"It was a Disaster" Chris Joye on the Budget, Australia’s Property Correction, Trump & Bitcoin

Chris Joye is one of Australia's sharpest economic minds. He's a fund manager, AFR columnist, and architect of the indices used to measure Australian house prices. In this conversation, Joye delivers a blunt assessment of where Australia is headed economically. He argues the federal budget was a defining moment that exposed the government's agenda: taxing the private sector to fund an expanding public service. He connects that policy shift to rising inflation, falling house prices, and a growing brain drain that few politicians are willing to confront honestly. Topics covered: • Why the federal budget was a turning point for Australian economic confidence • Sydney and Melbourne house prices falling at double-digit annual rates • The RBA's inflation battle and why interest rates may need to go higher • Australia's national and state debt crisis and what it means for future taxes • The case for cutting the NDIS, selling the NBN, and raising the GST • Why high-net-worth Australians and entrepreneurs are quietly leaving • Trump's economic model and what Australia could learn from US prosperity Subscribe to the Mentored newsletter here: https://the-mentored-platform-pty-ltd.myklpages.com/l/WWJGc5 Join my exclusive Mentored+ community: https://mentored.com.au/become-a-member/ See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

• 0:00Speaker 00

  Chris Joy, welcome to Straight Talk again, mate. It's a pretty good timing. Like, uh, how long are you in the country for?

• 0:05Speaker 01

  Uh, about a month.

• 0:06Speaker 00

  About a month. I'm glad I got hold of you before you, before you take off. Last time we met, before the budget, what would you say relative to what you were predicting before the budget? Now, post-budget, what do you think?

• 0:21Speaker 01

  Well, I mean, for a couple of years and certainly with you, we've talked about the fact that Australia's threatening itself with economic irrelevance. And we're kind of trading away our prosperity, our innovation, our ingenuity. And for several years, I've felt that the professional political class are coming for the private sector. They see it as a zero-sum game. The guys that have spent their entire life working in Canberra, working for government, have never started a business, never risked capital, never hired a single soul from their hip pocket, like you and I have done. They just see those who are working in small, medium and large businesses

• 1:06Speaker 01

  as targets for wealth transfers. So I've felt for a long time they're coming for our income, our savings, our capital. And I just think it's astonishing how brazen they were.

• 1:23Speaker 01

  I argued in my AFR columns before the budget that this would be catastrophic for Labour. Everyone thought I was being alarmist. All my journo mates said, no, no, no, mate, they've pulled the bejesus out of this buddy. And it's going to be wildly popular with the wokes, you know, the youth and so on. And once the budget was released, I wrote that I thought it was going to be cataclysmic for the country and for the government. And so it's proven. Yeah, I just think it's an absolute disaster. And, um, you know, you've got under Albanese, the bureaucracy since 22 in Australia,

• 2:07Speaker 01

  in the last few years alone, has increased 25% in the budget. They said, hey, we're trying to save money from this monstrosity called the NDIS. That's now costing as much as Medicare. Uh, that is just ridden with like absolutely rampant corruption. They're going to save nineteen point eight billion dollars. How amazing.

• 2:31Speaker 00

  Over what period of time?

• 2:32Speaker 01

  Over the, you know, forecast period of the budget, but here's the rub. So they're taking nineteen eight, nineteen point eight billion from the N D S, which was this huge white elephant that they created in the first place to feather their own nest. And they're spending the another nineteen point six billion on the public service, on themselves. So they're taking it from the N D I S and they're re-distributing back to themselves.

• 2:56Speaker 00

  So those people who are affected in the N D I S, like, like actual genuine people who need N D I S assistance, that for which they're no longer going to have, if they're looking to where that's gone to, that's gone to feathering the nest of the actual government themselves.

• 3:08Speaker 01

  Hundred percent. It's the only way they know how to make money, to tax and take from those who generate. And of course, this creates huge disincentives um for anyone in Australia who wants to establish a new product, a new service, a new business. Why would you do it in this country? When you've got the world's highest capital gains tax rate? You can go to any other country on the planet and get a lower capital gains tax rate. So just, you know, unbelievable, particularly as they promised, you know, relentlessly to not change capital gains tax or negative gearing prior to the budget. So I think it was a bit of an epiphany for the community. I think prior to this, you had Labour, you had Teals, you had the right, and it was a

• 3:50Speaker 01

  complex kaleidoscope of agendas. And it's like the budget was this one singular galvanizing moment where it all coalesced. You had this jigsaw puzzle where the pieces were scattered, and they all came into picture. And there was immense clarity for the community that this is all about the public service robbing from the private service in order to, you know, um bolster their own uh uh wealth.

• 4:19Speaker 00

  Is this what everyone was talking about when they talk about a transfer of wealth from one sector to another sector? In other words,

• 4:27Speaker 00

  I don't wanna say tax the rich because it actually applies to small business owners too. Tax one sector in order to bolster another sector. Is it a proper transfer of wealth?

• 4:36Speaker 01

  Well, think about small businesses, you know, one in three, one in two have a family trust. And the history of this country, we have never taxed trusts.

• 4:45Speaker 00

  Yeah.

• 4:45Speaker 01

  And then in one fell swoop, thirty percent tax on all trusts. World's highest capital gains tax rate. Estate taxes, you know, they've already tried under this government to tax unrealized capital gains. You'll get death cut taxes, you'll get more taxes on super, you'll get um, you know, taxes on any form of success. Because they see it as a target rich environment from which they can tax and take to ultimately pay themselves. And it's the only way they know how to make money.

• 5:15Speaker 00

  Do you believe in the fact that this is going to create a brain drain? Do you, I mean, do you think, do you think this will take innovation out of Australia? You know, the, the type that Malcolm Turnbull tried to encourage when he talked about the innovation nation back in the two thousand and sixteen, seventeen, eighteen period, that period whenever he was a prime minister. Do you think actually people will leave the country to take their innovative ideas to some other lower tax environment? Or do you think people just say, stuff it, I'm gonna stay here and I'm not gonna bother? I'm, I'm, I'm, I'd rather I'm stay on as a lawyer or a banker or whatever the case may be. I'm not gonna go into these other areas where I've got these really great ideas.

• 5:52Speaker 01

  Well, I know loads of people who are doing exactly that. Uh, so it's just a statement of fact that you're gonna discourage people from doing business in Australia, from investing in Australia, from establishing any new opportunity in Australia. And you can see this happening all over the world. It's happening in the US, in California and New York. They did this stealth socialism, uh, very similar playbook, just tax prosperity.

• 6:18Speaker 01

  Tax anyone who's had any success and they created huge disincentives to business. And what do business and people do? They left.

• 6:26Speaker 00

  Where they go.

• 6:26Speaker 01

  Huge exodus of people and money out of California and New York into Florida and Texas.

• 6:33Speaker 00

  Yeah.

• 6:34Speaker 01

  So you'll get these alternative states that will rise up in their stead. And you're also seeing it on a global basis. In Europe, the Italians stepped up and said, okay, if you commit to paying a fixed maximum number of tax each year, a few hundred thousand dollars or euros, you can come here and we won't tax any of your global income. So the Italians have attracted in large numbers, businesses and world-class investors and entrepreneurs that want to capitalize on that opportunity. Abu Dhabi did the same thing. Dubai has done the same thing. And so I think you're going to see more and more challenger states who want to usurp the incumbents,

• 7:17Speaker 01

  offer extreme incentives in what is an increasingly competitive and mobile world. We're becoming very mobile, very competitive. And ultimately, this is going to directly reduce Australian living standards, Australian incomes, Australian prosperity. So.

• 7:35Speaker 00

  Do you think it's a bad policy call? Like, I mean, is it a bad policy call? So what I mean by that is not bad policy for policy's sake, but in terms of prosperity for Australia, as you said, standard of living and those sorts of things. Do you think they got the policy wrong relative to Australians? And I don't want to be, I'm not being politically Labour, Liberal, whatever, just intellectually to build a country, a great nation of a really high living standard, you know, we can define that later, but high standard living, where you know, we can basically afford to do whatever, most of the things we like to do. Standard stuff, good stuff, you know what I mean? Do you think that this policy decision has been a major mistake then? Therefore, for Australia's nation building capacity?

• 8:16Speaker 01

  A huge mistake and, you know, it's a classic mistake made by nations that have experienced a tremendous amount of success. So Australia's been a very successful country. We've had very high growth rates. We've got these huge natural endowments of resources. We've had amongst the world's strongest population growth. And now we're squandering that prosperity. It's called Dutch disease. It's it's basically the moral hazard associated with having huge endowments of good fortune. In our case, iron ore, coal, you know, natural gas, uranium, et cetera, et cetera. Plus a political program to relentlessly import people from foreign countries. So we've been dropping half a million people in Sydney and Melbourne every year. We've had amongst the world's strongest population growth rates,

• 9:01Speaker 01

  increasingly because the politicians believe that people coming here will have a higher propensity to vote for those who brought them here. And so, you know, it's actually a political strategy. In the same way that, you know, they rolled out post the pandemic, the Dan Andrews playbook of just spending as much money as humanly possible to buy votes, financially corrupt voters and try to perpetuate their position of power. The problem with that program of just reckless spending in perpetuity is it eventually creates a huge amount of inflation. So all of this immigration and all of this public spending, it eventually bleeds into the cost of living. So it's pushing up prices. If you plonk half a million people in Sydney and Melbourne every year, there's only so many houses and only so many services that can

• 9:48Speaker 01

  support that population growth.

