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

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

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Speaker 1: and my guest today is a demographer. He's a data

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Speaker 1: and the major He's a key influencer on trends and

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Speaker 1: patterns that shape Australia basically and for our purposes today,

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Speaker 1: on the Australian investment market property market in particular. He

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Speaker 1: often writes for The Australian. You might have guessed by

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Speaker 1: now I'm talking to Simon kusten Macher of the Demographics Group.

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Speaker 1: How are you, Simon, I'm very good, Thanks, Nding Neil,

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Speaker 1: delighted to have you on. Is a demographer still more

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Speaker 1: or less fair description of you?

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Speaker 2: I think so. Yeah. So we very much do nothing

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Speaker 2: in our little company then to look at big fat

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Speaker 2: data sets all day long and trying to figure out

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Speaker 2: how the world works, trying to understand how Australia works.

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Speaker 2: And we always start with the big picture demographic data sets,

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Speaker 2: and then we feed in lots of be this economic data,

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Speaker 2: be this sociological and even psychological data. That's just what

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Speaker 2: we all use in order to then tell a story

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Speaker 2: about how Australia might look into the future.

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Speaker 1: Right, okay, so what for us? And to take it

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Speaker 1: that the audience are investors and interested anyway in what

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Speaker 1: the shape the future shape of Australia. Were particularly interested

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Speaker 1: in it as to how it will determine how things

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Speaker 1: will go for investors, for instance, for property investors, for example,

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Speaker 1: what to you? Most of us are going to know

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Speaker 1: the basics, right, We're going to know that Australia is aging.

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Speaker 1: We're gonna know that immigration is a sort of tap

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Speaker 1: that we can turn on and off, thankfully, and can

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Speaker 1: manage the economy to a great extent by being able

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Speaker 1: to do that. Not every country can do that in

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Speaker 1: such a sophisticated way as Australia. It also has some

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Speaker 1: big trends. I suppose work from home has come in

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Speaker 1: and seems to be becoming a really deep trend. For

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Speaker 1: what to you is the outstanding demographic trend and Australian

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Speaker 1: property investors should know.

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Speaker 2: There are quite a few. I'd start with the most

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Speaker 2: obvious and basic one, and that is the aging of

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Speaker 2: the population. Everyone read this a million times beforehand. It's

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Speaker 2: no surprise to anyone, but the extent of the aging

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Speaker 2: of our society surprises people, and I always point people

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Speaker 2: to the important year of eighty five. Eighty five is

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Speaker 2: the exact half of us make it to eighty five.

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Speaker 2: Half of us won't make it to eighty five. That's

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Speaker 2: the median age of death at the moment, and of

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Speaker 2: the core that make it past eighty five, half of

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Speaker 2: them need care on a daily basis. And we are

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Speaker 2: going to double the population eighty five plus in Australia

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Speaker 2: in the next fourteen years from five hundred and eighty

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Speaker 2: thousand people today to one point two million people in

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Speaker 2: fourteen years. That is very soon, and that is one

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Speaker 2: hundred percent going to happen.

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Speaker 1: One in ten people will be over eighty five.

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Speaker 2: One point two million people exactly. We're a bit more,

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Speaker 2: we'll grow by then, but something like eight percent or something.

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Speaker 2: It's a big number. And we then know already that

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Speaker 2: there is no chance in hell that we will have

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Speaker 2: even remotely enough aged care workers to look after the

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Speaker 2: aging population. Is utterly impossible. Even if we increase migration

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Speaker 2: as significantly, we cannot have enough age care workers in

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Speaker 2: the system. So that of course tells me that there

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Speaker 2: will be massive demand for family care that, of course

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Speaker 2: then means we need larger homes. If you cannot put

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Speaker 2: Mom into an aged care home, she will be somewhere,

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Speaker 2: and usually ideally in many cases at the very least,

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Speaker 2: you'll have the family unit step up. That of course

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Speaker 2: has the challenge how where do you put her? Because

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Speaker 2: spare bedrooms are so forbiddingly expensive that few families can

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Speaker 2: actually pull this off. So we are seeing an absolute

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Speaker 2: age care crisis coming at us. If we put the

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Speaker 2: you know, the human concerns aside, and we put this

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Speaker 2: looked purely through the investment lens, here, aged care will

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Speaker 2: be an insane investment. It will be an extremely high

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Speaker 2: demand and those players that operate, they will be very expensive.

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Speaker 2: Because shortage demands the prices go up. So that's a

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Speaker 2: short win.

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Speaker 1: In the early stages of this demographic shift, it hasn't

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Speaker 1: been a great investment. In fact, it's been an area

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Speaker 1: where investors have lost money on all the listed age

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Speaker 1: care groups have been, as a general observation, very disappointing

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Speaker 1: for investors. And so do you think that would ever change?

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Speaker 2: I would argue that there will be a flight to quality,

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Speaker 2: so you will see more up and coming age care venues,

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Speaker 2: and of course they are now operating a completely different market.

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Speaker 2: Back in the day you operated quite often with relatively

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Speaker 2: poor people, poor customers. We have very soon we have

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Speaker 2: the baby boomers moving into aged care for facilities. The

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Speaker 2: oldest baby Woma is seventy nine. They will very soon

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Speaker 2: be in that stage of the life cycle. And so

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Speaker 2: this is a more cash down, a richer generation that

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Speaker 2: of course will completely reinvent this.

