Property Experts Warning: Australian House Prices Could Fall Another 10%

00:00:00
Speaker 1: Welcome to Straight Talk, boys. This is a power panel. Louis Christopher, SQM, knows all the data. And of course, Tommy Panos, who is relentless when it comes to the property market and is a guy on the ground. He goes to auctions. He does auctions. He knows what's going on. And our little round table, because this is actually a round table. I don't know if the cameras can pick it up. This is a round table. I'm going to send this package to the treasurer. I'm going to say, we held a little round table. On what's going on in the property market here in Australia. And it's current. It's not something you held last year in July, August, whenever it was, where none of.
00:00:35
Speaker 2: Us- Jack's aside, Mark, Jack's aside, he should watch it.
00:00:38
Speaker 1: No, he should watch it.
00:00:39
Speaker 3: Right?
00:00:39
Speaker 1: He should watch it. Were you invited to the round table, Louis?
00:00:42
Speaker 3: No. No. Labor never invites me to anything.
00:00:44
Speaker 1: Were you ever invited?
00:00:45
Speaker 2: No, never, never. In fact, from what I understand, leading up to the budget, the various real estate bodies, including- the property council and the investment council, and I've got relationships with one of the chairman there, had said to me, the government is not interested in having any conversations, any socialization, that they're very clean in their position. That was leading up to that. That was the three or four months leading up to the budget.
00:01:14
Speaker 1: Wow.
00:01:15
Speaker 2: So it wasn't me. It wasn't anyone, to be honest with you, from what I understand.
00:01:19
Speaker 3: Yeah, I think that's where the government has deliberately tuned out from the industry. They're not interested in hearing the views from the industry overall.
00:01:28
Speaker 1: Why do you think that's the case?
00:01:31
Speaker 3: Well, I guess it boils down to the fact that what they've been wishing to put forward in terms of the property taxation changes has been a thing they've been wanting to do for many years now, and they've been helping them doing it. It's an ideological thing. I mean, let's recall they first raised a proposed change to negative gearing back at the 2016 election. Yep. So they've been looking to do this for quite some time.
00:01:55
Speaker 1: That was Bill Shorten.
00:01:56
Speaker 3: Yeah. Correct.
00:01:57
Speaker 1: And lost the election as a result.
00:01:58
Speaker 3: Yeah, lost the election. Then they tried it again in 2019. Lost the election. In, of course, 22, they said, no, this is off the agenda. Won the election. Yeah.
00:02:09
Speaker 1: Funny about that. Yeah. And then again in 25, he denied it.
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Speaker 3: They didn't flag. Yeah, they denied it.
00:02:17
Speaker 1: And 18 months later.
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Speaker 3: Here we are.
00:02:19
Speaker 1: Lo and behold, there we have it.
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Speaker 3: Yep.
00:02:21
Speaker 1: So you've got a massive database. I mean, you've been looking at data. How many years have you been looking at the data in the property industry?
00:02:26
Speaker 3: Since 2001. Okay.
00:02:28
Speaker 1: So you've got a massive database, right, of sales, rentals, prices by region. Maybe you can just quickly explain, Louis, just give us a bit of a framework of how you break Australia up and how you look at the data.
00:02:42
Speaker 3: So we have data from the national macro level all the way down to the street level. So we collect individual records and from that we can create aggregated statistics, which gives us a very good snapshot in terms of what any market is doing around Australia. And it is true that there's not just one market, there's a multitude of markets, but saying that too, all markets seem to be one way or the other impacted by macro events, such as changes in interest rates, such as changes in property taxation, such as changes in population growth. Right.
00:03:17
Speaker 1: So Is it fair to say then right now, if you look at, let's look at the national average, which is, you know, you aggregate everything.
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Speaker 3: Yeah.
00:03:26
Speaker 1: So where is the property cycle right now?
00:03:28
Speaker 3: Okay.
00:03:28
Speaker 1: Nationally, as an average, I'm talking.
00:03:30
Speaker 3: As an average, nationally, housing prices are down by about 7% from their peak. Right. Some areas are falling a lot more, some areas less, but most areas except for perhaps the city of Darwin and North Queensland has fallen.
00:03:46
Speaker 1: Okay, so I think it's important just to explain what peak means. Peak means the time at which the national average was at its highest, which was like mid-Feb?
00:03:55
Speaker 3: Yes, about mid-Feb.
00:03:57
Speaker 1: Is that before the interest rate rise, mid-Feb, or?
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Speaker 3: Just after the interest rate.
00:04:00
Speaker 1: Just right after.
00:04:01
Speaker 3: Right, okay.
00:04:02
Speaker 1: So the best time maybe to have sold your property if you're trying to get the absolute highest price on a sort of a statistical level would have been in sometime in February this year, 2026.
00:04:12
Speaker 3: Yes, that is correct.
00:04:14
Speaker 1: And since then, now we're in a trough now, right? We're in the trough. And from peak to trough- The.
00:04:17
Speaker 3: Trough would suggest we're at the bottom of this down.
00:04:19
Speaker 1: Okay, you're right. That's a good point.
00:04:20
Speaker 3: We're not at the bottom by any means.
00:04:22
Speaker 1: Wow. So from peak to bottom, from where we are, we're looking at, did you say a national 9%?
00:04:26
Speaker 3: No, we're down nationally about 7%.
00:04:30
Speaker 1: 7%. I remember you predicting this is maybe post-CGT changes, post the budget.
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Speaker 3: Yeah.
00:04:42
Speaker 1: And before a lot more interest rate changes, but you were predicting from peak to trough a 10% national change.
00:04:49
Speaker 3: Yeah.
00:04:50
Speaker 1: Have you changed your view on that?
00:04:53
Speaker 2: Yes.
00:04:53
Speaker 3: Our view on the trough is that it's going to be more than a 10% decline. And we think even above what's already happened, there is an 80% probability that housing prices are going to fall somewhere between another 5% to 10% over the next six months. Whoa.
00:05:10
Speaker 1: That's scary. And I'm going to come back to you, Tom, in a second because you're on the ground. So if I say to you, which metros are the most affected?
00:05:25
Speaker 3: I'll give you one area that's most affected right now, and that's the Gold Coast. Really? Yeah, absolutely.
00:05:33
Speaker 1: I thought the Gold Coast was staying strong.
00:05:34
Speaker 3: No, it's been smashed. Wow. Yeah. So Uniprice is on the Gold Coast. Yeah. have fallen by 16% from their peak. No. Oh, absolutely. There's no question about it.
00:05:46
Speaker 1: And you're tracking it. That's their stats. So that's off data.
00:05:49
Speaker 3: House prices on the Gold Coast haven't fallen as much. They're down by about 8% from the peak.
00:05:53
Speaker 1: So we're seeing the typical thing has always happened on the Gold Coast for some reason.
00:05:57
Speaker 3: It's very much happening this cycle. And the reason is, is because it's a combination of a number of factors. We have had a surge in supply recently. of new stock on the Gold Coast.
00:06:08
Speaker 1: That's true.
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Speaker 3: We've been up there recently.
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Speaker 1: Yeah, there's cranes everywhere.
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Speaker 3: Cranes everywhere. Reminds me of the 1980s, right? So that's going on.
00:06:15
Speaker 1: When the Japanese were funding building after building after building.
00:06:18
Speaker 3: Correct. And in this cycle, there's been a lot of spec building on the Gold Coast driven by private credit. Wow. Okay. So in previous cycles, we haven't seen a lot of speculative activity. And just to be clear what I mean by that, is that normally when developers get a loan from a bank, the bank demands, say, at least 90% pre-sales.
00:06:42
Speaker 1: Yeah, well, there weren't enough pre-sales to cover the costs.
00:06:44
Speaker 3: Yes, correct. But private credit demands a lot less than that in terms of pre-sales. I've actually heard of zero pre-sales of private credit and developers getting the loan. I'm not saying that's the average. I would say the average is probably 25%. So there's been a lot of speculative activity, and so... There's been a building approvals and construction surge on the Gold Coast precisely at the time when demand's fallen back due to the property taxation changes and the interest rate rises. And this is creating these big falls, particularly in the unit market on the coast.
00:07:23
Speaker 1: Any other metros outside of Brisbane that are sort of really gaping sores?
00:07:29
Speaker 3: I would suggest Sydney's Cronulla.
00:07:31
Speaker 1: Cronulla.
00:07:32
Speaker 3: Is not looking that particularly good. Once again, we've seen, if you know Cronulla well.
00:07:36
Speaker 1: Yeah, lots of new buildings.
00:07:37
Speaker 3: Lots of new buildings. Same thing's happening. Hasn't fallen by 16%. I've got it down by about 11% in terms of the unit market.
00:07:44
Speaker 1: So, a lot greater than the national average.