• 9:51Speaker 00

  And supply chain.

• 9:52Speaker 01

  And supply chain, energy, electricity, everything. And ultimately, it it just kind of precipitates higher prices. So as people start to realize that there's a connection between crazy amounts of public spending and population growth. And that drives a higher cost of living, higher inflation. And then they see interest rates start to rise. And then ultimately, all this debt needs to be serviced. And that Manifests in the form of higher taxes with no willingness from the political class in in any way to consolidate their spending because that directly impacts their own personal wealth because they're all sucking on the tea to the taxpayer, these

• 10:31Speaker 01

  professional politicians. So they've got no incentive whatsoever to balance their books. They've only got an incentive to continuously spend. I mean, the amazing thing about the budget. Just to give you the numbers is this financial year, FY twenty seven, they claim the deficit is thirty two billion. That's what they call the underlying cash deficit, but the actual deficit is sixty four billion dollars. So at a time when the Reserve Bank of Australia is aggressively lifting interest rates three times from three point six percent to four point three five percent, at a time where we have an inflation crisis in this country, where we haven't hit the inflation target since twenty twenty one, where inflation expectations are drifting higher and the

• 11:15Speaker 01

  battle against entrenched inflation is becoming tougher and tougher and is going to likely warrant higher and higher interest rates.

• 11:22Speaker 01

  The political class are pouring more fuel on the flames because that's what serves their financial interests. The pay rises, the constant wage inflation for the public sector, the the pet personal political projects, i.e. the NDIS. It was meant to be twelve to thirteen billion a year and suddenly it's fifty five billion a year and every man in their dock is rotting it. So you get this vicious cycle and the only thing that can really stop it is high inflation, high interest rates and then a public reckoning when we realise that actually we're squandering our prosperity. We're trying to boost today by borrowing from the future, but ultimately that money has to be repaid. And by allocating money really imprudently today, we're actually bidding up prices. We're pushing up the price of everything. And it's not sustainable.

• 12:06Speaker 00

  What did you think when you heard the treasurer talk about? Um. The intergenerational inequality. Um. By the way, it's not the first time that term's ever been applied. I mean, Costello applied that in two thousand and five, I think, the same thing. But Costello's solution, by the way, was to get rid of debt, national debt, public debt.

• 12:25Speaker 01

  Well, he had an opportunity to, because the government in two thousand and seven was running budget surpluses.

• 12:29Speaker 00

  Yeah.

• 12:30Speaker 01

  Amazing. Rather than a sixty four billion dollar deficit, they're actually printing cash. They were actually spending less than the money they were receiving. And Costello actually had a national conversation about the possibility of completely repaying all government debt.

• 12:42Speaker 00

  Hmm.

• 12:43Speaker 01

  Whereas today, they've racked up one point three trillion of new debt.

• 12:47Speaker 00

  Done, not including side debt.

• 12:49Speaker 01

  Correct. And, and the, the amazing thing is that you mentioned the point about the political class running this propaganda around intergenerational fairness and equity. But how is it fair to borrow trillions of dollars from future Australians that haven't been born today in order to spend that money on the current generation? That's robbing the future to pay for the present. That is demonstrably unfair. That's demonstrably inequitable, particularly when there's no case for spending that money. Um. I think national debt per person in circa two thousand and seven was around six thousand dollars to ten thousand dollars. And today it's something like sixty thousand dollars. So it's not

• 13:34Speaker 01

  fair in any way, shape or form. These guys are just bullshitting because they ultimately just wanna uh claim more power by controlling more and more of the economy and putting uh larger and larger uh parts of the economy under the rim of the public service and paying themselves more money.

• 13:51Speaker 00

  What do you think about the Treasury? And of course, Treasury supported all this stuff, Treasury being the, you know, the Department of Treasury as opposed to the Treasurer's Office. Um. What do we think about the Treasury forecast in terms of the effects on house prices, which by the way, so far hasn't turned out to be correct? They said house prices will continue to rise, but at a slower rate. In fact, right now, we're looking at house prices falling, like, like falling like a stone. And, and, and there's no point in, I, I don't wanna sort of, um, you know, sugarcoat this. It is bad. And in some places, some parts of Australia's worse than others, like Victoria, but it's it's bad. Sydney's bad.

• 14:26Speaker 01

  Dude, like, uh, I, as you know, designed the totality indices that we use to measure house price changes in Australia. On the last three months of data, Sydney house prices are falling at a 12% annual rate. And Melbourne prices are also falling at a double-digit annual rate. So we have potentially the mother of all house price corrections. The biggest fall in national house prices ever recorded was 11%. So I think there's two explanations for this big downward adjustment in prices. One is obviously the RBA has lifted the cash rate three times because they shouldn't have cut the cash rate in 2025, but they were politically corrupted by the Treasurer Jim Chalmers. He sacked the Treasurer, sorry,

• 15:08Speaker 01

  he sacked the Governor of the RBA and replaced that Governor Phil Lowe with a new Governor and a Deputy Governor.

• 15:14Speaker 00

  And a new board.

• 15:15Speaker 01

  And and a new board. And so he replaced seven of the nine interest rate voting members on the interest rate sitting committee. And so ultimately you got a very dovish Reserve Bank of Australia that was very, you know, politically partial to Chalmers and Albanese, and they won the election with the tailwind of the rate cuts. But house prices prior to that point had been falling. So until the RBA first cut rates in February 2025, house prices were in decline. And those rate cuts really bailed out the housing market. Now they've reversed those rate cuts and we are still staring at the specter of potentially further hikes. So currently the cash rate is at 4.35%. Our modeling implies the RBA probably.

• 15:56Speaker 00

  Cool bar. This is cool bar.

• 15:57Speaker 01

  Cool bar, yeah. Our modeling implies that the RBA should probably lift the cash rate to somewhere between 4.75.

• 16:04Speaker 00

  Whoa.

• 16:05Speaker 01

  5%. Yeah. So that's another couple of hikes, possibly three hikes. And that's not that high.

• 16:11Speaker 00

  That's to control inflation, though.

• 16:13Speaker 01

  Yeah. And so how bad is inflation? I talk, you know, I use the potentially hyperbolic characterization of an inflation crisis, but we haven't hit the target since 2021. But today. Inflation over the last six months in Australia has annualized at a 3.4% annual rate and over the last 12 months at a 3.5% annual rate. So inflation is running way above the RBA's target. And with all this public spending creating pressure on the economy, at the same time as the half a million new people coming into the country every year is creating pressure on the economy, we have entrenched inflation pressures that only higher interest rates can deal with unless the politicians start to pull in their purse strings and balance

• 16:57Speaker 01

  the books, but they're not going to do that. So I think the RBA has a multi-year battle on its hands with inflation. I don't think there's any short-term panacea. I don't think there's any easy answer. It's going to require a lot of pain. And we had a similar cycle between 2002 and 2007, when the RBA lifted the cash rate to as high as 7.25%. But I was going to make the point that from 2022 to 2023, the RBA lifted the cash rate from 0.1%, all the way up to 4.35%. They stopped in November 23. The rest of the world went to 5 to 5.5%.

• 17:34Speaker 00

  And I remember you talking about that. You were saying we should have gone more.

• 17:36Speaker 01

  We should have gone more. Exactly. You've got a good memory. So Canada, New Zealand, the US, UK, all went to 5, 5.5. The RBA was the only central bank in the world that really bucked that trend. They said, no, no, no, we're unusually gifted. We can thread the needle. We're going to keep unemployment low and inflation low. And I argue they were wrong. And particularly, we used their own economic models. So we cool by ran the RBA's economic models and we showed publicly that they should have gone to five, but they didn't. They went to 4.35% and we never got inflation under control. So the risk is we need to go back to five again. And the risk is it's going to be a bit of push-pull and it could be a long cycle where they pause for 12 months and then hike again. And all of that's bad for house prices. So the first negative for house prices is the RBA

• 18:18Speaker 01

  lifting the cash rate. The second negative is just the huge regulatory and tax uncertainty created by the budget. What is and isn't going to happen. And I just think you get an immense amount of inertia and decision. Making paralysis because people don't know what's going to happen. What are they going to keep? What are they going to roll back? What happens if there's a change of government? And so it just kills sentiment and it kills the preparedness for people to allocate their marginal dollars into real estate.

• 18:46Speaker 00

  So what's interesting about that, and I know this for a fact, that in terms of flow of new mortgages on a monthly basis, around forty two percent of that was coming from investors. And the investor market has just completely disappeared.

• 19:02Speaker 01

  Is that right?