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Speaker 1: Yeah, okay, what about the bigger houses then, is that

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Speaker 1: is what you're saying partially explaining the how investors and

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Speaker 1: builders and homeowners continue to want larger accommodation And can

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Speaker 1: you just remind us by per capita per square meter,

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Speaker 1: what's the story in Australia. Are we moving to bigger

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Speaker 1: accommodation or is that an illusion of my illusion?

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Speaker 2: So over overall our houses are getting bigger and our

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Speaker 2: lot of our lots of lands are getting smaller. The

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Speaker 2: story is pretty simple. Land is outrageously expensive, and we

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Speaker 2: want to live somewhere, and so we've got in order

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Speaker 2: to make housing cheaper. The easiest way to make housing

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Speaker 2: cheaper is to minimize the land size that you occupy.

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Speaker 2: And so we've been seeing this all the while, well,

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Speaker 2: the personal preferences of families very much change. You do

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Speaker 2: not put two kids into a bedroom. There's a clear

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Speaker 2: formula that Australians have one bedroom for mom and dad,

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Speaker 2: one bedroom for each kid, and then a spare bedroom,

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Speaker 2: you know, an office if you are knowledge workers that

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Speaker 2: work from home. So a family with two kids needs

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Speaker 2: four bedrooms. That is a lot. Right now and for

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Speaker 2: the next thirteen years. We have the biggest generation of

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Speaker 2: them all the millennials, making babies, starting their families. That

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Speaker 2: means they move out of their inner city hipster apartments

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Speaker 2: in your Fitzroy's, your Surrey Hills, your four de two valleys,

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Speaker 2: and they are looking for family sized homes.

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Speaker 1: Do you assume they will look for homes at least

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Speaker 1: as large as they came from.

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Speaker 2: So that's the ideal. So if there's housing preference research

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Speaker 2: that asks people, yeah, you know what, of course, you

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Speaker 2: all deal with financial constraints. Doesn't matter how rich you are.

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Speaker 2: There a certain financial constraints that you're operating with. What

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Speaker 2: are the things that you're willing to compromise on at

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Speaker 2: which other things you're not willing to compromise on the

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Speaker 2: number of bedrooms is the most important thing for people.

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Speaker 2: They're willing to compromise on the quality of the build,

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Speaker 2: on the location of this type of the dwelling. But

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Speaker 2: the number of bedrooms are the most important bit, is

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Speaker 2: that right?

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Speaker 1: Yeah, And so there's no innovations going on there in

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Speaker 1: the way of smaller bedrooms.

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Speaker 2: Of course we are shrinking the bedrooms. That very much

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Speaker 2: is happening as well, because you say, ah, the kids

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Speaker 2: deserve privacy whatever it is that the study doesn't need

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Speaker 2: to be all that big to be honest, the master

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Speaker 2: bedroom needs to be big enough, a big bed. But

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Speaker 2: that we have been shrinking those swellings and quite often

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Speaker 2: people say that's stupid, we're jeopardizing the quality of life here.

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Speaker 2: But the reason our land gets so expensive is of

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Speaker 2: course a bit silly considering how big we are as

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Speaker 2: a country.

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Speaker 1: It just makes me think. It leads me to a

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Speaker 1: larger point which I wanted to bring up with you.

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Speaker 1: I really want to know where you're coming from on

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Speaker 1: this selling back from it, we were thought that if

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Speaker 1: there's an aging of Australia, that many of that age

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Speaker 1: cohort might like to lead the larger cities to somewhere

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Speaker 1: more pleasant, are more relaxed, and we also had a

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Speaker 1: big shift in COVID to the treat change sea change.

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Speaker 1: Standing back from it, is that happening in any serious

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Speaker 1: way demographically.

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Speaker 2: Yes, quite a few of those pandemic trends are persisting

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Speaker 2: to a smaller degree, so they're working from home phenomenon.

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Speaker 2: We quite quickly realized that the people that work fully

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Speaker 2: remotely fully from home is actually relatively small. Most people

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Speaker 2: work in a hybrid way. Doesn't matter whether you go

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Speaker 2: to the office one day per week or five days

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Speaker 2: per week, as long as you go to the office.

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Speaker 2: Sometimes you stay within a magical two hour drive time

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Speaker 2: radius of the CBD. So you can draw this two

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Speaker 2: hour drive time radius around all CBDs in the country,

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Speaker 2: and its population boom inside and its crickets outside of

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Speaker 2: that two hour drive time radius. It's nice and quiet there.

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Speaker 2: And of course the retirees that they always were a

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Speaker 2: collde that could move wherever they wanted because they were

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Speaker 2: not shackled by their place of work anymore. And so

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Speaker 2: the downsizer narrative that some people expected with the baby

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Speaker 2: boomers to occur is much smaller than it actually was expected,

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Speaker 2: simply because baby boomers are not at scale doing the

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Speaker 2: gold watch retirement, where it's the gold watch on the

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Speaker 2: Friday and then it's golf course until you drop. That's

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Speaker 2: not what they do. They increasingly slide into retirement. They

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Speaker 2: reduce their working hours three days per week, two days

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Speaker 2: per week, a bit of consulting here and there. Maybe

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Speaker 2: you take a really long break in the middle of

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Speaker 2: the year, got on a Rhine River cruise or something

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Speaker 2: like this, And ultimately that means that you are shackled

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Speaker 2: to the CBD for longer, because why would you give

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Speaker 2: up your large scale family home that is in comfortable

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Speaker 2: commuting distance to move elsewhere to retirement destination.

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Speaker 1: So has downsizing not matched forecasts of downsizing.

