1 00:00:01,880 --> 00:00:04,640 Speaker 1: Leith and Iceltam. Welcome to Property Insights Made. It's really 2 00:00:04,680 --> 00:00:07,240 Speaker 1: great to talk to you. And by the way, founder 3 00:00:07,280 --> 00:00:11,480 Speaker 1: and chief economists at Macrobusiness dot com dot au. And 4 00:00:11,520 --> 00:00:13,760 Speaker 1: you're calling me from we're doing this by Riverside. But 5 00:00:13,760 --> 00:00:15,920 Speaker 1: you're down there in Victoria. So what's going on down there? 6 00:00:15,920 --> 00:00:17,400 Speaker 1: How's it going mate? 7 00:00:17,400 --> 00:00:17,800 Speaker 2: It's good? 8 00:00:17,880 --> 00:00:22,000 Speaker 3: Well, yeah, it's good in a sense that my personal 9 00:00:22,040 --> 00:00:24,520 Speaker 3: life is going well. But unfortunately, mate, I live in 10 00:00:24,560 --> 00:00:27,120 Speaker 3: the I live in the Rustbucket State, or the new 11 00:00:27,200 --> 00:00:31,480 Speaker 3: Rustbucket State, which is appallingly run, and you know, I'm 12 00:00:31,480 --> 00:00:33,120 Speaker 3: dealing with you know, we're all dealing with us with 13 00:00:33,159 --> 00:00:35,880 Speaker 3: the state government that is just massively in debt and 14 00:00:35,960 --> 00:00:39,120 Speaker 3: taxes to the eyeballs, and unfortunately, it's just not. 15 00:00:39,960 --> 00:00:42,360 Speaker 1: If I go back ten years, I remember Victoria was 16 00:00:42,360 --> 00:00:45,239 Speaker 1: growing at a faster rate than every other state. There 17 00:00:45,320 --> 00:00:49,280 Speaker 1: was net migration in Victoria. Then of course we had COVID, 18 00:00:49,320 --> 00:00:51,720 Speaker 1: there was net migration out of Victoria. And it seems 19 00:00:51,720 --> 00:00:54,279 Speaker 1: like everyone's gone up to Queensland. Can't blame him. Whether 20 00:00:54,320 --> 00:00:56,760 Speaker 1: it's pretty good, I'm not about a place live, especially 21 00:00:56,760 --> 00:01:00,760 Speaker 1: around the Gold Coast. What's the program then for a 22 00:01:00,800 --> 00:01:03,120 Speaker 1: place like Victoria, like from an economics point of view, 23 00:01:03,880 --> 00:01:05,840 Speaker 1: because there's a light of people down there buying property, 24 00:01:05,880 --> 00:01:08,199 Speaker 1: they own property, they're paying all this extra land tax 25 00:01:08,360 --> 00:01:11,360 Speaker 1: after five I think it's fifty grand valuation they've got 26 00:01:11,400 --> 00:01:14,080 Speaker 1: to pay the land tax. I think in New South 27 00:01:14,080 --> 00:01:16,640 Speaker 1: Wales it's like one million and fifty you start paying 28 00:01:16,720 --> 00:01:21,480 Speaker 1: land tax. There's an exempt that amount. What's the prognosis 29 00:01:22,120 --> 00:01:23,000 Speaker 1: what needs to happened? 30 00:01:23,720 --> 00:01:26,000 Speaker 3: Yes, so for starters, I mean, I think the tax 31 00:01:26,000 --> 00:01:28,720 Speaker 3: burden needs to come down here we text everything. Also, 32 00:01:29,760 --> 00:01:32,720 Speaker 3: Victoria used to be the manufacturing powerhouse of the country, 33 00:01:33,560 --> 00:01:36,839 Speaker 3: primarily because it had very cheap energy. So we had 34 00:01:37,040 --> 00:01:39,560 Speaker 3: some of the cheapest electricity in the world because we've 35 00:01:39,600 --> 00:01:41,480 Speaker 3: got oodles of. 36 00:01:41,840 --> 00:01:43,119 Speaker 2: Very very cheap brown coal. 37 00:01:43,720 --> 00:01:48,040 Speaker 3: But we've decided obviously Australia has decided to stop stop 38 00:01:48,160 --> 00:01:51,040 Speaker 3: using coal and doing renewables build out and that sort 39 00:01:51,040 --> 00:01:53,720 Speaker 3: of stuff. But our government stupidly is also banned new 40 00:01:53,760 --> 00:01:56,560 Speaker 3: gas exploration and they've made just you know, a very 41 00:01:56,560 --> 00:01:59,320 Speaker 3: difficult place to do business generally, and as a result, 42 00:01:59,360 --> 00:02:01,320 Speaker 3: a lot of head office have left the state and 43 00:02:01,360 --> 00:02:04,080 Speaker 3: they've gone up north, you know, to places like Queensland, 44 00:02:04,400 --> 00:02:07,240 Speaker 3: and the state government hasn't helped the situation because they've 45 00:02:07,280 --> 00:02:11,079 Speaker 3: dug us into this massive debt hole because they've hugely 46 00:02:11,160 --> 00:02:13,760 Speaker 3: bloated the bureaucracy. So we've we've had a bigger growth 47 00:02:13,760 --> 00:02:16,720 Speaker 3: in public servants in Victoria than anywhere else in the 48 00:02:16,800 --> 00:02:21,000 Speaker 3: last fifteen years, and that's blown out the wage build 49 00:02:21,120 --> 00:02:24,760 Speaker 3: is their biggest cost. And then we've had a procession 50 00:02:24,800 --> 00:02:27,680 Speaker 3: of infrastructure projects that have basically been way over time 51 00:02:27,720 --> 00:02:30,799 Speaker 3: and massively over budget, and that's also dug us into 52 00:02:30,800 --> 00:02:33,280 Speaker 3: this debt hole. So it's not a great situation. And 53 00:02:33,840 --> 00:02:35,600 Speaker 3: there isn't really as I said, there isn't really a 54 00:02:35,600 --> 00:02:41,600 Speaker 3: sustainable business model down here. We don't have any particular 55 00:02:41,639 --> 00:02:44,840 Speaker 3: advantage in any sort of industry. And the whole model, 56 00:02:44,880 --> 00:02:48,240 Speaker 3: as I say, is just grow the population very quickly 57 00:02:48,639 --> 00:02:51,600 Speaker 3: and then get all the growth that comes off that 58 00:02:51,680 --> 00:02:54,040 Speaker 3: through having to build houses and infrastructure and services and 59 00:02:54,040 --> 00:02:57,360 Speaker 3: that sort of thing. And the parasitic nature of Victoria 60 00:02:57,360 --> 00:03:00,240 Speaker 3: can see is trade balance. So you know, if you 61 00:03:00,280 --> 00:03:03,760 Speaker 3: go back to the turn of the century, a trade 62 00:03:03,760 --> 00:03:06,040 Speaker 3: deficit was about twenty billion in real terms. Now it's 63 00:03:06,040 --> 00:03:08,600 Speaker 3: close to one hundred billion. So we've basically bought all 64 00:03:08,639 --> 00:03:12,680 Speaker 3: these people who don't provide any export every revenue. Really 65 00:03:13,280 --> 00:03:15,480 Speaker 3: they don't work in export industries, but they buy heaps 66 00:03:15,520 --> 00:03:18,120 Speaker 3: of important goods like new cars, TVs, all this sort 67 00:03:18,120 --> 00:03:21,600 Speaker 3: of stuff, and it's not a particularly sustainable model we've 68 00:03:21,600 --> 00:03:22,280 Speaker 3: got down here. 69 00:03:22,639 --> 00:03:25,480 Speaker 1: Well, you made a really really interesting point and that 70 00:03:25,560 --> 00:03:28,400 Speaker 1: sort of leads us into the Australian economy generally, which 71 00:03:28,480 --> 00:03:29,560 Speaker 1: is sort of what I want to talk to you, 72 00:03:29,560 --> 00:03:32,600 Speaker 1: because I consider you one of Australia's leading economists and 73 00:03:32,840 --> 00:03:38,920 Speaker 1: appreciate your time when you talk about Victorian governors. By 74 00:03:38,960 --> 00:03:41,560 Speaker 1: the way, this is not limited to Victorian government, but 75 00:03:41,560 --> 00:03:43,240 Speaker 1: as seon as like, Victorian government has done this at 76 00:03:43,280 --> 00:03:44,360 Speaker 1: a greater pace than everybody's. 77 00:03:44,400 --> 00:03:46,840 Speaker 4: That is, employee more people in the public service. 78 00:03:47,000 --> 00:03:50,480 Speaker 1: Which arguably doesn't really add anything to productivity for the nation, 79 00:03:50,840 --> 00:03:53,040 Speaker 1: but the whole nation. All the states in the nation 80 00:03:53,120 --> 00:03:55,920 Speaker 1: have been doing this or that, particularly the labor States. 81 00:03:56,680 --> 00:03:57,720 Speaker 4: News soap I was included. 