• 19:03Speaker 00

  Yeah, just like gone nowhere. And sure, there are some, and I heard the Prime Minister saying yesterday or the day before that there's more new homeowners in Australia or more people buying, first time owners are buying homes. Yeah, but as a percentage of what? Of first time owners before, yes, house prices might be lower, therefore a few more people might be able to afford to buy a house. But the point is, you have to, there are more people who are, who own a house, who have a mortgage, or people who own a house who don't have a mortgage but paid it off, did the right thing. And then, you know, it might be in the sixties, whose only asset is their home. So they feel rich or poor based on the value of their home. As opposed to the number of people who want to get into the home.

• 19:46Speaker 00

  And this is a bit of a problem. I mean, you don't solve one problem by creating a problem for somebody else.

• 19:51Speaker 01

  Correct.

• 19:51Speaker 00

  So they, the way they've just decided to solve the problem for the people who don't own a home, first time buyers, is to take value away from the people who do own a home.

• 20:03Speaker 01

  Yeah, they're trying to unilaterally pick winners and losers.

• 20:06Speaker 00

  That's not the answer.

• 20:06Speaker 01

  As if there's some, some benevolent dictator.

• 20:08Speaker 00

  Well, it's God, that's God mentality.

• 20:10Speaker 01

  Yeah.

• 20:11Speaker 00

  And it's unfair because.

• 20:12Speaker 01

  It's the same mentality of, you know, trying to win, hoodwinking the entire country by saying in an election repeatedly, we're not going to do CGT, we're not going to do negative gearing, never even contemplating taxing trusts or death taxes. And then just rolling out precisely that. And then they got, what's amazing, mate, is it was clear that the community.

• 20:32Speaker 01

  Signal that after the budget, this was something that they were violently opposed to. Like, there was a huge backlash against all these policy measures, and yet they've still railroaded them through parliament. So they have no interest in sort of cleaving to any democratic notions at all. This is just a money and a power grab.

• 20:51Speaker 00

  So, you know, a lot of people are gonna, you know, I know what's gonna happen, Peter are gonna come after us, they're gonna say, well, you know, you two are die the more liberals. This is not, this has nothing to do with Liberal Party, Labour, Greens, this is just about policy, like, individuals who made, who've decided to make a policy. The point being here is, the Reserve Bank, which is independent, is putting interest rates up because of the money that's being spent.

• 21:10Speaker 01

  Okay, absolutely.

• 21:11Speaker 00

  And they're gonna do it again.

• 21:13Speaker 01

  Yeah, interest rates would be a hell of a lot lower, and inflation would be a hell of a lot lower in Australia, and our cost of living would be lower, if, and our taxes would be lower, if they weren't spending as much money as they are on all of these crazy projects, infrastructure projects that are never completed, pet projects that are completely unnecessary, the M B N. I mean, we spent the best part of fifty, sixty billion on the M B N, which is being rendered completely redundant by Starlink, right?

• 21:38Speaker 00

  Yeah, yeah.

• 21:38Speaker 01

  When they came out with the idea of the M B N, and this was a classic, two Labour politicians sitting on a private jet, writing an idea down on a beer coaster, that wouldn't it be great just to build a fibre optic network that we control? We control the internet. That sounds pretty fun, doesn't it? Yeah, sure. Then they splurge fifty to sixty billion on it. At the time they came out with the idea, I wrote for the A B C online, what happens if we get super fast wireless internet? Hey, what happens if somebody starts cracking the code on satellite internet? Lo and behold, Elon Musk rocks up with SpaceX delivering Starlink internet, which can give you a thousand megabit per second internet speeds in aeroplanes

• 22:17Speaker 01

  flying at forty five thousand feet. So arguably SpaceX and Starlink, you know, are gonna eviscerate the need for the M B N. Huge waste of money.

• 22:28Speaker 00

  I use Starlink. I mean, and I don't have it in my house, I don't even have it in my farm, but, but I equally would say I'd put it in my house and sit if I need to. Like, I have no issue with that, none whatsoever.

• 22:36Speaker 01

  You're gonna have Starlink in your phone soon. What's gonna happen to the telecommunications? Companies when SpaceX and Sally are completely disintermediating them.

• 22:46Speaker 00

  So what's the prognosis then, mate? Like, I mean, this sounds very bleak. I mean, if we're talking about house prices, do you see a recovery on house prices? I mean, we're still going to have a shortage. One good thing is they're bringing more people into the country, all of which everybody needs somewhere to live. Over time, do you think it'll recover, get back to where it was? I mean, we've seen falls in house prices before in Australia. We've seen falls in share markets before in Australia. Things seem to recover. They tend to recover even better than they were before the fall. What do you feel?

• 23:16Speaker 01

  I think this will be one of the biggest, if not the biggest correction in house prices we've ever seen. Point one, point two. I think it'll be a multi-year battle against inflation that will require the RBA to potentially lift.

• 23:27Speaker 00

  That's the question.

• 23:28Speaker 01

  Interest rates a lot further. And it could be very stop-start, like we saw between two thousand and two and two thousand and seven. I think another problem that the housing market faces, which no one's really talking about, and which I think I might have spoken about in the last podcast episode we did. But one of our key predictions, and this is well before the budget triggered the debate, was that we would have a very polarizing debate on immigration, as we've seen play out around the rest of the world, in Canada, in the UK, in the US.

• 23:58Speaker 00

  Poland.

• 23:58Speaker 01

  Yeah, Poland. And what I told you last time was, I think we need to prepare for a world, or more specifically, a country and an economy where we have no population growth. It's quite normal in the US right now, they have no population growth. In Japan, they've had for a long time negative population growth. Now, population growth has slumped in New Zealand and Canada. And an Australian economy with no population growth is a completely different proposition. And that would be as a function of a radical reduction in immigration, which is arguably required just to cope with the huge influx in people that we've had to absorb in recent times, where we've been running the world's strongest rate of population growth, certainly as measured by kind of, you know, leading countries in the OECD. So that would be very, very negative for housing, mate.

• 24:43Speaker 01

  So you have a combination of much higher interest rates, which we're contending with right now, coupled with extreme tax. Legal, regulatory and political uncertainty because you just look left and right every time you move, you're getting your head blown off by these professional politicians who just want to take everything, your income, your savings, your capital, the works. And then you have a world in which the demand side driver that had been the gift that keeps on giving in the form of world beating population growth suddenly disappears. And that could happen very quickly. If you turn off the immigration taps, you're not going to have any population growth, you know, trivial population growth because we don't have much in the way of natural fertility. So I think the prospects for the housing market are a little grim. And I think there's

• 25:26Speaker 01

  a reasonable chance we have one of, if not the biggest correction in house prices we've ever seen.

• 25:31Speaker 00

  The growth in population or the immigration that helps the population growth, what's the economic policy behind that so far? I mean, what is it that is justified from an economics point of view? Apart from collecting more taxes because everyone has to get a job?

• 25:45Speaker 01

  So I think the political calculus is the government of the day at the federal and state level has spent trillions of dollars and they need people to deliver those intentions, whether it's schools, infrastructure.

• 26:00Speaker 00

  Care economy.

• 26:00Speaker 01

  Yeah, hospitals, whatever the case may be. And we just don't have enough people in this country. So unemployment in Australia is sitting at very low historical levels, around four point four percent. The normal rate of unemployment, according to the RBA's own numbers, is about five percent. And what that means is the labour market's hot and that drives wage pressures. We've obviously had very large minimum wage increases that amplify that. And that in turn feeds into the costs that businesses have to bear, which are people. And in Australia, we have a particularly insidious problem where not only is there healthy wage growth, but productivity is amongst the world's lowest. And so productivity adjusted

• 26:43Speaker 01

  wage growth is very strong. And that's what drives inflation. So our productivity adjusted wage growth has been running around five percent. And that feeds into very strong services inflation, which keeps the cost of living very high. So we have ongoing, very robust inflation pressures that in turn warrant higher interest rates.

• 27:02Speaker 00

  So what does a government, what have they got to do? Like, I mean, I remember years ago, you wrote. A nine point plan or eleven point plan for Joe Hockey when he was the treasurer. But what, what would you be planning for? What would you say to Jim Chalmers now?

• 27:18Speaker 01

  Yeah.

• 27:19Speaker 00

  To correct things. Cause like, cause, because, because the last thing he wants is to go on election in twenty eight. With us perhaps in a recession, and we'll talk about that in a moment, or house prices down. Um, interest rates high, um, et cetera, you know, unemployment perhaps going closer to five percent. Last thing he wants is that. What, what would you be saying to Jim now?

• 27:41Speaker 01

  I'd sell the M V N and get whatever value you can salvage from it. I'd cut the N D I S down by fifty to seventy five percent. I would try and shrink the public service by about a quarter. So you'd save a huge amount of money through those channels. I'd increase the G S T and widen the base of the G S T.

• 28:04Speaker 00

  To cover more things.

• 28:05Speaker 01

  Yep, I'd increase it to about fifteen percent. And then I'd use all of those savings to fund massive income tax cuts and massive corporate tax cuts. I'd obviously remove his new taxes, like the trust taxes. And then I'd create incentives for the founders of new business whereby they uh would have the opportunity to pay no capital gains tax on their upside. In the, in the event that they were successful and they created world beating products and services. So you could create a um, a quarantine on any capital gains tax at all up to say a certain threshold.

• 28:43Speaker 01

  And try and ensure Australia remained a destination for world class and human and financial capital. They would have all the incentives to establish new ideas here.

