Jim Chalmers, Aged Care & Unintended Consequences | Property Buzz

Speaker 1: This is a Momentum Media production.

Speaker 2: G'day. Hey, Garnfield Tarrant, Property Buzz, Friday morning, 10 a.m. in the studio, fresh. As a daisy and back in the rhythm and routine, I've been carrying this show for the last month as my co-host Liam Garman, who is the managing editor of the real estate at Momentum Media, has been on leave. I've caught him back into the office. This is his first week back after some time.

Speaker 3: I abandoned you.

Speaker 2: Abandoned.

Speaker 3: Abandoned.

Speaker 2: Abandoned me.

Speaker 3: Yeah, I did.

Speaker 2: It's been, the traffic's been great since you've been gone. Go on.

Speaker 4: I actually did say that. That's very hurtful.

Speaker 2: Okay.

Speaker 4: I don't know how quickly people realize that they skip through the video and they realize I'm not there. But you know what? I said to you just before we hit go. um i've got opinions so be careful i'm going to voice them uh you know maybe and people that watch this every week know that i've got opinions so maybe there's this whole new this whole new group of people that started watching knowing that i wasn't going to upset them maybe

Speaker 2: Well, we're not here to upset the Apple car, but we'll say it is on Property Buzz and that's the purpose of Property Buzz and why you were gone. I've had some interesting conversations. Tom Panos filled in for you for one. one installment of Property Buzz and I had a good chat with Tom and

Speaker 4: Speaking of opinions, oh, he's got opinions,

Speaker 2: yeah but

Speaker 4: yeah.

Speaker 2: they're informed opinions

Speaker 4: They're

Speaker 2: they're

Speaker 4: great opinions.

Speaker 2: very very informed like we're just like the stuff you know like the Property Buzz Instagram's got hundreds and hundreds thousands of views and stuff like that people like you know me and Tom when we get together we normally have a good old chin wag I'm probably one of the few people who actually interrogates Tom rather than him giving the views and I think he quite quite like that so we're good old yarn that was a good chat i've had some some of your colleagues i've been talking a little bit about money and finances uh why you'd be gone but while you were gone that's probably the last

Speaker 4: time Have

Speaker 2: i'm you going to

Speaker 4: had

Speaker 2: say

Speaker 4: a song?

Speaker 2: since you've been gone since you've been since you've been gone you're in charge of it but it sort of happened while you were gone a whole new media platform was launched by by you and your team called banking daily so i assume it's happens daily and it's You know, it's about banking.

Speaker 4: Well, wise.

Speaker 2: Yes.

Speaker 4: Yeah, to everything about financial services in Australia. And it's a really exciting product that we're launching off the back of just we've got such a varied interests at momentum broadly across the lending space, the investing space and smart property investment, real estate accounting, everything you name it. And banking daily was a very natural next. next step because it was it's the nexus that brings everything together and there's no better time to move into this space especially in regards to financial services with everything that's going on at the moment in the market and i know today we're recording this 72 hours or something after um the the interest rate announcements 48 hours after the government released the abs released the new cpi figures and i've got the data to interrogate a little bit more because because it seems clear to me that we're not being told the entire story. But we've got these experts from lending and mortgages through to finance, through to investing, through to accounting and tax, and we're bringing it all together and we're leveraging this knowledge to provide what is a real fountain of knowledge for people that work in the banking and financial services industry day to day, everything from the... The redundancies and the gossip that's going on to really, really, really pointed opinion. And a classic example is, you know, go through the AFR or the Telegraph in the UK or some of the mastheads in the United States and for every story that you read on, say the bond market, for example, you're getting about 20 different opinions on it, you know, and the way that people would look at these figures and the way that they would interpret it and what it means for the economy going forward. And so we're here, we're bringing our expertise and we're pulling it apart to provide people that work in financial services the news they need to know.

Speaker 2: So I went to the launch of Banking Daily. I think it was an event, a future banking summit, and there was a big awards program, Banking Innovation Awards, which I went to. And I spoke to a lot of bankers and I'm quite comfortable around bankers. Bankers do very important work. Sometimes they're often grouped. grouped with journalists is some of the most untrustworthy

Speaker 4: Yeah, yeah.

Speaker 2: people and

Speaker 4: And selling agents.

Speaker 2: selling

Speaker 4: Yeah,

Speaker 2: agents who

Speaker 4: yep.

Speaker 2: would have thought it's funny how all these uh these uh these industries are deemed to be um banking banking is vibrant let we always talk about property being um Well, my thesis, the critical of most critical infrastructure, what sustains largely the banking sector in Australia is the mortgages that underpin Australian real estate. That

Speaker 4: Without is a doubt.

Speaker 2: the case. The

Speaker 4: I mean, case in

Speaker 2: $7

Speaker 4: point.

Speaker 2: trillion of... value

Speaker 4: Yeah.

Speaker 2: inside but not now maybe six trillion but um i think a third of australians have a mortgage against their principal place of residence and a third of all australians live in rented accommodation so there's a lot of mortgages out there which underpin the housing economy the housing economy obviously being central to the banking sector the banking sector being central to the superannuation sector etc etc and how things get funded so it's a pointy end of where the rubber hits the road when it comes to economic health integrity Period was dry.

Speaker 4: And case in point with this, pretty much immediately when the budget comes out, you saw CBAs drop by over 10%, case in point, because you're disincentivizing people from investing in property. And one of the big interesting facts that came out, especially following the interest rate rises this week, because obviously we have 15-year highs in interest rate rises in interest rates. But the value of the debt since 2011 when interest rates were this high has doubled.