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Speaker 2: It's much exaggerated. The whole downsizing narrative, of course does happen,

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Speaker 2: and people do move to Noosa, that's true, but ultimately

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Speaker 2: we are staying put. And if you talk to Australians,

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Speaker 2: older Australians, they'll tell you things like I want to

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Speaker 2: be carried out of the family home. That seems to

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Speaker 2: be the ultimate god in life. Unfortunately, while most people

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Speaker 2: say they want to do this, only fourteen percent of

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Speaker 2: us die in the family home. Will ultimately still die

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Speaker 2: in hospitals or hospitals.

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Speaker 1: What about downsizing within the neighborhood, within the zone.

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Speaker 2: That's of course not possible because the baby womans that

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Speaker 2: are living in big family homes, if they want to

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Speaker 2: downsize locally, there are no comfortable to bedroom apartments or

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Speaker 2: smaller dwelling availables because these are dominated by those family

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Speaker 2: homes and they did not add any stock over the

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Speaker 2: last decades. Because the bastions of the baby woman family

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Speaker 2: homes are also the nimbi bastions that they've blocked development

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Speaker 2: because they wanted to retain the built environment, the atmosphere

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Speaker 2: of the area they lived in, and now they cannot downsize.

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Speaker 1: It would suggest to me maybe I'm wrong. Tell me

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Speaker 1: what you think downsize or type accommodation in any suburb

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Speaker 1: will be highly valued in the near future because there's

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Speaker 1: such little supply of it.

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Speaker 2: Exactly, and to be perfectly blunt to be operating in

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Speaker 2: a property market where there is a shortage of all

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Speaker 2: types of housing in all locations. Not to be too

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Speaker 2: flippant about it, but whatever you build will have will

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Speaker 2: find a buyer.

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Speaker 1: Sure people will buy or rent tenanting. What do you

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Speaker 1: think in the nature of property formation. What type of

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Speaker 1: property do you think will be the most in demand

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Speaker 1: in the near future.

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Speaker 2: In the near future, family sized homes for millennials. Millennials

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Speaker 2: cannot put the families that they're making into the dwellings

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Speaker 2: they're currently in. That's impossible. So we know that over

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Speaker 2: the next thirteen years or so, the biggest generation of

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Speaker 2: them all moves from the inner suburbs of our big

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Speaker 2: cities to wherever they can find a three and four

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Speaker 2: bedroom dwelling. Of course, if you talk to the planners,

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Speaker 2: they say, yo, we want heaps more three and four

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Speaker 2: bedroom dwellings in the middle suburbs. We need to densify

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Speaker 2: our cities. Our cities are much too sprot out. Absolutely correct,

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Speaker 2: they are, and they should have been built differently. But

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Speaker 2: the cheapest way of building housing in the here and

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Speaker 2: now is to build us a bit of land on

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Speaker 2: a greenfield side and put a cheap box on top.

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Speaker 2: It is much much more expensive on a square meter

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Speaker 2: basis to build medium density or high density. And if

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Speaker 2: you operate a city like Melbourne that grows at one

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Speaker 2: hundred thousand people per year, you need housing fast. And Melbourne,

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Speaker 2: of course has no physical boundaries around it. You can

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Speaker 2: just pancake the city out and out and do you

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Speaker 2: then build infrastructure problems for the future and whatever. You

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Speaker 2: build an absolutely unmanageable, terrible city. But that's neither here

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Speaker 2: nor there in the show term. So that's one of

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Speaker 2: the big conundrums that we have.

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Speaker 1: Just keeping it on national picture, you mentioned that millennials

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Speaker 1: were the biggest.

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Speaker 2: What do you mean so millennials are the biggest generation.

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Speaker 2: They're not the biggest birth code. We always talk about

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Speaker 2: the baby boomost being the biggest birth code because we

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Speaker 2: had three point eight kids per families, that these are

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Speaker 2: big families. But millennials saw the benefit of the last

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Speaker 2: two decades of being empt up by migration. So they

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Speaker 2: are much more multicultural generation, if you will, as baby wooms,

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Speaker 2: and so they're much bigger in numbers and now they

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Speaker 2: are all on.

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Speaker 1: They are the dominant cohort in Australia absolutely as we speak.

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Speaker 1: And just remind your listeners what a millennial is.

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Speaker 2: Millennials are people born in the eighties and nineties. So

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Speaker 2: these are people. The oldest millennials in the early forties.

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Speaker 2: The youngest one is in their mid twenties.

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Speaker 1: So it seems to be there's two huge trends. There's

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Speaker 1: the aging of Australia and this is the doubling up

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Speaker 1: the over eighty fives, and then there is the millennial

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Speaker 1: to simplify, moving from their inner city barista neighborhood to

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Speaker 1: the middle suburbs. They hope to find a family home.

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Speaker 1: They hope, which would suggest to me that the standalone

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Speaker 1: family home is it's been highly prized and its valuations

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Speaker 1: have risen faster than units for a long time, and

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Speaker 1: it was suggest to me that's going to keep going

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Speaker 1: if that is the demographic undercurrent.

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Speaker 2: Absolutely, just to be fair, millennials or need three and

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Speaker 2: four bedrooms very soon. Are we building them fast enough? No,

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Speaker 2: so they will go up further in price. All the

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Speaker 2: while we're not seeing the benefits of actually baby boomers

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Speaker 2: in the next ten years vacating they are three in

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Speaker 2: four bedroom dwellings because they are not downsizing. They're hanging

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Speaker 2: on in the workforce for longer. They don't see the

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Speaker 2: point in selling the family home just yet because it

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Speaker 2: massively increases in value, and if you sell, you have

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Speaker 2: to do the whole stupid stamp to these stuff and whatever.