• 28:56Speaker 00

  Would you, would you create like a, you know, like a, a place in a certain, a, a, a circle in a certain place in Sydney or Melbourne or Brisbane, wherever it is. A bit like what they've done in Ireland and Dublin, where you invite all the big guys in and say, look, if you establish yourself here and employ people and start building buildings and that sort of stuff. Your tax rate would be ten percent, would you, like Singapore style?

• 29:15Speaker 01

  Yeah, I mean.

• 29:15Speaker 00

  Dublin style.

• 29:16Speaker 01

  We, again, we've seen around the world that these incentives work, whether it's Abu Dhabi, Dubai, Italy, Portugal, uh, Florida, Texas. If you set the platform up for businesses uh to become world beating, you will attract people and capital. But I probably would look at a um. A national reset. So I I'm not that interested in having one particular jurisdiction that has these incentives. I want to make Australia a great place to invest and work in.

• 29:45Speaker 00

  Buy Australians.

• 29:46Speaker 01

  Yeah. And so I think the solutions are clear. It's a lot less political spending, much lower taxes and massive rationalisation of waste, NBN waste, NDIS waste, public bureaucracy. I mean, we know that if we went through, in fact, I was just having lunch with a bunch of guys today, who said the waste in the public service in commercial real estate is unbelievable. He said, we own these buildings.

• 30:11Speaker 00

  There's no one in there.

• 30:12Speaker 01

  There's nobody in there.

• 30:12Speaker 00

  No, they're empty. It's Canberra.

• 30:14Speaker 01

  These are ghost

• 30:15Speaker 00

  Yeah.

• 30:15Speaker 01

  cities and everyone works from home.

• 30:18Speaker 00

  Yeah, everyone, I know. They don't need, they probably can work from home. Some of them being supervised and stuff like that, but they don't go to work. I know that to be the case in Canberra.

• 30:26Speaker 01

  We know that there's been absolutely zero increase in government productivity for about a quarter of a century. So that's one of the big problems that Australia has with its overall productivity performance.

• 30:36Speaker 00

  How much of this is to blame just Labour? I mean, where's Liberal feet in all this and Nationals and the Coalition generally?

• 30:43Speaker 01

  You know, people often say that the opposition is to blame. We don't have a healthy opposition. I just wonder whether it's the opposition or it's actually the electorate and the community and voters themselves. Because they want this hedonism, they want this myopia, they want the handouts. They've loved making out like bandits on the NDIS.

• 31:00Speaker 00

  But you haven't, I mean, I don't know, this room has got that handout. I mean, do you know people got the handouts?

• 31:04Speaker 01

  No, but people are getting handouts and they are making it like bandits and they are perpetually voting the likes of Dan O'Nair's back into power. So the incentives work. You know, you pay money, they tend to people, they tend to be partial to your perspectives when you're funding them. And I think that works until you get an inflation crisis that warrants much higher interest rates. And it also works until you rack up so much debt that you're left with no choice but to jam taxes up in order to get people to repay the money you've borrowed. So, and I think that reckoning is emerging now. We're starting to see people join the dots and understand that there is a powerful relationship between government spending,

• 31:47Speaker 01

  cost of living, inflation, interest rates and taxes.

• 31:50Speaker 00

  Could you, we often talk about the national debt, like just on under a trillion dollars, which means, you know, like Australians, we all owe that amount of money and we'll all be paying the interest. And our children and grandchildren are paying the interest on that for the future. But maybe you could just quickly touch on what never gets talked about is the state debt. I mean, as I understand state debt, debt is close to eight hundred, eight fifty billion. It's not far off the national debt. How important is it for us to get control of state debt? And what is the relationship between state and federal? Like, why is the state racking up so much money?

• 32:24Speaker 01

  Well, I think they're borrowing from that same playbook. Everyone across all the states has recognised that for that period, the money was cheap and interest rates were very low. They wanted to borrow as much as possible and spend as much as possible to buy votes. And that became a very successful political reflex that was rolled out. And but now we're seeing the consequences. What we are seeing is the interest rates on state government debt have gone through the roof. So Victoria was paying an interest rate on its debt of about one percent in twenty twenty one. Whereas today it will be paying closer to six percent.

• 32:56Speaker 00

  Wow.

• 32:57Speaker 01

  And certainly five and a half to six percent, depending on what the underlying government.

• 33:00Speaker 00

  Because there's losses rating, didn't it? It went down a couple of notches.

• 33:03Speaker 01

  And it's now double A and the risk is it goes to single A.

• 33:08Speaker 01

  But yeah, I mean, our public debt is a combination of the federal and state government debt. It's a fairly inefficient system where you've got a lot of duplication. And a lot of coordination failure between state and federal governments. And as you mentioned, it wasn't long ago that we had no debt to really speak of. And the states weren't buying much and the feds weren't buying much. And now their collective debt is well north of a trillion dollars. And the states are borrowing about a hundred and twenty five billion a year. A little bit more than that, in fact. And the feds are also borrowing about a hundred billion a year. So between the two of them, they're borrowing about a quarter of a trillion dollars of new debt every year.

• 33:51Speaker 00

  What do you think is going to happen with Australia's rating? Because at the national level I'm talking about, in terms of the credit agencies rating of us. Do you think that they're going to start to get nervous about deficits and debt rising? And so much so that they might change our rating, which means our interest cost is going to be a lot more costly on an annual basis?

• 34:12Speaker 01

  Yeah, we've definitely been in the crosshairs on our rating in the past. The credit rating agencies that are anoint these things have threatened to downgrade Australia repeatedly. And the ongoing deterioration in our credit worthiness and the enlargening of these deficits threatens that rating. So there's every chance we could lose that triple rating. We never used to have a triple A rating. We won it after the thrifty experience of the pre-GFC period, and then that rating has since been called into question. And I think it's a good question. If we lost it, would interest rates go up? There is a bit of a relationship between the rating and the quality of the rating and the interest rates.

• 34:55Speaker 01

  It's a somewhat complex relationship, but I think the direction of travel for

• 35:01Speaker 01

  interest rates on debt are much higher, and that just means higher taxes. Higher interest on debt means governments have to pay more money to the people they borrow from, which means they have to raise taxes in order to service that debt.

• 35:13Speaker 00

  And I think it's really important just to, I mean, you and I understand this, but maybe the audience doesn't quite get it. The bottom line is when we talk about intergenerational inequity in relation to the big amounts of debt that have been gathered by governments, state and federal, but the intergenerational inequity is that the bigger the debt, the higher the amount of interest we pay. The only place governments are going to get it, they've got to get it from taxes. They either increase the population to get more taxes out of an increased population, or alternatively do something to make our country really profitable and everybody's making a whole heap of money. Then we all pay more taxes. Or alternatively, if we don't make a whole lot of money, in other words, there's no GDP growth, we're not growing, just charge more tax, just drag more tax out of it, because we, the government, have to pay the interest on the bill.

• 35:58Speaker 00

  So we have to get the money from somewhere. So your point earlier was.

• 36:04Speaker 00

  Changes change that you said change the population growth, immigration, change the tax position, maybe do something with the GST, but do you can you see a government doing any of that?

• 36:15Speaker 01

  Probably not, until you have a cathartic crisis.

• 36:18Speaker 00

  Well, what do you mean by that? Like we actually hit the

• 36:20Speaker 01

  Recession you have to have.

• 36:21Speaker 00

  Yeah.

• 36:22Speaker 01

  And that forces that basically galvanises the collective will for real change. So I think the change has to come on a grassroots basis. I think the great thing about the budget is it did catalyse a huge public debate and suddenly it cast into sharp relief that there are alternatives. You know, you do have one nation, you do have the coalition. And I don't think it's the coalition's fault necessarily that they weren't contest. I mean, maybe they competed and contested the space very poorly. I don't follow Aussie politics particularly closely myself. But I think there was just no community interest and appetite for change. I think everyone was on the the take. I mean, the CIS, the Centre for Independent Studies, estimates that one in two Australians are deriving more than half their income directly or indirectly from the public purse.

• 37:07Speaker 01

  Whether that's right or wrong, we know it's a big number. And and so the only way you can convince people that they need to change and they need to perhaps be more thrifty and parsimonious is if they can see the cost. And they're now staring down the barrel of the cost because it's cost of living, interest rates, taxes.

• 37:26Speaker 00

  So it seems to me what you're saying is that we need to have a collective national punch in the head.

• 37:32Speaker 01

  Yep.

• 37:34Speaker 00

  A recession we had to have. And the last time we had a major recession was back in the early nineties and Kiding called it the recession we had to have.

• 37:40Speaker 01

  Yeah.

• 37:41Speaker 00

  By the way, that period, whilst interest rates were substantially higher in absolute terms, in relative terms, relative to the amount of money we borrow, we're actually in a worse position now, right now. He did call Sir Banana Republic at the same time, I think, well, earlier on in that year. But he said it's a recession we had to have. Being honest, you know, one thing about Kiding was always pretty honest. He said we had to have it because that was the only way you're going to control inflation, getting interest rates back. Do you see that as a proper prognosis from Australia?