Speaker 2: Hmm. The value is double the national debt. Or

Speaker 4: With

Speaker 2: the real estate

Speaker 4: private

Speaker 2: debt.

Speaker 4: debt. Yeah,

Speaker 2: Okay.

Speaker 4: the mortgage debt.

Speaker 2: Mortgage debt. And by the way, Australia operates at a pretty good LVR.

Speaker 4: Yes.

Speaker 2: I think it's like 30% right? All housing.

Speaker 4: As a relative to what it was 15 years ago, people were doing it real hard.

Speaker 2: Yeah.

Speaker 4: People are doing it real hard. So, but yes, to the point earlier with the banking, I mean, the health and security of Australia's financial services.

Speaker 2: sector is

Speaker 4: pretty intertwined with real estate property

Speaker 2: There you go. You're just going to have plenty to do.

Speaker 4: plenty to So do and

Speaker 2: what's your big opinion

Speaker 4: look my

Speaker 2: for the week then for banking

Speaker 4: yeah

Speaker 2: and real

Speaker 4: so

Speaker 2: estate?

Speaker 4: i thought to myself self what better way of starting off this than with one of australia's most opinionated men giving a weekly opinion and that's me giving a weekly opinion

Speaker 2: Good.

Speaker 4: so um i tell you what actually you know i'm going to steal i'm going to steal from you your um your beef of the week i'm going to take this or you're going to do you're

Speaker 2: I'll

Speaker 4: going to do yours

Speaker 2: go on as well. Don't worry. All right. Don't worry. There's plenty of things go around.

Speaker 4: To prove that Phil and I don't game plan this before we go live, we might even have the same beef of the week.

Speaker 2: I doubt it.

Speaker 4: Okay, well then, mine's very predictable. Beef of the week. Treasurer Jim Chalmers.

Speaker 2: Yeah.

Speaker 4: Oh my goodness.

Speaker 2: They joined a

Speaker 4: I

Speaker 2: queue.

Speaker 4: know, but everyone seems to be the fault and the core and the genesis of Australia's inflation problem, everything is inflation problem except the treasurer, it seems to me. And I've heard it, we've heard it every time that the RBA has come out, increasing interest rates. that everyone's the problem.

Speaker 2: yep

Speaker 4: The first time was the business sector is so strong. The private sector is so strong. It's

Speaker 2: got

Speaker 4: so strong. That's why we've got to put brakes on. Then it was people spending too much. Where all too rich feel? All of our listeners were all too rich. We're all spending too much.

Speaker 2: heaps heaps of money

Speaker 4: Now it's the war in Iran and obviously he has been fighting the war in Iran for several months. But where this is coming out is And whether this is coming apart at the seams is basically every single person far smarter than Treasurer Chalmers himself has said, you are so wrong with this, that is so incorrect. The IMF, the head of some of the region's largest banks and auditors, even members of his own party, Premier Chris Minns, New South Wales Premier Chris Minns, and he's quite a popular person, has come out saying. we actually, my treasurer and I, you know, we actually listened to the RBA and we're looking to have a little bit of fiscal discipline. I'm not going to make comment for my federal colleagues. So there are people in his own caucus that realize that this is not necessarily the full truth. But in his 20 minute. press conference following the RBA raising interest rates, he blamed the war in Iran 10 times. Now, I'm taking this as a secondhand fact from some of the national mastheads because I didn't watch it and I don't intend on watching it. So I'm going to take that 10 figure at face value. But what I did clearly unlike Treasury and unlike his staff members is I thought to myself, well, I'm going to go to the root. How much? is this really impacting us? And they gave the figure that in CPI about a 14% increase in fuel costs. There's been about a 14% increase in fuel costs over the 12 months. But what this didn't factor in is that they have had changes to the excise tax. So they had excise tax, they got rid of it, it's come back, that has created artificial ups and downs in the CPI. But I thought, well, let's go right back to the source. So let's go to our friends in the Middle East. Brent crude. Now, I'm going to throw a bit of a fun fact out there. Phil, when do you think Brent crude was last this expensive? And obviously, Dr. Jim, being a PhD, knows everything. And of course, Australia's inflation problem is as a result of the Middle East crisis. But when do you think Brent crude oil was this expensive last?

Speaker 2: at an aggregate level or as a product of what money's worth

Speaker 4: price

Speaker 2: today okay

Speaker 4: per barrel at today's figures or actually it's the same or inflation

Speaker 2: maybe it would have been during an oil shock of the past And then one of the Gulf Wars maybe.

Speaker 4: One of them. Yes. Well, there has been a few. There

Speaker 2: Yeah.

Speaker 4: has been a few. 2022.

Speaker 2: You know, I was going to say that.

Speaker 4: Yeah,

Speaker 2: Yeah,

Speaker 4: yeah.

Speaker 2: I was going to say that because I thought post-COVID it sort of spiked.

Speaker 4: And exactly right.

Speaker 2: Yeah,

Speaker 4: So we were paying, and I mean an aggregate, we, everything's about aggregate demand now, an aggregate, we were paying more for Brent crude oil three years ago.

Speaker 2: Yeah, I remember petrol was expensive back then.

Speaker 4: It was, right.

Speaker 2: Yeah,

Speaker 4: Interesting.

Speaker 2: but that's a political hot potato.

Speaker 4: It's a bit of a political hot potato. The price of oil. well not only was more expensive than it is today in 2022 it is adjusted for inflation 45 percent cheaper than it was in 2008 not

Speaker 2: How long was it that high for? It wasn't for a sustained

Speaker 4: no

Speaker 2: period.

Speaker 4: it wasn't for a sustained period it it

Speaker 2: And why?

