WEBVTT - Leith Van Onselen - ‘The Treasury of Common Sense’

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<v Speaker 1>Each week we speak to Leith fan Onsolin macro business

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<v Speaker 1>dot com dot au. It's where we get our financial

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<v Speaker 1>and economic news each day. Brilliant macrobusiness dot com dot

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<v Speaker 1>Are you Leith Fanonsolin is on the line. Good morning,

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<v Speaker 1>Very well mate, what about you long weekend? Doing something wonderful.

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<v Speaker 2>Or note the weather's turned pretty miserable down here in Melbourne.

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<v Speaker 2>Unfortunately we had an absolute fools paradise spring whereby I

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<v Speaker 2>reckon about four weeks ago, is that's the swimming at

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<v Speaker 2>the beach which you never do in Melbourn? Yeah, this

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<v Speaker 2>time of year. But suddenly it's has hit us like

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<v Speaker 2>you know, punch, punch in the nose. So unfortunately, mate,

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<v Speaker 2>it's going to be a bit wet and a bit cold,

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<v Speaker 2>so I'll probably just stay in doors and do some

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<v Speaker 2>other stuff.

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<v Speaker 1>Yeah, nothing wrong with that, now you you say that

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<v Speaker 1>the government in return for now a couple of weeks

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<v Speaker 1>already we should be getting policy whiplash. Why do you

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<v Speaker 1>say that?

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<v Speaker 2>Yeah? So this week, well, earlier this week I should say,

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<v Speaker 2>it looked like the Albanie album was going to make

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<v Speaker 2>some sort of sensible policy compromises in a bunch of areas.

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<v Speaker 2>But later in the week they pretty much have done

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<v Speaker 2>a one eighty degree turn it seems, and have fumbled

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<v Speaker 2>the balls. So you know, the first area is gas, right,

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<v Speaker 2>So you discussed in detail last week it appeared that

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<v Speaker 2>labor was opened to establish an East Coast gas reservation policy,

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<v Speaker 2>effectively emulating the excellent policy that the Coalition took to

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<v Speaker 2>the election. Now I'll just give a very quick refresher say,

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<v Speaker 2>in case you missed last week, the Rod Guillay government

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<v Speaker 2>in the early twenty tens made the disastrous decision to

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<v Speaker 2>improve l G exports out of Gladstone, Queensland without requiring

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<v Speaker 2>gas producers to supply the domestic market first. And because

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<v Speaker 2>this effectively made East Coast Australia the only place in

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<v Speaker 2>the world, the only export gas exporting jurisdiction that doesn't

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<v Speaker 2>require companies to supply their own residents first, so domestic

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<v Speaker 2>reservation policy. And since then, you know, since they export

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<v Speaker 2>terminals booted up about a decade ago, we've literally doubled

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<v Speaker 2>the production of gas in these case, but we've actually

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<v Speaker 2>supplied twenty five percent less gas the domestic market, so

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<v Speaker 2>just bartened it offshore, right, and as a result, in

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<v Speaker 2>these case, gas price is roughly tripled, and the Coalition

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<v Speaker 2>promised during the election to implement an East Case reservation

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<v Speaker 2>policy by imposing export levies and uncontracted gas, so effectively

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<v Speaker 2>gas does not only contract, which goes into what's called

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<v Speaker 2>the spot market, which is actually what sets the helps

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<v Speaker 2>set the electricity price. They were going to force that

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<v Speaker 2>gas to be supplied domestically rather than export, and they're

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<v Speaker 2>going to do it by basically charging export levy on

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<v Speaker 2>that gas to make it more cost prohibitive to export.