• 38:11Speaker 01

  I think inevitably, like whether we have a recession soon or at some point in the future, that's probably going to be what's required to make the changes that are needed in order to restore productivity, improve the per capita income growth, the standard of living nationally and to power prosperity. Because otherwise, we, and we've talked about this before, we become Asians at B that we just sell our physical wares, our beaches and bikinis and budgies. And yeah, so we need a big reset. I do think the brain drain's a real issue. I mean, a lot of very successful Australians that I speak to are looking for alternatives.

• 38:51Speaker 00

  They'll move their capital.

• 38:52Speaker 01

  Yeah, well, they are. It's happening. Yeah. Because they're just like, and the rest of the world looks at Australia and just thinks we're basket cases in the sense that

• 38:59Speaker 00

  Banana Republic.

• 39:00Speaker 01

  Well, they think this is the UK redux. This is exactly what happened in the UK. This stealth socialism, the pendulum swinging to the far left. It's also similar to what happened under Biden. So we're now seeing the pendulum swinging the other direction. And people are saying to understand that the cost of, you know, taxing away productivity and prosperity is lower living standards. And everyone's worth off. The world is actually a much better place with the Elon Musks out there, rather than having the place powered by the Jim Chalmers and the Anthony Albanese's of the world, who are kind of, you know, sucking on the taxpayers' teeth. And the thing about Musk is people say, well, let's just tax him even more, as if there'll be no consequences. But if you create those disincentives, Musk will go elsewhere.

• 39:45Speaker 00

  Yeah, he'll leave. Yeah. And he can do the same thing. His brain will take him anywhere.

• 39:49Speaker 01

  Yeah, as crazy as it sounds, why do you think he wants to create an interplanetary capability? I mean, who has control of rights, regulations and tax in space?

• 39:58Speaker 00

  Or Mars. Yeah. It's very interesting.

• 40:01Speaker 01

  The Victorian utopia.

• 40:02Speaker 00

  Yeah, it's a very interesting prognosis that we're sort of sitting in front of us. Because what should people be looking out for if this government thinks that we're going to go into recession? Let's just say someone in Treasury said there's a possibility we go into recession because of the high interest rates and the cost of living, et cetera, et cetera. What would you expect to see the government do to avoid that before the next election? What sort of policies would they put in place? I don't know me and economic policies, but spend, give people more money.

• 40:29Speaker 01

  I think they're going to spend more and this is the.

• 40:31Speaker 00

  To buy their way out of recession for the next election.

• 40:33Speaker 01

  Yeah, to try and defer and delay that prospect. And the problem is it just exacerbates the problem.

• 40:38Speaker 00

  Well, pushes a bit further but makes it bigger.

• 40:40Speaker 01

  Yeah, but they're kicking the can down the road. But if they lose the election, it'll be the next government. And if they win the election, they can deal with that problem at that point in time.

• 40:49Speaker 00

  So in other words, we'll put the landmines out there everywhere.

• 40:52Speaker 01

  Yeah.

• 40:52Speaker 00

  And if we lose, someone else is going to have the problem.

• 40:54Speaker 01

  I mean, these guys are absolutely deluded donkeys. They have no, no idea whatsoever. I mean, everything they're doing is killing the country.

• 41:01Speaker 00

  Meanwhile, we got the Reserve Bank governor sitting, sitting there looking at all this going on and thinking, so well, my job is to reduce inflation. Um, my only, my only mechanism is interest rates. What chance does she have of not putting rates up and continuing to do so?

• 41:17Speaker 01

  Yeah, I mean, they've been perpetually dabbish, so they will try and avoid rate hikes if they can. So the housing market, you know, gives them a bit of a state of execution because they can look at house prices and say, well, Sydney house prices are falling at a 12% annual rate. And Melbourne house prices are, you know, falling by the same margin and that's most of the country. Maybe we'll get a negative wealth effect and maybe that'll tax or dampened consumption and spending and.

• 41:40Speaker 00

  Maybe.

• 41:41Speaker 01

  Put down pressure on inflation, but maybe not. Maybe if we keep on importing all these migrants and the politicians keep on spending like drunken sailors and there's this huge waste and inefficiency. There'll continue to be price pressures and they'll continue to be in productivity adjusted wage growth that drives high inflation because we're increasing minimum wages by massive margins is another example. And so then, you know, you just have this slow moving train wreck.

• 42:05Speaker 00

  But do you think that the Reserve Bank will actually therefore make a rate rise in August? I mean, you're expecting to see a higher inflation number in the June 30 numbers coming out the end of July. You're expecting that, we're all expecting that. Do you think they'll just say, well, it's in wait because house prices are going down, people are feeling less wealthy, therefore they're going to tend to spend less money? Do you think that's?

• 42:25Speaker 01

  I don't have a strong view on August. I do have a strong view that the. Inflation battle is going to be long lived and difficult and painful. So whether they raise rates or not in August is kind of irrelevant to me personally. Um. What I'm much more focused on is where does the cycle go? What's the direction of travel? Um. You know, how high could rates ultimately uh go? And what are the consequences of that? And I think it's going to be paying for property. Uh. It's going to be a much lower rate of population growth. I think you're going to see uh a radical reduction in migration. I think you're going to get a really polarizing political debate because everyone, and we're seeing this right now, everyone's going to be blaming everybody else. Here and now, you know, Chalmers now being saying, hey, these precipitous house price falls, that's not our fault, right?

• 43:10Speaker 01

  It's the RBA's fault. And the RBS is going to say, well, actually, you know, you've created an unprecedented uh investment uncertainty. I mean, you just, we had very clear rules of the game that have existed for decades. And you just chuck the rules out the door and said, no, no, we're establishing a new game because we want to control the game. Because we're, you know, we're the real big dogs, right? We're just, you know, going to be mafioso style. Um. Taking money from here, there and everywhere to feather our nests. And also tilt the probabilities in our favor because we want to tax and take from the private sector. Because that's the only way we know how to make money. Um. So I think that's devastating for confidence and sentiment. And, you know, you want people to have the comfort and confidence to establish businesses,

• 43:56Speaker 01

  to spend money, to build world-class products and services, to hire staff, to drive future growth, and that's going to be very difficult.

• 44:03Speaker 00

  Let's talk about America because you spend a lot of time over that way. I mean, you visit lots of countries in relation to your Kudumba business and you know, um, often pitching, you know, your, your, your, uh, how, how well your products, your, your list of products, which is a growing list, they go on forever. Um, Kudumba, and I actually noticed Luke ringing a bell the other day for an ETF fund.

• 44:25Speaker 01

  Yeah, yeah.

• 44:26Speaker 00

  You guys.

• 44:26Speaker 01

  New ETF on the asset.

• 44:27Speaker 00

  New ETF fund. Um. Luke Boris, that is, hi Lukey, how do you get that one in? What are they saying, what are they saying in other countries about us, mate? Like, what do they, what do they think about us?

• 44:39Speaker 01

  Well, I think the interesting thing is, is a lot of positivity and optimism in the US. So for all the visceral hatred of Trump and the Trump derangement syndrome, which is a real thing. It's amazing how even very smart people can't divorce themselves from their sort of primal distaste for the orange man. Notwithstanding that some of his policies may be really quite tractable, durable and important. I mean, he has completely, single-handedly rewritten the rules of the Middle East. And he's rewired all the relationships in the Middle East. He's kind of created this unwitting coalition between Israel and all of Iran's contiguous neighbours. I was speaking at a lunch yesterday to 150 people, mostly clients, and one guy got up and said, oh,

• 45:23Speaker 01

  it sounds like you like Trump. I mean, he's a coward. He didn't put boots on the ground. The Iranians won. And I was like, dude, Iranians are all dead. Like, that regime was largely eliminated. They've had most of their offensive kinetic military capability destroyed. They have had all of their nuclear facilities destroyed. They have no enrichment capacity whatsoever. They have very limited to any power projection capabilities. And if you think Trump's lost, he's become the biggest exporter of oil in the world. And moreover, the price of oil has gone from 71 bucks a barrel to 121 bucks a barrel. And whereas today it's back down at 71 bucks a barrel.

• 46:04Speaker 01

  Trump won comprehensively. I mean, it was the most one-sided conflict you can possibly ever imagine. They didn't have a single casualty in Iran. There are a few people that were injured at various bases around the US. So I would say we're seeing in the US the reassertion in a fairly unprecedented way of US geostrategic primacy and US economic exceptionalism. And people in the US, whether they like or hate Trump, and obviously a lot of people hate him, they, I think, are generally in agreement that they have the most business-friendly President in history and he's not perfect like you know, nobody, I don't like the front running and the insider trading that you sometimes see from what seems to be a very

• 46:48Speaker 00

  Or suspect.