Speaker 4: very

Speaker 2: Why was

Speaker 4: prompted

Speaker 2: it going to

Speaker 4: oh

Speaker 2: shock?

Speaker 4: i

Speaker 2: It's because of war in... I think it was war in Ukraine helped accelerate because there was an oil shock. So there was an energy shock. Maybe

Speaker 4: Oh,

Speaker 2: that's

Speaker 4: that would be probably 2022 because

Speaker 2: yeah,

Speaker 4: we slapped the embargoes on Russia. So that would probably. have reduced the supply due to just

Speaker 2: Just

Speaker 4: musings.

Speaker 2: speculation on that, yeah.

Speaker 4: 48% cheaper risk adjusted than it was in 2008. So there are other problems going on here. Now, when you go through the CPI data, electricity costs, household electricity costs have gone up 13%. Building costs are up 5.4%. Insurance, secondary education and car maintenance, things that we as Aussies can't avoid,

Speaker 2: Yeah.

Speaker 4: can we? And we up 5.6%, 6.6% and 6.2% respectively. These are costs that we can't run away with. Now, the RBA the other week got a lot of hot water because it said, well, we don't actually, when asked, we don't model government expenditure. We are very lucky in Australia and perhaps we are in a good spot and I've always defended the RBI's decisions because one of the good things in Australia is that we do the best that we can do, don't politically meddle in what the RBI does. And that is why you do have a real run

Speaker 2: I don't

Speaker 4: overtly.

Speaker 2: know.

Speaker 4: But that's why we don't have real runaway inflation like what you do overseas where you do have political appointments driving these decisions. where you do have super high inflation rates and still low interest but the RBA has said when prompted that we don't really model for what yes

Speaker 2: I think I saw this on the television where a deputy governor or a senior person in the RBA wasn't necessarily the governor was getting grilled by a senator, I think maybe it was a Senate estimates type of situation.

Speaker 4: yeah that was a couple weeks ago Yeah.

Speaker 2: and it was pretty much like have you actually modeled what would happen to inflation if the government stopped spending as much as what it was spending and they said no we haven't modeled that and the question was why haven't you modeled that and the response was because we haven't been asked to model that and then he was like well wouldn't you think that you would just go about doing that and sort of working out if you spent less what would happen to inflation and there's then no

Speaker 4: Well, that's because it's an exogenous input. You know, you have to hold it exogenous exogenous input

Speaker 2: input

Speaker 4: because you have to hold

Speaker 2: no you got people like me who aren't that smart what does that mean

Speaker 4: have to hold it as a constant. It's something that you can't account for. Like you have to hold that a constant because with this between monetary and fiscal policy in Australia and fiscal being controlled by the government and monetary being. being controlled by the RBA, we have like a big firewall,

Speaker 2: Yeah.

Speaker 4: you know, we have a big firewall. So they have to treat that as a concert in the same way that the government should treat the RBA, their own decisions as not a constant, but outside

Speaker 2: So you don't want an

Speaker 4: of RBA arms reach.

Speaker 2: to show initiative.

Speaker 4: it's because they can't influence a democratic institution and you know as much as i

Speaker 2: Structurally, yeah, I sort of probably agree that's probably the right construct.

Speaker 4: yeah and and so when they say you know we can't do it is it then time we're going to use these big fancy words like exogenous should the treasurer not treat the war in iran as exogenous to because when our move to green energy is pushing up our electricity prices by by 13% and we have flow-on impacts of higher taxes leading to higher building costs, etc., etc., there are ways that we can bring inflation to heal and far smarter people than myself have said this, the IMF, Chris Minns, the head of probably every major bank in Australia, they've all come out saying that aggregate demand is coming because we are adding money to the market where it shouldn't building, for example. Even the unions gave a slot. slight nod to this and i don't think they intended to do it when they were attacking data centers they said all these big public infrastructure projects leading to inflation actually to the unions that is true especially when they're backed by the government person a lot of people make a lot of money doing it means that there are fewer people on the tools doing things like housing for example or providing to the trades pool but fast smart people than myself have said that yeah the government is crowding out you out not only in terms of money and in terms of the labor supply, but also in terms of borrowing. When the government comes out and says we're looking to raise several hundred million dollars and you have a bond auction, people come to that bond auction to lend the government money, that is less money that they're putting in to, say, private borrowing. So businesses can grow themselves. This is the crowding out factor feel and this is why government spending is also leading to a reduction in productivity by. The private sector.

Speaker 2: Yeah,

Speaker 4: So the long and the short, Phil, be for the week, the man, the Teflon man that takes no blame at all. Dr. Jim Chalmers,

Speaker 2: the

Speaker 4: the

Speaker 2: gym bay he's uh well they're calling him the gaslighter right

Speaker 4: gaslighter.

Speaker 2: yeah nothing to see don't worry about it oh you're crazy

Speaker 4: It's

Speaker 2: you're

Speaker 4: a war

Speaker 2: you're

Speaker 4: on Iran,

Speaker 2: crazy

Speaker 4: mate.

Speaker 2: thinking about that

Speaker 4: It's a war

Speaker 2: it's got nothing

Speaker 4: on Iran.

Speaker 2: to do with us nothing to see here um yeah well considered um and there's a lot there's a lot to that um that the issue is and and this is this dichotomy that a lot of what i would say australians for the maybe it's my awareness but i think this is a universal universal thing. For the first time I can really put my finger on it, more Australians appear to be more economically sophisticated today than what they were in other periods of time over the last, call it two decades,

Speaker 4: right? I think Australians have always been quite, well, yes,

Speaker 2: I

Speaker 4: especially

Speaker 2: think

Speaker 4: now.

