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Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm

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Speaker 1: James Kirkby, the Wealth editor at the Australian. Welcome aboard everybody.

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Speaker 1: If you're an investor, it's worth knowing that this week

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Speaker 1: may well be a turning point on rates, which are

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Speaker 1: so important, of course to investors. The big banks have

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Speaker 1: been cutting their deposit rates that they offer retail customers.

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Speaker 1: Three of the big four have moved in the last

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Speaker 1: few days, cutting their rates by about half a percent,

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Speaker 1: roughly from a five percent or so to four and

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Speaker 1: a half on the deposit. That means that the banks

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Speaker 1: really do believe that rates are coming down. Cynically, of course,

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Speaker 1: you might say they're moving well ahead of time and

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Speaker 1: maybe moving ahead of any we even get. We'll talk

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Speaker 1: about that in a moment. And we've also been talking

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Speaker 1: about how all year. If you've listened to various shows,

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Speaker 1: I've had several guests saying that the units are going

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Speaker 1: to go better than standalone houses on price, and that

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Speaker 1: is exactly what's been happening in recent times. You'll see

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Speaker 1: that reported. And one other I thought quite topical news

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Speaker 1: worthy item is today the major report on childcare has

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Speaker 1: come out from Victoria University and it gives the lie

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Speaker 1: of the landown childcare. Basically, it says that one in

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Speaker 1: four Australians live in what they call it childcare desert,

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Speaker 1: that is where there are three or more kids for

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Speaker 1: each spot in the childcare center. There are regional towns

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Speaker 1: and suburbs where those deats go off the deep end

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Speaker 1: and there are six kids for every spot. And that's

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Speaker 1: on the basis that you can even get into a childcare.

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Speaker 1: My guest today is impeccably credential to talk about all

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Speaker 1: this because a she's a economist at AMP B. She's

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Speaker 1: a regular guest on the show. And see she just

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Speaker 1: very interesting what would you call it a social media

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Speaker 1: video about childcare and she filmed herself going down to

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Speaker 1: the childcare center and speaking as an economist but also

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Speaker 1: someone dashing to childcare, which I've you've never done that,

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Speaker 1: You'll never forget it and you know all about it.

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Speaker 1: It's Diana and Mossina of amp.

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Speaker 2: How are you, Diana, Hi, James, I'm good. Thank you

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Speaker 2: for having me on.

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Speaker 1: Great to have you on, Great to have you on

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Speaker 1: the thing about child care and Coree Sink if you will.

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Speaker 1: But the thing about child care is you're.

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Speaker 3: So interested in childcare, just remembering that I was on

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Speaker 3: the board of the childcare center when we had kids

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Speaker 3: at childcare, and I can remember actually being applying to

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Speaker 3: for grants to renovate the place and all that sort

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Speaker 3: of thing.

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Speaker 1: And you're so involved, and then your kids move on,

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Speaker 1: and well, it's only human. You're you're not as intensely

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Speaker 1: interested as you were. But we will do that in

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Speaker 1: a moment, folks. But I want to talk to Diana

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Speaker 1: first of all about some big picture of things, because

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Speaker 1: it's news to me actually that the big banks have

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Speaker 1: been cutting the rates the pay depositors, and that to

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Speaker 1: me is them really moving now. It's beyond theory. Now

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Speaker 1: they are of the belief that rates are going forward.

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Speaker 1: Do you think that tells us anything we didn't already

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Speaker 1: know about where rates are going, Diana.

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Speaker 2: Well, the bank's price, they're fixed rates, and the deposit

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Speaker 2: rates of what money market expectations tell us, and money

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Speaker 2: markets are pricing in a rate cut by the end

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Speaker 2: of the year in Australia. Here four rate cuts in

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Speaker 2: the US and money market expectations in Australia are very

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Speaker 2: much influenced by what happens globally, particularly in the US,

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Speaker 2: So we may not get a rate cut by the

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Speaker 2: end of the year, but clearly the market has moved

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Speaker 2: and is signaling that there are going to be rate

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Speaker 2: cuts within the next twelve months. The market jumps around

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Speaker 2: a lot. We can't necessarily take it to heart that

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Speaker 2: this is exactly what's going to happen, but I think

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Speaker 2: that's just what the banks are responding to, this change

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Speaker 2: in money market expectations about where rates are going to go.

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Speaker 2: The banks don't have any clue as to what the

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Speaker 2: Reserve Bank is actually going to do because the Reserve

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Speaker 2: Bank hasn't met yet. They are the ones that decide

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Speaker 2: the rates on that day, So I think it's just

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Speaker 2: them responding to what the financial markets are saying right now.

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Speaker 1: How important are I thought that the depositor the depositors

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Speaker 1: were very important to our local banks in terms of

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Speaker 1: where they set their rates.

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Speaker 2: Well, absolutely they are. We've been in this period where

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Speaker 2: deposit rates have been extremely high over the past twelve

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Speaker 2: to eighteen months, so this is a normalization to the

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Speaker 2: rates that we've had.

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Speaker 1: Are they high on what measure above inflation or historically or.

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Speaker 2: The high relative to the last five to ten year average,

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Speaker 2: the deposit rates have basically moved in line with the

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Speaker 2: rate hikes and the very interest rates. About eighty five

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Speaker 2: percent of the rate hikes have been passed onto the

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Speaker 2: average variable rate. I usually look at the one that's discounted,

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Speaker 2: because most of the banks are still giving discounts to

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Speaker 2: the headline rates. Usually in most rate cycles, we see

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Speaker 2: about ninety percent passed through from changes to the cash

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Speaker 2: straight to the actual variable interest rates. So it's been

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Speaker 2: a little bit less than normal.