00:07:46
Speaker 3: Yeah, correct. And then, of course, in Sydney's northwest, we're seeing a similar thing in terms.
00:07:53
Speaker 1: Of- Where's northwest? Give me a suburb, for example.
00:07:56
Speaker 3: I'd say Box Hill.
00:07:57
Speaker 1: Box Hill, right.
00:07:57
Speaker 3: Yeah, towards Windsor. Right. Yeah. I mean, there's been a lot of activity for a very long time in those areas. And we're seeing some steeper price falls there, particularly on the freestanding estate houses. So long and short of it, areas where we've seen pockets of oversupply, we're seeing the greatest price falls.
00:08:22
Speaker 1: Tommy, you're on the ground. You're auctioning people's places, houses, apartments, all sorts of things.
00:08:28
Speaker 2: A lot less than before, but- Well, why? There's a loss of confidence in vendors that- The vendors don't have the confidence. They don't have the confidence. Well, actually, Mark, both parties don't have confidence. We're in a market of hesitancy. You've got buyers who know that there's good value, and there are some properties that have already dropped 20%. I'm sure we'll come to it. Because I think one of the things with real estate, and Lou will agree, is that there are markets within markets, right? A broad-based view is a good high-level way to look at real estate. To start.
00:09:05
Speaker 3: To start.
00:09:06
Speaker 2: But right now, the truth is there are certain marketplaces where there's an undersupply of property in the lower price point fed by the 5% deposit scheme where other buyers want to buy in the cheaper price point where you actually have not seen significant losses at that lower price point. So for many of those people, it actually has been a bit of a golden opportunity because theirs hasn't gone down that much, like a unit, say, in some parts of the inner.
00:09:30
Speaker 3: West, right?
00:09:31
Speaker 1: That's if someone already owns a property.
00:09:32
Speaker 3: Correct. Yeah.
00:09:33
Speaker 2: And they've been able to move into the next price point because that price has gone down.
00:09:39
Speaker 1: Yeah, the price point above them has come down, but their place has stayed pretty stable.
00:09:44
Speaker 2: So an example would be a unit in, say, Croydon or Summer Hill, an Art Deco unit. has probably kept its value at around $ 1 million, might have gone down from $ 1. 5 million to $ 1 million. They're looking at a house that's gone down from $ 2.
00:09:56
Speaker 3: 1 million to $ 1. 8 million.
00:09:57
Speaker 2: So, gone down 300 there. Theirs has probably gone down 50. So they're actually making 250,000 in the upgrade for some people there. But generally speaking, the higher price points have come down. Eastern suburbs, the Melbourne high price points. They've come down. I forgot the question that you actually asked me now.
00:10:17
Speaker 1: But what are you seeing on the street?
00:10:18
Speaker 2: What I'm seeing on the street is there's a hesitancy that buyers, even though buyers can see that there's value out there, that they can buy 10% less than what they could have, say, five months ago, they don't want to catch a falling knife. And the second thing I'm seeing is that even though prices have come down, affordability hasn't come down because... you know, the cost of money and getting that money, in some cases, borrowing capacity has dropped more than the actual prices. So that's also been an issue. I mean, you can have property prices dropping, but it's still not affordable, becomes less affordable. And from Vendor's point of view, they're sort of thinking to themselves, there's no point going onto the market unless I have to, because I'm not going to get my price. So we're predominantly seeing vendors that transact at the moment are being the Ds, the deaths, the divorce and the debt. Those three are the drivers where people say, I'll transact.
00:11:11
Speaker 3: But if you've got Mr.
00:11:12
Speaker 2: And Mrs. Smith who own the home in, say, Haberfield, they've had it for 15 years, they're not going to rebuy again because that's not where their life is. And they're not forced to sell. They've got enough to see through it. A lot of them are saying, I'm not going to put it on the market.
00:11:28
Speaker 3: What for?
00:11:29
Speaker 2: I'll wait and get an extra three, four, 500,000 in the next few years. So we're seeing hesitancy there and that's impacted volume. Volume, the industry that I come from, property services and the mortgage brokers and all the people connected to real estate, it's not the prices that have impacted.
00:11:45
Speaker 1: It's the number of transactions.
00:11:46
Speaker 2: It's the number of transactions. It's volume and that's fallen off the cliff.
00:11:50
Speaker 1: Okay. What's interesting is I don't want to talk so much about the policy of the capital gains tax, whether it's good or bad. I mean, we all have our own personal views and we all probably share the same view, but But I'd rather more talk about where the policy was designed to try and do, or at least what the narrative was, was that we're going to make more people, we're going to push the house price down or the price of dwellings down, so more people can now afford real estate. I'll give you one fact that comes from my business. We would ordinarily, up until mid-February, we were lending, or to the end of February, or the end of March, actually, because we had a bit of a tail, we would lend $ 3. 5 billion a month, typically.
00:12:27
Speaker 3: When was that? End of March.
00:12:28
Speaker 1: End of March. The interest rate came into the late February and then the, uh, the couple of days changes came into the May budget. So we're sort of tracking quite well. Now we'd be doing 20% less. And in the less bit, we are doing more refi than we've ever done before. So that keeps our numbers up. But in the less bit, the two parts of the marketplace that are most affected are first home buyers who are virtually nil.
00:12:57
Speaker 3: Hmm.
00:12:58
Speaker 1: And investors has dropped from 42% down around 23%. So the government policy and interest rate environment has cancelled out two really important parts, the first-time buyers and the investors.
00:13:15
Speaker 2: I think, Mark, the budget overestimated the strategy that they brought up. This was a flawed strategy. The strategy was very, very clear. What we're going to do is actually leave the incentives in for the investors and And what will happen is investors are going to move away from buying existing stock, move to the new properties because that's attractive. And then what will happen is first home buyers are going to come in and buy those things. And that has not happened. That has not eventuated. In fact, what's actually happened is what you've just said is both those parties have walked away from the market.
00:13:48
Speaker 3: They've walked away.
00:13:49
Speaker 2: Investors have walked away because investors, the way that they think is not a little bit, not dissimilar to someone buying a new car, right? They're thinking to themselves, I'm going to go buy something new. There's a profit already in there. I'm not going to buy something that's got a profit or developer. I know that existing stock normally has a better capital growth. So investors walked away from from all real estate. First home buyers have walked away for lots of reasons, but number one is they're paranoid about negative equity. Look, negative equity is not a problem when you're in your forties, right? But when you're, it's a problem for everyone, but it's less of a problem when you're a young person and you have spent four or five years.
00:14:29
Speaker 3: Working two jobs saving, right?
00:14:32
Speaker 2: And then you're being told you paid a million and You use the 5% deposit scheme, that's $ 50, 000. That means you borrowed $ 950, 000. Now your property may have gone down from $ 1 million to $ 900, 000, right?
00:14:44
Speaker 1: Well, based on what Louis said, yes.
00:14:47
Speaker 3: Correct, right? And maybe more.
00:14:49
Speaker 2: So what happens, and this is the interesting thing, it's your loan bit doesn't go down. It's your own money that goes down, right?
00:14:57
Speaker 1: The principal stays fixed, at least for the first four years.
00:15:00
Speaker 3: Correct.
00:15:00
Speaker 1: Because you don't start paying your principal down until after four years.
00:15:03
Speaker 3: Correct, right. correct.
00:15:05
Speaker 2: So Mark- So do you.
00:15:07
Speaker 1: Think that's the reason the first home buyers have dropped off? Because one of the things we're noticing is that first home buyers don't qualify anymore. Because in the qualification process, we have to assess you on the current interest rate plus 3%. So as the current interest rate keeps climbing up, as the reserve keeps increasing the interest rates, and we keep adding 3% to the new debt servicing interest rate, we're looking at people, we're assessing people on nearly 10% interest at the moment. So, and then based on the amount, so we say your income's $ 5, 000 a month after tax, let's call it. Your living expenses are $ 2, 000 a month, which means you have $ 3, 000 left. We're going to work out how much that $ 3, 000 can service and based on how much it can service is the amount we'll lend you. We still can't lend them enough because house prices haven't come down enough. It's a bit of a chase. So, Whilst every interest rate remain high and that threshold remains high that the, you know, the regulator imposes on everybody, um, whatever that exists, there's going to be less buyers because they can't afford to pay what the, uh, vendor wants. The vendor who needs to sell will have to take a lower price. Um, but the other vendors, I've only just explained, they're not going to take a lower price. They're okay. They've paid down their mortgage. You know, they, 50% of Australians are two years ahead of their schedule. So they've got plenty of fat left in their system. They don't have to sell. They're pretty healthy.