Speaker 2: more so than

Speaker 4: More so

Speaker 2: ever before.

Speaker 4: now.

Speaker 2: They're more connected and

Speaker 4: Yeah.

Speaker 2: more people have a view or at least an appreciation for the machinations of economics and politics and how it all comes

Speaker 4: But

Speaker 2: together

Speaker 4: I would

Speaker 2: and

Speaker 4: say, yes,

Speaker 2: changes.

Speaker 4: yes, you are correct. But I would say Australians. I like that because we're property mad. We treat property as a sport. So I think if you were to pluck the average Australian off the street versus, let's not go to the swimmer, let's say the average Brit or the average American, I think that the average Australian would have a better understanding of financial instruments like mortgages. They would have a better understanding of how mortgages work.

Speaker 2: People are more financially literate and financially sensitive or aware these days. And I think that's a good thing, but it just means that. that you're having more participants down the dialogue and discussion around it and people have a voice, right?

Speaker 4: You

Speaker 2: You're seeing

Speaker 4: can't hide.

Speaker 2: people voting now, right? And I saw the polls coming out this week in relation to... anthony albanese as the prime minister he's polling worse than julia gillard polled

Speaker 4: Really?

Speaker 2: which was as bad as you could actually poll so you know the sharks are circling uh the sharks are circling and i think what the government the labor government are very effective at doing is that they're pretty good at quelling or stifling discontent from from backbenchers right like yeah you didn't normally see that like you had a lot more vocal backbenches in coalition governments

Speaker 4: Hmm.

Speaker 2: right they'll stand up and say something but it's very sort of hierarchical and everyone knows their space inside of the current government so they're able to sort of even if there is discontent there and rumbling so they're quite good at putting a suppressing it

Speaker 4: Mm

Speaker 2: down but

Speaker 4: -hmm.

Speaker 2: you know with all this sort of stuff going on and and i like probably because it lets me test ideas and you work out pretty quickly whether or not you know what you're thinking makes you're an idiot or you're actually onto something now my beef this has been something that's been going on for a while I'm going to put it under the wrapper of unintended consequences is my belief Mm and bear

Speaker 4: -hmm.

Speaker 2: with me for a moment. We've spoken about this at length. Every time the government makes a decision, I remember my physics from high school, every action has an equal and opposite reaction. Often the government doesn't really think about. the consequences of their decisioning and yeah let's just talk about some of these things right now yeah we don't need to go over how tax reforms has changed Property prices, they would say that was an intended consequence, but then renting everything connected with it, removing of SMSF lending, residential lending inside of self-managed super funds, unintended consequences, 30, 40% of all pre-commitments for new builds were typically inside of self-managed super funds that doesn't exist anymore, which putting pressure on builders, builders can't. make projects stack up because people don't want to buy the stuff because they're not there because they're supposed to have something therefore projects aren't happening therefore property properties aren't getting built that's an unintended consequences and there's many versions of that which were spoken about over the last period of time here's a new concept i want to raise and i don't think anyone has thought about this hit me so i'm going to be the first to talk about this You so

Speaker 4: had it you first?

Speaker 2: right now a lot of people think and feel that at this moment of time where there's all this change going on it will stabilize right like it'll bounce back to how it was it's not going to bounce back to how it was bear with me we're at a structural moment of change in australia so we have the advent of AI and the digitization and the automation of. how Australians work and the potential replacement of the type of jobs that Australians are going to have into the future.

Speaker 4: Yep.

Speaker 2: That's not going to bounce back to how it is. It's fundamentally changing industrial revolution type change, right? We've got that underway right now. This is the important point. We also have And it depends on your politics or what your view is, this structural change for how Western countries will power itself.

Speaker 4: Mm

Speaker 2: So

Speaker 4: -hmm.

Speaker 2: we have an energy change right now,

Speaker 4: Yep.

Speaker 2: philosophical energy change away from the evil boogeyman of fossil fuels into green energy. It's costing us a lot of money around that as well, right?

Speaker 4: Sure is.

Speaker 2: This is a big point, right? So structural change. It's not going to go back to how it was. That's where there's... forever and we've still got to work our way out and it might not be perfect and it's going to cost a lot of money and that's going to be inflationary right um then you also have an aging population and the 2066 intergenerational report spoke about it last friday that goes from views and opinions on that tells us that we're going to have an aging economy and aging economy means that people are going to need more money For longer inside of their self-managed super fund in order to live. Now you've got GDP figures at the moment, I think. tax as a portion of GDP, 24, 25% of the money it brings in. I

Speaker 4: Yeah,

Speaker 2: think government spending is about 26,

Speaker 4: 6.5,

Speaker 2: 27%.

Speaker 4: yeah.

Speaker 2: So there's a gap there,

Speaker 4: Yeah.

Speaker 2: right? That gap needs to be funded. That funding is done by us borrowing. Borrowing is becoming more and more expensive, right? But running in parallel with that is an aging population. And with an aging population, it means that people's money needs to last longer. that's a big deal. So it either means that the government's going to have to find more money in the future to pay for a ageing population running in parallel with the idea that jobs are going to be changing and there might not be as many jobs as what they used to be in taxpayers in Australia, right?

Speaker 4: Mm

Speaker 2: So

Speaker 4: -hmm.

Speaker 2: this is all moving around. So the idea I have considering all of that environmental circumstances and structural change, if people are living longer. We need to care for those people who are living longer and care now in this modern age and in the Western world, this is quite a common thing is that. younger children don't normally look after their older parents they they ship them off into a home or

Speaker 4: Yep.