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<v Speaker 2>So it was excellent policy, and the Coalition promised to

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<v Speaker 2>lie with the East Case gas price to blow ten

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<v Speaker 2>dollars gigdils. They currently it's around twelve floats. Around twelve

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<v Speaker 2>goes up a bit whatever. But the counterfact of not

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<v Speaker 2>doing this, look is because we've got these gas shortages,

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<v Speaker 2>these artificial shortages, we're actually looking at importing gas in

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<v Speaker 2>this up Wales and Victoria, potentially South Australia. So these

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<v Speaker 2>elergist terminals, if they come online, they're going to push

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<v Speaker 2>up the price of gas on the East Coast to

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<v Speaker 2>possibly twenty dollars a gigadril from twelve currently because we'll

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<v Speaker 2>be paying import parity prices so that's the effectually the

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<v Speaker 2>price we paid the moments basedally export parity prices, which

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<v Speaker 2>is before you liquify, which uses tons of energy and

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<v Speaker 2>is expensive, the cost of transport and then converting it

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<v Speaker 2>back into gas at the other end, so we'd be

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<v Speaker 2>basically paying that extra cost. And so the Coalition promised

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<v Speaker 2>to implement our reservation policy. Now, Labour's Resource Minister Madeline

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<v Speaker 2>King during the election dismissed Coalition's policy as a quote

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<v Speaker 2>thought bubble and so that basically they efectually opposed it.

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<v Speaker 2>But last week the AFAR reported that the Albany's government

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<v Speaker 2>was considering imposing the East Coast the reservation policy. So

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<v Speaker 2>that basically got me pretty pretty excited. I thought, I

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<v Speaker 2>hear it go that Labour's bending the knee and coming

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<v Speaker 2>back to common sense. But then late this week from

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<v Speaker 2>Minister Anthony Albanese distanced himself from the notion of reservation

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<v Speaker 2>and despite the fact that he publicly praised Western Australia's

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<v Speaker 2>gas reservation policy. So West Australis is a separate gas

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<v Speaker 2>market's not linked by pipeline. They've had a reservation policy

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<v Speaker 2>since the early two thousands. That's brought down the cost

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<v Speaker 2>of gas and electricity in West Australia's worked excellently, so

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<v Speaker 2>Albany said, Wa, this is a quote WA. Frankly showed

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<v Speaker 2>good vision going forward when they put in the reservation,

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<v Speaker 2>so you know, he said it's a good thing. But

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<v Speaker 2>then he said that the coalition's policy had been plucked

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<v Speaker 2>out of a cocoa pops packet and said that labor

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<v Speaker 2>already has the power the force producers to sell the

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<v Speaker 2>local market. Well, if you do, why it exactly, so

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<v Speaker 2>you know, Unfortunately this is a sort of whiplash. It

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<v Speaker 2>looked like Colish is an excellent policy. It got Lambassa

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<v Speaker 2>during the election for political reasons. It looked like last

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<v Speaker 2>week Lay was going to bend the knee and potentially

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<v Speaker 2>do a similar policy now and Elbows come out attacking

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<v Speaker 2>the coalition's policy or reservation, saying it was plucked out

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<v Speaker 2>of the cocoa pops packet. So the upshot is that

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<v Speaker 2>if we don't do this work, if Labour doesn't fix

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<v Speaker 2>their stuff up from under the Rudgillard government, when they

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<v Speaker 2>prove these projects without reservation, we're facing the very real

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<v Speaker 2>prospect of having to import energy, which is going to

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<v Speaker 2>send the gas price through the roof. It's going to

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<v Speaker 2>send electricity prices high, it's going to push up inflation,

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<v Speaker 2>it's going to lead the higher cost of living concerns,

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<v Speaker 2>and it's obviously going to push more on manufacturing off

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<v Speaker 2>shore because we won't be able to make stuff as

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<v Speaker 2>nearly cheaply because energy is arguably the key input if

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<v Speaker 2>you're a manufacturer, and if we make that energy expensive,

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<v Speaker 2>we send a manufacturing I'm sure we get a less

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<v Speaker 2>diversified and industrialized economy and the manufacturing end up just

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<v Speaker 2>going to China, which is where we sell a large

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<v Speaker 2>chunk of our colon gas anyway. So it's just crazy

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<v Speaker 2>stuff mate.