00:16:28
Speaker 2: So, Mark, this morning I had coffee at Travertino's in Abbotsford. A young guy there. He's 27 years of age. He's a PT. He's actually– his old man's involved with the Tigers. I won't need to mention his name. And he said to me– I said to him, mate, why aren't you buying now? Why aren't you buying now?
00:16:46
Speaker 1: Why aren't you or why aren't you?
00:16:48
Speaker 3: Yeah, why aren't you?
00:16:48
Speaker 2: Why aren't you buying? Here's what he said to me. I'm not buying because it's hard for me to afford to actually buy it. And I said, why is that? He goes, really simple. Me saving up for a deposit, I've been slammed with that tax on shares. I was using shares, right? I've been slammed there, right? Number one.
00:17:05
Speaker 1: Now, you need to open that up a bit. But tell me, like, what do a lot of young people do? They don't just put the money in the bank every month. They put some in the bank, but they go and buy stock.
00:17:14
Speaker 3: Correct.
00:17:14
Speaker 1: There is a shares and a share market, and there is a buy shares and a share market because the capital gains tax is pretty good, was pretty good. And then instead of paying whatever the tax rate is, they were paying only half of that.
00:17:24
Speaker 3: Correct.
00:17:25
Speaker 1: On the transaction, on the capital gain.
00:17:26
Speaker 3: Correct.
00:17:26
Speaker 1: And that's a way of fast-tracking your deposit.
00:17:29
Speaker 3: Correct.
00:17:29
Speaker 1: You could have put in the bank and earned 6% per annum or whatever the bank's 4%, whatever the bank's pay, and pay tax on that. Or you can go and buy shares, support the share market, and you might make 100%. Correct. If you're really lucky. And you only have to pay a small amount of tax on that. So that's what you're talking about. That's what this young fellow's talking about.
00:17:46
Speaker 2: And his words were, Tommy– I'm taking the risk. I'm putting my neck on the line to move ahead. So I invest there to get a deposit so I can get it faster. That's been taken away from me, right? Number two, he goes, conversations that I've had with the financial institutions as to getting into money means that it's going to be hard for me. So I think they're probably the two reasons. And I think the third reason, but is the psychological fear. Hey, I might be buying a cheaper home than six months ago. But I'm not prepared to catch a falling knife and I have no faith in the direction the country's taking. So maybe I should do nothing.
00:18:26
Speaker 1: Well, maybe I can ask Louis on this one. Does the data indicate that buyers are reticent to put their hand up in the marketplace outside of those two reasons? Because you may have seen this in previous periods that they think they can buy cheaper. In other words, I should wait because it's going to get cheaper and the places turn into shit. And there might be an opportunity, that million-dollar plot probably that we were just talking about now. It's not going to be worth $ 900, 000. I might get it for $ 850, 000. Like opportunism. Is there an opportunism thing going on?
00:18:58
Speaker 3: The data will not give the rationale as to why buyers are holding back. We can only speculate on that. And I agree with Tom's views as to why. I would add into that my view based on running my own business and knowing a number of business operators, both big and small, is that job insecurity has been increasing. Oh, wow. For people in their 20s and 30s.
00:19:22
Speaker 1: Because the job numbers, the unemployment number jumped recently.
00:19:25
Speaker 3: It did jump. Now, there was still some employment growth. I'm talking about the concern on the impact of AI on jobs. And from what I can see, graduate positions in the financial services sector.
00:19:40
Speaker 1: And the legal sector.
00:19:41
Speaker 3: Have been reducing the number of valuable positions to get into a career. And so I think there's some concern out there for existing people who've got a job. Will they hold their job in 12 months from now?
00:19:59
Speaker 1: So job stability.
00:20:01
Speaker 3: Yeah, job stability. I think there's been more concerns surrounding job stability. Then over and above that, if you look at the job ad survey. SEEK. yes, job ads recently have been reducing. Now, we don't know whether that's a defined new trend or not, but in recent periods, they have been reducing. So we'll see. There's still job growth. I don't want to over-talk it, but I'm just wondering whether for first-time buyers, whether they're also concerned.
00:20:29
Speaker 1: Are they that savvy? Do you think, and I ask you two guys because I don't know, but property buyers are that savvy? In other words, they know There's been a reduction. They might not have gone to the SEEK pages and looked at what SEEK's saying, but was it just a feeling they have?
00:20:48
Speaker 3: Look, I think housing has always been an emotional investment. And you need buyers with confidence to jump into the market. I mean, it's going to be everybody's biggest purchase, asset purchase in their lives most likely.
00:21:04
Speaker 1: And liability purchase.
00:21:05
Speaker 3: Yeah, and liability purchase. So it's a big thing to enter into. But yeah, I mean, if you're lacking confidence for a multitude of reasons, then no wonder we're seeing less buyers in the market.
00:21:16
Speaker 1: Well, let's list the confidence issues, Tommy. Let's just look at them now. So one, it would appear that we could be heading to a recession. Let's open that up a little bit. You've been around a long time doing real estate. How do people respond to that thought? There could be a recession coming.
00:21:35
Speaker 2: I've got daughters that are 22 and 20 years of age, right? And one of them asked me, Daddy, because I keep hearing, are we going to get into a recession? She actually, one of them asked me, she goes, have you ever been in a recession? And I said, I have. And she goes, what did it feel like? She goes, what's it like? And it was when I was... 20 years of age, 21, undergrad, sort of in real estate sales, open up a real estate company, 1990. And what it felt like was a quiet lockdown at the start is probably the best way.
00:22:15
Speaker 1: Like we experienced during COVID.
00:22:16
Speaker 3: Yeah. Like phones stopped ringing.
00:22:19
Speaker 2: Like we didn't have emails then or text messages.
00:22:23
Speaker 3: It was the calls. The calls stopped.
00:22:27
Speaker 2: Coming in from buyers. And people go inward. That's the other thing you notice. And people get very conservative and people are paranoid. So what they're doing is they spend nothing, right? So that's the feeling. And I remember it was 1990, 91, 92. But if I can recall, Mark, That 17.5% interest rate, it was different to now. It was a fast, short jab, I remember. And I'd have to look it up. I don't know how long.
00:22:59
Speaker 3: It stayed up.
00:23:00
Speaker 1: It lasted about 18 months.
00:23:01
Speaker 2: 18 months, was it?
00:23:03
Speaker 3: Okay.
00:23:04
Speaker 1: That was one of the longest periods of high interest rates we've ever had.
00:23:07
Speaker 2: It was Keating.
00:23:08
Speaker 1: It was Keating, yeah. It was Keating Hawk, then it was just Keating.
00:23:12
Speaker 2: So I know from economics, like, At uni, they say recession, the definition is two, three month, two quarters that have had negative growth, right? So that's the way that you, that's the official diagnosis that you're in recession.
00:23:28
Speaker 1: Plus unemployment. They should add unemployment these days, but yes.
00:23:32
Speaker 3: Correct.
00:23:34
Speaker 2: So are we like, what's your question? Are we heading into one? I can tell you if we have two rate rises, like I'd be very surprised if we have two rate rises, then you add those two quarters, I think we'll be in recession. If we have one, maybe, maybe, maybe not. Many people say we're in a recession right now, but it's not actually the definition of a recession economically based on textbooks, you know?
00:23:59
Speaker 1: Do you think, therefore, I'm going to ask you, Louis, do you think from a data point of view, you guys at SQM Research have got this stuff happening all the time, do you think the definition of a recession probably needs to be modernised and perhaps we are in a recession of some type?
00:24:12
Speaker 3: It's a good question. I mean, it's true that we've been in a per capita recession except for the last quarter.
00:24:18
Speaker 1: You better explain that out.
00:24:20
Speaker 3: Okay, so basically on a per person basis as an average, our standard of living has been falling. The output per person- Measured by? Measured by the ABS. So this all feeds through into GDP, right?
00:24:34
Speaker 1: Gross domestic product.
00:24:35
Speaker 3: Gross domestic product, but then you divide gross domestic product by the population, the number of people.
00:24:41
Speaker 1: From period to period?
00:24:42
Speaker 3: That's right.
00:24:43
Speaker 1: We'll see on a per person basis, we've got negative- Growth.
00:24:49
Speaker 3: We've had negative growth for some years.
00:24:51
Speaker 1: Yeah, a number of years.
00:24:52
Speaker 3: Yeah. And that's where you hear the stories, our productivity has been deteriorating. And that's measured by the GDP per capita. And what it really means is our living standards, on average, have been falling backwards for some time.
00:25:09
Speaker 1: As measured by those typical measurements.
00:25:12
Speaker 3: Now, the reason why this is not coming up in the headline number is in part because Because of relatively strong population growth. So total demand still increases driven by a greater increase in population. But the economic cake that we all share per person has shrunk. Right.
00:25:36
Speaker 1: And we've got more persons as well.
