Transcription
But I think Australia has a bigger problem. Um, so in Australia, uh, we have even higher inflation than the US. So, last, I mentioned the US, they're running at 3.4 last six months. Three last 12 months, targets 2. In Australia, the target's 2.5. Last six months, we've been running at 3.9 for core inflation. 3.9, 2.5 last 12 months, 3.4. And the problem in Australia is our inflation is not being driven by all this, you know, private sector growth. It's actually the opposite. All of our inflation in Australia has been driven by two things, really, only two things.
Government spending, the $800 billion of debt, almost $30,000 per person, that racked up since 2019. The NDIS is a great example. It was meant to be 13 to 14 billion sized by the Productivity Commission a year. So, 13 to 14 billion a year. They're now spending over 50 billion a year. All that waste is basically like a python squeezing a balloon, and the balloon is kind of getting bigger and bigger, and it's crushing or it's fixiating the, uh, private economy, and it's creating price pressure. So, government spending is so large, that $80 billion deficit per annum is so large that it's pushing out the price of everything. It's pushing up our cost of living. It's pushing up inflation, uh, and ultimately, it's pushing up interest rates. It's why we're getting rate hikes.
But the other dynamic is immigration. We had record, a record number of 500,000 people arrive in the country in January. So, we got record migration.
Wow.
Yeah. And the, if you dump 500,000 people, half a million people a year on Sydney and Melbourne, the, we just can't cope because we don't have that much rental accommodation. We don't have that much capacity to transport this population shock efficiently. And so the Aussie economy has been artificially inflated by immigration and by government spending, not by businesses, not by the private sector. In fact, the private sector is in a, um, per capita income recession has been since 2023. So, what's actually happening, Mark, is relative to government, the private economy is shrinking. The government part of the economy is the biggest since World War II. This is actually stealth socialism, right? Because Australia got Australians have been addicted to the idea that the Dan Andrews of the world will bail them out. And according to the Center for Independent Studies, one in two Australians now derive more than half their income from government and related sectors. So, this means we have an economy built on fake growth. Uh, an economy with a lot of cost pressure on debt, cuz that money, debt and immigration, and we have a huge amount of fake growth. The private sector is actually struggling. So, if you speak to moms and dads, they're like, I'm working my ass off and why are rates rising and why is my cost of living rising? Like, how am I contributing to these problems? You're not. It's got nothing to do with you, mate. It's got everything to do with politicians and population.
That's so when the Reserve Bank says, um, um, inflation is to some extent being driven by both private and public demand.
It's horshit.
Yeah. Okay. Can you explain that? Because because of course, our treasurer gets up and goes, "Well, I've told you private demand. Private demand is fantastic. Everyone's." Which, so the implication is everybody's doing fantastic and we're all out there spending like drunken sailors. Can you just give us a reconciliation of that?
No. No. Almost all, almost all the inflation in Australia has been driven by immigration and government spending. And, uh, in the absence of that, the overall economy would be very weak. Inflation would be much lower, and interest rates would be much lower. That's just a statement of fact. It's an objective fact that interest rates and inflation would be much lower for the extreme government spending and population growth we're seeing. I think the politicians probably think that you ship in half a million people a year, they probably vote for you, but it's not sustainable. And the broader question is, well, the challenge for the RBA and in your question is really, why isn't the RBA calling this out?
The reason the RBA isn't calling this out is because they've been whipped by charas. Charmer's appointed the governor and deputy governor. Char's appointed most of the voting members of the interest rate setting committee, which is entitled to. And I would have done the same thing. But the reality is they've been completely muzzled. They are completely unwilling to call out government spending. Uh, other iteration of the Reserve Bank in the past have been quite forthright in saying that, you know, governments need to, uh, balance their budgets and pull in the purse strings and, and kind of contribute to more, um, you know, prosperity because you can't drive living standards up without an increase in productivity. So, this is the other problem. So, it's all related. The government's sector completely asphyxiating the overall economy and private activity is crushing productivity because there's no productivity in the government sector. In the public sector, there's been no productivity growth for 25 years. So, Australia actually has gone from one of the most competitive nations in the world. When we grew up as kids, the whole world admired our sports people and our business leaders, um, you know, the Don Bradmans, the Rupert Murdochs, um, you know, the Shane Warnes, for their innovation, ingenuity, intensity, and work ethic. And that's more or less disappeared. So, our productivity performance is amongst the worst in the world. Whilst the US productivity is soaring, we are worse than Europe. And that's because the government sector is taken over so much of the overall, uh, growth pulse, uh, and productivity in the government sector is so poor that it's dragging down our overall productivity statistics. The productivity in the private sector is not amazing, but it's not nearly as bad as it is in the government sector. And low productivity means you just have to pour more money and people into producing goods and services, which is inflationary.