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Speaker 1: Well, I must say, folks, if you are thinking of

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Speaker 1: lucking in some money on term deposit and you were

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Speaker 1: waiting for the top, but they say, no one rings

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Speaker 1: a bell at the top. Right, But this is as

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Speaker 1: close as you'll get to it. I think where they're

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Speaker 1: just starting what could be the first of a sequence

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Speaker 1: of cuts. Okay, Now, the other thing that I wanted

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Speaker 1: to tell to you about briefly was that unemployment turned

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Speaker 1: out to be stronger than people thought, that the numbers

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Speaker 1: behind the scenes were stronger. And I'm taking from that

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Speaker 1: full employment to still here, and I'm taking from that

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Speaker 1: that basically rental, the demand forens isn't going to change

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Speaker 1: much because people will be able to pay them. There

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Speaker 1: really is no sign up unemployment going the wrong way

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Speaker 1: at the moment. I know the headline number moved ever

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Speaker 1: so slightly. Oh, but could you explain what your interpretation

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Speaker 1: of the unemployment numbers and recites.

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Speaker 2: The labor market's been quite interesting in Australia. What we've

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Speaker 2: seen is employment growth being quite high actually, but the

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Speaker 2: unemployment rate trending up and the two moving in line

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Speaker 2: doesn't necessarily make a lot of sense. Usually you would

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Speaker 2: expect that if employment growth was slowing, you would see

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Speaker 2: the unemployment rate go up. What's been happening in Australia

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Speaker 2: is that we are seeing an increasing amount of people

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Speaker 2: actually in the labor force, so people who are in

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Speaker 2: the labor force either those who are working or looking

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Speaker 2: for work, therefore technically unemployed. The participation rate in the

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Speaker 2: labor force has gone up to a record high, so

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Speaker 2: the number of people age of fifteen going into the

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Speaker 2: labor force is at its highest level it's ever been

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Speaker 2: in Australia. That's a result of high immigration into the

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Speaker 2: country forcing people into the workforce, but also that people

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Speaker 2: are feeling confident enough to go and try and find

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Speaker 2: a job, which is why employment growth is still holding up,

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Speaker 2: but the unemployment rate is moving up, just quite slowly.

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Speaker 2: I'd say it bottomed at three and a half percent.

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Speaker 2: It's now four point two percent. As you said, it's

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Speaker 2: the unemployment rate is moving higher, but it's still not

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Speaker 2: at a level where you've been becoming concerned about the

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Speaker 2: state of the consumer. I think obviously the consumer has

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Speaker 2: weakened in the past eighteen months, and we've seen that

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Speaker 2: through lower retail spending, particularly in volumes per capita retail spending, overall,

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Speaker 2: very weak consumer confidence, negative real disposable income growth, but

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Speaker 2: wh're not at the point where consumers are having to

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Speaker 2: double down on their mortgages and are forced to sell.

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Speaker 2: We haven't seen a huge increase in arrears or delinquency rates.

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Speaker 2: If the unemployment rate gets up a little bit higher,

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Speaker 2: we think it will get to four and a half

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Speaker 2: four point six percent. That's probably at a level where

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Speaker 2: you might see some further awakening in consumer spending, but

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Speaker 2: not enough where you're going to say levels of force

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Speaker 2: selling and the property market.

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Speaker 1: So those numbers from an investor's point of view, and

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Speaker 1: say a property investor point of view, talk about defaults

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Speaker 1: or bargains in the market where people are defaulting on

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Speaker 1: their mortgages, folks, there is no signal in results, particularly

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Speaker 1: from banks, that is happening in any significant fashion whatsoever. However, Diana,

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Speaker 1: what about if I'm trying to make a decision as

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Speaker 1: an investor on rates and the RBA is out there

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Speaker 1: saying there's no rate till Christmas. The biggest bank in

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Speaker 1: the country is out there cutting rates already because they

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Speaker 1: well they can, but also of course caught it coming

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Speaker 1: them for depositors that is, not borrowers. But the point

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Speaker 1: I want to ask you is is the chance of

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Speaker 1: a rate cut elevated then, and is it even worth

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Speaker 1: waiting for.

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Speaker 2: If you're looking to get into the market and you

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Speaker 2: want a variable interest right, then you do have to

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Speaker 2: wait for it because variable interest rates aren't being cut yet.

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Speaker 2: Some of the fixed rates have come off their highs,

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Speaker 2: but that was already happening even six months ago, when

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Speaker 2: as I said before, the fixed rate moves with money

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Speaker 2: market expectations around around interest rates. So it depends what

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Speaker 2: sort of stage or in terms of the investment cycle.

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Speaker 2: I think a rate cut is still worth waiting for

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Speaker 2: in the sense that there is still the risk of

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Speaker 2: a rate rise here. If you listen to what the

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Speaker 2: Reserve Bank is saying, they still sound hawkish. If we

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Speaker 2: get an upside surprise in inflation the next six months now,

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Speaker 2: they could potentially lift interest rates again. If they're becoming

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Speaker 2: concerned about inflation again.

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Speaker 1: That means those banks would never cut their borrowing rates

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Speaker 1: and would just lift those deposit rates back up.

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Speaker 2: Well, that's usually how it works.

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Speaker 1: Okay, keep that in mind, folks. You might think that

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Speaker 1: it's a natural line to draw that if they're cutting

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Speaker 1: their deposit rates, well, the lending rates must be coming down.

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Speaker 1: Not necessary sssarily sorry, but don't make that assumption because

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Speaker 1: you would be running ahead of yourself and the banks

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Speaker 1: can run ahead of themselves if they wish their banks

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Speaker 1: they're operating in different set of dynamics and you and I. Hey,

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Speaker 1: one other thing I wanted to ask you about before

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Speaker 1: we go to the break. A question in a while

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Speaker 1: from O Mark really interesting about how that in his

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Speaker 1: particular suburb, which must be in Melbourne, because the prices

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Speaker 1: aren't going anywhere, the rates were going up at the

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Speaker 1: same time councilor rates going up at the same time.

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Speaker 1: I don't know if you look at this as an issue,

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Speaker 1: but I do see a spot reports all the time

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Speaker 1: about councils in funding, various funding crisis and emergencies with that.