• 46:49Speaker 01

  Inf- yeah, very informationally porous administration. So that sort of stuff um is is quite unseemly, but um the reality is if you want to establish your business in the US, uh you've got the most business friendly climate that people have seen in our lifetimes. And that's why the the information technology or the IT or tech oligarchy, who many of whom were Democrat pumpers uh have all um coalesced behind Trump. So you know, most of the tech oligarchy are now very partial to and supportive of Trump. Because they recognize that he's out there trying to help them win. He wants to win. That's his game. So I would say if you juxtapose that

• 47:29Speaker 01

  um uh ostensibly positive uh economic uh and business dynamic against, say, the UK where you know, the country feels like it's in depression. It's a very, very different dynamic. Um and the US economy is as strong as ten men. I mean, our big economic ideas over the last twelve months have been that AI is inflationary, not deflationary, or create jobs rather than destroy jobs. And that Trump's tax cuts would support growth uh and that combined with the unprecedented AI capex, which we argued would be much, much bigger than people think, because we thought that hyperscalers were lying about the true extent of the capex because they didn't want to tip off their rivals, how much they wanted to spend, because they've all got to compete for the same people,

• 48:12Speaker 01

  chips, memory cards, compute and resources to build data centers. We argued that the capex boom combined with the tax cuts, combined with the um massive deregulation um dynamic in the US would power a very, very strong economy that would then force the Fed to lift rates. The market a year ago when we were saying this, and I think I've said it here before, the market was pricing a hundred basis points of rate cuts from the Fed.

• 48:34Speaker 00

  Yeah.

• 48:34Speaker 01

  No one, not, people thought I was in that case when I was saying, listen, we think the Fed's going to hike in twenty six, twenty seven, twenty eight. The bond market was pricing a zero percent probability of rate hikes in twenty six, twenty two, twenty seven, twenty eight. Today, they're now pricing a hike. They're in fact pricing almost two hikes from the Fed later this year, probably after the midterm elections. So I think um the US is making out like bandits right now. People are positive. Um I think they look incredulously at Australians, say, why on earth has the one day down under the best performing economy in the fricking world?

• 49:04Speaker 00

  Over the last forty years, at least, yeah, thirty years.

• 49:06Speaker 01

  Like this economic miracle, why have they suddenly lumbered uh uh business creators and investors with the highest CGT rate on the planet? And why have you slammed small businesses with a thirty percent tax on their trusts? When that's a key vehicle for small business organisations?

• 49:24Speaker 00

  They all do, all do. It's not just for rich people.

• 49:26Speaker 01

  Yes.

• 49:26Speaker 00

  Plumbers, electricians, like a shop owners.

• 49:29Speaker 01

  Tax, what's the cost of closing down the trust uh and re-establishing and reorganising?

• 49:34Speaker 00

  Or getting evaluation.

• 49:35Speaker 01

  Or getting evaluation. I mean, you're talking about tens of thousands of dollars potentially. So it's just ridiculous. And and the conclusion is, this is again, the stealth socialism that we've seen uh ascend and then fail throughout much of the world. We saw it under Biden. We've seen it in Canada. You've seen it in the UK. You saw it under Aderna in New Zealand. And um it's, you know, all ultimately failed.

• 49:58Speaker 00

  Do you think the US today, whilst Trump is, all those things you just mentioned, like he's, he can be a bit annoying, can be a bit confusing, um he can be a bit um, come across as arrogant, et cetera, there's a whole heap of things. And maybe we don't like his particular form of politics. But do you think that his view on leading a country's economic might is something that the rest of the world shall borrow? That should, is is economics prosperity, welfare is important, but is prosperity a number one outcome for a country's um, you know, national pride and strength that a politician should be aiming for? Economic prosperity?

• 50:37Speaker 01

  I mean, he just wants to compete, win and maximise prosperity. And I think that's near the right objective.

• 50:44Speaker 00

  It's pretty simple, but it makes sense.

• 50:45Speaker 01

  A rising tide lifts all boats. And, you know, the most prosperous countries can provide for the poorest people.

• 50:51Speaker 00

  You're correct, that's how you organise welfare, by being prosperous.

• 50:54Speaker 01

  Correct.

• 50:54Speaker 00

  Not by borrowing it.

• 50:56Speaker 01

  Correct. And uh, you know, his um, I think economic calculus is is pretty distilled and simple insofar as compete and win. And by winning, you can generate income and wealth. And with that resource, you can provide for, you know, the community more broadly. But I I think um. He is, he has a kind of primal understanding what is required to succeed in the private sector. And what he knows on a human level is that government interference and governments trying to stand in the wheel of entrepreneurial progress is typically suboptimal. And that's what I think he's trying to eliminate.

• 51:39Speaker 01

  He's also, I think, trying to remove external interference in the US, you know, particularly in his sphere of influence. We've seen this in Venezuela and that campaign's been remarkably successful. He's turned the crosses more recently to Cuba. And, you know, Iran was clearly the most misanthropic act globally that was threatening Western prosperity and they've neutralized, I think, Iran very effectively. So I think his program's been pretty successful. I think as an individual, he's a much more complex cat than Australians in particular give him credit for. It's interesting, when you talk to Aussies about Trump, almost everyone qualifies anything they say by saying something like both of us have said today, which is, listen, I know

• 52:23Speaker 01

  he's not everyone's cup of tea, or I know he's a bit crazy, or I don't personally like him. And that's fair enough, but when you speak about Trump across the rest of the world, people are much more, I think, focused on his actions and decision-making processes.

• 52:35Speaker 00

  His effectiveness.

• 52:36Speaker 01

  And the outcomes. And even from Democrats in the US, I think they acknowledge that the economy has been a big beneficiary of the shift. And there's a massive compare and contrast taking place in the US where you've got two systems and two models in the form of California and New York on the one hand, and Florida and Texas on the other. And Trump's clearly alone with the latter. And the business-friendly, enterprise-oriented, relatively free-market solutions are winning. And that's what he's focused on.

• 53:06Speaker 00

  Do you think therefore, because this is where I'm trying to get to, do you think the governments, maybe in the UK and other places, particularly here in Australia, they're overthinking it and it should be more simple? They just say, get the economy prosperous and we can look after all the people who need welfare and help them all out. We can do the, you know, if you're disabled or you're, you know, you don't have a job or whatever the case may be, we can help you. But that's a pretty simple way of looking at things. And sometimes the simplicity of these things, we can test that, we've got to say, no, that's, it's got to be more nuanced. He doesn't seem to be nuanced. He just seems to be saying, we'll get ourselves to be successful and we'll make lots of money and I'll drop the tax rates to make sure everybody's incentivized to do that. I'll get productivity up because their productivity is up relative to

• 53:50Speaker 01

  Productivity is incredible.

• 53:51Speaker 00

  Like relative to, like we're nowhere.

• 53:53Speaker 01

  Relative to everyone in the world, the US productivity is.

• 53:55Speaker 00

  So this simple stuff has worked.

• 53:57Speaker 01

  Yep.

• 53:57Speaker 00

  Why does, and why, what, what do you think it is here in our mentality that our politicians don't accept that? We're just, or end or adopt it?

• 54:05Speaker 01

  Well, I think we've lost sight of the fact that what powers prosperity and living standards is success. We want to take and tax success, whereas in the US they have a, a deep sort of genetic understanding that everything is about success.

• 54:21Speaker 00

  Yeah.

• 54:22Speaker 01

  You know, Musk has probably created a hundred trillion dollars plus of welfare, welfare for the community in large. I mean, he's the guy that has electrified automobiles. He's given us electronic payment systems. He's given us cheap internet connectivity for every person on the planet. And he's now giving us the capacity to develop an interplanetary species. So the welfare, he might have made a trillion dollars, but he's gifted to the rest of the world a hundred X that, possibly more. And we want to, you know, motivate and mobilize and incent every Musk out there. And you don't do that by crushing productivity and prosperity, which is what the other side want to do. And I think you lose sight of

• 55:05Speaker 01

  the need for productivity and prosperity and the need to cultivate success. When you're so wealthy and you're so rich, they just want to argue about cutting up the pie rather than growing.

• 55:15Speaker 00

  As a country, that's us.

• 55:16Speaker 01

  As a country, yeah. And I think that's what we've been doing.

• 55:18Speaker 00

  Prevent spoilt.

• 55:19Speaker 01

  Yeah, yeah. And I think these entitled professional politicians are just, you know, want to rape and pillage from the private sector in order to buffer their own pockets. And that's the problem. And you only realize it's a problem when you start to pay the consequences of that problem in the form of rates, taxes, cost of living, which is, I think what's playing out right now.

• 55:44Speaker 00

  You've had a lot to say in the past about cryptocurrency. Too expensive. We've seen Bitcoin more recently come back and really sort of fall fall quite a lot like over the last six to twelve months. What is your hypothesis on crypto now? Where you stand?

• 56:01Speaker 01

  Yeah, I think it's pretty worthless. I don't really see any utility from crypto at all. It's not a stable store of wealth. It's the most volatile asset that exists. It's not government guaranteed. So in any crisis, it can get eliminated. It's not cryptographically secured. I've argued for years that quantum computing could threaten the encryption that protects blockchain and Bitcoin. I think people are getting very nervous about that right now. And it's not an inflation hedge. In the first big inflation crisis after the pandemic and after the GFC, Bitcoin fell eighty percent. And, you know, I know now, you know, this week has been trading down around fifty eight thousand dollars.

• 56:40Speaker 01

  So I think you're gonna see the momentum and fidelity to the crypto cause over time decay. And I just don't see what the the value of crypto is, period. If you want digital currencies, nation states and central banks will over time create government guaranteed digital currencies.