Speaker 2: some sort of care facility we see all the NDIS advancements a lot of that is is connected with the aged care regime it costs Australia a lot of money around it so we've got to be comfortable with this idea that older Australians are probably going to live in homes nursing homes call them what they are to get into a nursing home this is this is it this is a property related story to get into it into a nursing home, it's means tested.

Speaker 4: Mm-hmm.

Speaker 2: So if you are one of those one in three Australians who own your property outright, and there's one in three Australians who today have a mortgage who will eventually be owning your home outright, when your circumstance require you to move into an aged care home, you will need somewhere between 600 to $800,000 ready to go in your hot little hand in order to pay a non-refundable deposit to go into a nursing home. That's the reality. That's just to secure the room and that goes into a fund of some sort. I think rules have changed recently. It used to get all of it back, but now they take

Speaker 4: Yep.

Speaker 2: a bit and stuff. I don't want to go into that. So here's the point. If property values are decreasing. And therefore, people's homes aren't worth as much. At the point in time when they need to move into an aged care facility, their assets isn't going to be significant substantial enough to underwrite the cost of them to move into aged care. So what does that mean? It means that's going to cost the government more money in order to facilitate aged care for Australians. So the integrity, this is the point. The integrity of Australia's aged care regime is intrinsically connected with the value of Australians' real estate. If you mess with one, you've got to have problems on the other. This is probably one of the, it's a relatively new thought that I had, but this is the unintended consequences that not one person has yet spoken about. If you devalue... The home of the person who's living in it, the boomers who are probably all going to start moving to aged care homes or already are, they're not going to be able to move to aged care homes.

Speaker 4: Mm

Speaker 2: So what

Speaker 4: -hmm.

Speaker 2: happens? What happens?

Speaker 4: They become a burden on the taxpayer.

Speaker 2: The worst things are going to have the worst quality of life.

Speaker 4: Yep.

Speaker 2: And if anyone's ever been through a process of seeing their parents aging and going to this thing, it's not a nice time, right? It's pretty shit for them. It's pretty shit for everyone else, right? That means they're going to be not as happy and healthy and, you know, connected in their wellness and well-being. And that's a very, very important point. But running in parallel with that is the financial burden of that. Who's going to pay for all this stuff? The aged care providers are just going to go, well, we're only going to accept people in who have the dough to pay for it, even though their value's gone down. But everyone else who there's got to be more and more of these people around who are going to need this help,

Speaker 4: Yep.

Speaker 2: unintended consequence. This is like third, fourth order impacts of budget changes.

Speaker 4: Mm-hmm.

Speaker 2: You're stuffing the future for Australians. You're compromising the future for Australians. as a result of this, by messing with the value of their properties.

Speaker 4: Yeah.

Speaker 2: Go and speak to your mate, the treasurer, and see what he says. I'd actually like to put that to him and I hope someone does. I don't know if anyone has done it yet, but someone should specifically ask the government a question. How do you feel about, have you budgeted? Let's go, I can't remember who the senator was who was asking the ABA this question. Have you yet budgeted the impact? On the Australian economy, for the aged care regime as a result of falling property prices,

Speaker 4: Mm.

Speaker 2: I'm sure they're going to say, oh, we haven't been asked to do that.

Speaker 4: Mm I'd-hmm.

Speaker 2: like to think Treasury's done it.

Speaker 4: Mm-hmm.

Speaker 2: Has there been any modelling being taken place in and around that? I doubt it. And if there is, can we see it? What black hole are you putting the future of Australians into? in relation to debt to fund this because you're messing with the the prices of australian property of australians who are moving age care well

Speaker 4: already you've got a multi-billion dollar reduction in stamp duty revenues i

Speaker 2: i know you think i'm onto something with this this

Speaker 4: think

Speaker 2: was you know

Speaker 4: yeah 100 100

Speaker 2: this should be a

Speaker 4: yeah

Speaker 2: committee i know i know governments love committee i want to see a committee on this the crisis of age care there's a phd thesis in it

Speaker 4: Yeah,

Speaker 2: how

Speaker 4: there is.

Speaker 2: this comes back to my theory my thesis the most critical critical structure in australia is real estate this is just another another um aspect of it because it will provide that is your retirement nesting that's what means whether or not you're sitting at home in a chair somewhere eating baked beans out of a tin and you can't work and you can't do anything you can't clean yourself you can't look after yourself you can't do any stuff Or you're in an aged care facility actually having quality of life.

Speaker 4: Yeah.

Speaker 2: And I put it to anyone that wouldn't want their parents to have a better quality of life in that situation. But if the government starts with the value of prices, it's going to compromise that. Anyway, that's my beef for the week.

Speaker 4: No, I think that's very reasonable. And how many people... You know, this is a multi-year journey, right? When you're paying down your mortgage, how many, the average age of an Australian buying a home now is 39 or something. How many hundreds of thousands are not to labor the point because you and I talk about it every week, but how many of these people are going to be paying off debt? for debt's sake

Speaker 2: Yeah

Speaker 4: when the value of the home doesn't equally you know negative equity but when we talk about negative equity we also seriously undercook it you know realistically what stamp duty is three to five percent depending on the value of the home depending on where you are plus question to our listeners has anyone ever tried to sell a home without using an agent or without spending thousands of dollars on listing fees on a portal you're not going to be able to do it yourself and you're going to be paying 1.5% to 2.5% of selling fee on your way out. We talk about negative equity through this lens of my $500,000 house is now worth $490,000. I'm in $10,000 negative equity. But what about that $40,000 stamp or $30,000 stamp you paid on that way in? What about the $10,000, $20,000 selling costs on the way out? There are a lot of costs that factor in that mean there are a lot of people that are buying homes at the moment to set themselves up for success and set themselves up for financial security like when they're retiring that

Speaker 2: Yeah.