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Speaker 1: Have you looked at that at all. Whether council rates

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Speaker 1: may go up even in suburbs where prices aren't going.

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Speaker 2: Up, this is interesting. I think it probably reflects a

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Speaker 2: lagged inflationary response from the council. So usually the council

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Speaker 2: rights do have to respond to land values which have

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Speaker 2: been going up alongside home prices. I mean, the home

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Speaker 2: price index is basically a value of land and the

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Speaker 2: cost of building, so land values are still going up

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Speaker 2: across the nation. In Victoria and Melbourne in particular, it's

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Speaker 2: been a different story. Melbourne price have been going down,

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Speaker 2: as you mentioned. I think the council rting increases are

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Speaker 2: probably reflecting just the high inflation environment that we've been in,

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Speaker 2: and those types of rates like evening, utilities, insurance, all

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Speaker 2: those types of rates that we pay usually tend to

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Speaker 2: lag the broader inflation cycle. I think it's probably only

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Speaker 2: a matter of time before we see some softer inflation

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Speaker 2: in some of those council rates, but probably not outright deflation. Unfortunately,

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Speaker 2: that's not the way they operate.

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Speaker 1: Does that mean that the rating pieces might not be

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Speaker 1: as severe as they have been.

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Speaker 2: I think that they have to stop being as high.

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Speaker 2: And we've basically already seen the peak in insurance premiums

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Speaker 2: and insurance costs and finance costs as well. Those types

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Speaker 2: of rates just tend to reflect what happened inflation a

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Speaker 2: few months ago. And also, of course the specifics that

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Speaker 2: go alongside that industry, like and insurance, they've had their

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Speaker 2: own issues that have been going on that have led

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Speaker 2: to high premiums and higher and these higher costs for consumers.

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Speaker 2: But obviously the broader inflation inflationary environment impacts a lot

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Speaker 2: of those rate setting agencies.

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Speaker 1: Hey, I want to ask you one last thing. It

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Speaker 1: came up once or twice on the show. In certain

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Speaker 1: parts of the country and even in the big cities,

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Speaker 1: the economics of property, particularly unit investments, was that the

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Speaker 1: replacement cost of building apartment towers in some areas are

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Speaker 1: as high, if not higher, than the cost of the

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Speaker 1: apartments inside existing towers. And that's a really fundamental economic thing,

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Speaker 1: isn't it That if you can get something and it's

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Speaker 1: actually a discount on its replacement cost, then you really have,

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Speaker 1: from a textbook point of view, were barred. Then apparently

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Speaker 1: have you come across it, are you aware of it?

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Speaker 1: Could you explain to even this is what why that's significant?

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Speaker 2: I think that probably reflects the fact that the expectations

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Speaker 2: for home values are still that they're going to go

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Speaker 2: up in terms of the land value, but also that

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Speaker 2: the cost of the materials the labor that go into

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Speaker 2: building a potential new dwelling just continued to rise, and

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Speaker 2: we've seen that in that new dwelling construction cost component

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Speaker 2: of the Consumer Price Index. We see that in rents

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Speaker 2: and in labor costs as well, particularly around construction, because

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Speaker 2: we've seen that the infrastructure construction space has basically been

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Speaker 2: crowding out the residential construction space, leading to high wages

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Speaker 2: in the residential construction sector. So that probably explains that

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Speaker 2: dynamic as well as this expectation that home prices will

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Speaker 2: continue to rise in Australia.

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Speaker 1: Yes, well, it's interesting. Certainly the numbers are there that

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Speaker 1: in some parts that is the case. It may reflect

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Speaker 1: that kind of inflation spike that reach hit builders for

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Speaker 1: a while, and it may when you come across that

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Speaker 1: if you can if you find a place that is

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Speaker 1: where the existing stock is actually at a discount replacement value.

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Speaker 1: Then you're really onto something. We take a short break,

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Speaker 1: we're going to have a look at childcare. I expect

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Speaker 1: that for most listeners. If you're involved with childcare, you're

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Speaker 1: going to find this really interesting. If childcare is coming

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Speaker 1: down the line in your life, you're going to find

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Speaker 1: it really interesting. If you've passed the childcare part of

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Speaker 1: your life, you might skip the segment, except to say,

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Speaker 1: folks that there is also a property dimension here, of course,

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Speaker 1: with big childcare listed groups and what's going on there.

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Speaker 1: So we will deal with that in a moment, and

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Speaker 1: then we'll have some questions. Hello, Welcome back to The

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Speaker 1: Australian's Money Positive podcast. I'm James Kirby talking to Diana

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Speaker 1: Mussina of AMP. Diana is an economist who's been on

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Speaker 1: the show regularly. Now, I this wasn't my plan at

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Speaker 1: all that but it's very useful that this major childcare

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Speaker 1: report came out today from Victoria University. It's getting a

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Speaker 1: lot of coverage around around the place. I see it

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Speaker 1: was released exclusively to the ABC, which of course I

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Speaker 1: would be very I know it about because I like

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Speaker 1: these things to be released to everybody at the same time.

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Speaker 1: Just to point there Victoria University, and it's a major report,

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Speaker 1: really is. It looks at Australian childcare issues, it looks

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Speaker 1: at overseas issues, and it looks at the availability of places.

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Speaker 1: A couple of broad points. This situation has improved ever

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Speaker 1: so slightly in recent times. That's one thing in terms

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Speaker 1: of the supply of centers. But then there are spots

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Speaker 1: all over the country where there is what they call deserts.

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Speaker 1: Regional area is pretty obvious it wouldn't be a childcare center,

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Speaker 1: but also lower associate economic areas and parts of the

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Speaker 1: city where there's just bad luck, where there are less

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Speaker 1: spots than there are children. So let's talk about macro

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Speaker 1: first and then specifically your own experience here. Where are

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Speaker 1: we on childcare? Do you think do you think it's

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Speaker 1: improving broadly on a macro point of view in terms

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Speaker 1: of a service locally.