• 57:04Speaker 01

  But, you know, I think it's pretty preposterous that this cryptocurrency Bitcoin was created by a guy Satoshi son, who apparently has billions and billions of dollars of stuff, but has never utilized it. And protected blockchain with an encryption technology, SHA two five six, was which was developed by the National Security Agency.

• 57:26Speaker 01

  And my best guess is that it's a Western intelligence honey trap that, you know, around the dawn of the time of the internet and the widespread adoption of the internet and the advent of the idea of digital currencies, they thought in the souls, well, any non democratic actor is going to want to keep wealth outside of the banking system, outside of the reach of nation states via these cryptocurrencies. So why not try and control them? But yeah, I have I have no cryptocurrency, have never had any exposure to it, and I don't really understand it.

• 57:57Speaker 00

  Well, I was gonna say, it's because you don't understand it.

• 57:59Speaker 01

  Yeah.

• 58:00Speaker 00

  And by the way, I don't either. I find it incredibly difficult to understand the point of it.

• 58:05Speaker 01

  Yeah.

• 58:05Speaker 00

  But what about gold?

• 58:07Speaker 01

  Well, one of our big ideas a year ago was, um, everyone in the world was talking about how much, you know, they hated Trump and how we're going through this forever de-dollarization trade. And then the AFR wrote a year ago, forget de-dollarization thing.

• 58:20Speaker 00

  You wrote this?

• 58:21Speaker 01

  Yeah, I wrote, I don't know anyone else globally who uses this term, but I said, you should be talking about not de-dollarization. You should be talking about re-dollarization. Why? Because Trump, he's going to go out there and swing hard and he's going to reassert his big dog, you know, hegemonic, uh, you know, geostrategically dominant status, which is exactly what he's done. The US economy is going to be the central clearinghouse for all AI spending, AI research, AI innovation, and AI profits. They're going to be the big beneficiary, not China, or not Russia, or not France, or Germany. It's all about the US. And this revolutionary technology. And, um, that ultimately is going to create a lot of, uh, economic success and inflation, which is going to force US interest rates higher.

• 59:07Speaker 01

  And higher interest rates should push, push the US dollar higher. And just more recently, we've seen, um, strong US dollar appreciation. And what was happening under the de-dollarization dynamic is when Russia invaded the Ukraine, the West froze Putin's US dollar reserves. And at that particular point in time, every non-democratic state in the world woke up and realized that they could not keep US dollars as their liquidity source of last resort. And so they had to sell it. So all the non-democracies of the world have been selling dollars to buy gold and crypto in some cases. And, um, at some point that runs its course. At some point they sell the dollars, they buy the gold and they're done.

• 59:49Speaker 01

  At that juncture, the natural economic forces that determine the price of gold and the exchange rate, uh, reassert themselves.

• 59:57Speaker 00

  Or like, that's like any asset class. But go on.

• 59:59Speaker 01

  Yeah. So the, the de-dollarization thing was like a picture of Python. And I argued a year ago that eventually you're going to see re-dollarization. As people wake up and realize that the US dollar actually is the global reserve currency. It's not Chinese currency. It's not crypto. It's the US frickin' dollar, which is backed by a military that's stronger than the rest of the world combined. Uh, and that is completely unassailable and also is currently being run by an administration that is hell bent on asserting not just geostrategic, but also economic promise. Um. And so that's bad for gold. Um. Because, uh, you know, the bid for gold at some point, um, deteriorates. Uh, and that demand disappears because the diversification is done.

• 1:00:44Speaker 01

  So I suspect that's what's happening.

• 1:00:45Speaker 00

  They've all bought.

• 1:00:46Speaker 01

  They've bought, it's done, and gold prices are normalizing in the same way that, you know, the people that were the crypto junkies have done what they needed to do. Um, bought their Bitcoin at a hundred and twenty thousand dollars and now it's, um, normalizing back down to close to nothing.

• 1:01:00Speaker 00

  It's interesting you say that because like, you know, the old saying was when the doorman of the Wentworth Hotel, which is now the Sofitel Hotel, but when the doorman of the Wentworth Hotel starts talking about buying shares, that's when you know you should sell out. That was an old saying in the eighties. And, uh, what's interesting about that, there's a, there's a, a gold bullion company, I won't name the name, but in Martin Place and up until about, uh, two months ago, there was a line there every single day of a hundred meters of people lining up to go in there by, by, by gold. And, uh, and I walk past there like often and over the last three to four weeks, that line has gone, it's disappeared, does not exist, none, zero people.

• 1:01:36Speaker 01

  Wow.

• 1:01:37Speaker 00

  And that's the doorman of the Wentworth. That, that's, that's, that's the canary in the coalmine for me.

• 1:01:41Speaker 01

  Yeah.

• 1:01:42Speaker 00

  And that's a big indicator of that, that particular asset class. Well, I just wanted to say one thing is before we finish because, you know, it's funny how moments we're celebrating tend to have a few things in common. Good company, something worth toasting and something that makes it feel like it mattered. Seventy five years of Penfolds Grange, once tasted, never forgotten. Now let's dive back in. A lot of people, you know, watch these shows and, uh, and all, you know, things that you write or I might write and they, they sort of, uh, want to come at you for a whole lot of reasons and, um,

• 1:02:18Speaker 00

  and I've known Chris Joy for a long time. Um. Chris is, um, a pure pragmatist. Um. So when he's here talking about the USA, Trump.

• 1:02:30Speaker 00

  Whatever, any asset class you want to talk about. It's not because he's a fanboy. That's not him. He actually can give a rat's ass about any of those things, those people. Cause he's, but no, because he's, he's pure economics. He's, you're purely interested in what asset class is going to be the best outcome for me for your business, which is cool about. And, uh, and for Chris and, uh,

• 1:02:52Speaker 01

  Well, actually you know me, mate, cause you know,

• 1:02:53Speaker 00

  A long, long time.

• 1:02:54Speaker 01

  Yeah. I mean, it's true.

• 1:02:56Speaker 00

  It's factual. We're talking about facts.

• 1:02:57Speaker 01

  But also I can't help myself. I just say what I think.

• 1:02:59Speaker 00

  Yeah.

• 1:03:00Speaker 01

  People often say to me, after I do these podcast interviews and I was on Carl's a couple of times as well. And they're like, oh, why don't you go into politics, mate? I could not think of anything worse.

• 1:03:08Speaker 00

  Yeah. Cause you're not political.

• 1:03:10Speaker 01

  Uh, not at all. Like, and the other thing is that if you deal with these politicians, they're all narcissists.

• 1:03:15Speaker 00

  Yeah.

• 1:03:15Speaker 01

  Like these dudes are the student politicians who have never worked a day in their lives and all they're interested is in their personal power. And, you know, it's just the worst thing in the world. I mean, when you're a kid, you're very idealistic and you knew me during my twenties. I wanted to change the world. I had all these great ideas. And I thought, wow, this is amazing. You go to Canberra, you convince people that there are some demonstrably good ideas.

• 1:03:39Speaker 00

  I remember you doing John Howard.

• 1:03:40Speaker 01

  Yeah, I wrote

• 1:03:41Speaker 00

  Share equity.

• 1:03:41Speaker 01

  380 page, uh, report for the Prime Minister on affordable housing.

• 1:03:45Speaker 00

  Yep.

• 1:03:45Speaker 01

  I convinced Kevin Rudd during the GFC to invest $15 billion into, uh, residential mortgage backed securities. But, but at the end of the day, you, certainly in Australia, come to the conclusion that these are deeply flawed and conflicted processes where you very, very rarely get good decisions. And to your point earlier about, well, what's the best operating model? Should government step aside and just let businesses do what businesses do? And drive as much innovation, investment, endeavour, exertion and progress as humanly possible. Let the collective wisdom of the economy do its thing and try and minimise interference.

• 1:04:26Speaker 01

  Just set the stable rules of the game such that we maximise the probability that Australia will win in this global market. Or should they try and pick the winners and losers? Should they try and act? Like those benevolent dictators and divine uh what the outcomes will be now is they're never going to make the right decisions. It's like those idiots sitting in that private jet saying, hey, why don't we just take fifty to sixty billion of other people's money and pour it into the M B N? Only to be absolutely eviscerated by Elon Musk and you can name countless snowy hydro two point zero. All of these white elephant infrastructure projects that they've spent hundreds of billions of dollars on just total extreme waste. Um. So.

• 1:05:09Speaker 00

  And no accountability, by the way.

• 1:05:10Speaker 01

  But you but your point is I don't have an agenda. I really don't know.

• 1:05:14Speaker 00

  And I I want people to understand because.

• 1:05:15Speaker 01

  Yeah, I I'm just telling people what I think.

• 1:05:17Speaker 00

  Yeah, well, no, it's not what you think. It's what you've you've analyzed it. So, you know, like what people don't realize is you've got all these PhDs working for you. You're all sort of looking for a basis point here and there, but literally, because your your business.

• 1:05:27Speaker 01

  But I'm not trying to make money out of this conversation.

• 1:05:29Speaker 00

  No, no, that's what I'm saying.