00:25:37
Speaker 3: And we've got more persons. Yeah. So this is a big issue.
00:25:41
Speaker 1: So if we could talk about it like this. We have a cake in the middle of the table.
00:25:44
Speaker 3: Yeah.
00:25:45
Speaker 1: And there's three of us today.
00:25:47
Speaker 3: Yeah.
00:25:48
Speaker 1: But what you're saying is the cake is a 12-inch cake.
00:25:51
Speaker 3: Yeah.
00:25:51
Speaker 1: The 12-inch across diameter. You're saying that cake now is only six inches in diameter.
00:25:56
Speaker 3: Yep.
00:25:56
Speaker 1: Not only have we got three people across the table, we've got now 12 people around the table.
00:26:00
Speaker 3: Yes. Well, I would say the cake is probably the same or has only grown a little bit. But the number of people around the cake has doubled. Doubled. So, you know.
00:26:11
Speaker 1: More people are going to come up with smaller cake, slightly smaller cake. Yeah.
00:26:14
Speaker 3: And so... That means then bottom line is our standard of living has been falling.
00:26:20
Speaker 1: And let me explain that a little bit too, if I could put in really commonplace parlance. So what you mean by that, Louis, though, is that when you say standard of living, if we measure the standard of living by what we can voluntarily have, and in this case it's having a nice piece of cake.
00:26:35
Speaker 3: Yeah.
00:26:35
Speaker 1: Because if you've got enough money, you can buy a nice piece of cake and you can send your kids to music lessons or dancing lessons or buy them a, One of those bikes that Tommy drives up in Byron Bay.
00:26:45
Speaker 3: Yeah, yeah.
00:26:46
Speaker 1: But if all of a sudden your cake, the money you take home, that's your cake.
00:26:50
Speaker 3: Yeah.
00:26:50
Speaker 1: And in this example, I'm going to get less of that. If there's now 12 people around the table, the same size cake, I'm going to get, my one-twelfth is going to be less than my one-third.
00:26:59
Speaker 3: Correct.
00:26:59
Speaker 1: That means my standard of life is that I'm not having as much cake. Basically, I'm just not having as much cake.
00:27:06
Speaker 3: And that's what's been going on.
00:27:07
Speaker 1: And that's what we call the standard of living.
00:27:09
Speaker 3: Yeah.
00:27:09
Speaker 1: Now, let me just talk about that standard of living. This is really important to me, and I know you guys agree with that. Would you agree, and I don't mean this as a leading question, but would you agree that the basic fundamental role of a government and the policies that they bring into place fundamentally should be about either maintaining our standard of living or improving our standard of living? More cake.
00:27:33
Speaker 3: More cake. Everyone wants more cake. And we expect the government to do their best to be able to enable that.
00:27:39
Speaker 1: Would you say that's at a very basic time, like Albanese and everybody else in that government who are running the show?
00:27:47
Speaker 3: Yeah.
00:27:48
Speaker 1: Guys, what we're paying you for is we don't want to get a small piece of cake.
00:27:54
Speaker 2: Mark, the cake, you could actually write a book about the cake, to be honest with you, because if you fundamentally think about the issue that we've got at the moment, you and I and Louie, And many people in our generation benefited during a period where the cake got bigger and bigger. And that was as a result of having leaders that were Keating, Hawke, Costello, Howard. These people were about growing the cake. What we've seen in recent times is let's move pieces around the cake. Let's grow bigger shares of within the cake, not make the cake bigger. And many people feel that the government is saying, we believe that the way the cake should look like is the government has the biggest slice of the cake, right? That's the fundamental issue. And people are sort of saying, we've got a problem with that. And that's why you're getting some people take off and go to other places where they're saying, hey, in this place here, they're letting us actually grow a double-decker cake, right? So this is why I think people are frustrated. And again, I want to, Mark, you know, I want to make it very clear. I have voted for Labor more than I voted for Liberal. Like you, I came from that part of Sydney where you were brought up, hey, Labor, they're the working party, right? So this is nothing. I'm not anti-Labor. I'm anti not having common sense. Like, it's clear we need the cake to get bigger. If the cake gets bigger, everyone's happy, including the new migrants that come in.
00:29:30
Speaker 1: And both you and I, you know, we're the sons of migrants. Absolutely. And that was sort of what our families built their lives on. They were pretty … you know, pretty convinced that the cake would keep getting bigger. And that's why they've come to our country.
00:29:46
Speaker 3: Yeah.
00:29:47
Speaker 1: This is a land of plenty.
00:29:48
Speaker 2: The Greeks and Italians were building the cake.
00:29:50
Speaker 3: If you look at the 60s, they were building it.
00:29:52
Speaker 1: Especially in Haberfield.
00:29:53
Speaker 3: Yeah. So, okay.
00:29:54
Speaker 1: So now we've got a narrative. So, you know, this is not a, bash up Jim Chalmers' opportunity, but Jim has to be accountable for what he says and what he does, but what he says. So recently, Jim was saying, I heard him talking somewhere or other, saying that the reason we had to have an interest rate rise more recently was because of the Middle East. Now, the Reserve Bank, of course, it was off the back of the Reserve Bank's change more recently, and the Reserve Bank, of course, said That's not what the governor said in her address after what they printed out at 2.31 p.m. on whatever the date was last week. She goes and addresses the media, and she said inflation started before that, and my role is to stop inflation. The narrative of the treasurer said, no, it's all about the Middle East. Inflation's here, yes, but it's all about the Middle East. Do you buy that? Do you guys buy that?
00:30:56
Speaker 3: It's certainly not all about the Middle East. I mean, the facts are that government spending as a proportion of GDP has been increasing. Basically, government expenditure is now running at about 28% of GDP. At the start of this century, it was running at about 15% of GDP.
00:31:15
Speaker 1: So when you say government spending, Louis, maybe you could explain what it means. What does that mean, government spending money?
00:31:21
Speaker 3: Total expenditures on welfare, on, say, infrastructure, on government's own departments.
00:31:28
Speaker 1: Public servants.
00:31:29
Speaker 3: Public servants. The whole box and dice in terms of where our taxes go.
00:31:34
Speaker 1: So maybe you can explain a little bit more. So governments take in around 24.1% of GDP in taxes.
00:31:42
Speaker 3: Yes.
00:31:42
Speaker 1: So the government's books, it's profit and loss.
00:31:46
Speaker 3: Yeah.
00:31:46
Speaker 1: It's revenue, which is tax. Maybe a few other bits and pieces, but basically tax. Money we all pay, okay? Corporations, BHP, banks, everything. That's their revenue. That's the top one. Then they have another line which says, what were the government going to spend off that money we raised? So 24.1% of GDP is currently the amount of money they're raising from taxes.
00:32:08
Speaker 3: Yeah. And they're spending a bit more than that.
00:32:10
Speaker 1: They're spending 28% or closer.
00:32:12
Speaker 3: I think it's about 27, 28%. Yeah.
00:32:14
Speaker 1: I think it's 26.9%.
00:32:16
Speaker 3: There we go.
00:32:17
Speaker 1: That's 27%. Let's settle on that. So basically what that means is like if you run your business like that, You'd be in trouble. If I were in my business like that, I'd be in lots of trouble because I'm losing money. I earned 24.1 and I spent 26.9, 27. There's a 3% gap or close enough. Yeah. Where do governments get that money from? How do they bridge that gap?
00:32:41
Speaker 3: So they're borrowing. They're running budget deficits. Right. And we're currently in a budget deficit.
00:32:45
Speaker 1: So that's what a budget deficit means.
00:32:47
Speaker 3: Yeah.
00:32:47
Speaker 1: They're spending more than they earn.
00:32:49
Speaker 3: And through doing that, that means you have to borrow.
00:32:52
Speaker 1: Yeah. So if you did that at your house, what would your family say to you?
00:33:00
Speaker 3: Okay.
00:33:01
Speaker 2: What would my family say to me?
00:33:03
Speaker 1: Dad, why are you spending all this money on trips to Bali and everything more than we're earning?
00:33:07
Speaker 3: Yeah. Yeah. I mean, look, as we all know, there's good debt and there's bad debt.
00:33:14
Speaker 2: Actually, to answer your question, I'd have different. I'd have some members of my family that would say, they don't give a stuff, keep the good times happening. I don't care where it's coming from, but I'd have some other people that are saying, daddy, do we, where's this money coming from?
00:33:28
Speaker 1: And you say, I'm going to borrow it.
00:33:29
Speaker 3: I'm going to borrow it.
00:33:30
Speaker 1: We've got a house. I'm going to keep borrowing against our house. Okay. Yeah. And I'm going to keep doing it every year for the next 20 years.
00:33:37
Speaker 3: Yeah.