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Speaker 2: It's a nuisance and you don't have the ideal downsizer

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Speaker 2: unit nearby. What makes sense to downside for you, so

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Speaker 2: they will stay. So the demand four, three and four

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Speaker 2: bedroom goes through the roof. It's absolutely gigantic, But there's

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Speaker 2: also a bit of a to be honest. So the

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Speaker 2: millennials that need family homes now in the next ten years,

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Speaker 2: I don't have any positive news for them. If I'm

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Speaker 2: talking to people that are twenty that only need their

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Speaker 2: family sized homes in fifteen years time or so, I'm

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Speaker 2: a bit more optimistic about them for them because by

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Speaker 2: then you'll have all the baby boomers die out of

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Speaker 2: their homes and so you'll see that massive search of

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Speaker 2: supply in the market. So that should then soften house prices.

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Speaker 2: Whether this is a slowdown of growth, whether this is

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Speaker 2: actually price reduction, who knows. But it'll be easier for

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Speaker 2: people that are twenty than it is now for people

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Speaker 2: that are thirty.

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Speaker 1: Interesting, all right, we'll take a short break. We'll be

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Speaker 1: back in a moment. Hello, Welcome back to The Australian's

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Speaker 1: Money Puzzle podcast. I'm James Kirby and I'm talking to

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Speaker 1: Simon kusten Marker of the Demographics Group, who is a

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Speaker 1: demographer and well known demographer and read for The Australian

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Speaker 1: and is a well known of course generally in media

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Speaker 1: as a spokesman or a commentator on trends in population,

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Speaker 1: which I always find very interesting as it informs trends

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Speaker 1: in property. Now, in the first segment we did talk

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Speaker 1: about two big trends the aging of Australia. The population

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Speaker 1: over eighty five is going to double. There's lots of

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Speaker 1: ways you can look at that and be aware of

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Speaker 1: that in how you invest. Similarly, Simon was mentioning how

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Speaker 1: the millennial, the largest cohort of all born in the

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Speaker 1: eighties and nineties, currently in their inner city pads. Once

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Speaker 1: they have kids, they've got to go out to the

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Speaker 1: middle suburbs unless they want to be falling over each

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Speaker 1: other inside in their small house. So they do, and

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Speaker 1: he's laying it out that will be very competitive in

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Speaker 1: the near future. So there are two major trends. We

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Speaker 1: didn't really zone in on work from home Simon. I mean,

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Speaker 1: it's a trend that's emerged in our lifetime in a

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Speaker 1: serious manner. People always did it. I mean, just to

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Speaker 1: reflect on that, do you think the COVID period changed

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Speaker 1: work from home in any structural fashion, and how might

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Speaker 1: that affect property in the going forward.

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Speaker 2: Working from home is here to stay. Once you give

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Speaker 2: people a right, it's very hard to take it away.

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Speaker 2: You can see this in the US with gun rights.

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Speaker 2: Once you give people a certain right, taking this away

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Speaker 2: is very tough. So people will want to work from home.

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Speaker 2: Of course, you see this in New South Wales where

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Speaker 2: a government tries to force the government employees back. We'll

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Speaker 2: see how this plays out. I think it's very unfavorable

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Speaker 2: and I think that for the next well, for seeble future,

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Speaker 2: it is workers who hold the leverage. Workers can make

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Speaker 2: the courts simply because we are running out of workers.

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Speaker 2: That is another very important demographic druism in the coming decade.

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Speaker 2: There's a skilled shortage right now. The skilled shortage is

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Speaker 2: not really linked to the pandemic. Yes, the pandemic made

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Speaker 2: it worse because we said, hey, in no financial support

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Speaker 2: for temporary visa holders, so they bucked off. That created

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Speaker 2: a dip of three hundred thousand people in a workforce

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Speaker 2: of fourteen million. That had an impact, But the skilled

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Speaker 2: shortage will still be here in the next ten years

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Speaker 2: because what we are seeing is the big court of

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Speaker 2: baby boomers leaving the world of work. They of course

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Speaker 2: allowed to retire. It's fine, they worked hard. But at

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Speaker 2: the other end of the spectrum we have a slightly

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Speaker 2: smaller cord entering the world of work. As if this

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Speaker 2: imbalance wasn't bad enough, for the next thirteen years, we

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Speaker 2: have millennials making babies. That means they go on parental

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Speaker 2: leave at least for a little bit, and so they

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Speaker 2: temporarily leave the world of work.

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Speaker 1: This didn't immigration traditionally plug those problems.