82 00:03:58,680 --> 00:04:02,600 Speaker 1: And when you look at the unemployment number relative to 83 00:04:02,760 --> 00:04:05,280 Speaker 1: what everyone is always on everybody's lips, you know that 84 00:04:05,400 --> 00:04:09,440 Speaker 1: is interest rates. The unemployment number is still hovering around 85 00:04:09,480 --> 00:04:14,200 Speaker 1: four point one, quite healthy from a full employment perspective. 86 00:04:16,160 --> 00:04:18,600 Speaker 1: How much of that is do you think is artificially 87 00:04:18,600 --> 00:04:20,320 Speaker 1: propped up and what's the sustainability of that? 88 00:04:20,360 --> 00:04:22,479 Speaker 4: And what I mean by artificially propped up is that. 89 00:04:23,240 --> 00:04:27,200 Speaker 1: Most of the growth or steadiness in the four point 90 00:04:27,240 --> 00:04:29,560 Speaker 1: one unemployment number hasn't come about as a result of 91 00:04:29,560 --> 00:04:32,719 Speaker 1: the private sector. Private sector is not sacking people, but 92 00:04:32,760 --> 00:04:36,720 Speaker 1: it's not employing people employment. A lot of employment growth 93 00:04:37,960 --> 00:04:41,680 Speaker 1: is disproportionately coming coming out of state federal governments. 94 00:04:42,760 --> 00:04:44,560 Speaker 4: What do you think that means. 95 00:04:44,560 --> 00:04:47,280 Speaker 1: When the Reserve Bank governor looks at that, and what 96 00:04:47,320 --> 00:04:49,839 Speaker 1: do you think she thinks about? Well, should I put 97 00:04:49,880 --> 00:04:51,800 Speaker 1: interest rates down in the next meeting, which won't be 98 00:04:51,880 --> 00:04:54,080 Speaker 1: until after the July numbers drop out? 99 00:04:54,320 --> 00:04:56,880 Speaker 3: Well, honestly, I think you summed that up beautifully. So 100 00:04:56,880 --> 00:04:59,520 Speaker 3: most of Australia's job growth has come from the non 101 00:04:59,520 --> 00:05:04,000 Speaker 3: market sect. So that's basically government semi government type jobs. 102 00:05:04,120 --> 00:05:06,640 Speaker 3: So you know that they could be private sector employers, 103 00:05:06,640 --> 00:05:09,080 Speaker 3: but they're relign on government funding, so they're effectively, you know, 104 00:05:09,120 --> 00:05:12,600 Speaker 3: financed by government. And you got two sectors of non 105 00:05:12,600 --> 00:05:15,200 Speaker 3: market the market sector. Unfortunately, the market sector job growth 106 00:05:15,240 --> 00:05:19,320 Speaker 3: has been terrible for several years and the non market sector, 107 00:05:19,360 --> 00:05:22,559 Speaker 3: so the government aligned sectors have experienced very very strong 108 00:05:23,480 --> 00:05:26,960 Speaker 3: employment growth, and that's mostly to do to do with 109 00:05:26,960 --> 00:05:29,640 Speaker 3: the blowout in the NDAs. So I've got this, you know, 110 00:05:29,680 --> 00:05:33,040 Speaker 3: the National Disability Insurance game. It costs about fifty billion 111 00:05:33,160 --> 00:05:36,080 Speaker 3: dollars annually or it's getting up to there. It's projected 112 00:05:36,120 --> 00:05:38,560 Speaker 3: to grow to about one hundred billion dollars in the 113 00:05:38,560 --> 00:05:42,080 Speaker 3: next ten years. So it's a massive, massive amount of 114 00:05:42,120 --> 00:05:46,120 Speaker 3: money here, and and that's basically what's been driving Australia's 115 00:05:46,200 --> 00:05:49,560 Speaker 3: job growth. It's not particularly sustainable. Obviously, it's funded by 116 00:05:49,640 --> 00:05:55,200 Speaker 3: taxes the market sector. The private sector's been struggling, and 117 00:05:56,000 --> 00:06:00,320 Speaker 3: certainly I think this massive government spending has kept interest 118 00:06:00,400 --> 00:06:02,720 Speaker 3: rates higher than they would be otherwise. But at the 119 00:06:02,760 --> 00:06:06,000 Speaker 3: same time, mark this week's National accrewent accounts, the QYE 120 00:06:06,080 --> 00:06:09,240 Speaker 3: National Accounts show that we've we've slipped back into per 121 00:06:09,360 --> 00:06:13,719 Speaker 3: capita of procession, so we've had it's not technically a recession. 122 00:06:13,720 --> 00:06:15,640 Speaker 2: You had growth last quarter. You have to have two 123 00:06:15,680 --> 00:06:16,719 Speaker 2: in a row to have a recession. 124 00:06:16,760 --> 00:06:18,080 Speaker 4: But it is negative. 125 00:06:18,200 --> 00:06:21,200 Speaker 3: Yeah, that's right, it is negative. So per capital GDPs, 126 00:06:21,279 --> 00:06:23,600 Speaker 3: that's that's your total economic activity when you divide by 127 00:06:23,640 --> 00:06:26,760 Speaker 3: the population filled yo point two percent in the March quarter, 128 00:06:26,800 --> 00:06:29,520 Speaker 3: and that's the ninth fall out of the last eleven quarters. 129 00:06:30,080 --> 00:06:33,479 Speaker 3: So the overall economy, once you strip out population growth, 130 00:06:33,520 --> 00:06:36,440 Speaker 3: is in a hole. Most of the growth has been 131 00:06:36,520 --> 00:06:39,760 Speaker 3: driven a by population growth obviously, but also by this 132 00:06:39,800 --> 00:06:43,000 Speaker 3: government massive government spending which is near a record level 133 00:06:43,040 --> 00:06:45,359 Speaker 3: of GDP. And all that tells you is that the 134 00:06:45,360 --> 00:06:49,200 Speaker 3: private sector economy is very weak. Now that the total 135 00:06:49,240 --> 00:06:52,240 Speaker 3: growth of point two percent, which includes population growth, was 136 00:06:52,240 --> 00:06:55,839 Speaker 3: actually half of what the Reserve Bank forecast in its 137 00:06:55,839 --> 00:06:58,800 Speaker 3: main monetary policy statement. And I think because of that, 138 00:06:59,160 --> 00:07:01,240 Speaker 3: we're very, very likely to get a rate cut in 139 00:07:01,320 --> 00:07:05,279 Speaker 3: July because the economy is far far weaker than they expected. 140 00:07:05,400 --> 00:07:09,080 Speaker 3: And in fact, financial markets have now ascribed the ninety 141 00:07:09,120 --> 00:07:11,960 Speaker 3: percent chance roughly of a rate cut in July, so 142 00:07:11,960 --> 00:07:15,200 Speaker 3: they've bought their rate cuts forward and they're expecting three 143 00:07:15,240 --> 00:07:17,560 Speaker 3: more rate cuts this calendar year. So we had one 144 00:07:17,600 --> 00:07:19,560 Speaker 3: in February, one in May, and they expect three more 145 00:07:19,680 --> 00:07:21,800 Speaker 3: and end if a cash right at three point one percent. 146 00:07:22,640 --> 00:07:24,320 Speaker 4: So this is great for borrowers. 147 00:07:24,320 --> 00:07:29,600 Speaker 1: So could you explain though the disconnect or the dysfunction 148 00:07:29,800 --> 00:07:34,960 Speaker 1: though that I comes into my mind when the RBA 149 00:07:35,120 --> 00:07:38,680 Speaker 1: is talking about you know what their definition of full 150 00:07:38,720 --> 00:07:41,440 Speaker 1: employment might be in relation to the modeling, could be 151 00:07:41,480 --> 00:07:45,840 Speaker 1: around an unemployment number of four and a half, you know, 152 00:07:45,920 --> 00:07:51,880 Speaker 1: the so called nehru. Okay, how do you reconcile when 153 00:07:51,920 --> 00:07:55,160 Speaker 1: they are looking at they're saying a model, that's their 154 00:07:55,240 --> 00:08:00,640 Speaker 1: model that suggests what is the non inflationary rate of unemployment, 155 00:08:00,640 --> 00:08:03,760 Speaker 1: in other words, the unemployment whereby people in this country 156 00:08:03,800 --> 00:08:07,600 Speaker 1: moment was so strong that they can ask some more money, 157 00:08:07,960 --> 00:08:10,120 Speaker 1: which would they says. 158 00:08:09,880 --> 00:08:10,720 Speaker 4: Around four and a half. 159 00:08:10,800 --> 00:08:13,560 Speaker 1: But it's stubbornly sitting a four and a four point one, 160 00:08:13,600 --> 00:08:15,320 Speaker 1: which is as you say, and. 161 00:08:16,880 --> 00:08:17,840 Speaker 4: It seems to be the case. 162 00:08:17,920 --> 00:08:21,440 Speaker 1: Most of the employment is coming through the governments, various 163 00:08:21,480 --> 00:08:22,480 Speaker 1: governments initiatives. 