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Speaker 2: There's actually been a huge amount of change in the

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Speaker 2: childcare sector in the last few years. The Labor Government

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Speaker 2: introduced some new policies last year that increased the childcare

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Speaker 2: benefit to many families, broadened it out, also gave some

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Speaker 2: additional funds to the preschool sector, which is different to childcare.

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Speaker 2: I think a lot of people think of as basically

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Speaker 2: from one year to three and a half or four,

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Speaker 2: but there's also this preschool sector. And Australia is quite

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Speaker 2: strange in that we have some community funded preschools in

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Speaker 2: some specific areas, but if you're lucky enough to live

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Speaker 2: in that area, you get it. If you're not too bad,

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Speaker 2: you have to pay one hundred and eight or two

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Speaker 2: hundred dollars a day for continued childcare. So that and

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Speaker 2: that's only something that I've discovered after becoming a parent myself.

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Speaker 2: I think we still have a long way to go

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Speaker 2: to solve some of the issues that you say around

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Speaker 2: the right provisions of the number of centers in specific areas.

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Speaker 2: We've seen a huge boom in demand for centers in

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Speaker 2: terms of where people are living, so in their local

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Speaker 2: areas there are no spots for children. But in areas

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Speaker 2: like the CBD for example, childcare centers have actually had

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Speaker 2: to close because less people are working in the city.

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Speaker 2: A lot of them have actually emerged together in the

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Speaker 2: CBDs as people have chosen to send their kids to

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Speaker 2: more local centers. So this is the childcare dynamic is

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Speaker 2: really changing. And then we've had also some large wage

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Speaker 2: gains that have gone to the childcare sector, which reflects

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Speaker 2: the fact that the age care sector had these wage

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Speaker 2: gains last year and that pushed people out of childcare

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Speaker 2: into agecare, so there's not enough stuff going back into

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Speaker 2: child Hopefully these wage gains can actually encourage more people

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Speaker 2: into the sector, and I personally think that the wage

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Speaker 2: gains were very much needed for.

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Speaker 1: That space and the services that are so important, and

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Speaker 1: we just had run terribly behind in some of those

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Speaker 1: services age childcare too. Now property perspective still with big picture,

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Speaker 1: there was a time, perhaps there are still some believers

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Speaker 1: out there that childcare could be a business. Not only

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Speaker 1: could it be a business, successful business, but so successful

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Speaker 1: that it could be listed on the stock market and

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Speaker 1: we could all be investors in successful childcare centers. This

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Speaker 1: idea was tabusht by Yeah ABC childcare Centers, which spectacularly

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Speaker 1: went off the rails. This is some years ago, but

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Speaker 1: that I mentioned it because from the ashes of that,

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Speaker 1: if you like Ken good Start, and there are now

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Speaker 1: really three big childcare chains in Australia. Good Start, which

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Speaker 1: is a nonprofit and was created from the wreckage if

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Speaker 1: you like, of the ABC child Care Centers group and

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Speaker 1: it went under. Then there's Guardian, which is very big

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Speaker 1: across the country and is currently for sale, owned by

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Speaker 1: private equity group. And then there's G eight, which is

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Speaker 1: a listed stock and is at least twenty or thirty

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Speaker 1: percent lower now than it was five years ago. Not

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Speaker 1: a successful stock, but was put forward to people as

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Speaker 1: a property as much as a childcare business because they

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Speaker 1: have property underneath them. I'm using this as a lead

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Speaker 1: in to ask you, Dana, whether you think it's actually

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Speaker 1: not that it's legitimate. I'm not interested in the sort

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Speaker 1: of philosophical part about this, but whether childcare as a

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Speaker 1: business is a feasible investment for private industry, and whether

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Speaker 1: anyone could ever really expect to make money as an

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Speaker 1: investor shareholder in listed childcare centers. Have you ever looked

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Speaker 1: at that?

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Speaker 2: To be honest, I think the answer is probably more no,

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Speaker 2: because when I think about the long term drivers of

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Speaker 2: a stock performance, I'm not a stock analyst, but when

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Speaker 2: I think about generally what drives shares in the long term,

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Speaker 2: it's profit growth, and I don't think fundamentally that childcare

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Speaker 2: is a profitable investment. It's very highly regulated, so it

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Speaker 2: has a lot of public sector involvement and funding, and

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Speaker 2: I find it difficult to imagine that the profit margins

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Speaker 2: are high or that you could potentially expect to be

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Speaker 2: running high profit growth in that type of very highly

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Speaker 2: regulated area. So I feel childcare, while it is privately

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Speaker 2: provided in Australia, it has so much public influence, and

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Speaker 2: I think that personally it should have more public influence.

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Speaker 2: We should be going more down the path of some

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Speaker 2: Scandinavian countries that are basically all regulated by the government,

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Speaker 2: because the best examples of early childcare provision is one

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Speaker 2: that is provided by the government, like our public primary schools.

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Speaker 1: Now, tell me your own experience. Did you say two

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Speaker 1: hundred bucks a day? Is that what it is now?

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Speaker 2: It's a bit less than that, but in some for

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Speaker 2: one child in some areas in Sydney, I've heard people

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Speaker 2: paying two hundred dollars a day in areas like Paddington.

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Speaker 2: Apparently that doesn't include any benefit that you get from

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Speaker 2: the childcare rebate. A family income is now means tested

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Speaker 2: up to about five hundred thousand dollars for a family, but

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Speaker 2: it obviously steps down after a certain amount, so there

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Speaker 2: is some benefit involved there. I think the bigger issue, though,

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Speaker 2: is that we just don't have enough provision of public preschools.

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Speaker 2: I think I mentioned that briefly before. So if you're

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Speaker 2: lucky enough to live in an area where there's public preschools,

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Speaker 2: that's great, and you could pay fifty seventy dollars a day,

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Speaker 2: much cheaper rates than childcare amounts. But if you don't

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Speaker 2: live in the areas where those are provided, then you're

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Speaker 2: stuck to just putting your children into childcare, which is

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Speaker 2: much more expensive. So again this government influence that's partly

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Speaker 2: funded by state and local governments in terms of those preschools.