00:33:37
Speaker 1: And at the end of the 20 years, um, that, that maybe the house is going to be worth a lot, but we're going to have quite a big debt and I'll probably die.
00:33:44
Speaker 3: But girls, you'll have to take over.
00:33:46
Speaker 2: I don't know what the state of affairs are going to be.
00:33:48
Speaker 3: But it's going to be over to you.
00:33:49
Speaker 1: What do you reckon they'll say then?
00:33:51
Speaker 2: Well, if they look closely at what the numbers are going to look like, they'd say stuff that keep your holiday.
00:33:56
Speaker 3: That's what I reckon.
00:33:56
Speaker 1: Don't spend.
00:33:57
Speaker 3: Don't spend. They'll say that. So, Mark, I want to say something.
00:33:59
Speaker 1: It's pretty simple, though, isn't it?
00:34:00
Speaker 3: It's pretty simple. Can I just add this? That I think we all agree, it doesn't matter whether you've got a Labour in, Liberal in.
00:34:09
Speaker 1: It's not about politics.
00:34:10
Speaker 3: Government overall is inefficient. Hmm. I think we all agree, compared to, say, the private sector.
00:34:15
Speaker 1: Yeah, totally.
00:34:16
Speaker 3: So if government spending as a proportion of GDP is increasing, that in part explains why productivity per person has been falling. Just a theory. Just a theory.
00:34:28
Speaker 2: Potentially.
00:34:29
Speaker 1: Because then people are incentivized. Yeah, that's exactly right. There's no incentive.
00:34:34
Speaker 2: I want to add this, and I Googled this before I went on AI, before I came in. I thought to myself, I want to remember, when did I first meet you? It was 2006 I walked in.
00:34:44
Speaker 3: I remember. I was unwilled. That's when I got diagnosed.
00:34:46
Speaker 2: I walked in.
00:34:46
Speaker 1: I was a wizard, yeah.
00:34:47
Speaker 3: Right?
00:34:47
Speaker 2: You know what I did? I went in and had a look at what was a deficit or surplus in 2000. I'll just give this before I walked in.
00:34:54
Speaker 3: Yep. 2006.
00:34:55
Speaker 2: We had a surplus.
00:34:57
Speaker 3: Yeah, surplus.
00:34:58
Speaker 2: Of $ 17 billion.
00:34:59
Speaker 3: Yeah.
00:35:00
Speaker 2: And I had a look at what is the forecasted surplus or deficit 2026, 2027.
00:35:04
Speaker 3: It's $ 30 billion. Then I worked out.
00:35:10
Speaker 2: What it costs to pay the money that you've borrowed, right, that it's grown.
00:35:14
Speaker 3: It's $ 80 million a day.
00:35:17
Speaker 2: So $ 80 million every day, the government, before they can pay for any services, any hospital workers.
00:35:24
Speaker 1: Anything that helps our standard of living.
00:35:26
Speaker 3: Correct.
00:35:26
Speaker 1: Anything that's going to help us live a better life.
00:35:28
Speaker 3: Correct.
00:35:29
Speaker 2: So, Mark, think about it. If this deficit keeps growing and that bill every month keeps going up, someone's got to pay.
00:35:36
Speaker 3: The invoice, and the invoice.
00:35:38
Speaker 2: is probably going to be paid by my daughters and their buddies.
00:35:42
Speaker 1: Yeah, and one other way of doing that is, well, government only earns revenue from one place, tax. So one way we could fix this is increase the taxes.
00:35:52
Speaker 3: Yeah.
00:35:53
Speaker 1: Because that is the only way out. Like if you come to me, I'm a lender, and you say to me, look, I've got a different deficit. I'm going to say, well, mate, I can't lend you any more money. You've got to go and earn some more money.
00:36:04
Speaker 3: Correct.
00:36:05
Speaker 1: And you go and earn some more money.
00:36:06
Speaker 2: Is there another option, Louis? Is there any other option apart from spending less?
00:36:11
Speaker 1: You either earn more, borrow more, or both, or, and Louis just said it, spend less. Because one of my mortgage lawyers might say to you, well, Mark, I can't put your application up because you don't earn enough money. Net. So maybe you should stop spending on Uber Eats. Stop having a bet on the footy. You know, maybe stop going out on Friday nights for a palmy and schnitzel, whatever it is, because I can see those numbers in your credit card spending. I can see it. You know, I can just slow you down. For the next three months, get yourself in good shape and maybe come back and I can lend you the amount of money you need to go and buy the property you want to buy, buy the thing you want to buy. That's household economics, home economics, which when I went to school, that was a subject. How hard is it for the government– And I'm not trying to play it down just to apply simple home economics to our economy. Why is it so hard, do you think?
00:37:14
Speaker 3: I think there's a degree of ideology involved.
00:37:16
Speaker 1: I'm perplexed though, Louis. I'm seriously perplexed. I don't know why it's so hard.
00:37:19
Speaker 3: Yeah.
00:37:20
Speaker 1: Why can't we go back and do what Costello did? He did that. We had a surplus.
00:37:25
Speaker 3: It's a good question.
00:37:26
Speaker 1: And we paid our debt to, national debt to zero.
00:37:30
Speaker 3: Yeah.
00:37:30
Speaker 1: Zero in 2006. That's right.
00:37:33
Speaker 3: And we had savings.
00:37:35
Speaker 1: And he put $ 400 million, I think it was, into the Future Fund.
00:37:38
Speaker 3: The Future Fund, that's right.
00:37:39
Speaker 1: And not $ 1 has been added to the Future Fund since, other than what it's earned.
00:37:43
Speaker 3: Yeah.
00:37:43
Speaker 1: So you don't have to be an economics– you don't have to be Milton Friedman.
00:37:49
Speaker 3: Yeah.
00:37:50
Speaker 1: One of the world's– the best economists or Keynes to work this stuff out. It's pretty simple. Why do you think– you said ideology. What do you think it is?
00:38:00
Speaker 3: I think it's ideology as well.
00:38:01
Speaker 1: I think– Do you think they're trying to send us broke, though?
00:38:05
Speaker 3: I don't think they're actively trying to do that.
00:38:08
Speaker 1: Do you think they don't care? They must be able to see it.
00:38:10
Speaker 3: Oh, yeah. Look, each political party has its own base, of course.
00:38:16
Speaker 1: Of voters.
00:38:17
Speaker 3: Of those voters. I would argue that there is a larger proportion of public service voters who will generally vote towards Labor.
00:38:29
Speaker 1: Because that's just paying the bills.
00:38:30
Speaker 3: Yeah. That's exactly right. You follow the money.
00:38:33
Speaker 1: And they get paid 70% superannuation. A normal person probably never gets 12. It's a pretty good gig.
00:38:39
Speaker 3: Yeah, that's exactly right.
00:38:40
Speaker 1: And I'm not having a crack at public service, by the way. If you're smart, you probably are working for the public service now. It's a smart place to be.
00:38:46
Speaker 3: And let's recall, of course, as Tom May mentioned, that the whole kidding government was involved heavily in microeconomic reform, which increased the size of the cake. So- It doesn't mean that every Labor government's going to be like this, where they're focusing on who should be around the cake. But it does appear that recent governments have been more focused on that rather than growing the cake. And this goes to the point about, all right, we don't have as much productivity going on. So when you see an increase in government expenditure, that's what creates inflation. Going all the way back to the inflation question, that's what can contribute to inflation. So then to the point of Chalmers, avoiding that particular point is most interesting, kind of self-serving, isn't it? To say this is all on the Iran war, this is all about oil prices.
00:39:41
Speaker 1: And what he calls private demand. And that's sort of like indicating that Tommy's out there spending too much money.
00:39:47
Speaker 3: But if you look at the stats, it's quite clear government demand has been increasing more rapidly than private demand. That the ABS publishes this. It's clear as black and white.
00:39:58
Speaker 2: It's a fact. The more you think about it, it is the ideology because if you fundamentally think about what's happened, there's one ideology is.
00:40:11
Speaker 3: Aspiration.
00:40:13
Speaker 2: One is redistribution. And if you listen to just the dialogue of the treasurer, he'll keep making reference. And the independent reserve bank said that it was, you know, the war overseas. Basic economics 101, if you're doing an economics degree in year one, you're taught that things that drive inflation are individuals, businesses, and government. Those three things will drive inflation. At the moment, I mean, the way the government is carrying on is they're sort of saying everyone else is the problem except for us, you know. At no point are they saying, having said that, in the last 48 hours, I've noticed the treasurers talking about the midpoint budget or whatever they're using, saying, oh, it's It's going to be hard.
00:41:08
Speaker 3: We've got to tighten it up.
00:41:09
Speaker 1: The December budget.
00:41:10
Speaker 2: Yeah.