164 00:08:23,520 --> 00:08:26,480 Speaker 4: How does the RBA reconcile that with what you just said? 165 00:08:26,520 --> 00:08:29,600 Speaker 1: Then that growth is pretty poor in other words, GDP 166 00:08:29,880 --> 00:08:33,720 Speaker 1: is whether it's per capital or just GDP without just 167 00:08:33,760 --> 00:08:34,840 Speaker 1: generally speaking. 168 00:08:35,240 --> 00:08:35,760 Speaker 4: Pretty poor. 169 00:08:35,840 --> 00:08:38,320 Speaker 1: It's not going anywhere near the forecast definitely doesn't go 170 00:08:38,320 --> 00:08:41,280 Speaker 1: anywhere near what the Reserve Bank was forecasting at one 171 00:08:41,320 --> 00:08:44,160 Speaker 1: stage two point eight and what the government forecasts for 172 00:08:44,200 --> 00:08:47,360 Speaker 1: their own budgets at around I think two point eight 173 00:08:47,480 --> 00:08:50,960 Speaker 1: or something like that, which was a little while ago, how. 174 00:08:50,840 --> 00:08:51,840 Speaker 4: Do you reconcile those two? 175 00:08:51,920 --> 00:08:53,840 Speaker 1: So when does Reserve Bank say, well, wait a minute, 176 00:08:53,960 --> 00:08:56,040 Speaker 1: if we put the rates down, maybe we're just going 177 00:08:56,080 --> 00:08:58,760 Speaker 1: to stimulate the bloody economy again and people are going 178 00:08:58,800 --> 00:09:01,839 Speaker 1: to start getting unemployment might drop below four point one 179 00:09:01,880 --> 00:09:03,880 Speaker 1: and wow, we've got a real problem. 180 00:09:03,960 --> 00:09:04,560 Speaker 2: Then yeah. 181 00:09:04,600 --> 00:09:07,680 Speaker 3: So so so that that basically we'll call it a 182 00:09:07,720 --> 00:09:10,480 Speaker 3: natural rate of unemployment just to keep keep it for late, 183 00:09:10,559 --> 00:09:14,440 Speaker 3: late layperson. That that's that natural rate of unemployment, which 184 00:09:14,520 --> 00:09:17,880 Speaker 3: which the Reserve Bank, which you mentioned, the Reserve banks 185 00:09:17,920 --> 00:09:19,840 Speaker 3: actually dropped that a fair bit. So in the later 186 00:09:19,880 --> 00:09:23,760 Speaker 3: statement of country policy. By memory, I'm going off memory here, 187 00:09:23,840 --> 00:09:26,440 Speaker 3: I think they dropped to about two point seventy five percent. 188 00:09:27,679 --> 00:09:30,880 Speaker 3: So yeah, yeah, so that they've they've cut it, and 189 00:09:30,920 --> 00:09:33,640 Speaker 3: I think I think that's just based on you know, 190 00:09:34,000 --> 00:09:36,240 Speaker 3: empirical evidence, right, they're looking at the job market and 191 00:09:36,240 --> 00:09:38,319 Speaker 3: hang on, this doesn't really compute. 192 00:09:38,679 --> 00:09:40,079 Speaker 2: And you know that there and. 193 00:09:40,000 --> 00:09:42,680 Speaker 3: There have been other market economis like CBA and others 194 00:09:43,080 --> 00:09:44,600 Speaker 3: who think it's below three percent. 195 00:09:46,120 --> 00:09:46,880 Speaker 2: So actually, I think you. 196 00:09:46,880 --> 00:09:49,400 Speaker 3: Want to be in two point nine percent their new figure. 197 00:09:49,880 --> 00:09:52,160 Speaker 3: But what that suggests is that the lower bound for 198 00:09:52,200 --> 00:09:55,800 Speaker 3: interest rates is lower. So we could that that market 199 00:09:55,840 --> 00:09:58,760 Speaker 3: forecast for a three point one percent cash rate by 200 00:09:58,760 --> 00:10:01,480 Speaker 3: the end of the year is around about the neutral rate, 201 00:10:01,520 --> 00:10:03,160 Speaker 3: or it might even be one more rate cut beyond 202 00:10:03,200 --> 00:10:05,880 Speaker 3: that if you base it on that. So I think 203 00:10:06,000 --> 00:10:08,840 Speaker 3: I don't think the IRBA is as worried about this 204 00:10:09,000 --> 00:10:15,000 Speaker 3: unemployment rate now, and certainly their latest monetary policy statement 205 00:10:15,040 --> 00:10:16,920 Speaker 3: in the minutes and that sort of thing suggests that 206 00:10:16,920 --> 00:10:21,120 Speaker 3: they still believe that the cash rate at its current 207 00:10:21,200 --> 00:10:25,360 Speaker 3: rate is mildly contractory or it's contractory for the economy, 208 00:10:25,400 --> 00:10:28,319 Speaker 3: which suggests that there's obviously further rate cuts to come. 209 00:10:29,080 --> 00:10:32,200 Speaker 1: And maybe you could just for the moment, I know 210 00:10:32,240 --> 00:10:34,439 Speaker 1: it's only a monthly number, but could you reckon sort 211 00:10:34,480 --> 00:10:38,360 Speaker 1: of help us reconcile the trim mean increase recently? So 212 00:10:38,720 --> 00:10:41,000 Speaker 1: I think the trim mean for the March quarter was 213 00:10:41,040 --> 00:10:43,839 Speaker 1: two point six. I think my member in the last 214 00:10:43,840 --> 00:10:45,800 Speaker 1: monthly one for April I think was two point eight, 215 00:10:46,600 --> 00:10:52,080 Speaker 1: which sort of suggests it's gone up a bit. Do 216 00:10:52,080 --> 00:10:53,880 Speaker 1: you think the Reserve Bank what do you think they're 217 00:10:53,920 --> 00:10:56,199 Speaker 1: looking for when the next number comes out? What sort 218 00:10:56,200 --> 00:10:58,440 Speaker 1: of number do you think they'll be happy with in 219 00:10:58,559 --> 00:10:59,679 Speaker 1: order to drop rates again? 220 00:11:00,320 --> 00:11:00,520 Speaker 2: Yeah? 221 00:11:00,600 --> 00:11:04,559 Speaker 3: So, the monthly increase was I think just above their projection, 222 00:11:04,640 --> 00:11:07,320 Speaker 3: but the quarterly inflation, which is the more comprehensive one, 223 00:11:08,040 --> 00:11:10,319 Speaker 3: that was two point nine percent, so it's within that band. 224 00:11:11,360 --> 00:11:13,439 Speaker 3: I think they'll just be taking keeping a watchful in 225 00:11:13,600 --> 00:11:18,120 Speaker 3: it to see, you know, not so much the monthly. 226 00:11:18,160 --> 00:11:19,920 Speaker 3: The monthly excludes a lot of stuff, so it's only 227 00:11:19,920 --> 00:11:22,959 Speaker 3: accounts about sixty percent of the basket and excludes a 228 00:11:23,000 --> 00:11:25,480 Speaker 3: lot of services and that sort of thing. But certainly 229 00:11:25,520 --> 00:11:27,760 Speaker 3: the next quarterly released I have a key it do it. 230 00:11:27,840 --> 00:11:30,240 Speaker 3: I don't think it'll stop the next rate cut, but 231 00:11:30,280 --> 00:11:33,240 Speaker 3: the one after that definitely like it'll be. They'll be 232 00:11:33,360 --> 00:11:36,640 Speaker 3: very data dependent on the trim means. So at the 233 00:11:36,640 --> 00:11:40,360 Speaker 3: moment it's right sort of at the top of its band. Yeah, 234 00:11:40,480 --> 00:11:44,520 Speaker 3: it's tracking marginally above their forecast, but not by a lot, 235 00:11:44,720 --> 00:11:47,640 Speaker 3: and I think they'll just keep a watchful on it. 236 00:11:47,640 --> 00:11:50,760 Speaker 3: It's one of those things. I'll be mildly alert to it. 237 00:11:50,800 --> 00:11:54,680 Speaker 3: But it's you know, certainly, I think the week national 238 00:11:54,720 --> 00:11:56,640 Speaker 3: accounts number is probably more of a concern for him, 239 00:11:56,640 --> 00:11:59,520 Speaker 3: and obviously external events too with all the tariffs and 240 00:11:59,520 --> 00:12:01,280 Speaker 3: how that's going to go to wash through. 241 00:12:02,080 --> 00:12:06,319 Speaker 1: So generally speaking, when we have rate cuts is because 242 00:12:06,320 --> 00:12:07,040 Speaker 1: we've got a problem. 243 00:12:08,000 --> 00:12:09,040 Speaker 4: We're trying to solve problem. 244 00:12:09,880 --> 00:12:13,560 Speaker 1: I will say though, that, as you just mentioned, it 245 00:12:13,640 --> 00:12:16,400 Speaker 1: is also to correct something. So the correction might be 246 00:12:16,480 --> 00:12:18,959 Speaker 1: at the moment not so much that there's a problem, 247 00:12:19,040 --> 00:12:22,640 Speaker 1: but the correction could be that the current cash raid 248 00:12:22,760 --> 00:12:25,840 Speaker 1: is contractionary, so we'd like to bring it back to neutral. 