So, um, so I think all roads lead to, uh, entrenched inflation pressures that are going to be hard to resolve unless we do one or two things. The solutions are simple. You got to spend a lot less. So, the government has to spend a lot less, and you need to pull back on immigration. Now, the interesting thing is the government saying that they want to tax us more. So, they want to take more of our savings so they can spend more to resolve a spending problem, which makes no sense. You can't resolve a pathological spending problem by stealing even more money from taxpayers. Right? You got to resolve your kind of addiction to pork barreling.
It works against that. Also works against productivity. Why is someone going to work harder if they just got to pay more taxes?
Man, this is a key point. Like we have, you know, you can, as an Australian, you can move to Florida and have a top marginal tax rate of 38%. Why would you stay in Australia and be, if you're a top producer, and pay 47%?
And by the way, it kicks in much earlier, too.
Yeah.
I mean, in the US, you can be earning 500 grand a year until you get in the top rate.
Yeah.
US dollars. Here, you're you're in the top rate at 200.
So, you're exactly right. So, not only are they raising taxes to crush entrepreneurship and innovation and disincentivize hard work, but they're trying to say that our spending problem is going to be resolved, Mark, by giving us more money, which makes absolutely no sense. Your spending problem, mate, is resolved by you spending less. My folk.
Yeah.
It's pretty simple, right?
But also, do you would you suggest that? Can I say I think when, sorry to interrupt, but when Main Street connects the dots, which I think may here.
Yeah. But when, when mom and dad understand that whilst they're making out like a bandit on the NDIS and probably robbing the NDIS, the quid pro quo or cost of that is a higher cost of living, higher inflation, and getting whacked by higher interest rates.
Net net against you.
Yeah. Yeah. And then higher taxes, right? I think people start to realize, actually, this is not sustainable. Particularly if the government, as they're already doing, starts to self-cannibalize and say, "Well, actually, we've got a massive corruption problem with the NDIS. We need to start pulling it back in." Um, and it was interesting that they raised that last week. But, um, the other, the other dynamic in Australia is the swinging the political pendulum to the right here. I think the casualty of that will be immigration, which we do need to pull back on.
Can we talk about that, Nick? Because what's your prognosis on that?
Yeah, I think our view is, if you look at what's happening in the UK and the US. So, you've gone from Biden to Trump. And you're going from a very hard left government in the UK to potentially Farage and Reform in the UK, which are hard right. And then you're seeing similar dynamics start to manifest here in Australia. You can clearly see a lot of community discontent with the idea that you've spent almost a trillion bucks of our money. You're now asking us to pay it back through higher taxes. Our interest bills gone from 1% per annum to 5% per annum. Uh, and the casualty is our cost of living is going through the roof. Uh, and yeah, we're getting wet.
Standard of living is going backwards. Standard of living. Yeah, that's the key point, I think. Yeah. Our per capita incomes actually declining. So, our standard of living and our prosperity is shrinking. Um, yeah, I think that galvanizes or catalyzes the change in the political zest. Whoever wins government, I think you're going to see big policy change. So, this is my prediction. We're going to see Australia for the pretty much the first time in history, at some point, without any population growth. In the US, you've gone from super strong population growth under Biden to none. [clears throat] In Canada, they had super strong population growth and they've crushed it and immigration. In New Zealand, they had super strong population growth and it's fallen dramatically. And I think you'll see the same thing happen in the UK. So, I think whether Labor judges that, hey, all of this immigration is creating lots of problems, whether it's, you know, assimilation issues, allow Bondi, whether it's, um, inflation issues, cost of living issues. I mean, I think blind Freddy can see the country just can't cope with half a million foreigners coming here every year to live. So, I think you'll see policy change. Whoever prevails.
Either, either party.
Yeah. Yeah. But I think you'll see big policy change. And what's profoundly important, I think, for viewers is we have to imagine an Australia, and there's a sequencing to this, but we got to think forward and imagine an Australia with no population growth, which we've never seen before, Mark. It hasn't happened really. We've always run the same.