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<v Speaker 1>So what about superannuation whiplash again?

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<v Speaker 2>Yeah, it does. So under Labour's proposed super reforms, they

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<v Speaker 2>want to effectively increase the earnings tax on large super balances.

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<v Speaker 2>That's balances over three million, and I don't personally have

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<v Speaker 2>a problem with that necessarily provides index. But the real

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<v Speaker 2>controversial area here is they want to change the rules.

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<v Speaker 2>So at the moment there's a fifteen percent super tax

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<v Speaker 2>on earnings within super funds. That's like dividends and interest payments,

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<v Speaker 2>and if you've got a commercial property, rent, et cetera.

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<v Speaker 2>And they want to increase that for thirty percent, which

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<v Speaker 2>for large balances is fine. I don't really have a

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<v Speaker 2>problem that. The problem is they want to start applying

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<v Speaker 2>it to unrealized paper profits, which is crazy. So what

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<v Speaker 2>that means is that if you've got a share port

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<v Speaker 2>follower and the shareport follower arises in the year, they

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<v Speaker 2>want to start taxing that before you've even sold it.

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<v Speaker 2>And it's a real problem, particularly if you hold unlisted assets.

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<v Speaker 2>So if you hold assets that are not traded on

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<v Speaker 2>a share market, for example, you know, commercial property or whatever,

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<v Speaker 2>how do you value that? So they need to basically

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<v Speaker 2>get a private valuer in that's all rubbery evaluations anyway,

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<v Speaker 2>and then you need to need to pay tax every

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<v Speaker 2>single year on whatever. This person themes that it went

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<v Speaker 2>up before you've actually sold it, and then if you

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<v Speaker 2>don't agree with that, you're probably going to spend thousands

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<v Speaker 2>of for an alternative assessment. It's just a whole bunch

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<v Speaker 2>of complexity that we don't need. And the Prime Minster

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<v Speaker 2>Anthony Albany suggested early in the week that Labor would

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<v Speaker 2>negotiate the coalition instead of the Greens and raise the

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<v Speaker 2>prospect that it would abandon its unrealized capital gains component,

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<v Speaker 2>but instead, good old Treasure of Jim Charmers on Wednesday

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<v Speaker 2>came out and then slammed the door on that's saying, no,

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<v Speaker 2>I do know, Labour's going to negotiate with the Greens.

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<v Speaker 2>We're going to keep the unrealized tax on that and

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<v Speaker 2>we're going to basically keep the existing policy which is

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<v Speaker 2>subject to balances of three million dollars, but it doesn't

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<v Speaker 2>it's not indexed. That's what that means is that in

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<v Speaker 2>say twenty five or so years, if you've got inflation

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<v Speaker 2>at two and a half percent, that three million balance

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<v Speaker 2>in twenty five years will be equivalent to say one

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<v Speaker 2>and a half million in today's are you So it's

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<v Speaker 2>going to suck more and more people into that net.

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<v Speaker 2>So you know, for Stars, it should be indexed and

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<v Speaker 2>they should get rid of the unrealized component. And I

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<v Speaker 2>think if they did that, we probably have a good,

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<v Speaker 2>good policy because the reality is the superinoagent sessions are

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<v Speaker 2>ridiculously generous and they do cost a budget about sixty

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<v Speaker 2>billion dollars currently, so this is very expensive that they're

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<v Speaker 2>forecast grow to cost the budget more than the age

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<v Speaker 2>pension in several decades, so we should really raise a

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<v Speaker 2>bit more money out of that stuff. But it should

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<v Speaker 2>be done properly. And the way you do it is

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<v Speaker 2>you just simply double the tax for large balances you

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<v Speaker 2>in the accept What we could also do is we

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<v Speaker 2>could change the way concessions attack. So at the moment