249 00:12:26,080 --> 00:12:30,640 Speaker 1: But anything beyond contractionary, anything beyond contractionary, is. 250 00:12:32,559 --> 00:12:34,360 Speaker 4: Indicative of there being a problem. 251 00:12:34,840 --> 00:12:37,680 Speaker 2: Yeah, that's right, So how do you reckon? 252 00:12:37,800 --> 00:12:40,959 Speaker 1: Because the treasurer got up there and said, oh, I know, 253 00:12:41,080 --> 00:12:44,040 Speaker 1: we're going pretty good. You know, like that did make 254 00:12:44,040 --> 00:12:45,520 Speaker 1: a lot of sense to me, Like when he looked 255 00:12:45,520 --> 00:12:46,880 Speaker 1: at all the national numbers come out of the day 256 00:12:46,960 --> 00:12:47,360 Speaker 1: or so ago. 257 00:12:48,240 --> 00:12:51,680 Speaker 3: Yes, so look, you know, let's be honest, treasure Charmers 258 00:12:51,679 --> 00:12:53,760 Speaker 3: has been a politician, right, so he was putting lipstick 259 00:12:53,800 --> 00:12:57,640 Speaker 3: on a pig. That national accountsl number. No matter which 260 00:12:57,679 --> 00:13:00,360 Speaker 3: way you look at it was poor. So obviously you 261 00:13:00,400 --> 00:13:03,280 Speaker 3: know we had a we've got negative per capital growth, 262 00:13:03,280 --> 00:13:05,200 Speaker 3: which we just mentioned, but if you actually look at 263 00:13:05,240 --> 00:13:08,120 Speaker 3: the underlying you know data in this national accounts, so 264 00:13:08,240 --> 00:13:12,440 Speaker 3: that was also poor. So we've got business investment as plunged. 265 00:13:13,000 --> 00:13:15,800 Speaker 3: So we've got capital expenditures et cetera as running at 266 00:13:16,040 --> 00:13:19,040 Speaker 3: very poor levels historically, and that's a negative sign for 267 00:13:19,600 --> 00:13:23,040 Speaker 3: productivity growth because we've got to grow in population. If 268 00:13:23,040 --> 00:13:24,840 Speaker 3: you don't grow your capital stock to go along with 269 00:13:24,880 --> 00:13:27,680 Speaker 3: that population, you get what's called capital shallowing, where you 270 00:13:27,720 --> 00:13:30,800 Speaker 3: have less machinery and tools and that sort of thing 271 00:13:30,840 --> 00:13:33,199 Speaker 3: per worker, and that means you become less productive. So 272 00:13:33,640 --> 00:13:36,520 Speaker 3: that was absolutely shocking. The household sector has been smashed. 273 00:13:37,200 --> 00:13:41,240 Speaker 3: So household consumption has fallen by memory, I think it 274 00:13:41,280 --> 00:13:44,360 Speaker 3: was seven or eight consecutive quarters in annual terms, and 275 00:13:44,400 --> 00:13:46,360 Speaker 3: it's down about two and a half percent from its peak. 276 00:13:46,400 --> 00:13:49,880 Speaker 3: So households just aren't spending at the moment. And again 277 00:13:49,920 --> 00:13:52,120 Speaker 3: it gets it just gets back to this situation whereby 278 00:13:52,200 --> 00:13:56,800 Speaker 3: the economy has been propped up by a population growth 279 00:13:56,840 --> 00:13:59,839 Speaker 3: and b government spending, and I think I think that'll 280 00:13:59,840 --> 00:14:04,360 Speaker 3: take primacy over most other things in the RBA is thinking. 281 00:14:06,160 --> 00:14:08,360 Speaker 3: And also, look, you know, from a policy perspective, the 282 00:14:08,360 --> 00:14:10,800 Speaker 3: government needs to look at that and go, hang on, 283 00:14:11,160 --> 00:14:14,880 Speaker 3: we can't run an economy on government spending and we 284 00:14:14,920 --> 00:14:19,440 Speaker 3: need to fire up the private sector. And again this week, 285 00:14:19,520 --> 00:14:23,320 Speaker 3: cap X is a red flag not just to the economy, 286 00:14:23,320 --> 00:14:26,440 Speaker 3: but to productivity more generally, because if we don't grow 287 00:14:26,480 --> 00:14:31,000 Speaker 3: the populations the capital stock, so talking machinery, tools, that 288 00:14:31,080 --> 00:14:33,760 Speaker 3: sort of thing, to keep up with the population growth, 289 00:14:34,560 --> 00:14:36,479 Speaker 3: we're going to have declining productivity. 290 00:14:36,520 --> 00:14:37,320 Speaker 2: It's as simple as that. 291 00:14:37,480 --> 00:14:41,200 Speaker 3: Capital deeping in has driven most of Australia's productivity growth 292 00:14:41,200 --> 00:14:43,600 Speaker 3: in the post war period since a post war period, 293 00:14:44,200 --> 00:14:46,480 Speaker 3: so that's you know, providing your workers with more tools 294 00:14:46,480 --> 00:14:49,040 Speaker 3: and equipment to work with, you can get more done. 295 00:14:49,560 --> 00:14:52,760 Speaker 3: And the last decade or so we've had we haven't 296 00:14:52,760 --> 00:14:55,880 Speaker 3: grown the capital stock nor the infrastructure stock enough to 297 00:14:55,960 --> 00:14:58,160 Speaker 3: keep up with population growth, and that's one of the 298 00:14:58,200 --> 00:14:59,760 Speaker 3: reasons why our productivity stings. 299 00:15:00,600 --> 00:15:04,560 Speaker 1: We therefore, on that basis leith A, we sort of 300 00:15:05,320 --> 00:15:08,320 Speaker 1: ex extentially heading for a problem because I mean, because 301 00:15:08,360 --> 00:15:11,280 Speaker 1: I can't see the government changing their current policy. They're 302 00:15:11,320 --> 00:15:13,720 Speaker 1: going to keep employing more people into the various governments, 303 00:15:13,720 --> 00:15:14,440 Speaker 1: state and federal. 304 00:15:14,480 --> 00:15:15,200 Speaker 4: They're going to keep. 305 00:15:15,120 --> 00:15:18,000 Speaker 1: Put employing people into the public service and also into 306 00:15:18,920 --> 00:15:22,840 Speaker 1: public sector expenditure, you know, because you mentioned before ndiis 307 00:15:23,040 --> 00:15:26,440 Speaker 1: But NDIS employs a lot of people externally but funded 308 00:15:26,480 --> 00:15:30,240 Speaker 1: by a taxpayer coming off the government balance sheet. Do 309 00:15:30,320 --> 00:15:33,000 Speaker 1: you see some sort of ex extential issue coming up 310 00:15:33,400 --> 00:15:35,720 Speaker 1: up on the horizon in respect to the Reserve Bank? 311 00:15:36,000 --> 00:15:39,160 Speaker 3: Yeah, absolutely, I honestly think economy the way it's heading 312 00:15:39,160 --> 00:15:42,200 Speaker 3: the moments he managed to climb. So it's I think 313 00:15:42,200 --> 00:15:45,440 Speaker 3: we've got a very grim lost decade. We're already in 314 00:15:45,440 --> 00:15:47,320 Speaker 3: a lost decade, but we've got another one coming up. 315 00:15:47,960 --> 00:15:51,000 Speaker 3: And the reason for that is that this productivity thing 316 00:15:51,000 --> 00:15:54,280 Speaker 3: I just mentioned, we're not growing, you know, we're basically 317 00:15:54,320 --> 00:15:57,160 Speaker 3: running a high population growth model without the business investment 318 00:15:57,200 --> 00:16:00,320 Speaker 3: infrastructure to keep up with that. We're also wish have 319 00:16:00,400 --> 00:16:02,400 Speaker 3: the cheapest energy in the world mark I mean not 320 00:16:02,880 --> 00:16:06,240 Speaker 3: talking oil here, but talking gas and electricity. We are 321 00:16:06,280 --> 00:16:08,400 Speaker 3: the second biggest gas exporter in the world, where the 322 00:16:08,440 --> 00:16:11,840 Speaker 3: biggest coal exporter in the world. We export five times 323 00:16:11,840 --> 00:16:15,160 Speaker 3: more coal roughly than we use domestically. We export four 324 00:16:15,200 --> 00:16:20,960 Speaker 3: times more gas. Yet we've made those things. The government 325 00:16:20,960 --> 00:16:23,000 Speaker 3: through its net zero agenda and its renewables and this 326 00:16:23,080 --> 00:16:25,920 Speaker 3: sort of stuff, as basically said, no, no, we're allowed 327 00:16:25,920 --> 00:16:26,960 Speaker 3: to sell that to the rest of the world, but 328 00:16:27,000 --> 00:16:29,640 Speaker 3: we're not allowed to use it ourselves. And as a