Speaker 1: Each week we speak to Leith fan Onsolin macro business
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Speaker 1: Are you Leith Fanonsolin is on the line. Good morning,
Speaker 1: Very well mate, what about you long weekend? Doing something wonderful.
Speaker 2: Or note the weather's turned pretty miserable down here in Melbourne.
Speaker 2: Unfortunately we had an absolute fools paradise spring whereby I
Speaker 2: reckon about four weeks ago, is that's the swimming at
Speaker 2: the beach which you never do in Melbourn? Yeah, this
Speaker 2: time of year. But suddenly it's has hit us like
Speaker 2: you know, punch, punch in the nose. So unfortunately, mate,
Speaker 2: it's going to be a bit wet and a bit cold,
Speaker 2: so I'll probably just stay in doors and do some
Speaker 2: other stuff.
Speaker 1: Yeah, nothing wrong with that, now you you say that
Speaker 1: the government in return for now a couple of weeks
Speaker 1: already we should be getting policy whiplash. Why do you
Speaker 1: say that?
Speaker 2: Yeah? So this week, well, earlier this week I should say,
Speaker 2: it looked like the Albanie album was going to make
Speaker 2: some sort of sensible policy compromises in a bunch of areas.
Speaker 2: But later in the week they pretty much have done
Speaker 2: a one eighty degree turn it seems, and have fumbled
Speaker 2: the balls. So you know, the first area is gas, right,
Speaker 2: So you discussed in detail last week it appeared that
Speaker 2: labor was opened to establish an East Coast gas reservation policy,
Speaker 2: effectively emulating the excellent policy that the Coalition took to
Speaker 2: the election. Now I'll just give a very quick refresher say,
Speaker 2: in case you missed last week, the Rod Guillay government
Speaker 2: in the early twenty tens made the disastrous decision to
Speaker 2: improve l G exports out of Gladstone, Queensland without requiring
Speaker 2: gas producers to supply the domestic market first. And because
Speaker 2: this effectively made East Coast Australia the only place in
Speaker 2: the world, the only export gas exporting jurisdiction that doesn't
Speaker 2: require companies to supply their own residents first, so domestic
Speaker 2: reservation policy. And since then, you know, since they export
Speaker 2: terminals booted up about a decade ago, we've literally doubled
Speaker 2: the production of gas in these case, but we've actually
Speaker 2: supplied twenty five percent less gas the domestic market, so
Speaker 2: just bartened it offshore, right, and as a result, in
Speaker 2: these case, gas price is roughly tripled, and the Coalition
Speaker 2: promised during the election to implement an East Case reservation
Speaker 2: policy by imposing export levies and uncontracted gas, so effectively
Speaker 2: gas does not only contract, which goes into what's called
Speaker 2: the spot market, which is actually what sets the helps
Speaker 2: set the electricity price. They were going to force that
Speaker 2: gas to be supplied domestically rather than export, and they're
Speaker 2: going to do it by basically charging export levy on
Speaker 2: that gas to make it more cost prohibitive to export.
Speaker 2: So it was excellent policy, and the Coalition promised to
Speaker 2: lie with the East Case gas price to blow ten
Speaker 2: dollars gigdils. They currently it's around twelve floats. Around twelve
Speaker 2: goes up a bit whatever. But the counterfact of not
Speaker 2: doing this, look is because we've got these gas shortages,
Speaker 2: these artificial shortages, we're actually looking at importing gas in
Speaker 2: this up Wales and Victoria, potentially South Australia. So these
Speaker 2: elergist terminals, if they come online, they're going to push
Speaker 2: up the price of gas on the East Coast to
Speaker 2: possibly twenty dollars a gigadril from twelve currently because we'll
Speaker 2: be paying import parity prices so that's the effectually the
Speaker 2: price we paid the moments basedally export parity prices, which
Speaker 2: is before you liquify, which uses tons of energy and
Speaker 2: is expensive, the cost of transport and then converting it
Speaker 2: back into gas at the other end, so we'd be
Speaker 2: basically paying that extra cost. And so the Coalition promised
Speaker 2: to implement our reservation policy. Now, Labour's Resource Minister Madeline
Speaker 2: King during the election dismissed Coalition's policy as a quote
Speaker 2: thought bubble and so that basically they efectually opposed it.