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<v Speaker 2>when you contribute to your super fund you get, you

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<v Speaker 2>do it at a flat fifteen percent tax. Now there

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<v Speaker 2>are some carb apps if you earn over two hundred

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<v Speaker 2>and fifty k, but for most people it's fifteen percent

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<v Speaker 2>flat tax on supercontributions. Instead of doing that, what that

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<v Speaker 2>does that that means that if you're if you're on

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<v Speaker 2>a higher income, you get a bigger concession. So for example,

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<v Speaker 2>if your income's two hundred and twenty thousand, your mugin

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<v Speaker 2>and tax trait four seven percent, but if you pay

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<v Speaker 2>fifteen percent contribution effectily getting the tax benefit thirty percent.

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<v Speaker 2>Whereas if at the lower end, you don't get as

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<v Speaker 2>bigger benefit because your martyr tax rates lower. So instead

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<v Speaker 2>of if you want to make that more more against

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<v Speaker 2>sustainable and also fair, just follow the Henry Tax Reviews recommendation,

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<v Speaker 2>which is basically give a fifteen percent flight production. So

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<v Speaker 2>for any supremodation, you paid at your marginal tax rate

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<v Speaker 2>minus fifteen percent, and that way you'd be giving a

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<v Speaker 2>bigger benefit. Well effectively a bigger benefit to lower income earners,

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<v Speaker 2>so then they currently get, but you wouldn't be given

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<v Speaker 2>as bigger benefit to high in commanders. And ultimately, the

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<v Speaker 2>superde rates system should be about relieving pressure on the

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<v Speaker 2>age pension. And the way you do that is, instead

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<v Speaker 2>of giving heaps of concessions of people who would never

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<v Speaker 2>go on to the pension anyway, you should stew that to

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<v Speaker 2>the lower end. And if you do those two things

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<v Speaker 2>that the government would say dollings dollars in more revenue

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<v Speaker 2>would be a fairer system, and we have more money

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<v Speaker 2>to are cutting coome taxes and do other stuff. But

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<v Speaker 2>get rid of this unrealized games. It's ridiculous.

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<v Speaker 1>It's ridiculous. I had a listener say earlier, if you

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<v Speaker 1>if you have an unrealized gain, you should pay the

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<v Speaker 1>tax with unrealized income, which I thought was a nice

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<v Speaker 1>way of dealing with it. Now, do we have a

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<v Speaker 1>clown or hero? I think at the clown this week?

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<v Speaker 2>Is that right? Yeah? Unfortunately, I'd love to do a

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<v Speaker 2>hero but.

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<v Speaker 1>Yeah, okay, well play the get sent me play the

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<v Speaker 1>music first round mate Clown of the week.

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<v Speaker 2>Yeah, as I said, mate, I'd love to do a

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<v Speaker 2>hero and I will one day. But unfortunately we've got

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<v Speaker 2>another clown and unfortunately it's none other than Treasure Jim Charmers.

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<v Speaker 2>So this week we got the Q one National Accounts,

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<v Speaker 2>so the March Courter National Accounts releasing the ABS and

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<v Speaker 2>there was another absolute shocker, right, so we're back in

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<v Speaker 2>there for capital a session. Economic growth once you subtract

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<v Speaker 2>population growth, well yzero point two percent, right, So we

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<v Speaker 2>went backwards again. This present the ninth decline in eleven quarters.