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Speaker 2: It could plug those problems because in the past we

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Speaker 2: had relatively small cords retiring year after year. Now we

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Speaker 2: have this impact of this gigantic baby boomer cord leaving. Yes,

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Speaker 2: and this is why we I'm absolutely convinced that we

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Speaker 2: will continue a high migration approach in this country, which

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Speaker 2: of course sometimes people criticize for saying, hey, right now

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Speaker 2: we have a housing shortage, and why are we still

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Speaker 2: taking in migrants. Maybe we should put the brakes on

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Speaker 2: for now for a bit, But ultimately, as slowing migration

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Speaker 2: creates more problems than it solves, and quite often I

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Speaker 2: think it's just a cheap political way of saying we

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Speaker 2: tackle the housing affordable issue by saying we slow our

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Speaker 2: migration because it's very convenient, isn't politically you say housing

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Speaker 2: affordability is the fault of a non voting court. Easy,

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Speaker 2: And of course you're saying that I ticked my speaking

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Speaker 2: point about housing affordability. I don't need to talk about

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Speaker 2: as a government in all the ways that I'm complicit

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Speaker 2: in driving up house prices. Because you could get rid

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Speaker 2: of stamp duty, you could get rid of Franklin credits,

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Speaker 2: negative gearing, and you could first home bio grants. They

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Speaker 2: only drive up house prices. There are plenty of policies

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Speaker 2: there that drive house prices up. But if you were

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Speaker 2: tackling them, if you were dumb enough to tackle them,

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Speaker 2: like Bill Shorten Boss, you're guaranteed to not be voted

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Speaker 2: in because you still operate the country where the majority

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Speaker 2: two thirds of all voters own their home and they

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Speaker 2: don't want to down.

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Speaker 1: But back to the work from home and the difference

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Speaker 1: it might have made if it did make a difference

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Speaker 1: to property investing, what's your initions reaction there?

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Speaker 2: So what it does is traditionally people wanted to avoid

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Speaker 2: the solstry and commute, and so they moved as close

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Speaker 2: to the CVD as they could afford. Now that working

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Speaker 2: from home is a thing, and you know, yeah, you

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Speaker 2: only need to go to the office every now and

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Speaker 2: then we widened our perimeters. So all of a sudden,

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Speaker 2: and this is where we'd look at this two hour

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Speaker 2: drivetime radius from the CBD. All of a sudden, a

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Speaker 2: wider area is considered acceptable. You're willing to commute longer.

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Speaker 2: If you're only going to the office one or two

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Speaker 2: days a week, then the hour and a half commute

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Speaker 2: each way or whatever is fine, Whereas in the past

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Speaker 2: this would have been ridiculous.

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Speaker 1: It would have been hell because you were doing it

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Speaker 1: five days. But you can do it two days. And

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Speaker 1: do you see in the numbers any reflection of that

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Speaker 1: kicking in, for instance, city zones becoming more popular or

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Speaker 1: more expensive that perhaps could be explained in some way

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Speaker 1: by that trend.

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Speaker 2: Yeah, we see the fastest growing areas in all capital

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Speaker 2: cities is the urban fringe. That's because this is where

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Speaker 2: you build greenfield development sites, so you can build relatively

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Speaker 2: cheap housing at scale fast you build the through four

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Speaker 2: bedroom stock that those millennials want, and you are just

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Speaker 2: in the commutable distance.

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Speaker 1: When you say fastest growing you mean building growth.

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Speaker 2: Meaning population growth. I measure everything in population growth. But yeah,

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Speaker 2: this is where the if you look at the big cities,

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Speaker 2: they see growth everywhere right now, but it's the fringe.

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Speaker 2: It's like a belt around the old fringe. That is

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Speaker 2: absolute boom town.

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Speaker 1: Have you seen any zones where there was price appreciation

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Speaker 1: because of work from home trends?

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Speaker 2: No, not really, because you would say, in a sense

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Speaker 2: the inner suburbs would have seen a weakening theoretically in

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Speaker 2: an environment where we didn't also see massive population growth.

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Speaker 2: And so because you have growth wherever you look, essentially

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Speaker 2: in the big cities, prices don't fall. And then, of

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Speaker 2: course prices didn't fall during the pandemic because we had

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Speaker 2: even though we had negative population growth, people left the country.

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Speaker 2: We had super low interest rates, and if interest rates

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Speaker 2: are super low, people are happy to bid, you know,

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Speaker 2: a lot of money for their houses, and so that

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Speaker 2: drove up prices. And now we have this crazy shortage

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Speaker 2: and interest rates are going up and up, and we

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Speaker 2: still see high prices that don't really see them fall.

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Speaker 1: Structurally speaking, one of the things I want to ask you,

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Speaker 1: which is an economic question, I'm sure you're across it.

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Speaker 1: Was this notion very strong concept. I think that what

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Speaker 1: happened we had this extraordinary period or interest rates went

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Speaker 1: to zero and they fell from whatever in long term

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Speaker 1: average seven percent to zero for some years. And in

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Speaker 1: that time being roughly have the five years, six maybe

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Speaker 1: seven years running up to about two a year and

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Speaker 1: a half ago, two years ago. What occurred in the

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Speaker 1: property market was a capitalization of interest rate changes as

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Speaker 1: reflected on what you're saying that basically people could bid

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Speaker 1: more because the loans were cheaper than they ever have

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Speaker 1: been before. That period is now over, So I'm asking

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Speaker 1: you do you think we will Do you think it's possible?

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Speaker 1: People say it. Property is very expensive, Yes, it is

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Speaker 1: on a historical and international measure. Do you think we

438
00:23:02,480 --> 00:23:04,919
Speaker 1: could have a piece in the next decade of the

439
00:23:04,960 --> 00:23:07,360
Speaker 1: sort of price appreciation we had in the last decade

440
00:23:07,720 --> 00:23:10,760
Speaker 1: that included that period of capitalization of interest Yeah.

441
00:23:11,400 --> 00:23:13,800
Speaker 2: The way that I look at interest rates is, you know,

442
00:23:13,880 --> 00:23:15,800
Speaker 2: it would be, of course fun to have lower interest

443
00:23:15,840 --> 00:23:18,800
Speaker 2: rates again, but I don't see that happening because the

444
00:23:18,880 --> 00:23:22,040
Speaker 2: RBA is fighting an uphill battle against demographics. The RBA

445
00:23:22,200 --> 00:23:24,440
Speaker 2: wants us to spend less money. That's why they put

446
00:23:24,480 --> 00:23:26,800
Speaker 2: up the interest rates because high interest rates are deflationary.