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Speaker 2: So we really need to see more of that, I think,

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Speaker 2: to solve some of the issues that we have in

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Speaker 2: the childcare sector.

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Speaker 1: So are you paying hundreds of dollars a week for childcare?

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Speaker 2: Lucky I have some grandparents support and some childcare, so

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Speaker 2: it's not five days of childcare.

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Speaker 1: Oh it's tough. I know. We didn't have anything like

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Speaker 1: that at all, of course, And I remember there was

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Speaker 1: a we lived about I worked about twenty kilometers from

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Speaker 1: the childcare center, and every day my wife used to

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Speaker 1: bring them over in the morning and I just go

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Speaker 1: down and get them in the late afternoon and there

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Speaker 1: was a fine view relate. Yeah, to drive down this

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Speaker 1: highway every.

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Speaker 2: Day now two dollars a minute.

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Speaker 1: Yeah, Oh I remember driving on this highway every afternoon

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Speaker 1: with this fine hanging over my head. Whether I'd make

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Speaker 1: it or not. Oh God. It's a tough phase. And

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Speaker 1: if you haven't done it yet, As I say, folks,

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Speaker 1: you will find that the childcare you have intense interest

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Speaker 1: in the issue when you have people in childcare, just

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Speaker 1: like age care. I expect it's the very same. All Right,

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Speaker 1: We'll be back in the moment with some very interesting questions. Hello,

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Speaker 1: Welcome back to the Australians Money Pozzlive podcast. Diane. I'm

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Speaker 1: just going to read something first. There are some questions,

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Speaker 1: but this was a comment and I'd like you if

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Speaker 1: you have anything to say on this as well. So

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Speaker 1: it's about the fire movement. I financial independence retire early.

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Speaker 1: We did a special honor last week and we were

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Speaker 1: skeptical not about it. I think some of the habits

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Speaker 1: and principles of it are very good. I'm very interested

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Speaker 1: in the first part financial independence. I was skeptical about

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Speaker 1: how the possibilities of retiring early, and I thought the

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Speaker 1: movement perhaps made that seem a little bit too easy.

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Speaker 1: In any event, needless to say, and entirely fairly the

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Speaker 1: Fire Movement in Australia, the Brenda who represents them and

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Speaker 1: speaks for them and runs meetings once a week in Melbourne,

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Speaker 1: I believe has I'm just editing from her response, but

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Speaker 1: this is part of what she had to say. Right

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Speaker 1: of reply, the media left to home in on the

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Speaker 1: reduced spending to only live on rice and Bean's rhetoric

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Speaker 1: and bit pick about being frugal and that we don't

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Speaker 1: enjoy life as followers of the Fire movement. It's actually

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Speaker 1: the opposite. The Fire movement is about plugging holes where

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Speaker 1: money just escape for most people and using that to

436
00:24:01,880 --> 00:24:05,160
Speaker 1: build portfolios in and out of super I would say

437
00:24:05,200 --> 00:24:09,080
Speaker 1: you are correct that many pursue fire using shares and ETFs,

438
00:24:09,119 --> 00:24:14,639
Speaker 1: particularly perhaps a third of the Fire Movement followers in Australia.

439
00:24:15,440 --> 00:24:18,920
Speaker 1: I use property investments as part of their strategy or

440
00:24:18,920 --> 00:24:22,640
Speaker 1: a combination of both. We advocate for things like comparing insurance,

441
00:24:22,680 --> 00:24:25,240
Speaker 1: finding a better deal on bills, and yes, seeing where

442
00:24:25,240 --> 00:24:28,399
Speaker 1: you can reduce spending, but only where it doesn't align

443
00:24:28,480 --> 00:24:32,520
Speaker 1: with your values. Okay, thank you, Brenda. Have you come

444
00:24:32,520 --> 00:24:33,560
Speaker 1: across the fire movement?

445
00:24:34,160 --> 00:24:36,320
Speaker 2: Well, a lot of the research that we do at

446
00:24:36,359 --> 00:24:40,800
Speaker 2: AMP shows that about ninety percent of people die with

447
00:24:41,200 --> 00:24:43,959
Speaker 2: the majority of their super still intact, and they're not

448
00:24:44,080 --> 00:24:46,840
Speaker 2: drawing down their super because of fear that they're not

449
00:24:46,880 --> 00:24:48,960
Speaker 2: going to have enough to live on. So it is

450
00:24:49,000 --> 00:24:51,919
Speaker 2: a massive issue. You need to give retirees the confidence

451
00:24:52,040 --> 00:24:52,520
Speaker 2: to retire.

452
00:24:53,160 --> 00:24:54,879
Speaker 1: Yes, do you think part of that is not so

453
00:24:54,960 --> 00:24:58,760
Speaker 1: much fear but a determination to hand there to have

454
00:24:58,840 --> 00:24:59,879
Speaker 1: an inheritance.

455
00:25:01,240 --> 00:25:03,639
Speaker 2: Well, based on the surveys that I've seen within AMP,

456
00:25:04,240 --> 00:25:06,439
Speaker 2: that's not the major issue. The major issue is actually

457
00:25:06,480 --> 00:25:10,719
Speaker 2: this concern that they're not going to have enough to

458
00:25:10,760 --> 00:25:12,920
Speaker 2: live on. So I guess it's not knowing how much

459
00:25:12,960 --> 00:25:15,000
Speaker 2: they're spending or how much they want to spend every year.

460
00:25:15,040 --> 00:25:17,480
Speaker 2: So not having a financial plan in place, perhaps not

461
00:25:17,680 --> 00:25:21,080
Speaker 2: being concerned about the returns from their superb un worried

462
00:25:21,080 --> 00:25:22,560
Speaker 2: that the returns are going to go down, that the

463
00:25:22,680 --> 00:25:25,840
Speaker 2: actual value of their capital is going to fall, and

464
00:25:26,160 --> 00:25:29,879
Speaker 2: leaving something for inheritance is probably the third or the

465
00:25:29,920 --> 00:25:31,120
Speaker 2: fourth issue, but not the first.