00:41:12
Speaker 1: It's the one they put in. I think it's called Miefio. They put it out. It's the mid-term of the budget.
00:41:18
Speaker 3: Yeah.
00:41:18
Speaker 1: And it's a financial forecast and change. So they usually announce it in December. It'd be interesting if they do do something. I guess we both, all of us, have settled on the word ideology. The question is, Well, what is that ideology? What are we talking about? So we keep talking about Keating and Hawke. Keating and Hawke were the right of the Labor Party, to the right. This Labor Party is to the left, has a lot of left influence on it. What do we think the ideology is? You mentioned is transfer of wealth or redistribution of wealth. It's clearly the care economy. which is looking after those people who need care, which is– welfare is important. I think it's really important.
00:42:07
Speaker 2: Big government. Government must be bigger than business.
00:42:11
Speaker 1: Because government makes– because they take the view, we, the government, can make all the right decisions for you.
00:42:15
Speaker 2: We will make better decisions for the country.
00:42:18
Speaker 1: Leave it to us.
00:42:18
Speaker 3: Yeah. I think they just take the view.
00:42:21
Speaker 1: That's the ideology I want to work.
00:42:22
Speaker 3: The capitalist system, the pure capitalist system.
00:42:25
Speaker 1: Will create too much people– too many people need welfare.
00:42:27
Speaker 3: Create too much inequality. Yeah. is the view. And look, there's no system that's perfect. No. We know that. But yeah, that's the view. And so then they determine, well, who should have the greatest slice of the pie. That's their determination.
00:42:42
Speaker 1: And if you're not going to, and we, the government, if it's them talking, we, the government, don't trust that capital system because we know that too much wealth is going to go into the hands of too few.
00:42:52
Speaker 3: Yeah.
00:42:53
Speaker 1: And therefore, as a result of that, whilst we're in government, we've got to make sure that's not the case and we're going to distribute back to those people who need the welfare. Now, we're not talking about people here who are out of a job, live in a housing commission, and or are disabled. We are talking about people, there's a new layer of people that they're trying to look after.
00:43:17
Speaker 3: Well, that's true, but there is also, I think we need to consider this, that there is also a self-conflict here. Bigger government equals more power. more concentration of power with the government.
00:43:31
Speaker 1: And more likely of getting voted back in.
00:43:34
Speaker 3: Yeah.
00:43:34
Speaker 1: Maintaining my position.
00:43:35
Speaker 3: That's exactly right. So, yeah, look, you know, I have my own biases. I'm a small business operator. Yeah, obviously we've got a name out there, but what we do, we don't hire that many people. I'm a small business operator. I believe in smaller government. I always have. You know, just being upfront about it.
00:43:55
Speaker 1: Yeah, but that's your ideology.
00:43:56
Speaker 3: That's my ideology. That's right. But I like to believe it's backed with numbers. Yeah. And I'm a numbers guy. Yeah. And I can see what it takes to grow the cake, going back to the cake.
00:44:08
Speaker 1: Analogy.
00:44:08
Speaker 3: Analogy. Okay. And what it takes to shrink the cake, right? And shrinking the cake means running the economy inefficiently. And I'm afraid that this is what's been going on.
00:44:23
Speaker 1: And, Tommy, you're a small businessman too. I mean, you represent yourself. I mean, you've got different businesses. But, you know, by the way, right here in this business, this mental business or this straight-to-business, this is a small business as well. And, you know, we feel the effects of change in the economy just like everybody else. But, like, what do you think about what's your view on the split in Australia? Because it seems to me that there's fewer of us who have our ideologies And it seems to be more people attracted to this new ideology of the current government. Do you feel that is the case?
00:44:59
Speaker 3: Yeah, but I do think... Is there a change?
00:45:02
Speaker 2: Yeah, I think the latter group is smaller. I think that a lot of people that may have traditionally voted for Labor... are beginning to see that this extreme ideology does not fit in with their values. I think normally, take the budget for example, normally when something happens, you get one group that's cheering and one group that's angry. This time around, nearly everyone was angry. There's only a small cohort of people that are saying that they're happy. I mean, and yes, I am a small business. I also, the work I do, education, training, consulting is to small businesses fundamentally, right? Real estate companies. And they just feel the, I mean, you mentioned the word productivity. So in the old days, you'd work 10 hours and you would do 10 hours of selling. Now- Per day.
00:46:11
Speaker 3: Per day. Very productive.
00:46:14
Speaker 2: Now they're doing six hours.
00:46:17
Speaker 3: Why?
00:46:18
Speaker 2: Because four hours requires all this compliance, red tape, all this.
00:46:24
Speaker 1: Know your client.
00:46:26
Speaker 3: They're my clients.
00:46:27
Speaker 1: Mate, I got five sets of solicitors who work for me and they all know me for 25, 30 years. And now everybody's, every time we put in a different matter with different lawyers, I have to go through this process of identifying myself.
00:46:40
Speaker 3: Okay.
00:46:40
Speaker 2: So that, That impacts productivity. It's a simple concept, Mark. Like one person, right, can sell for eight hours a day. Another person only sells for four out of the eight hours. This person that does eight hours is twice as productive, right? They're both in for eight hours, except now what's happening is many of those hours are coming in with all the red tape compliance. And I've got a client that I'm doing a conference for on Thursday, and he says, Tom, you know, our issue is like between the compliance red tape of government and also the fact that there has been low unemployment. The minute you're sort of saying is we need to go down this direction, we get pushback from from our staff because both they know they can get another job, number one, but number two, we've got to keep ticking every box to make sure. And that's why I think- They don't want to take a risk.
00:47:39
Speaker 1: Yeah.
00:47:40
Speaker 2: And businesses are, you know, I'd love to look at the latest data with businesses. Man, they're slowing down and closing down at a rapid rate, you know. You've seen the fuss that, I mean, they're already, anyway- I don't want to sidetrack this conversation.
00:47:58
Speaker 1: No, but the regulatory process is a byproduct of the ideological process because if I increase the people who work for the government, they're going to do a job.
00:48:10
Speaker 3: Yes.
00:48:10
Speaker 1: It's not their fault. They're going to go find work. They're going to say, okay, well, we should regulate. I'm working in this particular department and my job is making sure people don't get ripped off, consumer protection, but let's call it that. I want to make sure that we don't– or anti-money laundering or, you know, like Austrac or something like that.
00:48:32
Speaker 3: Yeah.
00:48:32
Speaker 1: These numbers have increased amazingly, which is– the idea of it is very good to stop money laundering and to stop terrorism and all that.
00:48:38
Speaker 3: Sort of thing.
00:48:38
Speaker 2: It's important that it's done.
00:48:40
Speaker 1: But it gets overdone. Everything gets overcooked. Yeah. And as a result of that, all of a sudden, Tommy's trying to sell– be my real estate agent for something I want to sell, and he's got to identify me as someone who's– I am actually Mark Boris when he knows I'm Mark Boris because he knows– he's known me for 30 years. and he's been dealing with me for 30 years. I mean, that is so ridiculous. I mean, Tommy should be, I say, vouched. Instead of me having to produce my license back and front, photograph and look left, right, and center onto my phone and go through the process of making sure that my phone can identify me, then sending that off to Tommy. So Tommy then can send it to wherever he's got to send it to, to make sure that Mark Boris is the vendor of that property. And then I've got to do this. Then Mark's got to do the same thing with his lawyer. The lawyer's got to re-identify me as well. This is all money. This is money spent and time spent. It has nothing to the value of the property.
00:49:30
Speaker 2: It's also been one of the bigger causes as to why developers have decided they're going to sit on the sidelines. I mean, apart from the model not adding up, right, land, improvement, sale price, you know, they're not Mother Teresa, they want to make a profit.
00:49:43
Speaker 3: But one of the.
00:49:44
Speaker 2: Main reasons that they're not going ahead is that all the stuff that you're talking about, the compliance and red tape for a developer is just slowing up, slowing up, time is money, takes away from any margin that they're going to make. So They're not building, which is another cause of the housing crisis that we've got.
00:50:03
Speaker 1: There's not enough stock.
00:50:04
Speaker 3: Yes.
00:50:04
Speaker 1: And then that comes down to that regulatory environment actually affects the productivity environment.
00:50:10
Speaker 3: Yeah.
00:50:11
Speaker 1: And Australia's productivity. Now, Louis, where is Australia's productivity? Like, how have we been going?
00:50:16
Speaker 3: Well, it's been trending down over the last three years. Yeah. And I think we're off from the peak. It's coming up to 10%. Wow. Which is huge. So we were 10% more wealthier per person three years ago than where we are now. Wow. So it's a meaningful decline.
00:50:37
Speaker 1: And so we've got the capital gains tax legislation coming through. We've got high interest rates at the moment. We've got this regulatory environment that's sort of sitting below us. We've got a bigger government growing, growing, growing.