• 1:05:30Speaker 01

  I'm telling you what I believe.

• 1:05:31Speaker 00

  But this is but why I get you in is because you're doing the work, which I think our listeners need to hear. Um. But it's not politicized. I I don't want this to be anyone to think this is politicized. The and and uh because, I mean, we've seen what's happened to, you know, uh lots of people do holding podcasts now that they they tend to think, oh, well, you're just trying to take a side mark and or Chris Joye trying to take a side. No, it's it's I I've known you for a long time. He is not that type of person.

• 1:05:57Speaker 01

  And you're not that person.

• 1:05:57Speaker 00

  No, I'm not. I couldn't get a rat's ass about it. I I don't care. Like, to be honest with you, I don't think I don't think any of the parties can do it. I think it needs to be sort of somehow left to us, not you and me, but Australia to fix it themselves. I don't think anyone got the ability to fix it. I just don't.

• 1:06:11Speaker 01

  I agree with it.

• 1:06:11Speaker 00

  And and and I I've made suggestions to both sides of politics about the G S T. I get dismissed every time. I keep saying it should go up to I I don't go quite as far. I have no the numbers. If I don't go quite as far as fifteen percent, I say. But it should be a fungible G S T. Should we go between ten and twelve and a half? Every time the R B A needs to put the rates up, we put G S T up in lockstep. We put it back down, but never to be below ten percent. And whatever we raise above ten percent, it doesn't go to the state. Somehow we, you know, we say you're not going to get any more if you or you only get more if you can reduce your spending. You know, like it's a reward type, basic. I've been dismissed by both sides of politics. Because they and they told me straight in my face, Mark, we'll never get this through.

• 1:06:51Speaker 01

  Well, as we've spoken about, I think before, you and I rocked up to Wayne Swan.

• 1:06:55Speaker 00

  Hundred percent.

• 1:06:57Speaker 01

  Rocked up to Wayne Swan when he was treasurer and said, listen, here's the deal. We understand banks probably better than anyone in the world. And the banks benefit from a taxpayer subsidy where they can raise money artificially cheaply. Because of the perception their government guaranteed. And there is a case to whack a tax on the banks. To price the fact that they get to raise artificially cheap money. And that goes straight to not taxpayers, but to their bottom line. And that basically fluffs their return on equity. And so we're actually arguing for higher taxes. And.

• 1:07:34Speaker 00

  And what was his response?

• 1:07:35Speaker 01

  And a price on and a price on this taxpayer subsidy that we were gifting to the banking system. This is like heartland labour policy.

• 1:07:43Speaker 00

  This is straight up to GFC.

• 1:07:44Speaker 01

  Straight up to the GFC. And but this was, this is central casting labour.

• 1:07:48Speaker 00

  Yeah, totally.

• 1:07:49Speaker 01

  You know, taxpayers helping out banks, they should be appropriately recompensed. And you need to price the free gift to the financial system.

• 1:07:58Speaker 00

  In other words, tax the banks for the government guarantee, so-called government guarantee.

• 1:08:01Speaker 01

  Swan said, oh, no, I couldn't take on the banks. They're too powerful.

• 1:08:03Speaker 00

  He also said at the time, do you remember, I don't know if you remember this, but he said to both of us, and we went there in, you know, in good faith. He also said to us, because look what's happening in the mining lobby. I don't want to have to take on the bank lobby at the same time as taking the mining lobby because there's an election coming up.

• 1:08:17Speaker 01

  Hundred percent. You know, the irony of all of that is another person who's vilified, who's actually, you know, in all my dealings with him, he's a very good guy, Scott Morrison. He actually did, when he was treasurer, whack this tax on the banks.

• 1:08:29Speaker 00

  Yeah.

• 1:08:29Speaker 01

  He introduced something called the wholesale liability levy. And there is a 0.6% tax that the big banks pay. Every year and it generates billions of dollars of revenue for taxpayers. And that was our idea. That was the idea we put to Swanee.

• 1:08:45Speaker 00

  Yeah, but he didn't want to do it.

• 1:08:46Speaker 01

  He didn't have the balls.

• 1:08:46Speaker 00

  Yeah, because because he didn't, he thought it was going to affect winning election, the next election.

• 1:08:50Speaker 01

  Correct. Whereas Scott Morrison didn't do that for any reason related to politics. He did it because he thought it was actually the right thing. Whereas Swanee, all he cared about was politics and power.

• 1:09:01Speaker 00

  I recall there was another thing that you mentioned to him that they should do. And you said, we should have a royal commission into the banking system. And he said, there's no way. And then of course.

• 1:09:11Speaker 01

  Show hockey.

• 1:09:12Speaker 00

  You you then put your limbo point playing that to hockey.

• 1:09:14Speaker 01

  Yeah.

• 1:09:14Speaker 00

  Which called for the same thing. He said, no way. And then following that, um, was Scott Morrison, actually, who put them on?

• 1:09:22Speaker 01

  Well, no, it was actually, I put it to hockey. He backed it.

• 1:09:23Speaker 00

  He backed it.

• 1:09:24Speaker 01

  And back and hockey as treasurer held the Wallace, oh, the son of Wallace.

• 1:09:28Speaker 00

  That's right. Son of Wallace. You're right. You're sorry. You're right. You're a son of Wallace. I forget that. Cause the original Wallace inquiry was the original banking inquiry and the son of Wallace.

• 1:09:35Speaker 01

  And that was the Murray inquiry.

• 1:09:37Speaker 00

  Yeah.

• 1:09:37Speaker 01

  Yeah. Which I wrote the terms of reference for. So.

• 1:09:39Speaker 00

  David Murray. Yeah.

• 1:09:40Speaker 01

  It's funny, the people that would criticize, I think, a lot of the things I say are actually projecting their own political prejudices.

• 1:09:46Speaker 00

  Yeah.

• 1:09:47Speaker 01

  And you're, I think that's a key takeaway. We don't give a freaking rat's ass.

• 1:09:50Speaker 00

  No, I couldn't care less.

• 1:09:51Speaker 01

  All I care about is figuring out, uh, solutions to problems and getting to the right answer.

• 1:09:56Speaker 00

  And all I care about is bringing the best people to the show who know the problems, can articulate the problems like you do and come up with some solutions. And that's all we can ever hope for. But the problem is, mate, the politicians that listen to us, the country's so divided at the moment. The politicians know there's division. They're gonna play the division because they're unfortunately, you know, and I respect this part of it. They're fighting for their life.

• 1:10:19Speaker 01

  Yeah.

• 1:10:20Speaker 00

  They are fighting for their life.

• 1:10:21Speaker 01

  Yeah.

• 1:10:21Speaker 00

  And, uh, and, you know, good luck to them. Um, but it's one of the reasons why I know a lot of people say, I'm not gonna live in this country anymore. Because the place is.

• 1:10:28Speaker 01

  You've heard people say that.

• 1:10:29Speaker 00

  A hundred, a hundred percent. Heaps of people.

• 1:10:31Speaker 01

  Yeah.

• 1:10:32Speaker 00

  Heaps.

• 1:10:32Speaker 01

  Heaps to me.

• 1:10:33Speaker 00

  And they wanna take their capital, not only their money, but their know-how and what they've developed.

• 1:10:38Speaker 01

  Intellectual property, their creativity.

• 1:10:40Speaker 00

  Take it to some other place.

• 1:10:41Speaker 01

  They'll build businesses in New Zealand. They'll go someplace where.

• 1:10:43Speaker 00

  Well, Singapore.

• 1:10:44Speaker 01

  Singapore.

• 1:10:45Speaker 00

  Uh, people are saying to me, oh, well, Mark, there's only a few. There's not that many. Yeah, but these people, when they set businesses up, they employ tens of thousands of people.

• 1:10:53Speaker 01

  Yeah.

• 1:10:53Speaker 00

  So there is many.

• 1:10:54Speaker 01

  Isn't it Chalmers statistic? I don't know if this is right, but I thought I read it somewhere that it's zero point one percent of Australians pay sixty percent of all capital gains tax.

• 1:11:01Speaker 00

  Yeah.

• 1:11:02Speaker 01

  Well, if the zero point one percent up and leave, what's gonna happen to your tax revenue, buddy?

• 1:11:06Speaker 00

  Yeah.

• 1:11:06Speaker 01

  Same thing happened in the UK. They basically changed the tax incentives for successful people in the UK. They basically all left.

• 1:11:12Speaker 00

  They're all going to Dubai and Abu Dhabi and those places. Like there's been a massive exodus. Uh, like tens of thousands of people have left the UK.

• 1:11:19Speaker 01

  Yeah.

• 1:11:19Speaker 00

  It's the biggest exodus.

• 1:11:21Speaker 01

  And you might say, well, who cares about tens of thousands? But if that zero point one percent is sixty percent of your tax.

• 1:11:24Speaker 00

  Correct.

• 1:11:25Speaker 01

  That's a pretty problem.

• 1:11:26Speaker 00

  And they were employing all the people.

• 1:11:28Speaker 01

  Yeah.

• 1:11:28Speaker 00

  As usual, mate, Chris Joy. Awesome, mate. That was fantastic. Thanks, mate.