466
00:25:31,720 --> 00:25:33,840
Speaker 1: Interesting and thanks BRender, and we will come back to

467
00:25:33,960 --> 00:25:35,960
Speaker 1: a fire movement. I want to see what people think

468
00:25:35,960 --> 00:25:39,280
Speaker 1: about it. I know it's very popular, particularly in the US,

469
00:25:39,320 --> 00:25:41,280
Speaker 1: and I know there's popular here and I would like

470
00:25:41,320 --> 00:25:43,760
Speaker 1: to know, folks what you think about it. And I

471
00:25:44,200 --> 00:25:45,880
Speaker 1: we had some replies, but I thought we'd have more.

472
00:25:45,920 --> 00:25:48,040
Speaker 1: So let us know what you think, all right, Julie,

473
00:25:48,359 --> 00:25:50,560
Speaker 1: I read it the weekend units are our performing houses.

474
00:25:50,680 --> 00:25:52,919
Speaker 1: Is this a blip or something more important? Yes? I

475
00:25:53,000 --> 00:25:56,160
Speaker 1: refer to that the preamble units are our performing houses, Diana,

476
00:25:57,359 --> 00:25:59,600
Speaker 1: So are they a better investment?

477
00:26:01,400 --> 00:26:05,680
Speaker 2: Everything goes through cycles, right, So we've seen houses outperform

478
00:26:05,800 --> 00:26:09,640
Speaker 2: now basically through most of that post COVID recovery. Again,

479
00:26:09,680 --> 00:26:12,080
Speaker 2: it depends what capital city you're looking at. It's not

480
00:26:12,200 --> 00:26:16,159
Speaker 2: a national uniform market. There are differences. There are different

481
00:26:16,160 --> 00:26:19,600
Speaker 2: performances across the different capital cities and even across the regions.

482
00:26:19,880 --> 00:26:22,600
Speaker 2: The regions did so well after the initial stage of

483
00:26:22,640 --> 00:26:25,560
Speaker 2: the pandemic, and now we're seeing those areas. For Melbourne,

484
00:26:25,600 --> 00:26:29,399
Speaker 2: prices are declining. Unit values are getting some more demand

485
00:26:29,480 --> 00:26:32,040
Speaker 2: because of high population growth. So a lot of the

486
00:26:32,080 --> 00:26:34,920
Speaker 2: demand that's coming through is for units because a lot

487
00:26:34,920 --> 00:26:37,840
Speaker 2: of the a lot of the immigration that's coming through

488
00:26:37,920 --> 00:26:41,639
Speaker 2: is from students, and that's why we're seeing this increased

489
00:26:41,640 --> 00:26:44,399
Speaker 2: demand for units, and also because houses outperformed before. So

490
00:26:44,800 --> 00:26:47,359
Speaker 2: it's not to say that units are going to outperform forever.

491
00:26:47,440 --> 00:26:49,480
Speaker 2: It's just at this current point in the cycle, this

492
00:26:49,560 --> 00:26:50,280
Speaker 2: is what we're seeing.

493
00:26:50,680 --> 00:26:53,160
Speaker 1: Is it there a reversion to the mean? Are you

494
00:26:53,359 --> 00:26:56,320
Speaker 1: coming through with that economic concept?

495
00:26:57,119 --> 00:26:58,800
Speaker 2: Well, a lot of the time, I think that everything

496
00:26:58,840 --> 00:27:01,000
Speaker 2: does revert to its me. I guess the housing market

497
00:27:01,040 --> 00:27:03,240
Speaker 2: is a little bit different because if it reverted to

498
00:27:03,280 --> 00:27:05,359
Speaker 2: its mean, then we should have seen some bigger falls

499
00:27:05,400 --> 00:27:09,359
Speaker 2: to home prices and we haven't. I think probably the

500
00:27:09,400 --> 00:27:12,160
Speaker 2: better performance in units can continue for a little while

501
00:27:12,200 --> 00:27:15,960
Speaker 2: longer because we've got this strong immigration coming through. The

502
00:27:16,520 --> 00:27:19,840
Speaker 2: student numbers have declined and the government is clamping down

503
00:27:19,840 --> 00:27:23,080
Speaker 2: on a lot of those visas, so we may see

504
00:27:23,200 --> 00:27:26,040
Speaker 2: some weakness coming through later next year. But we're also

505
00:27:26,080 --> 00:27:28,520
Speaker 2: seeing that there's a lower number of people that are

506
00:27:28,520 --> 00:27:31,880
Speaker 2: living per dwelling, so we're obviously needing some more demand

507
00:27:32,400 --> 00:27:35,000
Speaker 2: for things like units. We don't have enough housing supply

508
00:27:35,080 --> 00:27:37,400
Speaker 2: in Australia as a nation, and particularly in New South

509
00:27:37,400 --> 00:27:41,199
Speaker 2: Wales and Queensland, so people will be attracted to the

510
00:27:41,280 --> 00:27:44,560
Speaker 2: unit market to get into the housing market and just

511
00:27:44,600 --> 00:27:47,040
Speaker 2: to get their foot in the door. But I think

512
00:27:47,080 --> 00:27:50,280
Speaker 2: eventually it's a difference between unit and house performance will

513
00:27:50,320 --> 00:27:52,439
Speaker 2: probably revert to more normal.

514
00:27:52,840 --> 00:27:54,760
Speaker 1: The gap, yeah, and I think the gap used to

515
00:27:54,800 --> 00:27:57,600
Speaker 1: be like ten percent, and now it's thirty percent something

516
00:27:57,640 --> 00:27:59,639
Speaker 1: like that. It's blown out as a death ratio. I

517
00:27:59,640 --> 00:28:02,439
Speaker 1: don't know how they measure that ratio, but that ratio

518
00:28:02,520 --> 00:28:06,080
Speaker 1: that measures the gap between the units and the houses,

519
00:28:06,520 --> 00:28:09,080
Speaker 1: it blew out to about thirty percent nationwide from about

520
00:28:09,080 --> 00:28:12,600
Speaker 1: ten percent nationwide, higher in some cities, of course. And

521
00:28:12,680 --> 00:28:16,639
Speaker 1: now you see that the prices, the price increases of

522
00:28:16,840 --> 00:28:20,280
Speaker 1: units are running harder and higher and faster than houses.