Speaker 2: But last week the AFAR reported that the Albany's government
Speaker 2: was considering imposing the East Coast the reservation policy. So
Speaker 2: that basically got me pretty pretty excited. I thought, I
Speaker 2: hear it go that Labour's bending the knee and coming
Speaker 2: back to common sense. But then late this week from
Speaker 2: Minister Anthony Albanese distanced himself from the notion of reservation
Speaker 2: and despite the fact that he publicly praised Western Australia's
Speaker 2: gas reservation policy. So West Australis is a separate gas
Speaker 2: market's not linked by pipeline. They've had a reservation policy
Speaker 2: since the early two thousands. That's brought down the cost
Speaker 2: of gas and electricity in West Australia's worked excellently, so
Speaker 2: Albany said, Wa, this is a quote WA. Frankly showed
Speaker 2: good vision going forward when they put in the reservation,
Speaker 2: so you know, he said it's a good thing. But
Speaker 2: then he said that the coalition's policy had been plucked
Speaker 2: out of a cocoa pops packet and said that labor
Speaker 2: already has the power the force producers to sell the
Speaker 2: local market. Well, if you do, why it exactly, so
Speaker 2: you know, Unfortunately this is a sort of whiplash. It
Speaker 2: looked like Colish is an excellent policy. It got Lambassa
Speaker 2: during the election for political reasons. It looked like last
Speaker 2: week Lay was going to bend the knee and potentially
Speaker 2: do a similar policy now and Elbows come out attacking
Speaker 2: the coalition's policy or reservation, saying it was plucked out
Speaker 2: of the cocoa pops packet. So the upshot is that
Speaker 2: if we don't do this work, if Labour doesn't fix
Speaker 2: their stuff up from under the Rudgillard government, when they
Speaker 2: prove these projects without reservation, we're facing the very real
Speaker 2: prospect of having to import energy, which is going to
Speaker 2: send the gas price through the roof. It's going to
Speaker 2: send electricity prices high, it's going to push up inflation,
Speaker 2: it's going to lead the higher cost of living concerns,
Speaker 2: and it's obviously going to push more on manufacturing off
Speaker 2: shore because we won't be able to make stuff as
Speaker 2: nearly cheaply because energy is arguably the key input if
Speaker 2: you're a manufacturer, and if we make that energy expensive,
Speaker 2: we send a manufacturing I'm sure we get a less
Speaker 2: diversified and industrialized economy and the manufacturing end up just
Speaker 2: going to China, which is where we sell a large
Speaker 2: chunk of our colon gas anyway. So it's just crazy
Speaker 2: stuff mate.
Speaker 1: So what about superannuation whiplash again?
Speaker 2: Yeah, it does. So under Labour's proposed super reforms, they
Speaker 2: want to effectively increase the earnings tax on large super balances.
Speaker 2: That's balances over three million, and I don't personally have
Speaker 2: a problem with that necessarily provides index. But the real
Speaker 2: controversial area here is they want to change the rules.
Speaker 2: So at the moment there's a fifteen percent super tax
Speaker 2: on earnings within super funds. That's like dividends and interest payments,
Speaker 2: and if you've got a commercial property, rent, et cetera.
Speaker 2: And they want to increase that for thirty percent, which
Speaker 2: for large balances is fine. I don't really have a
Speaker 2: problem that. The problem is they want to start applying
Speaker 2: it to unrealized paper profits, which is crazy. So what
Speaker 2: that means is that if you've got a share port
Speaker 2: follower and the shareport follower arises in the year, they
Speaker 2: want to start taxing that before you've even sold it.
Speaker 2: And it's a real problem, particularly if you hold unlisted assets.
Speaker 2: So if you hold assets that are not traded on
Speaker 2: a share market, for example, you know, commercial property or whatever,
Speaker 2: how do you value that? So they need to basically
Speaker 2: get a private valuer in that's all rubbery evaluations anyway,
Speaker 2: and then you need to need to pay tax every
Speaker 2: single year on whatever. This person themes that it went
Speaker 2: up before you've actually sold it, and then if you
Speaker 2: don't agree with that, you're probably going to spend thousands
Speaker 2: of for an alternative assessment. It's just a whole bunch
Speaker 2: of complexity that we don't need. And the Prime Minster
Speaker 2: Anthony Albany suggested early in the week that Labor would
Speaker 2: negotiate the coalition instead of the Greens and raise the
Speaker 2: prospect that it would abandon its unrealized capital gains component,
Speaker 2: but instead, good old Treasure of Jim Charmers on Wednesday
Speaker 2: came out and then slammed the door on that's saying, no,
Speaker 2: I do know, Labour's going to negotiate with the Greens.