result, 329 00:16:29,680 --> 00:16:34,040 Speaker 3: we've given ourselves expensive gas and expensive electricity prices because 330 00:16:34,040 --> 00:16:37,760 Speaker 3: gas feeds the electricity price, as does coal, and we've 331 00:16:37,800 --> 00:16:40,520 Speaker 3: given away one of the major advantages this country should have, 332 00:16:40,560 --> 00:16:43,920 Speaker 3: which should be cheap energy. And as a result, manufacturing 333 00:16:44,120 --> 00:16:47,000 Speaker 3: industry is contracting at a rat of knots it already was, 334 00:16:47,040 --> 00:16:49,920 Speaker 3: but we've added expensive energy into the mix. So we've 335 00:16:49,960 --> 00:16:53,760 Speaker 3: lost our last major plastics manufacturer, our last architectural glass 336 00:16:53,760 --> 00:16:59,360 Speaker 3: maker Oceanic Glass, you know, fertilizer maker insitect Pivots downsized 337 00:16:59,400 --> 00:17:03,080 Speaker 3: and is moving on. A whole bunch of other companies, 338 00:17:03,120 --> 00:17:06,080 Speaker 3: blue Scope, Aurica, etc. Have all said that these high 339 00:17:06,119 --> 00:17:08,920 Speaker 3: engy costs are killing them. And if we keep going 340 00:17:08,920 --> 00:17:12,879 Speaker 3: down this road of basically exporting an inch of the 341 00:17:12,920 --> 00:17:14,639 Speaker 3: rest of the world on the cheap but denying ourselves 342 00:17:14,680 --> 00:17:18,080 Speaker 3: that cheap energy, manufacturing is going to continue to shrink. 343 00:17:18,080 --> 00:17:20,720 Speaker 3: We're going to have upput pressure on inflation because energy 344 00:17:20,720 --> 00:17:24,639 Speaker 3: feeds everything, and obviously cost of living crisis, and the 345 00:17:24,720 --> 00:17:27,879 Speaker 3: end result is we're going to have a less diversified economy, 346 00:17:27,880 --> 00:17:30,399 Speaker 3: in a less industrialized economy. We're going to export our 347 00:17:30,400 --> 00:17:32,399 Speaker 3: manufacturing off to China at the same time as we 348 00:17:32,440 --> 00:17:36,280 Speaker 3: sell our coal and gas to China, so that China 349 00:17:36,280 --> 00:17:39,920 Speaker 3: can burn it instead of Australians. This is ridiculous policy. 350 00:17:40,280 --> 00:17:42,400 Speaker 3: And this all comes segues on to the fact that 351 00:17:43,040 --> 00:17:45,879 Speaker 3: we're facing a commodity price bust or commodity bus because 352 00:17:46,840 --> 00:17:50,320 Speaker 3: major export iron Ore. We're about to have a massive 353 00:17:50,320 --> 00:17:54,760 Speaker 3: competitor there in Africa himand so we're going to start 354 00:17:55,440 --> 00:17:59,280 Speaker 3: a huge competitor iron Ore. You know, coal mine is 355 00:17:59,359 --> 00:18:00,960 Speaker 3: opening up over there, which is going to eat our 356 00:18:01,040 --> 00:18:03,080 Speaker 3: lunch there as well. At the same time as China 357 00:18:03,280 --> 00:18:04,800 Speaker 3: is probably going to build less stuff and it's going 358 00:18:04,800 --> 00:18:07,760 Speaker 3: to need less in on. So for me that those 359 00:18:08,080 --> 00:18:11,000 Speaker 3: sorts of issues paint us a bit of a bleak 360 00:18:11,040 --> 00:18:12,720 Speaker 3: picture for Australia. 361 00:18:12,119 --> 00:18:15,399 Speaker 1: Which is probably why you're so let's call it bullish 362 00:18:15,400 --> 00:18:18,800 Speaker 1: on the capital markets or the money markets telling us 363 00:18:18,840 --> 00:18:21,240 Speaker 1: where the interest rates are going to go. So which 364 00:18:21,280 --> 00:18:23,280 Speaker 1: is why you know you're you're placing a fair bit 365 00:18:23,320 --> 00:18:27,000 Speaker 1: of weight on their prognosis with indust rates going down 366 00:18:27,720 --> 00:18:30,040 Speaker 1: based on what your prognosis is in relation to ECONO, 367 00:18:30,160 --> 00:18:32,879 Speaker 1: because as I said earlier, generally speaking, when you're getting 368 00:18:32,920 --> 00:18:36,399 Speaker 1: industry reductions is because you're slipping into recession, like medium 369 00:18:36,440 --> 00:18:37,160 Speaker 1: turn recession. 370 00:18:37,480 --> 00:18:38,760 Speaker 4: Stuff that's not great for us. 371 00:18:39,200 --> 00:18:44,639 Speaker 1: So how then do you think that'll all translate ultimately 372 00:18:44,960 --> 00:18:48,560 Speaker 1: into the price of dwellings because sellings still seem to 373 00:18:48,560 --> 00:18:49,240 Speaker 1: defy all this. 374 00:18:50,040 --> 00:18:50,240 Speaker 2: Yeah. 375 00:18:50,280 --> 00:18:53,560 Speaker 3: Yeah, So I'm pretty bullish on house prices for two reasons. 376 00:18:53,600 --> 00:18:57,960 Speaker 3: So obviously, you know, the AFI did a fantastic analysis 377 00:18:57,960 --> 00:19:00,359 Speaker 3: a few works back, and they basically looked at what's 378 00:19:00,400 --> 00:19:02,480 Speaker 3: happened to property prices in the last decade or so 379 00:19:02,840 --> 00:19:05,600 Speaker 3: last I think thirty years, every time we've gone to 380 00:19:05,640 --> 00:19:08,280 Speaker 3: a rate cutting cycle, and over the last I think 381 00:19:08,280 --> 00:19:10,880 Speaker 3: this century, we've basically had a double digit price rise 382 00:19:11,119 --> 00:19:14,760 Speaker 3: two years after the first rate cup. So property prices 383 00:19:14,880 --> 00:19:17,919 Speaker 3: have ended up rising about double digits and sometimes the 384 00:19:17,960 --> 00:19:20,679 Speaker 3: last time randall was twenty something percent, you know, but 385 00:19:20,880 --> 00:19:23,960 Speaker 3: it's always been about double digits. So you think, you know, 386 00:19:24,880 --> 00:19:29,520 Speaker 3: lower interest rates equals higher borrowing capacity, more demand, etc. 387 00:19:29,880 --> 00:19:33,360 Speaker 3: Should push up home prices. But then also started next year, 388 00:19:33,400 --> 00:19:36,280 Speaker 3: we've obviously got Labour's five percent deposits scheme for first 389 00:19:36,280 --> 00:19:38,600 Speaker 3: time buyers. Now, I personally think that's going to be 390 00:19:39,000 --> 00:19:42,240 Speaker 3: very inflationary to property prices. You're going to bring forward 391 00:19:42,280 --> 00:19:44,399 Speaker 3: a lot of demand. You're going to bring forward buyers 392 00:19:44,400 --> 00:19:46,760 Speaker 3: into the market who previously wouldn't have been able to buy, 393 00:19:47,560 --> 00:19:49,760 Speaker 3: and that's going to obviously put up with pressure on 394 00:19:49,880 --> 00:19:52,040 Speaker 3: home prices. And I think it's also going to be 395 00:19:52,080 --> 00:19:56,280 Speaker 3: self defeating ultimately from affordability perspective, because if you fast forward, 396 00:19:56,359 --> 00:19:59,159 Speaker 3: say five years down the track, the prices would have 397 00:19:59,200 --> 00:20:02,280 Speaker 3: just gone up lot because of these sorts of policies, 398 00:20:02,359 --> 00:20:04,480 Speaker 3: and we're going to end up in a situation whereby 399 00:20:04,960 --> 00:20:07,520 Speaker 3: we're just going to have households with carrying bigger mortgages 400 00:20:07,600 --> 00:20:10,920 Speaker 3: with less equity when they start, and higher home prices, 401 00:20:11,160 --> 00:20:14,680 Speaker 3: and ultimately it's going to have higher household debt and 402 00:20:15,040 --> 00:20:18,360 Speaker 3: a more expensive housing market. So I think the combination 403 00:20:18,480 --> 00:20:22,360 Speaker 3: of low interest lower interest rates and obviously there's stimulatory 404 00:20:22,400 --> 00:20:24,640 Speaker 3: type of policies like the five per cent deposit scheme 405 00:20:24,680 --> 00:20:26,360 Speaker 3: are just going to be red ragged to a bull 406 00:20:27,000 --> 00:20:28,200 Speaker 3: for home prices. 