get them better.

942
00:58:11,640 --> 00:58:15,160
Speaker 1: Do you think overall that this budget was a reform budget?

943
00:58:15,960 --> 00:58:18,200
Speaker 2: I do, which is not the same thing as saying

944
00:58:18,200 --> 00:58:21,520
Speaker 2: I like everything in it. There's some things in it

945
00:58:21,560 --> 00:58:25,200
Speaker 2: that I quite strongly disagree with. But it is fair

946
00:58:25,240 --> 00:58:27,680
Speaker 2: to say if you look back in the last couple

947
00:58:27,720 --> 00:58:33,080
Speaker 2: of decades, we have had white knuckled scary budgets as

948
00:58:33,120 --> 00:58:35,560
Speaker 2: we fought off crises, right, you know, and the budget

949
00:58:35,560 --> 00:58:38,840
Speaker 2: had to do really important things during COVID, during the

950
00:58:38,880 --> 00:58:42,120
Speaker 2: global financial crisis. And again not to say that our

951
00:58:42,160 --> 00:58:45,240
Speaker 2: decisions were perfect either time, but we know because we

952
00:58:45,280 --> 00:58:48,760
Speaker 2: could compare to what other nations did that. Both times

953
00:58:48,800 --> 00:58:52,840
Speaker 2: we did better than other nations. And you know, federally

954
00:58:53,240 --> 00:58:55,440
Speaker 2: it was under one side of politics with COVID and

955
00:58:55,520 --> 00:58:59,160
Speaker 2: another side during global financial crists. What we have not

956
00:58:59,520 --> 00:59:05,240
Speaker 2: done for many years now, our politicians have not challenged

957
00:59:05,280 --> 00:59:09,000
Speaker 2: Australians enough. If an opposition says, you know, we really

958
00:59:09,040 --> 00:59:12,040
Speaker 2: need to change, we don't vote them in. If a

959
00:59:12,160 --> 00:59:15,440
Speaker 2: government I don't think of the twenty fourteen budget says

960
00:59:15,640 --> 00:59:17,840
Speaker 2: all right, we do need to change, and this budget

961
00:59:17,880 --> 00:59:20,360
Speaker 2: said we do need to change, we tend to kick

962
00:59:20,400 --> 00:59:24,680
Speaker 2: them out at the following election. As an electorate, we

963
00:59:24,800 --> 00:59:28,680
Speaker 2: have begged our politicians to do nothing. We have elected

964
00:59:28,720 --> 00:59:31,360
Speaker 2: the ones who promised to do nothing, and then they

965
00:59:31,400 --> 00:59:35,160
Speaker 2: deliver on that promise of doing nothing. Our problem is

966
00:59:35,320 --> 00:59:38,840
Speaker 2: that our the barnacles continue to grow. You see it

967
00:59:38,840 --> 00:59:40,960
Speaker 2: in housing, You see it in climate policy, You see

968
00:59:41,000 --> 00:59:45,040
Speaker 2: it in federal State relations. You see it see it

969
00:59:45,080 --> 00:59:49,080
Speaker 2: in our tobacco taxing. You see it in now gas taxing.

970
00:59:49,720 --> 00:59:52,000
Speaker 2: You see it in the NDIS. You see it in

971
00:59:52,160 --> 00:59:57,040
Speaker 2: the deal, the sweetheart deal that gives West Australia extra

972
00:59:57,080 --> 00:59:59,440
Speaker 2: money even though it's got money coming out of its ears.

973
01:00:00,000 --> 01:00:04,480
Speaker 2: We do dumb things. And I find that very frustrating.

974
01:00:04,600 --> 01:00:07,080
Speaker 1: Can I show you one final question, Chris, in the

975
01:00:07,120 --> 01:00:10,480
Speaker 1: interest of time for you, and I appreciate the time

976
01:00:10,520 --> 01:00:14,960
Speaker 1: you spent on this. If you were advising the Treasurer

977
01:00:15,800 --> 01:00:19,680
Speaker 1: tough one and and he said to you, look, Chris,

978
01:00:19,920 --> 01:00:22,480
Speaker 1: this interest generation and equity is just wrong. We've got

979
01:00:22,520 --> 01:00:25,080
Speaker 1: to fix it. And the way I want to fix

980
01:00:25,120 --> 01:00:26,760
Speaker 1: it is I want to get young people into a house.