Speaker 4: are going to realize that they've burnt money for nothing.

Speaker 2: Do you want some other unintended consequences I flagged this week? Well, one's been going a little payday super.

Speaker 4: Mm.

Speaker 2: Like it's now starting to really hurt Australian businesses.

Speaker 4: Mm.

Speaker 2: You know, if people pay their super, if people pay their salaries weekly,

Speaker 4: Hmm.

Speaker 2: fortnightly, monthly, I mean, super needs to be paid straight after it rather than it happening quarterly. That's really hurting a lot of Australian business are hurting right now. And from what I hear and the vox pops I've had with business owners, that's hurting them a lot. It came in to play yesterday on the first. The removal of the credit card surcharge for

Speaker 4: Yep.

Speaker 2: payments, that is going to have so many unintended consequences. And I'll tell you one of the big ones, and again, I'd like to know whether or not the smart people down in Canberra have thought about this. A lot of Australian small businesses, SMEs, pay their tax on a credit card, on their American Express card. They do it because there's points and stuff, but a lot of them use it for cash flow funding. he can't do that no more so you know the ato is going to struggle so much more now to collect tax or allow australians to pay their tax on time because they don't have this this immediacy of of you know a good line of credit or whatever you want to call it to pay on credit cards that's going to have so many and in consequences and you've got to put more pressure on businesses as a result of this now you know in theory the idea being well why should you have to pay an additional fee for using a credit card for the convenience of using a credit card that's what they're trying to remove so some some people are exempt taxis and stuff for example but when you go and pay for your coffee what used to happen and your coffee was three bucks they they put a surcharge

Speaker 4: Yeah,

Speaker 2: on it you pay three dollars and whatever cents right yeah that's gone but that's sort of resolved i i did one of my my straw polls this morning when i was getting my coffee at a coffee shop that you would know and i've i've i've i've had a coffee with you beforehand you would know So, you know, these brothers and

Speaker 4: No,

Speaker 2: I

Speaker 4: yeah, yeah

Speaker 2: went, what are you doing about it? And he went. we just put our prices up today and he goes i've got to pay for that this gst on it this this this this is so so you're trying to curb inflation

Speaker 4: and you do something inherently inflationary so you got it's very weird it's a very weird combination so there are going to be businesses that are able to do that so businesses that are able to their ie cafes um they will be able to recoup it and it might only be like 10 15 cents and a lot of people might not even notice because if you're already getting that getting that one and a half cent surcharge versus 10, 15 cents. You might not even realize it, but there are going to be a lot of businesses out there that are very heavily dictated by recommended retail prices that are going to have to absorb it

Speaker 2: and Yeah.

Speaker 4: not be able to pass it on at all. I know people who used to own a news agency and they were explaining to me by the, used to own as they sold it, by the end of them owning it, they were spending about $2,000 a month, $2,000 a month in card fees. So they had to start passing it on. At first they were doing what they thought, you know, because the thing is business, they'll absorb it and work it

Speaker 2: Yeah.

Speaker 4: out. But when you hit $2,000 a month for a small business, how many small businesses? This is out there, genuinely, Dr. Jim, how many small businesses out there do you think have $2,000 a month floating around? And I'm talking about just hardworking Aussies, a laundromat, news agency owners, they've got an extra $2,000 a month that they can just do this. And the challenge with that business in particular is that they are governed and dictated by recommended retail prices for lottery tickets,

Speaker 2: Yep.

Speaker 4: for scratchies, they cannot, they can't pass on the cost. that's the challenge you can't pass on the cost when you go and buy a copy of the Sydney Morning Herald I've not bought that for years I'm going to get three dollars is

Speaker 2: that's more than that now yeah

Speaker 4: it you can't charge more than what's on the cover so

Speaker 2: so they used to be they used to be they put the surcharge on it for to facilitate a transaction now they need to absorb it

Speaker 4: now they have to absorb it

Speaker 2: so so some people can absorb some people can't absorb

Speaker 4: now you've got and it's almost like um during during COVID feeling You saw what was probably the world's greatest transference of money from middle class to the corporates,

Speaker 2: Mm-hmm.

Speaker 4: the closure of every small business on the high street that has to shut its doors and everyone starts buying stuff from Amazon. Who ends up shutting their doors in the end? Working class Aussie that does, that's having a crack, that's tried and who gets record share prices. And it's the exact same thing. You've got these working Aussies that are going to be. going to be really really hamstrung that are going to be um copying the hit mastercard still gets their one and a half percent amex is still going to get their three percent meanwhile the working class aussie's copying it and it just baffles me that that you know our elected officials they don't care

Speaker 2: they've never none of them ever run a business they don't know

Speaker 4: Yeah.

Speaker 2: they well maybe you know there's probably a handful of them had to try and probably failed but um yeah they just don't know and and look you know in this utopic idea going yeah why should australians have to pay more in order to facilitate the transaction go to the atm machine It costs you two bucks to get your

Speaker 4: doubt it's

Speaker 2: out.

Speaker 4: free now yeah

Speaker 2: You know, once upon a time you had to go to the bank to get your money out.

Speaker 4: yeah

Speaker 2: Someone was paying that teller to withdraw the money. So, you know, it's, yeah, I get the idea, but think about the outcome. Think about the consequences.