Speaker 2: We're going to keep the unrealized tax on that and
Speaker 2: we're going to basically keep the existing policy which is
Speaker 2: subject to balances of three million dollars, but it doesn't
Speaker 2: it's not indexed. That's what that means is that in
Speaker 2: say twenty five or so years, if you've got inflation
Speaker 2: at two and a half percent, that three million balance
Speaker 2: in twenty five years will be equivalent to say one
Speaker 2: and a half million in today's are you So it's
Speaker 2: going to suck more and more people into that net.
Speaker 2: So you know, for Stars, it should be indexed and
Speaker 2: they should get rid of the unrealized component. And I
Speaker 2: think if they did that, we probably have a good,
Speaker 2: good policy because the reality is the superinoagent sessions are
Speaker 2: ridiculously generous and they do cost a budget about sixty
Speaker 2: billion dollars currently, so this is very expensive that they're
Speaker 2: forecast grow to cost the budget more than the age
Speaker 2: pension in several decades, so we should really raise a
Speaker 2: bit more money out of that stuff. But it should
Speaker 2: be done properly. And the way you do it is
Speaker 2: you just simply double the tax for large balances you
Speaker 2: in the accept What we could also do is we
Speaker 2: could change the way concessions attack. So at the moment
Speaker 2: when you contribute to your super fund you get, you
Speaker 2: do it at a flat fifteen percent tax. Now there
Speaker 2: are some carb apps if you earn over two hundred
Speaker 2: and fifty k, but for most people it's fifteen percent
Speaker 2: flat tax on supercontributions. Instead of doing that, what that
Speaker 2: does that that means that if you're if you're on
Speaker 2: a higher income, you get a bigger concession. So for example,
Speaker 2: if your income's two hundred and twenty thousand, your mugin
Speaker 2: and tax trait four seven percent, but if you pay
Speaker 2: fifteen percent contribution effectily getting the tax benefit thirty percent.
Speaker 2: Whereas if at the lower end, you don't get as
Speaker 2: bigger benefit because your martyr tax rates lower. So instead
Speaker 2: of if you want to make that more more against
Speaker 2: sustainable and also fair, just follow the Henry Tax Reviews recommendation,
Speaker 2: which is basically give a fifteen percent flight production. So
Speaker 2: for any supremodation, you paid at your marginal tax rate
Speaker 2: minus fifteen percent, and that way you'd be giving a
Speaker 2: bigger benefit. Well effectively a bigger benefit to lower income earners,
Speaker 2: so then they currently get, but you wouldn't be given
Speaker 2: as bigger benefit to high in commanders. And ultimately, the
Speaker 2: superde rates system should be about relieving pressure on the
Speaker 2: age pension. And the way you do that is, instead
Speaker 2: of giving heaps of concessions of people who would never
Speaker 2: go on to the pension anyway, you should stew that to
Speaker 2: the lower end. And if you do those two things
Speaker 2: that the government would say dollings dollars in more revenue
Speaker 2: would be a fairer system, and we have more money
Speaker 2: to are cutting coome taxes and do other stuff. But
Speaker 2: get rid of this unrealized games. It's ridiculous.
Speaker 1: It's ridiculous. I had a listener say earlier, if you
Speaker 1: if you have an unrealized gain, you should pay the
Speaker 1: tax with unrealized income, which I thought was a nice
Speaker 1: way of dealing with it. Now, do we have a
Speaker 1: clown or hero? I think at the clown this week?
Speaker 2: Is that right? Yeah? Unfortunately, I'd love to do a
Speaker 2: hero but.
Speaker 1: Yeah, okay, well play the get sent me play the
Speaker 1: music first round mate Clown of the week.
Speaker 2: Yeah, as I said, mate, I'd love to do a
Speaker 2: hero and I will one day. But unfortunately we've got
Speaker 2: another clown and unfortunately it's none other than Treasure Jim Charmers.
Speaker 2: So this week we got the Q one National Accounts,
Speaker 2: so the March Courter National Accounts releasing the ABS and
Speaker 2: there was another absolute shocker, right, so we're back in
Speaker 2: there for capital a session. Economic growth once you subtract
Speaker 2: population growth, well yzero point two percent, right, So we
Speaker 2: went backwards again. This present the ninth decline in eleven quarters.