981
01:00:28,520 --> 01:00:29,400
Speaker 1: What would you whisper in?

982
01:00:29,520 --> 01:00:33,080
Speaker 2: Is he? I would say, and again, you know, I

983
01:00:33,080 --> 01:00:35,040
Speaker 2: was happy enough for the capital gains tax changes, but

984
01:00:35,040 --> 01:00:38,640
Speaker 2: I would say, it's not about tax. It is about

985
01:00:38,760 --> 01:00:42,880
Speaker 2: our stupid regulations. And I was part of that reform

986
01:00:43,400 --> 01:00:47,200
Speaker 2: round table here in Canberra last August. One of it's

987
01:00:47,280 --> 01:00:51,480
Speaker 2: key recommendations was just stop adding things to the National

988
01:00:51,560 --> 01:00:55,280
Speaker 2: Construction Code, those regulations. And if you are in a

989
01:00:55,360 --> 01:00:59,320
Speaker 2: nation where one of the key recommendations is just stop, right,

990
01:00:59,520 --> 01:01:02,720
Speaker 2: you know it helps you show the stupidity of what

991
01:01:02,760 --> 01:01:07,120
Speaker 2: we have done. I described it earlier as for decades,

992
01:01:07,200 --> 01:01:11,080
Speaker 2: Australian's housing policy has been the word no, no, you

993
01:01:11,160 --> 01:01:14,400
Speaker 2: can't do that. We have to make it yes. And

994
01:01:14,440 --> 01:01:20,480
Speaker 2: that is incredibly urgent because even if we have perfect policies, federal, state,

995
01:01:20,800 --> 01:01:23,960
Speaker 2: local council. Even if we have older and riches Australian

996
01:01:24,000 --> 01:01:27,160
Speaker 2: saying all right, okay, I get it. I've got to

997
01:01:27,240 --> 01:01:29,280
Speaker 2: change in my mind. I've got to be willing for

998
01:01:29,320 --> 01:01:33,200
Speaker 2: this to happen. You've then got to build it right.

999
01:01:33,240 --> 01:01:35,440
Speaker 2: And that's going to take a very long time to fix.

1000
01:01:36,120 --> 01:01:40,000
Speaker 2: And that is the tough news. There is no magic

1001
01:01:40,080 --> 01:01:44,360
Speaker 2: wand in housing. And I suspect the fix that it

1002
01:01:44,440 --> 01:01:49,120
Speaker 2: needs is not merely automatically slow because of the building process,

1003
01:01:49,480 --> 01:01:52,280
Speaker 2: but it has to travel through older and richard people

1004
01:01:52,520 --> 01:01:55,320
Speaker 2: who really do not want that sort of change.

1005
01:01:55,680 --> 01:01:58,360
Speaker 1: And would you offer them an incentive to accept a change?

1006
01:01:58,360 --> 01:02:01,160
Speaker 1: Would you say to older, richer people, look, you know,

1007
01:02:01,200 --> 01:02:04,520
Speaker 1: if you five people in those five houses, all alongside

1008
01:02:04,520 --> 01:02:06,680
Speaker 1: each other, all agree to sell to this develop who's

1009
01:02:06,680 --> 01:02:09,200
Speaker 1: going to put a block of apartments up there? Maybe

1010
01:02:10,040 --> 01:02:12,720
Speaker 1: I know there's some special incentive for you, some some

1011
01:02:12,840 --> 01:02:15,880
Speaker 1: tax incentive, or you know, I don't know, whatever. Would

1012
01:02:15,920 --> 01:02:17,600
Speaker 1: you do you think that's the way out of this,

1013
01:02:17,640 --> 01:02:19,640
Speaker 1: because I mean, how do you how do you how

1014
01:02:19,640 --> 01:02:22,880
Speaker 1: do you change people's attitude towards like you just said,

1015
01:02:23,080 --> 01:02:25,160
Speaker 1: the five older people living in a leafy suburbs. They've

1016
01:02:25,160 --> 01:02:26,800
Speaker 1: always lived for the last fifty years, have paid off

1017
01:02:26,840 --> 01:02:29,160
Speaker 1: the house that worked, paid the taxes. They don't want

1018
01:02:29,280 --> 01:02:32,320
Speaker 1: a five story building popping up next door to them.