00:50:51
Speaker 3: Yeah.
00:50:52
Speaker 1: And we've got an election coming up in 2028. We've got, like, different parties sort of positioning themselves. What would you do if you became the leader of the Labor Party today?
00:51:06
Speaker 3: Seriously.
00:51:07
Speaker 2: Can I start? The first thing I– Tommy wants to go for it.
00:51:09
Speaker 3: Okay.
00:51:10
Speaker 1: Because I've got a view, too. Go for it, please.
00:51:12
Speaker 2: The first thing I would do is hire– a smart group of people that probably aren't employed by the government to get them to go in and to say, let's reduce government spending, have a goal. Let's aim for a 3% reduction.
00:51:37
Speaker 3: And the way that.
00:51:38
Speaker 2: You'll do it is line by line, go through and see what can we get rid of?
00:51:44
Speaker 1: In terms of what we spent? Yes.
00:51:47
Speaker 2: What can be delayed? I'm not saying we're going to stop all projects. What can be delayed? What can we prioritize do this and let the government to do their thing, right, in helping us get inflation down, which in turn will help interest rates come down faster.
00:52:05
Speaker 1: Which will make affordability easier.
00:52:07
Speaker 2: So that would be get smart people in there line by line and say, that's a priority. That's not a priority. We can do that in 10 years. We can do those roads in 10 years, right? That's there. That would be the first thing. The second thing is I would quickly straight away have a look at migration and the type of migrants that are coming in, right?
00:52:27
Speaker 1: In terms of skills?
00:52:28
Speaker 2: Skills, but I mean, I totally get the concept of family reunions. If you've got a doctor that's moving to Brisbane, let's say, Bangalow because we need doctors there. Doctor might bring his doctor wife with him. I get that as well. But I would have a look at the skilled migrant prioritising that because that would be important to the building. It takes the building costs down because one of the reasons they're not building is the deal doesn't stack up with labour force. The next thing I would do is I would seriously have a look at bringing in the negative gearing back on just a limited number of properties. Because I actually think that if they, I'm totally against this concept where people have got, you know, 20, 30 properties walking around, you know, the Andrew Tate group of buyers, agents, let's just go buy all these properties. The deal's got to stack up. The negative gearing's got to work because everything is going to work to the dollar. I get that concept. I'm not in favor of that. But I do think that good long-term landlords provided a solution in this country, a solution that the government many years ago said, we don't want to participate in. They're the ones that caved in on public housing and said, let's leave it to the mums and dads do it. And they gave them some incentives along the way to do it for them because it was too tricky. I mean, that's the truth of the matter. So I would look at- Some.
00:53:52
Speaker 1: Form of negative gearing back into the system.
00:53:54
Speaker 2: Some form of maybe a maximum of two, three properties. On the capital gains tax, I would 100%. These young people that are using shares to build a deposit, I'd be looking at that as well.
00:54:07
Speaker 1: As an exemption.
00:54:08
Speaker 2: As an exemption. The other thing I'd be looking at is the capital gains tax, the 50% discount. I would look at having a system. If you have held a property for a period of time, you're a long-term landlord. You're not a flipper of a landlord, right? I would give those people the incentives to to want to invest in property long-term because this country operates a lot better when we do have landlords that provide housing for our tenants, but not ones that are short-termers, right? I would look at maybe sort of saying, if you've had a property.
00:54:38
Speaker 1: So there's a long-term capital gains tax discount and a short-term capital gains tax, which is maybe not the same discount.
00:54:44
Speaker 3: Correct.
00:54:44
Speaker 1: Which they have in the US.
00:54:45
Speaker 3: Correct.
00:54:46
Speaker 1: If you're a short-term owner of real estate or property and you flip it, you pay one tax rate if you hold it for so many years, You get a capital gains tax benefit and all. In America, what you can do is you can roll it over. So if I make capital gains tax on this property and I buy another property, as long as you buy something, you can roll straight into the property so that you can sort of defer it forever.
00:55:05
Speaker 3: Spot on.
00:55:06
Speaker 2: And the last thing I would probably do, I would look at a cohort of people in Australia, people that have had a big impact in my life, nurses, nurses, frontline workers, these people, they're needed in this country. And in many ways, they get treated quite poorly.
00:55:25
Speaker 1: They need to be living close to where they're providing the services to.
00:55:28
Speaker 3: 100%.
00:55:28
Speaker 2: And we should look at seeing providing those some sort of assistance, whether it's rental assistance. You live around Newtown, Camperdown, you're competing. And I know it. I'm a landlord in those areas, Newtown. I know, and we all know, that when overseas students come in, you want your lease finishing up at a time when these students come in because you end up getting four or five tenancy applications involving a lot of the overseas students. It takes the rent up by $ 100, 000, $ 200, 000. The same workers that work at RPA Hospital or the services get impacted by competing against those tenants. I would look at supporting the nurses. our firemen, people, essential services of people that give a lot to this country.
00:56:18
Speaker 1: We should look after them.
00:56:19
Speaker 3: A hundred percent. Louie? Oh, I agree with that sentiment. You know, if we're going to discuss the solutions to- You're the new boss. What would you- Improving housing affordability.
00:56:30
Speaker 1: Okay, well- Yeah, and you're the boss of the country. You're another prime PM. What were you going to do?
00:56:34
Speaker 3: Okay. Let's say the focus is on improving housing affordability. I would look to reduce the total tax intake that occurs when we're building new homes.
00:56:46
Speaker 1: You mean all the tax add-ons?
00:56:48
Speaker 3: Yeah, all the tax add-ons. On aggregate, when you build a new home, 40% of the price or the cost.
00:56:55
Speaker 1: Of that new home taxes. Okay, so of the money the developer spends on building a house on a block of land that he's subdivided, 40% of that cost to him is spent on taxes.
00:57:12
Speaker 3: Correct.
00:57:12
Speaker 1: Not spent on plumbers, not spent on surveyors or market techs or brickies or whatever. It goes to the government, one government or other.
00:57:21
Speaker 3: Yes, that's right. Local, state, federal.
00:57:23
Speaker 2: Yeah.
00:57:24
Speaker 3: So it's 40% on aggregate.
00:57:25
Speaker 1: Right.
00:57:26
Speaker 3: So imagine if we're able to cut that in half.
00:57:28
Speaker 1: That's 40% reduction in cost. Yeah.
00:57:31
Speaker 3: Okay. That would go a considerable way to Improving affordability on new homes.
00:57:36
Speaker 1: Well, it certainly would get the developers to become incentivized to build more stuff.
00:57:41
Speaker 3: Exactly.
00:57:41
Speaker 1: Because there's less cost.
00:57:42
Speaker 3: As low as their break-even point. Yep. So that would be one thing I would do. Now, the other thing that I would do is I would get rid of stamp duties and I would replace it with a broad-based land tax. Okay. And what that would do, of course, it would stabilize state government revenues as opposed to the boom-bust revenues that we have now. Now, I know not everybody's in favor of land tax, and I doubt there'd be political will to do it. But I just noted if we're able to do that, we would actually see a more liquid market out there. So that would be the two big things.
00:58:20
Speaker 1: And so the land tax would go to the state government.
00:58:22
Speaker 3: State government. And look, it's been done before. Remember, we used to have state excise taxes, and then we brought in a broad-based GST. It's not impossible where we had the state governments come in and agree. So it is possible we could try and do this, but I just don't think the political world's there. So I'm actually quite negative that we can actually make any change.
00:58:44
Speaker 1: Would you change the GST system?
00:58:47
Speaker 3: No, I think the GST system has been working fine.
00:58:50
Speaker 1: You wouldn't increase it, what do you mean?
00:58:51
Speaker 3: I wouldn't increase it. No, I'd leave it alone.
00:58:53
Speaker 1: And what would you do with the capital gains tax policy that's currently in place?
00:58:57
Speaker 3: Oh, I'd bring back the discount for sure.
00:59:00
Speaker 1: So would you do what? And the negative gearing? Would you do what Keating did in 1996 or 7?
00:59:07
Speaker 3: It's a good question.
00:59:08
Speaker 1: Six or what?
00:59:09
Speaker 3: I take the view that seeing higher rental yields in the market's not necessarily a bad thing. So investors right now are demanding higher rental yields to compensate them for the loss of taxation benefits. Worldwide, you see higher rental yields.
00:59:26
Speaker 1: And.