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<v Speaker 2>So this is the longest stretch of per capita declines

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<v Speaker 2>in modern history. It is not the deepest. It was

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<v Speaker 2>deeper in the early nineties and the mid eighties recessions,

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<v Speaker 2>but it's the longest we've had. So we've just been

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<v Speaker 2>at this slow grind. So nine out of out of

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<v Speaker 2>eleven quarters we've gone backwards. We were suffered a per

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<v Speaker 2>cap of GDP decline in one point seven percent over

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<v Speaker 2>that period. Also, the total economic growth in the March

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<v Speaker 2>quarts point two percent. That's with population growth, but that

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<v Speaker 2>was less than half of what the ABA projected in

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<v Speaker 2>last month's Statement of Monetary Policy, they projected point four

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<v Speaker 2>to five percent, So that's a really weak result. And

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<v Speaker 2>you know, good old Treasurer of Jim Chalmers put lipstick

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<v Speaker 2>on a pig. He did a meter release saying that

0:11:40.800 --> 0:11:43.320
<v Speaker 2>the private sector recovery we have planned for is gradually

0:11:43.320 --> 0:11:46.280
<v Speaker 2>taking hold. The Australian economy remains quote one of the

0:11:46.320 --> 0:11:50.800
<v Speaker 2>strongest in the world now the laverys thing that is

0:11:50.880 --> 0:11:54.760
<v Speaker 2>that is private sector recovery, public demand, so that's basically

0:11:54.840 --> 0:11:57.960
<v Speaker 2>public spending is a share of GDP is basically at

0:11:58.000 --> 0:12:01.959
<v Speaker 2>a highest level ever of nearly twenty nine percent, and

0:12:02.280 --> 0:12:05.120
<v Speaker 2>about sixty percent of the nation's growth in the year

0:12:05.160 --> 0:12:09.560
<v Speaker 2>to March was from public spending. So we've basically got

0:12:09.559 --> 0:12:13.120
<v Speaker 2>an economy here where the private sector is dead, it's

0:12:13.120 --> 0:12:17.160
<v Speaker 2>been propped up by high population growth, high public spending,

0:12:17.600 --> 0:12:19.440
<v Speaker 2>and then treasure gym charmers are saying that we've got

0:12:19.440 --> 0:12:22.480
<v Speaker 2>one of the strongest economies in the world, et cetera.

0:12:23.320 --> 0:12:25.560
<v Speaker 2>So you know, it's very hard to take him seriously

0:12:25.840 --> 0:12:29.320
<v Speaker 2>when per capita GDP, so everyone's slice of the equinity

0:12:29.360 --> 0:12:32.880
<v Speaker 2>pie that's fallen for nine out of the past eleven quarters.

0:12:33.280 --> 0:12:37.920
<v Speaker 2>And we've also experienced in a household spending has also

0:12:38.200 --> 0:12:42.640
<v Speaker 2>declined for seven consecutive quarters on an annual basis, is

0:12:42.679 --> 0:12:44.440
<v Speaker 2>down about two and a half percent from its peak.

0:12:44.480 --> 0:12:47.199
<v Speaker 2>So households are spending less as well. And we all

0:12:47.200 --> 0:12:49.360
<v Speaker 2>live in the household economy. So there's three parts of

0:12:49.400 --> 0:12:52.679
<v Speaker 2>the economy. You got household, businesses and government. We care

0:12:52.720 --> 0:12:55.880
<v Speaker 2>about the household sector and that sector particularly has been

0:12:56.040 --> 0:12:58.120
<v Speaker 2>hit very hard, and we care about that because that's

0:12:58.160 --> 0:13:00.000
<v Speaker 2>the sector that we all living. Everyone listerally, this is

0:13:00.160 --> 0:13:02.439
<v Speaker 2>part of the household sector. We're not part of government,

0:13:02.559 --> 0:13:05.160
<v Speaker 2>not part of business, and that checktors may think really hard.

0:13:05.200 --> 0:13:07.320
<v Speaker 2>We're all coming back on spending. We've got a per

0:13:07.360 --> 0:13:10.079
<v Speaker 2>capita recession. And Jim Charmer's the same of you out

0:13:10.120 --> 0:13:12.240
<v Speaker 2>there with im mediately saying Australia economy remains one of

0:13:12.280 --> 0:13:14.720
<v Speaker 2>the strongest in the world. Yeah, kind of ridiculous.