407 00:20:29,160 --> 00:20:31,879 Speaker 1: So well, what bothers me about that, then, Leath, is 408 00:20:31,920 --> 00:20:35,080 Speaker 1: that cost of living is going to continue going up 409 00:20:35,080 --> 00:20:38,800 Speaker 1: because particularly down there in Victoria, because we're sending all 410 00:20:38,840 --> 00:20:42,119 Speaker 1: our industries to somewhere else, and particularly you know, the 411 00:20:42,119 --> 00:20:46,439 Speaker 1: cost of electricity, which sort of drops into as an 412 00:20:46,440 --> 00:20:49,040 Speaker 1: input into just about every single thing we consume in 413 00:20:49,040 --> 00:20:51,880 Speaker 1: the country. It's not just how people just think about 414 00:20:51,920 --> 00:20:53,879 Speaker 1: it the electricity bill at home, but it's not everything 415 00:20:53,920 --> 00:20:58,199 Speaker 1: we consume, transport, everything, everything, So cost living is going 416 00:20:58,240 --> 00:21:01,200 Speaker 1: to continue going up. House prices and to continue going up. 417 00:21:01,800 --> 00:21:03,480 Speaker 1: Good thing is interest rates going to come down, but 418 00:21:03,520 --> 00:21:06,840 Speaker 1: it's going to stimulate the market. The government's five percent 419 00:21:07,640 --> 00:21:10,280 Speaker 1: deposit scheme is going to start off in sometimes issue. 420 00:21:10,280 --> 00:21:12,679 Speaker 1: That's also going to stimulate the property market. So we 421 00:21:12,760 --> 00:21:14,800 Speaker 1: have this going to have this great divide. I feel 422 00:21:15,040 --> 00:21:16,320 Speaker 1: I feel as we're going to end up having a 423 00:21:16,320 --> 00:21:18,040 Speaker 1: great divide astraight. We're going to have the people who 424 00:21:18,080 --> 00:21:20,800 Speaker 1: could afford to get into property at one end own 425 00:21:20,800 --> 00:21:22,480 Speaker 1: a joint and they're going to be all the rest 426 00:21:22,520 --> 00:21:24,719 Speaker 1: of the people down here down at the other end 427 00:21:24,760 --> 00:21:26,360 Speaker 1: without a property. Now they're going to pay in rent, 428 00:21:26,359 --> 00:21:27,880 Speaker 1: but they're going to be paying rent to people who 429 00:21:27,880 --> 00:21:30,760 Speaker 1: were expecting higher rents because they expect the same yield 430 00:21:31,160 --> 00:21:35,160 Speaker 1: on a higher price. So rents will continue to go up, 431 00:21:35,359 --> 00:21:39,320 Speaker 1: which ultimately will drive inflation. So you know, of course, 432 00:21:39,359 --> 00:21:42,399 Speaker 1: you know, services inflation is quite a big component of 433 00:21:42,440 --> 00:21:49,159 Speaker 1: the inflationary number. Do you see this as potentially causing 434 00:21:50,119 --> 00:21:52,399 Speaker 1: greater volatility. 435 00:21:51,800 --> 00:21:52,959 Speaker 4: In cash rates? 436 00:21:53,280 --> 00:21:55,240 Speaker 1: For the future because you know, like if you and 437 00:21:55,320 --> 00:21:58,800 Speaker 1: I've been around long enough, you know, before COVID or 438 00:21:58,920 --> 00:22:01,439 Speaker 1: even before GFC, interest rates used to go up in 439 00:22:01,520 --> 00:22:04,480 Speaker 1: nice five or six times twenty five base points. They'd 440 00:22:04,480 --> 00:22:06,560 Speaker 1: stay steady, then they go down five or six times, 441 00:22:06,600 --> 00:22:09,119 Speaker 1: and it'd be over a three or four year period. 442 00:22:09,480 --> 00:22:12,639 Speaker 1: And as you know, from ninety six to twenty twenty, 443 00:22:12,920 --> 00:22:17,199 Speaker 1: so the average inflation number was you know, between was 444 00:22:17,240 --> 00:22:20,080 Speaker 1: between two and three percent average I'm talking about, it 445 00:22:20,160 --> 00:22:21,280 Speaker 1: was pretty well contained. 446 00:22:21,960 --> 00:22:23,320 Speaker 4: Then we've got got a little bit out of control 447 00:22:23,359 --> 00:22:24,159 Speaker 4: after COVID. 448 00:22:23,880 --> 00:22:27,080 Speaker 1: But do you and now we see much more volatility 449 00:22:27,080 --> 00:22:29,320 Speaker 1: than we see a number rate, a whole lot of 450 00:22:29,400 --> 00:22:32,040 Speaker 1: rate reductions. COVID made a lot of sense, sort of 451 00:22:32,440 --> 00:22:34,919 Speaker 1: in hindsight, maybe not, but at the time, then a 452 00:22:34,920 --> 00:22:37,600 Speaker 1: whole lot of inst rate rises to compensate for the inflation. 453 00:22:38,200 --> 00:22:40,280 Speaker 1: Now we're going to have perhaps a number of interst 454 00:22:40,320 --> 00:22:44,080 Speaker 1: rate reductions to compensate for the dropping GDP or growth generally, 455 00:22:44,640 --> 00:22:49,760 Speaker 1: et cetera, and to reflect where inflation is. But maybe 456 00:22:49,800 --> 00:22:52,080 Speaker 1: then cost living starts to kick up again, rent starts 457 00:22:52,119 --> 00:22:54,719 Speaker 1: to go up again, et cetera. We might end up 458 00:22:54,720 --> 00:22:56,600 Speaker 1: going back up the other direction. Do you see more 459 00:22:56,800 --> 00:22:59,880 Speaker 1: more volatility in our lives relative to interest? 460 00:23:00,440 --> 00:23:03,200 Speaker 3: Yeah, absolutely, and I think you've touched on a few 461 00:23:03,200 --> 00:23:06,639 Speaker 3: good things there. So for starters, think it's going to 462 00:23:06,680 --> 00:23:09,800 Speaker 3: be structurally upward pressure on rents for a long time. 463 00:23:10,440 --> 00:23:12,520 Speaker 3: And the reason for that is obviously a lot of 464 00:23:12,600 --> 00:23:14,760 Speaker 3: vac rates at incredibly low levels. The government's going to 465 00:23:14,800 --> 00:23:17,840 Speaker 3: continue running a very high immigration policy, and we're just 466 00:23:17,840 --> 00:23:21,200 Speaker 3: not building enough homes. And the latest forecast from the 467 00:23:21,280 --> 00:23:25,639 Speaker 3: National Housing Supply and Affordability Council forecasts that we're going 468 00:23:25,680 --> 00:23:28,439 Speaker 3: to have a deficit over the next five years of 469 00:23:28,520 --> 00:23:32,600 Speaker 3: seventy nine thousand homes. So what that means is that 470 00:23:33,000 --> 00:23:35,240 Speaker 3: Shane Oliver at AMP estimates that we've already got a 471 00:23:35,320 --> 00:23:38,159 Speaker 3: housing shortage of between two hundred and three hundred thousand 472 00:23:38,160 --> 00:23:42,520 Speaker 3: somewhere between them, and the government's own Advisory Council said 473 00:23:42,560 --> 00:23:44,359 Speaker 3: that over the next five years you can add another 474 00:23:44,400 --> 00:23:47,480 Speaker 3: seventy nine thousand to that because the demand through population 475 00:23:47,600 --> 00:23:50,840 Speaker 3: growth is going to easily exceed the number of homes 476 00:23:50,840 --> 00:23:54,119 Speaker 3: that are built once you cancel o demolitions. And they 477 00:23:54,160 --> 00:23:57,480 Speaker 3: said that they forecast that the Albanese government's going to 478 00:23:57,520 --> 00:23:59,800 Speaker 3: miss it's one point two million housing target by about 479 00:23:59,840 --> 00:24:01,919 Speaker 3: two undred and sixty nine thousand homes. I think it 480 00:24:01,920 --> 00:24:04,120 Speaker 3: was the two hundred and sixty five, so about twenty 481 00:24:04,160 --> 00:24:06,480 Speaker 3: two percent, So massive miss, and the reason for that 482 00:24:06,520 --> 00:24:10,040 Speaker 3: it's pretty obvious, Markaman. Construction costs have gone up about 483 00:24:10,040 --> 00:24:12,960 Speaker 3: forty percent since the pandemic. We've got shortages of labor. 