447
00:23:27,280 --> 00:23:29,320
Speaker 2: But what we're seeing in the next decade is that

448
00:23:29,359 --> 00:23:32,960
Speaker 2: we see the biggest generation ever, the millennials, moving through

449
00:23:33,000 --> 00:23:35,400
Speaker 2: the highest spending phase of the life cycle. They completely

450
00:23:35,440 --> 00:23:37,600
Speaker 2: move through the mid forties. That's the phase of the

451
00:23:37,640 --> 00:23:39,879
Speaker 2: life cycle we spent more money than ever before or

452
00:23:39,880 --> 00:23:43,200
Speaker 2: ever after because you already had quite a couple of promotions,

453
00:23:43,200 --> 00:23:44,920
Speaker 2: so you have a lot of money to spend. You

454
00:23:45,040 --> 00:23:46,680
Speaker 2: have you already had all the kids that you will

455
00:23:46,720 --> 00:23:49,800
Speaker 2: ever have, so you have a lot of costs associated

456
00:23:49,800 --> 00:23:51,440
Speaker 2: with those kids. You have a big fed movie.

457
00:23:51,480 --> 00:23:53,960
Speaker 1: You can't save every penny.

458
00:23:53,680 --> 00:23:56,320
Speaker 2: That you earn, no matter the scenario, goes out the

459
00:23:56,359 --> 00:24:00,560
Speaker 2: door back into the economy, really accepting the forty year,

460
00:24:00,880 --> 00:24:05,440
Speaker 2: and so the millennials will spend no matter what guarantee.

461
00:24:05,480 --> 00:24:08,880
Speaker 2: The biggest generation also the richest generation, the Baby boomers.

462
00:24:09,200 --> 00:24:11,880
Speaker 2: They are now moving into retirement and traditionally they would

463
00:24:11,880 --> 00:24:15,960
Speaker 2: have been meant to become a poor penny pinching pensioner cohort,

464
00:24:16,119 --> 00:24:19,080
Speaker 2: but they're not because they benefit from high house prices.

465
00:24:19,119 --> 00:24:21,320
Speaker 2: They all own their own homes, so they feel richer

466
00:24:21,359 --> 00:24:24,200
Speaker 2: on paper the wealth effect, plus they own the vast

467
00:24:24,240 --> 00:24:27,080
Speaker 2: majority of cash savings. They benefit from high interest rates.

468
00:24:27,280 --> 00:24:30,080
Speaker 2: Why would the richest core would stop spending money. So

469
00:24:30,119 --> 00:24:32,280
Speaker 2: for the next decade we have this weird set up

470
00:24:32,520 --> 00:24:35,960
Speaker 2: where the richest cord and the biggest court definitely want

471
00:24:36,000 --> 00:24:37,760
Speaker 2: to spend money. And so what do you do as

472
00:24:37,800 --> 00:24:40,320
Speaker 2: an RBA. You can't just stay Yeah, we'll easily cut

473
00:24:40,400 --> 00:24:43,159
Speaker 2: rates as long as everyone is spending like crazy, So

474
00:24:43,320 --> 00:24:48,199
Speaker 2: keep the rates elevated as as a lower degree is.

475
00:24:48,280 --> 00:24:52,439
Speaker 2: But we will spend money like crazy, and so you

476
00:24:52,480 --> 00:24:54,879
Speaker 2: create the suffering at the bottom end of society.

477
00:24:55,880 --> 00:24:59,320
Speaker 1: It requires a consistent elevation of interest rates.

478
00:24:59,359 --> 00:25:02,480
Speaker 2: Is that what you Yeah, I'm saying. Structurally speaking, I

479
00:25:02,520 --> 00:25:04,720
Speaker 2: would say the indust rates want to be higher in

480
00:25:04,760 --> 00:25:07,159
Speaker 2: the next in this decade then they were in the

481
00:25:07,200 --> 00:25:08,040
Speaker 2: past decade.

482
00:25:08,520 --> 00:25:11,800
Speaker 1: Okay, food for thought, folks. Very interesting, and you might

483
00:25:11,880 --> 00:25:14,680
Speaker 1: just in terms of context in terms of what timon

484
00:25:14,720 --> 00:25:17,399
Speaker 1: the saying. Also keep in mind that the savings that

485
00:25:17,400 --> 00:25:20,679
Speaker 1: were built up during the pandemic have been effectively drained

486
00:25:20,720 --> 00:25:23,800
Speaker 1: with the exception of mortgage money. It's been quite obvious

487
00:25:23,840 --> 00:25:25,760
Speaker 1: and has been I mean the savings race first of all,

488
00:25:25,840 --> 00:25:27,920
Speaker 1: but from a long term average of six percent back

489
00:25:27,960 --> 00:25:31,600
Speaker 1: to about one percent now and the savings buffer that

490
00:25:31,640 --> 00:25:35,119
Speaker 1: was built up during COVID, as you will be aware,

491
00:25:35,200 --> 00:25:39,359
Speaker 1: has been almost entirely drained from the system and people

492
00:25:39,480 --> 00:25:42,040
Speaker 1: use that just basically for ongoing living expenses. It was

493
00:25:42,040 --> 00:25:45,120
Speaker 1: one of the things that cushioned people in the last year,

494
00:25:45,240 --> 00:25:48,400
Speaker 1: so it won't be cushioning them next year. Okay, shortbreak

495
00:25:48,400 --> 00:26:02,960
Speaker 1: back in a moment, Hello and welcome back to The

496
00:26:03,000 --> 00:26:07,240
Speaker 1: Australian's Money Positive podcast, Standing Away or stepping away from

497
00:26:07,400 --> 00:26:10,399
Speaker 1: daily news and weekly topics this week and looking at

498
00:26:10,440 --> 00:26:13,960
Speaker 1: the big picture with Simon Kussen Marcher of the Demographics Group.