523
00:28:20,320 --> 00:28:22,880
Speaker 1: That's the main point there, Okay, Omar, Well we did

524
00:28:22,880 --> 00:28:25,320
Speaker 1: cover this, Omar. Do you know why all the data

525
00:28:25,359 --> 00:28:29,119
Speaker 1: indicates is that how house prices in Meburn are going down, however,

526
00:28:29,200 --> 00:28:32,040
Speaker 1: consul rates are going up. And I think Diana explained

527
00:28:32,040 --> 00:28:34,879
Speaker 1: that usefully Omar. And by the way, none of this

528
00:28:35,040 --> 00:28:37,680
Speaker 1: is the advice, of course, it's all information only. Henry.

529
00:28:38,200 --> 00:28:42,200
Speaker 1: I wish you'd cover the need to remove incentives around

530
00:28:42,320 --> 00:28:46,240
Speaker 1: homes and get back to houses as a place to live.

531
00:28:47,160 --> 00:28:50,200
Speaker 1: The thirty year trend of financialization of housing is really

532
00:28:50,200 --> 00:28:53,320
Speaker 1: coming home to roost around the world. Should really be

533
00:28:53,360 --> 00:28:56,760
Speaker 1: invested in companies which are productive, not houses. But I

534
00:28:56,800 --> 00:28:59,360
Speaker 1: do concede it might be hard to reverse the trend.

535
00:29:00,120 --> 00:29:05,560
Speaker 1: About some strong tax dis incentives for second homes. Well, Henry,

536
00:29:05,720 --> 00:29:08,080
Speaker 1: I don't know if you are familiar with the Victorian government,

537
00:29:08,680 --> 00:29:13,800
Speaker 1: but they've been doing exactly that, exactly that, and guess what,

538
00:29:14,440 --> 00:29:16,120
Speaker 1: As as we've already pointed out in the course of

539
00:29:16,160 --> 00:29:19,200
Speaker 1: the show, it's the state where house prices our weakest.

540
00:29:19,240 --> 00:29:22,280
Speaker 1: In fact, they're dropping and there is a direct correspondent.

541
00:29:22,360 --> 00:29:25,640
Speaker 1: It's not entirely explained by a whole pilot new taxes

542
00:29:25,640 --> 00:29:28,440
Speaker 1: that can rolling down the line unexpectedly from the Victoria

543
00:29:28,480 --> 00:29:31,680
Speaker 1: state government, but it is to some extent associated with it,

544
00:29:31,720 --> 00:29:35,040
Speaker 1: because that's exactly what they did recently. They brought in

545
00:29:35,080 --> 00:29:37,000
Speaker 1: the tax for second homes and holiday homes and all

546
00:29:37,040 --> 00:29:40,080
Speaker 1: that sort of thing, and I think it's booked investors.

547
00:29:41,000 --> 00:29:44,000
Speaker 1: I don't know where you come from that, Diana, what's

548
00:29:44,040 --> 00:29:44,440
Speaker 1: your view.

549
00:29:45,000 --> 00:29:47,960
Speaker 2: I think the taxes in Victoria definitely having an impact

550
00:29:48,200 --> 00:29:51,440
Speaker 2: as well as on some analysis that I've done, Victoria

551
00:29:51,520 --> 00:29:55,880
Speaker 2: is actually in a state of oversupply. The other state, Melbourne,

552
00:29:55,920 --> 00:29:58,120
Speaker 2: I think is probably not in a state of oversupply,

553
00:29:58,280 --> 00:30:02,080
Speaker 2: but maybe in some specific suburbs. But in Victoria overall,

554
00:30:02,120 --> 00:30:05,720
Speaker 2: we've seen in the last two years a big increase

555
00:30:05,920 --> 00:30:08,840
Speaker 2: in net outflow out of the state, so going into

556
00:30:08,840 --> 00:30:13,160
Speaker 2: other states, particularly into Queensland, some into South Australia, and

557
00:30:13,240 --> 00:30:16,920
Speaker 2: that's why we've seen areas like Adelaide and Brisbane outperform

558
00:30:16,960 --> 00:30:20,640
Speaker 2: because they've seen this net positive migration into those states,

559
00:30:20,640 --> 00:30:23,240
Speaker 2: whereas Victoria is now in a state of outflow, which

560
00:30:23,320 --> 00:30:24,920
Speaker 2: really ramped up after the pandemic.

561
00:30:25,200 --> 00:30:28,320
Speaker 1: Issue of incentives in Henry. The incentives that really matter

562
00:30:28,360 --> 00:30:31,920
Speaker 1: and housing our negative fearing and capital gains, tax discounts,

563
00:30:32,080 --> 00:30:34,880
Speaker 1: that is what everybody's into. Not to mention the fact

564
00:30:34,920 --> 00:30:39,520
Speaker 1: that the house, the home is a secret cow inside

565
00:30:39,520 --> 00:30:42,160
Speaker 1: the financial system, and not only do you not pay

566
00:30:42,560 --> 00:30:45,760
Speaker 1: tax on its capital against tax, but it isn't measured

567
00:30:46,040 --> 00:30:50,800
Speaker 1: or assessed in accessing the pension, which means you can

568
00:30:50,880 --> 00:30:52,760
Speaker 1: have a four million dollar house and get the pension

569
00:30:53,160 --> 00:30:54,960
Speaker 1: and the other person who has a four hundred thousand

570
00:30:54,960 --> 00:30:57,880
Speaker 1: dollar house can also get the pension. And that is

571
00:30:57,920 --> 00:31:00,320
Speaker 1: the sort of incentives that are in there. Do you

572
00:31:00,880 --> 00:31:04,479
Speaker 1: think I'm not going to ask you because everyone and

573
00:31:04,520 --> 00:31:06,000
Speaker 1: the obvious thing is that I could throw that to

574
00:31:06,040 --> 00:31:07,680
Speaker 1: you and you're going to see politicians will never go

575
00:31:07,760 --> 00:31:10,600
Speaker 1: near it because it's dangerous. But let's move it on

576
00:31:10,720 --> 00:31:12,960
Speaker 1: a bit and ask you, Diana, whether you think any

577
00:31:13,040 --> 00:31:17,280
Speaker 1: of those particular incentives inside the housing market are vulnerable economically.