0:13:14.760 --> 0:13:17.199
<v Speaker 1>It is, all right, mate, have a great weekend. I'll

0:13:17.200 --> 0:13:20.480
<v Speaker 1>talk to you next week. Jeers Lake, thank you, Leith

0:13:20.559 --> 0:13:23.960
<v Speaker 1>van Ontolin. And just to support what Leith was saying

0:13:24.000 --> 0:13:28.040
<v Speaker 1>about the private sector, I found this astonishing. I really

0:13:28.040 --> 0:13:34.960
<v Speaker 1>did the Don Watson Group, which look after transportation and

0:13:35.040 --> 0:13:42.839
<v Speaker 1>cold stores. They've decided to shut their doors. Now, this

0:13:42.880 --> 0:13:48.800
<v Speaker 1>is a highly regarded company. It's a refrigerated logistics operation,

0:13:49.320 --> 0:13:53.080
<v Speaker 1>so it sends around the country frozen and cold goods.

0:13:53.080 --> 0:13:56.080
<v Speaker 1>Now you would think given the distance that they would

0:13:56.120 --> 0:14:00.240
<v Speaker 1>have great demand for their services. Well, it started back

0:14:00.280 --> 0:14:05.600
<v Speaker 1>in nineteen forty eight. The founder, Don Watson, would service

0:14:05.760 --> 0:14:11.280
<v Speaker 1>markets with a few Army surplus K series Austin's he

0:14:11.360 --> 0:14:15.559
<v Speaker 1>passed away in seventy Three's son took over and they

0:14:15.720 --> 0:14:20.520
<v Speaker 1>launched the refrigerated division in nineteen eighty four. And there's

0:14:21.240 --> 0:14:22.920
<v Speaker 1>there's a third generation owner.

0:14:22.960 --> 0:14:23.160
<v Speaker 2>Now.

0:14:24.040 --> 0:14:29.680
<v Speaker 1>Well they're shutting up shop. Final collections made tomorrow and

0:14:29.720 --> 0:14:35.560
<v Speaker 1>then they'll be delivered in the following days. The thing is,

0:14:35.680 --> 0:14:40.200
<v Speaker 1>there's three hundred employees now, they'll be paid their entitlements.

0:14:40.240 --> 0:14:47.840
<v Speaker 1>I've told but it's purely down to economic conditions, that's

0:14:47.880 --> 0:14:51.960
<v Speaker 1>what they say. Now, I'm sure they didn't by accident

0:14:52.080 --> 0:14:58.000
<v Speaker 1>last so long, from the original founder to the refrigerated

0:14:58.000 --> 0:15:00.600
<v Speaker 1>division founded in the eighties, I'm sure all they didn't

0:15:00.720 --> 0:15:05.760
<v Speaker 1>get through all that by accident. Something's going on here

0:15:05.920 --> 0:15:09.200
<v Speaker 1>and leave this so right for the treasurer to say,

0:15:09.320 --> 0:15:13.760
<v Speaker 1>look at me, how good. Remember we had that conversation

0:15:13.880 --> 0:15:16.600
<v Speaker 1>about lived experience and then we get you know, the

0:15:17.360 --> 0:15:21.280
<v Speaker 1>fluff and the spin and the statistics that are meant

0:15:21.320 --> 0:15:25.040
<v Speaker 1>to look this way, not that way. This is lived experience.

0:15:26.240 --> 0:15:30.600
<v Speaker 1>I hope all the people working for that company are okay.

0:15:30.720 --> 0:15:32.720
<v Speaker 1>And to think that they've got a shut after being

0:15:32.760 --> 0:15:36.280
<v Speaker 1>founded in nineteen forty eight delivering cold stuff in a

0:15:36.360 --> 0:15:42.400
<v Speaker 1>country outsize astonishes me. Next we won't be able to

0:15:42.400 --> 0:15:44.640
<v Speaker 1>make things here. Hang on,