499
00:26:13,960 --> 00:26:17,520
Speaker 1: He's a demographer and very much across the big trends

500
00:26:17,560 --> 00:26:21,840
Speaker 1: in Australia. We've been talking about the big trends in society.

501
00:26:22,480 --> 00:26:24,600
Speaker 1: I wanted to just zone in at the end of

502
00:26:24,600 --> 00:26:30,800
Speaker 1: the show Simon on place and region. In very broad terms.

503
00:26:32,359 --> 00:26:35,560
Speaker 1: Queensland seems to be in many ways the state of

504
00:26:35,600 --> 00:26:39,199
Speaker 1: the future. From a property perspective, was consistently strong in

505
00:26:39,240 --> 00:26:43,000
Speaker 1: recent years. I had a long, dull period. Admittedly, until

506
00:26:43,280 --> 00:26:45,520
Speaker 1: maybe three years ago it was pretty flat. Brisbane prices

507
00:26:45,560 --> 00:26:48,560
Speaker 1: had a long history of trouble. The city was overbuilt.

508
00:26:48,560 --> 00:26:52,080
Speaker 1: Then it had floods, then there was COVID et cetera.

509
00:26:52,160 --> 00:26:56,280
Speaker 1: But it's been steaming along since that time, and more broadly,

510
00:26:57,119 --> 00:27:01,119
Speaker 1: internal migration continues in that direction, from New South Wales

511
00:27:01,200 --> 00:27:05,159
Speaker 1: and from Melbourne. How important is that and what do

512
00:27:05,200 --> 00:27:07,640
Speaker 1: you think of that? I would say consensus but very

513
00:27:07,640 --> 00:27:10,760
Speaker 1: commonly held opinion that Queensland is where the property action

514
00:27:10,880 --> 00:27:13,919
Speaker 1: might really centralize in the future, Sydney being sort of

515
00:27:14,160 --> 00:27:16,320
Speaker 1: in some extent full to the gills and Melbourne being

516
00:27:16,320 --> 00:27:18,280
Speaker 1: able to be overbuilt it needs be.

517
00:27:19,480 --> 00:27:22,320
Speaker 2: Yeah, so I'm very optimistic about Southeast Queensland, and I,

518
00:27:22,400 --> 00:27:24,919
Speaker 2: of course, as a demographer, look at Southeast Queensland as

519
00:27:24,920 --> 00:27:27,880
Speaker 2: a single city, as a single conurbation. The local mayors,

520
00:27:27,880 --> 00:27:29,679
Speaker 2: the tom Taates of the world would of course hate this,

521
00:27:30,160 --> 00:27:32,960
Speaker 2: but if you view at south Southeast Queensland as a

522
00:27:32,960 --> 00:27:36,199
Speaker 2: single city, you realize how powerful this can be. It

523
00:27:36,280 --> 00:27:39,080
Speaker 2: is the best connected of the three big capital cities.

524
00:27:39,119 --> 00:27:41,560
Speaker 2: Then because you have a string of pearls of three

525
00:27:41,560 --> 00:27:45,800
Speaker 2: international airports across the Eastern seaboard, you have three CBDs.

526
00:27:45,880 --> 00:27:48,439
Speaker 2: You could even extend it to Woomba with a with

527
00:27:48,520 --> 00:27:52,400
Speaker 2: a big regional airport. So the most important challenge that

528
00:27:52,560 --> 00:27:55,760
Speaker 2: this region has is to improve the connectivity between its

529
00:27:55,840 --> 00:27:59,520
Speaker 2: hubs and this is what actually the Olympic Games was

530
00:27:59,640 --> 00:28:03,280
Speaker 2: meant to push. It was meant to do. This was

531
00:28:03,280 --> 00:28:05,280
Speaker 2: meant to do an Olympics on the cheap and use

532
00:28:05,320 --> 00:28:08,399
Speaker 2: all the money to build infrastructure, so that of course

533
00:28:08,560 --> 00:28:11,760
Speaker 2: drives the region. Additionally, so you have the fighting chance

534
00:28:12,000 --> 00:28:15,720
Speaker 2: to get Olympic infrastructure money into a city to a

535
00:28:15,720 --> 00:28:18,480
Speaker 2: degree that neither Melbourne nor Sydney have, so that works

536
00:28:18,480 --> 00:28:20,760
Speaker 2: in their favor. The only problem is that we now realized,

537
00:28:20,760 --> 00:28:23,320
Speaker 2: oh lord, we have no workers. If we take all

538
00:28:23,359 --> 00:28:26,879
Speaker 2: the workers to build our infrastructure, they are not building residential.