00:59:27
Speaker 3: If we were to see higher rental yields, what you would see in this country is the rise of the build-to-rent schemes come through. And I don't think that's necessarily a bad thing. I think you would see a genuine increase in supply if you were to see more build-to-rent schemes come through. But the numbers have got to stack up. That's the reason why we haven't seen it come through in this country yet. Yields have been too low. So I'm kind of neutral when it comes to negative gearing overall. I've always taken the view that, okay, if you're going to take negative giving away, you've got to phase it out. You don't strip the Band-Aid off. You've got to phase it out over time. And Labor has not been doing that. Time and time again, they just want to strip it off immediately. And this causes major waves in the housing market. That's what we're going through.
01:00:18
Speaker 1: Well, structural change is no good. And these are structural changes, or these are changes that create structural change. I mean, and you just, But the normal person out there who might be thinking about buying, might have a couple of properties, might have a house and a rental property, they can't handle structure change. And they don't know how to respond to it. They've got no impact on it. They've got no influence over it. And all you're doing is putting people in a negative frame of mind. I find the country right now really negative, really negative. Not about ideologies, just feel like shit. They don't actually know why, which is why I want to bring you guys in today. People don't really know why we're feeling so bad, but things are tough out there.
01:00:58
Speaker 3: Well, there's a wealth effect, of course. There's a lot of evidence for it. When you see falling housing prices, consumer confidence starts falling. The overall feeling of feeling reasonably comfortable and wealthy reduces.
01:01:13
Speaker 1: And you spend less.
01:01:14
Speaker 3: And you spend less as a result.
01:01:15
Speaker 2: And you support your kids less. That's why all of a sudden at my auctions, I've noticed that when I'm there, With a young couple, the few that are remaining, that are there, the mum and dad are not next to them, Mark. They're not next to them because the wealth effect is gone.
01:01:31
Speaker 1: Oh, you mean the parents?
01:01:32
Speaker 2: The parents. So, Mark, I find Saturdays a fun time. I only do it to stay in the market. It gives me a bit of credibility in my Monday to Friday work, right? And you sell a property and then you go over, you see a young couple. Hey, young guys, well done. That's your mum.
01:01:50
Speaker 3: Yeah, yeah, yeah.
01:01:51
Speaker 2: Yeah, oh, they're paying for the stamp duty or they're paying for this. They've disappeared because all of a sudden they're thinking to themselves, I've got to worry about myself now. The value of my house has gone down. I used to have a $ 2 million house down. It's gone down, right? My mortgage is still there. I need to look after myself now. So they're probably not helping their kids like before. So that's taken some first home buyers out of the market too.
01:02:14
Speaker 1: Often referred to as the mega mom and dad.
01:02:15
Speaker 3: Correct.
01:02:16
Speaker 1: Which was a quasi bank, but it was actually supporting our property market by supporting the buyers who were lucky enough to have a mom and dad who could actually put them in that position.
01:02:24
Speaker 2: Well, it was a redistribution of wealth made by the family decision under the roof themselves versus the government doing it for you.
01:02:32
Speaker 1: And how do you feel about, I mean, both of you are probably old enough to remember this, but Paul Keating reversed his, he got rid of negative gearing in, I don't know.
01:02:42
Speaker 3: 87.
01:02:42
Speaker 1: 87 it was. It was 87 and he brought it back. Didn't take him long. I'm sorry.
01:02:46
Speaker 3: No, it was 85, 87. Got rid of it in 85. Yeah. And then brought back negative gearing in 87.
01:02:51
Speaker 1: He brought the negative gearing back. Realized that we need a negative gearing. Negative, most people think, oh, this person's going to own this problem. They're getting a tax deduction for the rest of their life. No, it normally happens for about five years. It was after about five years, it starts to become positively geared.
01:03:03
Speaker 2: Yeah.
01:03:03
Speaker 3: What are you going to do? Yeah.
01:03:05
Speaker 2: Hold a trophy. I've lost money again this year. I'm negative gear.
01:03:08
Speaker 1: It's just a way to get into the system. That's all it was. I mean, there are some people who are sort of clever. You know, they're the exception. They're definitely not the rule.
01:03:18
Speaker 2: This budget, Mark, you know what it's done? I've got three mates that have all put around $ 25 million into the market in the last month. They're investors. They're rich investors.
01:03:28
Speaker 1: And guess what's happening? They're going to snap up all the property.
01:03:30
Speaker 2: They're snapping it up. You saw the guy from Strathfield the other day. He bought a site for $ 20 million in Tamarama that had traded for $ 30 million three, four years ago, right? See, rich people, they don't care about negative gearing. Alex Phillips sold it.
01:03:45
Speaker 3: Correct. Alexander Phillips. He told me.
01:03:47
Speaker 2: It was a mortgagee sale. The vendor was quite famous. So the issue is that wealthy people are actually like rents have been okay, property prices have gone down. That means that number, the yield is better. These people are cashed up, right? They're not dependent on having a negative gearing benefit. They're going in. Some of them, one of them bought a positive geared property saying to me, Tom, it's happy days at the moment.
01:04:15
Speaker 1: But I understand then if the ideology of the government is to redistribute wealth, all that's really happening is it's going around the other way. It's going back to the rich people. So the only people who really can afford to buy right at the moment, at least, are the rich people. The house prices are going down. They're going to go buy more.
01:04:30
Speaker 2: And, you know, every time the Reserve Bank has a meeting, you know, go look at my social media comments from some of the people. Actually, some of them are a bit tone deaf, but quite a few rich people are saying, hope rates go up. They've got 20 million sitting in term deposits. You've got to remember that. You've got to remember, we've got a cohort of people at the moment, just the way the system is in Australia because of the one tool, which is interest rates. We've got a cohort of people that are being impacted, that are collateral damage, right?
01:04:59
Speaker 3: The most vulnerable.
01:05:00
Speaker 2: And on the other hand, you've got other people there that are sitting there thinking, great, my term deposit's gone up, right? So how is this generational equality? That's one of the unintended consequences that we can all look back and say, man, it hasn't gone. Six months post-budget, Mark. Let's look at what's happened.
01:05:21
Speaker 1: It's getting worse.
01:05:22
Speaker 2: Six months. First home buyers are down 20% on last year. Fact, data, people can go in and look at it.
01:05:30
Speaker 3: 20%.
01:05:30
Speaker 2: It hasn't helped them. We've got a country that generally is despondent, that has got no optimism whatsoever. We have people that have paid millions and millions in Australian taxes that are leaving this country. I think a responsible government should sit down and say, okay, let's see how this thing is going. I think that's what needs to be done. And I also think, Mark, listen, don't even worry about Dave Hughes or any other people that have been loud, right? Even Albo should go and read the comments on his own page. I'm not talking about an algorithm.
01:06:09
Speaker 1: I actually read the comments on his page.
01:06:11
Speaker 3: On his own page. Have a look at what people are saying.
01:06:14
Speaker 2: Maybe the time has come to actually listen to what the people are saying, something that they probably didn't do hard enough leading into the budget.
01:06:24
Speaker 1: Okay, 30 seconds each. What would you say to the government? Look down the camera. The camera's on you. What do you want to say to them, Louie? Genuinely.
01:06:32
Speaker 3: I would say your job needs to improve big time in terms of the quality you've been putting out there and helping the community grow. I would say you need to reduce government spending, which will help reduce inflation, and you need to re-look at the property taxation changes you've brought in. So that's it.
01:06:54
Speaker 1: Tommy, just look at this camera and say it.
01:06:57
Speaker 2: Same, same, and I urge... you to go read the comments on your own pages. Please listen to what people are saying. Not some algorithm that might be taking them to a world of right wing, you know, shouting. Have a listen to the own comments of the people that follow your pages. That's what I would say.
01:07:22
Speaker 1: And I will say, don't be afraid to make a mistake. If you're worried about being reelected because you won't get reelected because you think people will blame you for making a mistake, if you get out there now and say, you know what? We made a mistake. We misread it. We're going to correct that mistake. You've got more chance of being reelected, if that's your game, than if you don't admit it. And just get up in front of the media, in front of everybody, and just say, because everybody knows you made some mistakes. You're spending too much. And the capital gains tax legislation was no good. So fix it. It's easy. We have to do it in the corporate world. We stuff up. We have to go and front shareholders. Difference in our world, your shareholders can call a meeting anytime. You guys, shareholders only call a meeting once every three years. In fact, you call a meeting. And we can only vote for you once every three years. Treat us like everyone else gets treated, like the corporate world gets treated. Go out in front of your shareholders. That's us, us voters, stakeholders. Tell us you made a mistake, and I guarantee you'll get 50% of the people will forgive you as long as you fix it.
01:08:34
Speaker 3: Well said.
01:08:35
Speaker 1: Just own up and own it.
01:08:38
Speaker 3: Thanks, guys.
01:08:38
Speaker 1: That was wonderful.
01:08:39
Speaker 3: Awesome.
01:08:40
Speaker 1: So good.
01:08:40
Speaker 3: Thank you.