Speaker 2: So this is the longest stretch of per capita declines
Speaker 2: in modern history. It is not the deepest. It was
Speaker 2: deeper in the early nineties and the mid eighties recessions,
Speaker 2: but it's the longest we've had. So we've just been
Speaker 2: at this slow grind. So nine out of out of
Speaker 2: eleven quarters we've gone backwards. We were suffered a per
Speaker 2: cap of GDP decline in one point seven percent over
Speaker 2: that period. Also, the total economic growth in the March
Speaker 2: quarts point two percent. That's with population growth, but that
Speaker 2: was less than half of what the ABA projected in
Speaker 2: last month's Statement of Monetary Policy, they projected point four
Speaker 2: to five percent, So that's a really weak result. And
Speaker 2: you know, good old Treasurer of Jim Chalmers put lipstick
Speaker 2: on a pig. He did a meter release saying that
Speaker 2: the private sector recovery we have planned for is gradually
Speaker 2: taking hold. The Australian economy remains quote one of the
Speaker 2: strongest in the world now the laverys thing that is
Speaker 2: that is private sector recovery, public demand, so that's basically
Speaker 2: public spending is a share of GDP is basically at
Speaker 2: a highest level ever of nearly twenty nine percent, and
Speaker 2: about sixty percent of the nation's growth in the year
Speaker 2: to March was from public spending. So we've basically got
Speaker 2: an economy here where the private sector is dead, it's
Speaker 2: been propped up by high population growth, high public spending,
Speaker 2: and then treasure gym charmers are saying that we've got
Speaker 2: one of the strongest economies in the world, et cetera.
Speaker 2: So you know, it's very hard to take him seriously
Speaker 2: when per capita GDP, so everyone's slice of the equinity
Speaker 2: pie that's fallen for nine out of the past eleven quarters.
Speaker 2: And we've also experienced in a household spending has also
Speaker 2: declined for seven consecutive quarters on an annual basis, is
Speaker 2: down about two and a half percent from its peak.
Speaker 2: So households are spending less as well. And we all
Speaker 2: live in the household economy. So there's three parts of
Speaker 2: the economy. You got household, businesses and government. We care
Speaker 2: about the household sector and that sector particularly has been
Speaker 2: hit very hard, and we care about that because that's
Speaker 2: the sector that we all living. Everyone listerally, this is
Speaker 2: part of the household sector. We're not part of government,
Speaker 2: not part of business, and that checktors may think really hard.
Speaker 2: We're all coming back on spending. We've got a per
Speaker 2: capita recession. And Jim Charmer's the same of you out
Speaker 2: there with im mediately saying Australia economy remains one of
Speaker 2: the strongest in the world. Yeah, kind of ridiculous.
Speaker 1: It is, all right, mate, have a great weekend. I'll
Speaker 1: talk to you next week. Jeers Lake, thank you, Leith
Speaker 1: van Ontolin. And just to support what Leith was saying
Speaker 1: about the private sector, I found this astonishing. I really
Speaker 1: did the Don Watson Group, which look after transportation and
Speaker 1: cold stores. They've decided to shut their doors. Now, this
Speaker 1: is a highly regarded company. It's a refrigerated logistics operation,
Speaker 1: so it sends around the country frozen and cold goods.
Speaker 1: Now you would think given the distance that they would
Speaker 1: have great demand for their services. Well, it started back
Speaker 1: in nineteen forty eight. The founder, Don Watson, would service
Speaker 1: markets with a few Army surplus K series Austin's he
Speaker 1: passed away in seventy Three's son took over and they
Speaker 1: launched the refrigerated division in nineteen eighty four. And there's
Speaker 1: there's a third generation owner.
Speaker 2: Now.
Speaker 1: Well they're shutting up shop. Final collections made tomorrow and
Speaker 1: then they'll be delivered in the following days. The thing is,
Speaker 1: there's three hundred employees now, they'll be paid their entitlements.
Speaker 1: I've told but it's purely down to economic conditions, that's
Speaker 1: what they say. Now, I'm sure they didn't by accident
Speaker 1: last so long, from the original founder to the refrigerated
Speaker 1: division founded in the eighties, I'm sure all they didn't
Speaker 1: get through all that by accident. Something's going on here
Speaker 1: and leave this so right for the treasurer to say,
Speaker 1: look at me, how good. Remember we had that conversation
Speaker 1: about lived experience and then we get you know, the
Speaker 1: fluff and the spin and the statistics that are meant
Speaker 1: to look this way, not that way. This is lived experience.
Speaker 1: I hope all the people working for that company are okay.
Speaker 1: And to think that they've got a shut after being
Speaker 1: founded in nineteen forty eight delivering cold stuff in a
Speaker 1: country outsize astonishes me. Next we won't be able to
Speaker 1: make things here. Hang on,