1019
01:02:32,680 --> 01:02:35,680
Speaker 1: How do you incentivize these people? What do you think?

1020
01:02:36,320 --> 01:02:40,400
Speaker 2: And I'm assuming they don't have kids and grandkids. They

1021
01:02:40,480 --> 01:02:44,040
Speaker 2: clearly not worrying about them. And the answer is that

1022
01:02:44,080 --> 01:02:45,680
Speaker 2: you're seeing it in New South Wales at the moment

1023
01:02:45,680 --> 01:02:49,560
Speaker 2: as they have changed by planning rules and regulations around

1024
01:02:49,680 --> 01:02:54,120
Speaker 2: train stations, for example, you are suddenly getting builders going

1025
01:02:54,120 --> 01:02:56,720
Speaker 2: to them and saying, well, hang on, there's money if

1026
01:02:56,720 --> 01:02:58,240
Speaker 2: you wanted to. You know, we can now do stuff

1027
01:02:58,280 --> 01:03:00,440
Speaker 2: that we couldn't do before. There's money here. So there

1028
01:03:00,560 --> 01:03:05,520
Speaker 2: is an incentive of financial incentive to change once that

1029
01:03:05,680 --> 01:03:09,280
Speaker 2: change is allowed. We are not yet at the point

1030
01:03:10,000 --> 01:03:15,040
Speaker 2: in Australia where much change is allowed. There's a spot

1031
01:03:15,080 --> 01:03:17,720
Speaker 2: I walked past in Sydney all the time. It's you know,

1032
01:03:17,960 --> 01:03:20,440
Speaker 2: a little half a terrace and it looks terrible. It

1033
01:03:20,520 --> 01:03:24,360
Speaker 2: is tiny, it is dirty, and I suspect it costs

1034
01:03:24,360 --> 01:03:26,600
Speaker 2: many millions of dollars and squeeze that there is no

1035
01:03:27,040 --> 01:03:30,560
Speaker 2: actual parking spot, but squeezed in under the sort of

1036
01:03:30,680 --> 01:03:34,920
Speaker 2: bay window. There is a very expensive looking push. We

1037
01:03:35,560 --> 01:03:39,480
Speaker 2: are creating a first world nation that has third world housing,

1038
01:03:40,160 --> 01:03:44,960
Speaker 2: and that just drives me crazy. You know, why are

1039
01:03:45,040 --> 01:03:47,320
Speaker 2: we are shooting ourselves in the foot like that?

1040
01:03:48,080 --> 01:03:53,280
Speaker 1: Well, Chris, Chris Richardson a former Deloitte Access Economics, but

1041
01:03:53,360 --> 01:03:57,240
Speaker 1: probably importantly today your business. You're the founder and principle

1042
01:03:57,240 --> 01:03:59,920
Speaker 1: of rich Insight. I really appreciate you. And by the way,

1043
01:04:00,080 --> 01:04:05,360
Speaker 1: thanks very much for explaining these complex minutia that sort

1044
01:04:05,400 --> 01:04:08,640
Speaker 1: of sit in budgets that, by the way, the media

1045
01:04:08,720 --> 01:04:11,120
Speaker 1: never talks about. They just hit the headlines all the time,

1046
01:04:11,720 --> 01:04:14,480
Speaker 1: and their headlines obviously are important to some people will

1047
01:04:14,480 --> 01:04:17,160
Speaker 1: be upset about CGT, and some people are going to

1048
01:04:17,200 --> 01:04:20,280
Speaker 1: be upset about negative gear and going and trust taxes

1049
01:04:20,320 --> 01:04:22,040
Speaker 1: and all that sort of stuff. And that's for another day,

1050
01:04:22,040 --> 01:04:24,120
Speaker 1: for another topic that's not for you and I today,

1051
01:04:24,160 --> 01:04:27,040
Speaker 1: But for you and I, what I really appreciate is

1052
01:04:27,080 --> 01:04:28,960
Speaker 1: you sort of get into the minutiri and sort of

1053
01:04:29,000 --> 01:04:31,480
Speaker 1: giving us context about that sort of stuff. I really appreciate.

1054
01:04:31,520 --> 01:04:32,160
Speaker 1: Thank you very much.

1055
01:04:32,680 --> 01:04:34,920
Speaker 2: I love it all too much, and it's my preuth.

1056
01:04:35,360 --> 01:04:35,920
Speaker 1: These griz