Speaker 4: i mean the way that i look at it if you want the if you want the uh the ease or the simplicity of the convenience thank you yeah if you want the convenience of paying with your phone which you can do now very easily it's two ticks for me like um that's where you get the one and a half percent you know and it shouldn't be down to and that's where my heart goes out to some of these some of these businesses that they overnight overnight just lost thousands of dollars

Speaker 2: no no but what's going to happen though all you're going to see now is that businesses won't take credit cards that's what's going to happen business is just going to go running some credit cards they want people to use cash anymore they want people to use digital currencies right

Speaker 4: Mm.

Speaker 2: no everyone's walking around with a debit card

Speaker 4: Yeah.

Speaker 2: you know so businesses

Speaker 4: Yeah, but

Speaker 2: you're you've got it you're going to see it more and more now in payments where they won't take a credit card so all that's doing is compromised a lot of australians live on 55 days interest free on their credit cards it's part of their part of their cash flow management strategies that's gone You know, because if someone just goes, stuff it, you know, I'm going to get, what would you rather? No, no, I'm keeping my prices the same, but you've got to pay with cash or you can't use a credit card.

Speaker 4: Mm.

Speaker 2: Oh, no, no, I want to use my credit card. I'm happy to pay the fee.

Speaker 4: Yeah.

Speaker 2: Can't do it. Can't do it. So you just, you, you, you. It's you're having a crack at small business and the convenience of doing what about people here's an idea, you know A lot of people use a credit card to pay their rent

Speaker 4: Do they?

Speaker 2: it's not a huge amount but they do so

Speaker 4: Always do direct debit,

Speaker 2: i know that but when people are going shit i can't make my i don't have the cash i don't have the cash this week i put on the credit card i know i've got this check coming i've got a bonus coming i'll sort it out it gives me 55 days 50 like whether or not this is a good thing to do i'm not saying it's not financial advice at all but um i've got 55 days to get that back but i can make sure i meet my rental repayments here's Here's an unintended consequence as a result of this. People aren't going to be paid their rent sometimes. Mr. and Mrs. Smith, you haven't paid your rent today. I can pay, but I want to pay my credit card.

Speaker 4: And you won't accept it.

Speaker 2: Well, who absorbs the fee?

Speaker 4: Yeah.

Speaker 2: You're not talking about a coffee for three bucks, four bucks.

Speaker 4: And presumably it's

Speaker 2: If

Speaker 4: a landlord,

Speaker 2: your rent's

Speaker 4: I guess.

Speaker 2: $3,000 for the month.

Speaker 4: Yeah, yeah,

Speaker 2: who's going to pay the fee like beforehand they're happy to pay the fee because of the convenience of doing the transaction a lot of people sit there and just go man i'm happy to pay 1.5 percent on the basis i can meet my rental commitments sure you know yeah it's cost me a few bucks but it's helped me out of a bind what about all those people how are they going to pay their rent so you're going to have more rental arrears potentially you know people get stuck in a hard place that's what a credit card is for to help them out but

Speaker 4: Yeah.

Speaker 2: now if someone doesn't accept the credit card or you can't actually put a fee on it to support someone in a period don't do anything about it anyway i'm just saying it's all going to come through they call me the oracle sometimes because i telegraph these things really really early they compound and they manifest and they go oh yeah and i sit there and go i spoke about this two years ago you know let's

Speaker 4: Hmm.

Speaker 2: talk about this you know and but these are the unintended consequences you know it's another running a riff on my unintended consequences of the erosion of the value of people's properties compromising age care right the value so you think about how hard it is to get into the Australian real estate market at the moment right so if a lot of people and unfortunately this is the way it is they're sitting around One of the only vehicles available to a lot of Australians is going to be able to get into the Australian real estate market. through inheritance so they're waiting for their maybe they don't go to an age age care home they your parents fall off the perch or normally what happens is that one of them goes first and normally the bloke and

Speaker 4: Yep, then the quick

Speaker 2: and

Speaker 4: succession,

Speaker 2: then and then

Speaker 4: yeah.

Speaker 2: the uh and then then then there's someone left in the family home and it's somewhere for them to to do and stuff a lot of kids are sitting around waiting you know going well you know unfortunately when when mom or dad finally sort of you know fall

Speaker 4: Mm-hmm.

Speaker 2: off the perch that house is going to get sold it's going to be split up there's going to be less money to go around as a result of this there's another unintended consequences so it's going to make housing even more unaffordable because what would have been a chance for people to attend the property market is going to be eroded you know anyway it's

Speaker 4: And in the meantime,

Speaker 2: the way it is well

Speaker 4: interest rates, people aren't able to borrow.

Speaker 2: they reckon that this inflation data may i think Well, there was pretty good consensus there'll be another interest rate rise in November, whether or not that's changed things.

Speaker 4: You have to, right?

Speaker 2: Yeah.

Speaker 4: Like, you have to. Now, you know, I'm in, let's make Governor Michelle Bullock's life easier. Let's make it easier. Let's get the spending under control, gents.

Speaker 2: but who's spending some people with mortgages that's not people

Speaker 4: no no no

Speaker 2: when there's

Speaker 4: when i say

Speaker 2: already people going there's a lot of people already crying

Speaker 4: no

Speaker 2: poor

Speaker 4: when

Speaker 2: for

Speaker 4: i say

Speaker 2: christmas

Speaker 4: gents i mean uh i mean canberra yeah yeah

Speaker 2: yeah people

Speaker 4: i'm in canberra

Speaker 2: already crying poor going this stuff like the economy well that's the idea it's going to be less people spending money on holidays i think uh new car sales have been inflationary all these electric vehicle again what you choose to um fund i.e Getting people into electric vehicles, which, you know, I've seen some research coming out on how disruptible electric vehicles can be from. The original manufacturers of those electric vehicles,

Speaker 4: yeah

Speaker 2: you want an unintended consequence,

Speaker 4: yeah

Speaker 2: hold on.