484 00:24:14,119 --> 00:24:18,080 Speaker 3: Builders are obviously competing against government big build infrastructure projects 485 00:24:18,080 --> 00:24:21,760 Speaker 3: and all this other stuff, and we've seen record numbers 486 00:24:21,800 --> 00:24:24,239 Speaker 3: of construction firms go under. And then we've also got 487 00:24:24,240 --> 00:24:27,000 Speaker 3: structurally high interest rates than we did, say during the 488 00:24:27,440 --> 00:24:31,720 Speaker 3: twenty fifteen to twenty twenty apartment construction boom, which also 489 00:24:31,760 --> 00:24:34,040 Speaker 3: weighs on construction as well. So we're not going to 490 00:24:34,040 --> 00:24:37,280 Speaker 3: build enough homes. We're going to maintain this high population growth, 491 00:24:37,560 --> 00:24:41,720 Speaker 3: which I think is foolish, and as a result, we're 492 00:24:41,720 --> 00:24:44,639 Speaker 3: going to have an increasing undersupplied homes and that obviously 493 00:24:44,680 --> 00:24:48,240 Speaker 3: will feed into rents ultimately. Now, at the moment rents 494 00:24:48,280 --> 00:24:50,560 Speaker 3: have come have stopped rising as quickly, and I think 495 00:24:50,560 --> 00:24:54,240 Speaker 3: that's because they've hit a bit of an affordability ceiling, 496 00:24:54,720 --> 00:24:57,760 Speaker 3: whereby if you at least according to core logic or 497 00:24:57,800 --> 00:25:02,280 Speaker 3: the catality now rents that the proportion of income is 498 00:25:02,280 --> 00:25:04,560 Speaker 3: spent on rents at the end of twenty twenty fours 499 00:25:04,560 --> 00:25:06,760 Speaker 3: at all time high, so they've hit a bit of 500 00:25:06,800 --> 00:25:09,879 Speaker 3: an affordability ceiling which limits their increase, and households are 501 00:25:09,920 --> 00:25:11,920 Speaker 3: starting to move into rens, is starting to move into 502 00:25:11,960 --> 00:25:14,480 Speaker 3: shared housing, staying at home for longer, that sort of 503 00:25:14,480 --> 00:25:19,240 Speaker 3: thing to try and alleviate the pressure. But ultimately we're 504 00:25:19,240 --> 00:25:22,080 Speaker 3: going to have a worsening housing shortage, which means upward 505 00:25:22,080 --> 00:25:24,399 Speaker 3: pressure on rents, and that also means upward pressure on 506 00:25:24,440 --> 00:25:28,600 Speaker 3: inflation because rents I think the second biggest single input 507 00:25:28,680 --> 00:25:34,000 Speaker 3: into the CPI. It's very significant and they're not related absolutely. 508 00:25:34,040 --> 00:25:37,720 Speaker 3: And also housing construction costs are going to be although 509 00:25:37,720 --> 00:25:41,119 Speaker 3: they've come off at the moment, if we keep pushing 510 00:25:41,200 --> 00:25:44,840 Speaker 3: up the price of energy, that's going to drive up 511 00:25:44,880 --> 00:25:47,520 Speaker 3: construction costs. We're talking about things like bricks and other 512 00:25:47,560 --> 00:25:51,240 Speaker 3: inputs into the construction cycle, like anything that's basically made here, 513 00:25:51,760 --> 00:25:53,880 Speaker 3: built here that goes into a house, like bricks, and 514 00:25:53,920 --> 00:25:56,560 Speaker 3: that sort of thing is going to become is going 515 00:25:56,600 --> 00:25:58,440 Speaker 3: to go up in price because energy is a key 516 00:25:58,440 --> 00:26:02,280 Speaker 3: input into that, and that'll also feed inflation. So and 517 00:26:02,600 --> 00:26:06,119 Speaker 3: of course, energy prices more generally, which feeds into everything. 518 00:26:06,160 --> 00:26:10,040 Speaker 3: As you said, so you know, electricity prices schedule go up. 519 00:26:10,080 --> 00:26:13,000 Speaker 3: Gas prices the East Coast of Australia is scheduled to 520 00:26:13,040 --> 00:26:16,440 Speaker 3: start important gas stupidly, even though we export nearly three 521 00:26:16,480 --> 00:26:20,200 Speaker 3: quarters of it. So Victoria has just approved an energy 522 00:26:20,240 --> 00:26:22,520 Speaker 3: input terminal. We've got one which is scheduled to open 523 00:26:22,600 --> 00:26:26,639 Speaker 3: up and port Kembler in East South Wales. Probably it 524 00:26:26,680 --> 00:26:29,080 Speaker 3: was slated for late this year or next year. But 525 00:26:29,280 --> 00:26:31,159 Speaker 3: once that comes into effect, if it is allowed to 526 00:26:31,160 --> 00:26:35,840 Speaker 3: come into effect, the East Coast gas price, which is 527 00:26:35,880 --> 00:26:38,440 Speaker 3: currently around twelve dollars a gigagel, which is ridiculously high, 528 00:26:39,040 --> 00:26:41,320 Speaker 3: could go up to twenty dollars because we're paying import 529 00:26:41,359 --> 00:26:46,119 Speaker 3: parity prices right, So if that happens, that just means 530 00:26:46,200 --> 00:26:48,840 Speaker 3: more pressure and manufacturing and higher energy cost. It also 531 00:26:48,840 --> 00:26:51,959 Speaker 3: means electricity prices will go up because gas is a 532 00:26:52,040 --> 00:26:54,919 Speaker 3: key price setter in the wholesale electricity market, and that 533 00:26:55,040 --> 00:26:58,640 Speaker 3: just means more inflation around us. So yes, I think 534 00:26:58,720 --> 00:27:01,280 Speaker 3: in the short like the next twelve months, we're going 535 00:27:01,359 --> 00:27:03,639 Speaker 3: to get rate cards, but who knows. If you go 536 00:27:03,720 --> 00:27:06,800 Speaker 3: twenty four months ahead, we could have all these cost 537 00:27:06,800 --> 00:27:09,359 Speaker 3: pressures coming through, and we could see the RBA commits 538 00:27:09,400 --> 00:27:13,159 Speaker 3: to another tightening cycle. Obviously could be wrong on that, 539 00:27:13,240 --> 00:27:16,240 Speaker 3: but there are these sort of long term structural pressures 540 00:27:16,800 --> 00:27:20,720 Speaker 3: on inflation through the housing market and through the energy market. 541 00:27:21,720 --> 00:27:25,880 Speaker 1: So so you and I take all sharp objects off 542 00:27:25,920 --> 00:27:32,720 Speaker 1: the table, but we're getting it's quite so a little 543 00:27:32,720 --> 00:27:36,800 Speaker 1: bit like giving us brain damage, you know, the volatility, 544 00:27:36,920 --> 00:27:38,720 Speaker 1: and because the one minute there was a being selling 545 00:27:38,840 --> 00:27:41,639 Speaker 1: us that things are pretty crap, you know, in a 546 00:27:41,800 --> 00:27:44,400 Speaker 1: data set, and therefore we better reduce rates. And we're 547 00:27:44,400 --> 00:27:46,400 Speaker 1: going to continue to reduce these rates to make sure 548 00:27:46,440 --> 00:27:51,800 Speaker 1: we get ourselves into a stimulatory territory. And then everyone 549 00:27:51,840 --> 00:27:53,480 Speaker 1: goes out and borrows money because they can borrow more 550 00:27:53,520 --> 00:27:55,920 Speaker 1: money now because he interest rates. The assessment process means, 551 00:27:55,920 --> 00:27:58,200 Speaker 1: you know, we assess on the current interest rate, and 552 00:27:58,280 --> 00:28:00,920 Speaker 1: then this is what happened in two thousand and two. 553 00:28:01,359 --> 00:28:02,919 Speaker 1: For those people who borrow in two thousand and one, 554 00:28:03,560 --> 00:28:05,959 Speaker 1: they were all confronted at twenty twenty. I should say, 555 00:28:05,960 --> 00:28:08,119 Speaker 1: when those people are borrowed in twenty twenty one, those 556 00:28:08,160 --> 00:28:10,119 Speaker 1: people are confronted with much higher interest rate all of 557 00:28:10,160 --> 00:28:14,400 Speaker 1: a sudden, and that puts pressure. Then on those particular individuals, 558 00:28:14,880 --> 00:28:18,320 Speaker 1: and especially if if you're borrowing ninety five percent on 559 00:28:18,760 --> 00:28:19,960 Speaker 1: their five percent of government scheme. 560 00:28:21,200 --> 00:28:23,120 Speaker 4: It just seems to me that that's all just bad 561 00:28:23,200 --> 00:28:25,680 Speaker 4: policy and I don't know how to reverse it. 562 00:28:25,880 --> 00:28:27,680 Speaker 1: What are your thoughts? I mean, did government talk to 563 00:28:27,760 --> 00:28:30,680 Speaker 1: you at macro business? Do you guys never get consulted? 