578
00:31:18,320 --> 00:31:21,720
Speaker 2: So it is really hard to see massive changes to

579
00:31:21,800 --> 00:31:26,000
Speaker 2: those incentives. I think the only one that could potentially

580
00:31:26,560 --> 00:31:29,920
Speaker 2: be touched in the next ten years or so would

581
00:31:30,000 --> 00:31:35,200
Speaker 2: be around valuing the home in the pension test, or

582
00:31:35,280 --> 00:31:39,400
Speaker 2: trying to provide more incentives for retirees to downsize and

583
00:31:39,480 --> 00:31:41,040
Speaker 2: know that they've tried that in the last few budgets

584
00:31:41,040 --> 00:31:43,800
Speaker 2: that hasn't really worked, or putting in place some sort

585
00:31:43,800 --> 00:31:45,680
Speaker 2: of death tax, but it's just it would be so

586
00:31:45,840 --> 00:31:49,160
Speaker 2: hard to do. That sort of seems to be the

587
00:31:49,280 --> 00:31:54,040
Speaker 2: area that we're going towards. Or potentially limiting negative gearing

588
00:31:54,720 --> 00:31:58,920
Speaker 2: to one home or to new builds. That could also

589
00:31:59,080 --> 00:32:03,840
Speaker 2: come up, but for now, I don't see anything changing

590
00:32:03,880 --> 00:32:05,640
Speaker 2: the next few years. I think if we have a

591
00:32:05,640 --> 00:32:08,560
Speaker 2: broader review on tax this could be something that might

592
00:32:08,560 --> 00:32:11,640
Speaker 2: come up, particularly around testing the home in the pension

593
00:32:11,680 --> 00:32:12,880
Speaker 2: or at least some sort of limit.

594
00:32:13,640 --> 00:32:18,240
Speaker 1: They could certainly they could capit that. Yeah, and again,

595
00:32:18,560 --> 00:32:21,280
Speaker 1: if you come to a situation where you can sit

596
00:32:21,320 --> 00:32:23,560
Speaker 1: back and say well whatever, people won't march in the

597
00:32:23,560 --> 00:32:25,479
Speaker 1: streets about it. They won't march if if someone has

598
00:32:25,480 --> 00:32:27,120
Speaker 1: a five million dollar house and they're not allowed to

599
00:32:27,120 --> 00:32:29,800
Speaker 1: get the pension anymore. I think people won't march in

600
00:32:29,840 --> 00:32:31,600
Speaker 1: the streets about that, just like they haven't marched in

601
00:32:31,640 --> 00:32:33,560
Speaker 1: the streets about the three million super tax. For all

602
00:32:33,600 --> 00:32:36,480
Speaker 1: the trouble around it, it is in the broader community

603
00:32:36,840 --> 00:32:38,360
Speaker 1: they just now their head and they say, well, three

604
00:32:38,400 --> 00:32:40,920
Speaker 1: million seems to be a lot to happen super para capita.

605
00:32:41,400 --> 00:32:44,240
Speaker 1: And that's an understandable point of view as well. Okay, hey,

606
00:32:44,320 --> 00:32:46,840
Speaker 1: really interesting, Thank you for your time, Thanks for coming

607
00:32:46,880 --> 00:32:47,440
Speaker 1: on the show.

608
00:32:47,840 --> 00:32:49,960
Speaker 2: Thanks James, it's been a pleasure, great.

609
00:32:49,720 --> 00:32:51,880
Speaker 1: To get if that was a wide ranging conversation, that's

610
00:32:51,920 --> 00:32:53,960
Speaker 1: the probably as wide ranging and interview as you'll do

611
00:32:54,120 --> 00:32:57,960
Speaker 1: for some time, I imagine. So thanks for putting you

612
00:32:58,000 --> 00:32:59,800
Speaker 1: through your paces there. It was really good and I

613
00:32:59,800 --> 00:33:03,640
Speaker 1: think it was great value for everybody who tuned in.

614
00:33:03,960 --> 00:33:08,760
Speaker 1: That was Diana Mossina, economist, at amp folks and hopefully

615
00:33:08,760 --> 00:33:12,280
Speaker 1: you can hear her video and see her video which

616
00:33:12,320 --> 00:33:14,480
Speaker 1: which is out there on I saw it on LinkedIn.

617
00:33:14,600 --> 00:33:17,280
Speaker 1: Lots of interesting comments and you see her going down

618
00:33:17,280 --> 00:33:21,160
Speaker 1: to childcare center. Keep the emails rolling the money puzzle

619
00:33:21,160 --> 00:33:23,680
Speaker 1: at the Australian dot com dot u is our email.

620
00:33:24,360 --> 00:33:27,120
Speaker 1: Do mention us to a friend. We'd like that if

621
00:33:27,160 --> 00:33:30,760
Speaker 1: you would just mention us to one person about the show.

622
00:33:30,800 --> 00:33:33,080
Speaker 1: If you like it, that's that's that's what It would

623
00:33:33,080 --> 00:33:36,720
Speaker 1: be a great way to give us some support. And

624
00:33:37,240 --> 00:33:42,560
Speaker 1: today's show was produced by Leah Samangalou. Talk to you soon,