Speaker 4: some of the um what is it like the distributor the salesperson versus the manufacturer and like that's hot potato like i'm not going to name them because they're just so popular now and i don't want to be mean to our listeners but some of the newer to market chinese vehicles um man there is potato because i think in australia like the manufacturer has to you know you've got warranties and things but um with china being our far more richer a larger perhaps more forthright neighbor a lot of those big manufacturers like nah we're not going to abide by australian consumer law it's documented everywhere and then when eventually they realize they have to they drag their feet and there have been stories online in some of these new electric vehicles where people just waiting months and months and months for their new battery because it was because it's under warranty and they've only had the car for like two months

Speaker 2: Oh, it's going to be bad. I also use diesel.

Speaker 4: Mm,

Speaker 2: Diesel

Speaker 4: yeah.

Speaker 2: away. Diesel.

Speaker 4: Mate, I tell you what. the 2017-2016 Holden Commodore is going well.

Speaker 2: 2016 holding common that's all you need well yeah

Speaker 4: Going well.

Speaker 2: yeah

Speaker 4: Just check the ties every now and then.

Speaker 2: that's all you need yeah have you got a set in the back that you can do for you don't want to burn that rubber too much i guess

Speaker 4: Some

Speaker 2: there's uh food

Speaker 4: will fall, yeah.

Speaker 2: fully sick anyway cover quite a lot there today uh property buzz so i think the uh the challenge now is how to make something The challenge is how can Phil not make something into a property story?

Speaker 4: It's pretty easy. I don't think we've got a story yet that you couldn't make into a property story. And you know what? To an evaluation

Speaker 2: I've

Speaker 4: that's economic.

Speaker 2: just made it educated, isn't it?

Speaker 4: Yeah,

Speaker 2: I believe that.

Speaker 4: Liam.Garman, G-A-R-M-A-N-G-A-R, alpha, Garaman at MomentumMedia.com.au, challenge. Find a story that

Speaker 2: Give

Speaker 4: we can't

Speaker 2: me something turn I

Speaker 4: into

Speaker 2: can't turn

Speaker 4: property,

Speaker 2: into a property

Speaker 4: yeah.

Speaker 2: story. Because every story is a property story.

Speaker 4: If you look hard enough. Yeah.

Speaker 2: Well, you know, you only need to think about our evil overlords, rogue agents hacking Australian infrastructure. Hmm. That's a property story.

Speaker 4: Hey,

Speaker 2: Oh

Speaker 4: how are you going to manage that one?

Speaker 2: God, where do I start? Well, they hacked into Medicare, right? Getting records of people.

Speaker 4: Yeah.

Speaker 2: Well, they can't hack into a bank and get everyone's full details that they put together in a loan application, take it offshore, sell it to a criminal, lovely

Speaker 4: I

Speaker 2: jubbly.

Speaker 4: think it wasn't meta, didn't meta get found out for mining everyone's Apple text and uploading?

Speaker 2: yeah let's see mate unplug yourself from the internet there you go that's what i do i can't really do it because i do this for a living but uh anyway who would have thought uh thank you

Speaker 4: liam No,

Speaker 2: it's good

Speaker 4: thanks,

Speaker 2: to have

Speaker 4: Phil.

Speaker 2: you back that was good bit of a bit of a sort of property buzz that's a bounce all around the place we don't need to talk about falling markets and this that and the other but but just to conclude though just for uh to keep consistent hang on let me log into my computer I'll just read and as a consumer of information and if you tune in the property buzz the idea is that was supposed to give you a real world view on what's going on here the most important thing right now in relation to real estate whether you work in real estate or you invest in real estate or your own real estate is what happens in between your two ears and what you choose to consume will dictate and determine how you think feel and act around property and property investment in particular always favors decisive

Speaker 4: Yeah.

Speaker 2: decision making and those people who actually take action so i'm just going to read here that this is uh most of the stories that they come into my feeds that i've got around property uh today right national home values slump six straight month next one housing downturn deepens as values fall next one fifth rate hike looms as inflation jumps next one investor credit growth slumps after budget hit next one construction forecast slashed on policy shocks next one new home approvals slump 6.1 percent triple in a row next one property price forecast turn to market correction next one private credit fund freezes nine billion bucks as redemptions halted you know it goes on and on and on these are just the last couple of hours right This is the world that you live in. If you want to choose to read that stuff. fair enough you're going to be informed but make sure what you choose to consume will actually determine and dictate the decisions you make around it so there you go I'll just finish with that bit Liam good to have you back nice this is property buzz Friday morning well we're getting towards lunchtime now not as nice as what it was yesterday it's quite balmy here in Sydney but some no doubt everyone's looking down the barrel and I'm going to try and sneak away a little bit early today with the long weekend ahead of us in New South Wales. I'll be traveling next week. So I'll have some reports. I'll be on the ground out west in Western Australia. So I'll be sniffing around a bit and I'll let you know what I see, think, feel and hear. And I'll be back ready for Friday morning for next installment of Property Buzz with my colleague, co-host, the managing editor of Real Estate Momentum Media, Liam Garman. I mean, hope you enjoyed that. Have a really good long weekend. We'll see you again next time. Until then, bye-bye.

Speaker 5: The information featured in this podcast is general in nature and does not take into consideration your financial situation or individual needs and should not be relied upon. Before making any investment, insurance, tax, property or financial planning decision, you should consult a licensed professional who can advise whether your decision is appropriate for you. Guests appearing on this podcast may have a commercial relationship with the companies mentioned.