564 00:28:30,960 --> 00:28:32,520 Speaker 2: Mate? They hate us. 565 00:28:32,760 --> 00:28:35,000 Speaker 3: So I'll be honest, as you know, I'm a bit 566 00:28:35,680 --> 00:28:39,600 Speaker 3: I throw a bit of shade at policy makers. As 567 00:28:39,640 --> 00:28:42,320 Speaker 3: a result, they tend not to talk to me, which 568 00:28:42,400 --> 00:28:46,200 Speaker 3: is fine, but honestly, I'll be honest. The single best 569 00:28:46,200 --> 00:28:49,120 Speaker 3: thing the federal government could do to alleviate the housing 570 00:28:49,200 --> 00:28:52,680 Speaker 3: crisis is to dramatically cut immigration. And it's there in 571 00:28:52,760 --> 00:28:55,320 Speaker 3: black and white in the National Housing Supply and Affordability 572 00:28:55,360 --> 00:28:58,240 Speaker 3: Council's report. Right, So, I mentioned that they forecast as 573 00:28:58,280 --> 00:29:02,440 Speaker 3: seventy nine thousand under supply over the next five years. 574 00:29:03,120 --> 00:29:05,600 Speaker 3: In their own sensitivity analysis, which is buried right at 575 00:29:05,600 --> 00:29:09,320 Speaker 3: the back of the report, they actually state that if 576 00:29:09,560 --> 00:29:12,920 Speaker 3: population growth is just fifteen percent less than what's forecasts, 577 00:29:12,920 --> 00:29:15,720 Speaker 3: and their forecasts are based on their Center for Populations, 578 00:29:15,720 --> 00:29:18,200 Speaker 3: which is basically it's in the budget. But if it's 579 00:29:18,280 --> 00:29:20,680 Speaker 3: just fifteen percent less. Instead of having a seventy nine 580 00:29:20,760 --> 00:29:22,960 Speaker 3: thousand shortage of homes over the next five years, we've 581 00:29:22,960 --> 00:29:27,120 Speaker 3: actually a forty thousand surplus. So that's a massive difference. 582 00:29:27,160 --> 00:29:29,560 Speaker 3: And all that tells you, Mark is that if you 583 00:29:29,600 --> 00:29:34,360 Speaker 3: want to solve the undersupply problem, merely cut immigration, right, 584 00:29:34,480 --> 00:29:37,640 Speaker 3: so reduce the population growth to a level that is 585 00:29:37,720 --> 00:29:40,600 Speaker 3: commensurate with the nation's ability to build housing infrastructure. Let's 586 00:29:40,600 --> 00:29:42,600 Speaker 3: face it, we haven't done that for twenty years. We 587 00:29:42,640 --> 00:29:45,920 Speaker 3: haven't built enough housing, no infrastructure since we started this 588 00:29:46,000 --> 00:29:49,080 Speaker 3: big Australia policy. But if we do that, you're going 589 00:29:49,160 --> 00:29:54,240 Speaker 3: to have enough housing supply. Supply will outrun demand and 590 00:29:54,400 --> 00:29:58,800 Speaker 3: we'll actually that'll push downward pressure on rents and also property. 591 00:30:00,760 --> 00:30:03,640 Speaker 3: But we have a twin crisis at the moment in 592 00:30:03,760 --> 00:30:08,120 Speaker 3: that rental affordability is, according to Catality at least is 593 00:30:08,200 --> 00:30:11,560 Speaker 3: at an all time low. An actual housing affordability before 594 00:30:11,600 --> 00:30:14,360 Speaker 3: the rate cards, a mortgage affordability, I should call it, 595 00:30:14,600 --> 00:30:16,360 Speaker 3: was at an all time low at the end of 596 00:30:16,720 --> 00:30:18,680 Speaker 3: twenty twenty four. It's obviously improved a bit now with 597 00:30:18,800 --> 00:30:21,400 Speaker 3: rate cards, but it's structurally both of them are structurally 598 00:30:21,560 --> 00:30:25,920 Speaker 3: very poor, and you actually solve both problems by cutting immigration. 599 00:30:25,960 --> 00:30:28,440 Speaker 3: I'll tell you why it's so important. It's especially important 600 00:30:28,480 --> 00:30:30,520 Speaker 3: for first home buyers because before you buy a home, 601 00:30:30,720 --> 00:30:33,400 Speaker 3: you tend to rent, and if you can cut immigration, 602 00:30:33,480 --> 00:30:36,160 Speaker 3: you reduce rents directly or rental growth directly, which then 603 00:30:36,400 --> 00:30:39,480 Speaker 3: makes it easier to save a deposit because you're not 604 00:30:39,520 --> 00:30:42,840 Speaker 3: paying so much on rent. And then not just that, 605 00:30:42,960 --> 00:30:45,480 Speaker 3: it also will limit the upward pressure on home prices. 606 00:30:45,520 --> 00:30:47,760 Speaker 3: But having low immigration, so you win twice. You pay 607 00:30:47,840 --> 00:30:49,719 Speaker 3: less rent while you save in a deposit, and then 608 00:30:49,760 --> 00:30:52,520 Speaker 3: you pay less for your home, so you're better off. 609 00:30:52,680 --> 00:30:55,800 Speaker 3: So I think you know, if we're worried about future 610 00:30:55,880 --> 00:30:59,040 Speaker 3: first home buyers and renters, the number one policy is 611 00:30:59,120 --> 00:31:00,640 Speaker 3: to loution. The federal gup we can do is pull 612 00:31:00,680 --> 00:31:03,280 Speaker 3: the immigration leaver, but unfortunately they don't seem to have 613 00:31:03,360 --> 00:31:07,600 Speaker 3: any The official projection for Australia mark is to grow 614 00:31:07,800 --> 00:31:10,280 Speaker 3: by thirteen and a half million people in the next 615 00:31:10,320 --> 00:31:12,560 Speaker 3: forty years. As a Center for Population's own projections. It 616 00:31:12,600 --> 00:31:14,959 Speaker 3: came out December twenty twenty four, and just to put 617 00:31:15,000 --> 00:31:18,840 Speaker 3: them into perspective, that is the equivalent to adding another Sydney, 618 00:31:18,960 --> 00:31:23,320 Speaker 3: another Melbourne, and another Brisbane. Wow, currently to Australia's population 619 00:31:23,400 --> 00:31:25,480 Speaker 3: in forty years, which means you need all of the 620 00:31:25,560 --> 00:31:27,600 Speaker 3: homes that are in Sydney, Melbourne, Brisbane, all of the 621 00:31:27,640 --> 00:31:30,480 Speaker 3: infrastructure that's in those three cities, all the water supplies, 622 00:31:30,520 --> 00:31:33,120 Speaker 3: the energy, everything else. You have to build that in 623 00:31:33,240 --> 00:31:36,120 Speaker 3: forty years just ensure we don't get backwards. And we 624 00:31:36,240 --> 00:31:39,560 Speaker 3: haven't built enough this century as a population has grown 625 00:31:39,640 --> 00:31:43,840 Speaker 3: by eight to a half million, So why who thinks 626 00:31:43,880 --> 00:31:45,520 Speaker 3: that we're going to build enough if we grow by 627 00:31:45,520 --> 00:31:48,080 Speaker 3: another thirteen and a half million or whatever it is 628 00:31:48,280 --> 00:31:50,000 Speaker 3: in the next forty years. 629 00:31:50,160 --> 00:31:52,360 Speaker 2: It's just impossible, but it cannot be done. 630 00:31:53,160 --> 00:31:58,640 Speaker 1: Well Leithan Nsulin. I think Jim Charmers, who listens to 631 00:31:58,720 --> 00:32:02,680 Speaker 1: our podcast Doctor Jim, listen to what this guy has 632 00:32:02,720 --> 00:32:05,800 Speaker 1: got to say, at least consider it. Jim, you're always 633 00:32:05,840 --> 00:32:07,400 Speaker 1: invited to come on the show. I know you probably 634 00:32:07,440 --> 00:32:09,480 Speaker 1: won't but because there's no election coming up, but you're 635 00:32:09,480 --> 00:32:11,400 Speaker 1: always invited to come on to the show and actually 636 00:32:12,040 --> 00:32:14,640 Speaker 1: defend your position and tell me what you think of 637 00:32:14,720 --> 00:32:17,040 Speaker 1: what Least been saying. Because to me, what you're saying 638 00:32:17,280 --> 00:32:22,000 Speaker 1: makes absolute sense, it's very logical, it's not controversial. You're 639 00:32:22,040 --> 00:32:24,440 Speaker 1: not saying stop people coming into our country. You're just saying, 640 00:32:24,440 --> 00:32:26,680 Speaker 1: reduced by fifteen percent, and we might be able to 641 00:32:26,680 --> 00:32:30,760 Speaker 1: achieve some of the affordability, housing affordability, or more importantly, 642 00:32:31,000 --> 00:32:35,680 Speaker 1: housing supply numbers that we need to produce. Thanks very much, 643 00:32:35,760 --> 00:32:38,040 Speaker 1: leth I really appreciate it. It is controversial, mate, but 644 00:32:38,120 --> 00:32:40,520 Speaker 1: that's what it's all about. You say what you think 645 00:32:40,720 --> 00:32:42,160 Speaker 1: and you're a good straight talker. 646 00:32:42,200 --> 00:32:42,360 Speaker 2: Mate. 647 00:32:42,400 --> 00:32:42,920 Speaker 4: Appreciate it. 648 00:32:43,120 --> 00:32:44,120 Speaker 2: Thanks, Mark, appreciate it.