539
00:28:27,119 --> 00:28:29,240
Speaker 2: That hurts the market there. And of course all nine

540
00:28:29,640 --> 00:28:33,080
Speaker 2: we realized that infrastructure is inflationary, so we can't build

541
00:28:33,160 --> 00:28:35,480
Speaker 2: too much because we don't want to add to the

542
00:28:35,560 --> 00:28:40,080
Speaker 2: inflationary pressures. That said, though, ultimately they will build more

543
00:28:40,120 --> 00:28:42,200
Speaker 2: infrastructure in Melbourne or Sydney in the coming decade. That

544
00:28:42,240 --> 00:28:44,640
Speaker 2: will push them up. And of course you will have

545
00:28:44,920 --> 00:28:47,960
Speaker 2: retirees continuing to move to Queensland. We have now a

546
00:28:47,960 --> 00:28:50,880
Speaker 2: big cod of retirees ahead, so this will come drive

547
00:28:51,240 --> 00:28:54,360
Speaker 2: the economy as well. And of course each of those

548
00:28:54,600 --> 00:28:57,520
Speaker 2: big cities Sunshin Coast, Gold cost Brisbane now have a

549
00:28:57,640 --> 00:29:00,719
Speaker 2: CBD very much in their own right, so they then

550
00:29:00,960 --> 00:29:05,360
Speaker 2: create jobs and then attract populations. The problem now is

551
00:29:05,360 --> 00:29:08,080
Speaker 2: that Brisbane is of course becoming more and more expensive

552
00:29:08,200 --> 00:29:10,880
Speaker 2: and so you're still in competition the big cities with

553
00:29:10,960 --> 00:29:14,200
Speaker 2: each other, so that slows growth a bit down. But

554
00:29:14,240 --> 00:29:16,640
Speaker 2: then you look at the Gold Coast. This is a

555
00:29:16,680 --> 00:29:19,400
Speaker 2: region that has it all. It's a retire redestination, it's

556
00:29:19,400 --> 00:29:21,560
Speaker 2: a lifestyle destination, has a CBD in their own right.

557
00:29:21,800 --> 00:29:25,160
Speaker 2: It also acts as an overflow suburb of the people

558
00:29:25,200 --> 00:29:28,440
Speaker 2: that cannot live in Brisbane, so they have it all.

559
00:29:28,640 --> 00:29:30,960
Speaker 2: It's perfect. It's a work from home destination as well.

560
00:29:31,080 --> 00:29:32,760
Speaker 1: It sounds that you have no problem at all with

561
00:29:32,800 --> 00:29:37,120
Speaker 1: the consensus about Queensland being basically having tickets.

562
00:29:37,000 --> 00:29:38,640
Speaker 2: Especially not if you talk about the Gold Coast or

563
00:29:38,640 --> 00:29:41,560
Speaker 2: Sanchion Coast. Very optimistic there. I would say the same

564
00:29:41,680 --> 00:29:45,400
Speaker 2: is to a slightly lesser degree true for Geelong. Geelong

565
00:29:45,440 --> 00:29:50,720
Speaker 2: will be an absolute massive growth machine because it's the

566
00:29:50,760 --> 00:29:54,880
Speaker 2: overflow suburb of Melbourne and increasingly has an industry a

567
00:29:54,920 --> 00:29:59,560
Speaker 2: CBD in their own right. There's nothing holding Geelong back either.

568
00:30:00,000 --> 00:30:03,200
Speaker 2: We then go further, and we look at guaranteed trends

569
00:30:03,200 --> 00:30:05,600
Speaker 2: in the next ten years will be an increasing military spending.

570
00:30:06,320 --> 00:30:08,920
Speaker 2: So who will benefit from more military spending. It's a Darwin,

571
00:30:08,960 --> 00:30:12,440
Speaker 2: it's a town's will, it's an Adelaide. Maybe it can'st

572
00:30:12,440 --> 00:30:15,080
Speaker 2: to a smaller degree, but so you see that these

573
00:30:15,120 --> 00:30:20,040
Speaker 2: big shifts definitely will be mirrored in our urban investments

574
00:30:20,040 --> 00:30:20,440
Speaker 2: as well.

575
00:30:21,240 --> 00:30:24,680
Speaker 1: Very good. Some great new ideas there that we haven't

576
00:30:24,720 --> 00:30:27,000
Speaker 1: come upon on the show before. Many of them we

577
00:30:27,120 --> 00:30:29,479
Speaker 1: often bounce off, but we don't sit down and talk

578
00:30:29,520 --> 00:30:31,360
Speaker 1: about them properly because we haven't had the right present

579
00:30:31,400 --> 00:30:34,200
Speaker 1: to talk to. But we did today. So Simon kustum

580
00:30:34,200 --> 00:30:35,760
Speaker 1: marka thank you very much for being on the show.

581
00:30:35,960 --> 00:30:38,120
Speaker 1: Very interesting. We'll talk to you again. I'm sure it's

582
00:30:38,120 --> 00:30:41,400
Speaker 1: been a delight lovely Thank you, Simon, and folks, keep

583
00:30:41,440 --> 00:30:43,920
Speaker 1: those emails coming if you can the money puzzle at

584
00:30:43,960 --> 00:30:47,840
Speaker 1: the Australian dot com dot AU. One other thing, do

585
00:30:48,080 --> 00:30:50,840
Speaker 1: mention us to someone you know in your circle. It

586
00:30:50,840 --> 00:30:52,840
Speaker 1: would be great to just tell them about the show.

587
00:30:53,480 --> 00:30:56,080
Speaker 1: And today's show was produced by the same ango. Talk

588
00:30:56,120 --> 00:31:00,840
Speaker 1: to you soon. A foot