Transcription
Uh, hi Leath. Welcome to another weekly edition of the the Macro and the M mortgage podcast. Um, how are you, my friend? What's been happening?
Yeah, I'm okay. I've been pretty busy. Um, yeah, my mom's a bit ill at the moment, so I spent a lot of time uh in hospitals and that sort of thing, which kind of sucks, but uh yeah, you know, I'm basically I'm 48, right? So my mom's late 70s and we're sort of in that sandwich generation where you got teenage kids and that's that that's brutal in itself. And then you got obviously elderly mother who needs help. So it's just uh yeah it's a bit of a an assault on both sides at the moment. But um apart from that not too bad. Uh slowly watching the world fall apart and that's [snorts] that that's quite depressing in itself which we can talk about in a sec. And unfortunately, as I'll talk as we'll talk about in a sec, Australia has set itself up for um you know, it's set up very poorly e economically over the next six months uh if not longer based on what's going on overseas. So um yeah, looking forward to talking about it.
Yeah, you're watching the Brisbane market closely as well.
That's right. Yeah. Yeah. Yes. I've been watching the markets, watching Brisbane, um watching the housing markets. Yeah. It's basically I think it's the we we could be on the precipice here um in especially in those places but I think more economically as well. So I I actually think and I'll get into it in a sec but I think the RBA is going to be cutting um could be cutting within you know the second half of this year based on everything all all the global you know problems that we've got going on.
Yeah. I mean, for for mine, I would say that we're pretty much there at the at the peak for this cycle now because we're seeing Melbourne and Sydney start to soften. Uh turnover has started to fall slightly. We're still very tight on listings, which is which is what is really holding prices up nationally. Um but although the national gains are still there, they're slowing. They're slowing in pace. And I think we need to recognize that there's not a lot coming up that's going to push these markets or lead them into acceleration. Certainly not with uh I went to the petrol station this morning actually following the conversation that I had with you yesterday where you said Katherine keep your car full of fuel. Uh not that I do a massive amount of driving, but I did stop and fill it up and was stood behind a lady that went to the counter to pay and didn't believe that it was her um bill when she got there where the the cashier was telling her what she owed and she said, "No, that can't be right. That can't be right." And he was trying to say to say like he said, "Prices have doubled. Prices have doubled." because she's like, "That's not usually what it costs."
Yeah, it's brutal. It's absolutely brutal. And it's
um I'm more worried about rather than the cost, I'm worried about shortages. Uh and
I actually went to um I've done prepper shopping, would you believe? So, I don't want to sound too doomerish, but uh I I'll get into it shortly, but I think we're going to have shortages and a lot of stuff. So, as a result, I've stocked up on uh staples and that sort of thing. Make sure my cupboards are full so that when when the shortages come, I don't have to stress out about it. I've got, you know, four people in my family. Uh, so, you know, I got teenage kids and they eat a lot and whatever. So, anyway, it's um, yeah, it's interesting times. Unfortunately, this decade has turned out to be absolutely suck. We've had obviously co, the pandemic, lockdowns, you and me both in Melbourne where it's been where is the worst. Then we've had wars and now we've got this. So, this is going to go down in history as the dismal 20s, I'm pretty sure. Um, I'm hoping it just doesn't escalate into a global conflict. That's that would be my worst case scenario. China invades Taiwan. They use, you know, America's exhausted a lot of its munitions, etc., and they use this as an opportunity to invade Taiwan. That's the worst case scenario.
Um,
well, if any, if anyone follows Well, first of all, before I before I say this bit, I will say that um I read a very good article on macro business this morning regarding uh stockpiling food and giving kind of like a weekly uh well, it wasn't a week. Yeah, it was a weekly. It was a weekly breakdown of what was going to happen over the weeks and then the months ahead um to fuel prices and the stockpile that we've got. And obviously we'll get into that. So just a just a plug there for anyone that's not subscribed to Macro Business to go over there and and uh give it a follow. It's a very very reasonable subscription per month and um the amount of information that you'll get there. You won't need to go to any other news source for your economic information other than macro business and you'll get the you'll get the low the breakdown there of sort of what's happening. So, just a plug for that. But, um, uh, I can't remember what else I was going to, uh, lead into now after interest rates.
Oh, interest rates. Yeah. Well, well, we should, we should get into that. I mean, I I was, well, actually, it was regarding the war. I mean, I do a lot of interviews with, um, some really good war analysts. One is a chap called David Murray, who's a global, he goes under the name of global forecaster. He's, um, he runs his, uh, business out of the UK. And uh I've been talking to him for a long time regarding this is this already is World War II. And if anybody doesn't think that the the the two regional wars are are, you know, are not going to sort of lead that way, then they're deluded. And I think even just hearing you who who are quite conservative when it comes to these discussions, you know, and where war can escalate, talking about China potentially evading Tai Taiwan and this area, I mean, ch the South China Sea, you know, and then, you know, is very important obviously to China and securing its trade routes, particularly under these these times. So it it's it's a really scary atmosphere and it kind of uh harks back a little bit to what happened in 2020 when we were facing restrictions through that period of time and a lot of unknowns. So let let's bounce into the data anyway. Um, we're starting off with interest rates. Of course rates went up.
Um,
yeah, of course we've definitely got to talk about that. So obviously the the Reserve Bank of Australia hiked rates by point uh 0.25% on Tuesday. Now, that was pretty widely expected. I think it's a mistake and I'll get get why I'll say why I believe so in a second. But, um, yeah, look, it was a very close cut decision. So, basically, five RBA members chose to hike and four were against. So, it was a line ball. If one of those had gone the other way, we would have had a hold decision. And, uh, financial markets are still tipping two more rate hikes this year. And that's the chart on the top left. That's basically the historical rates mixed in with the forecast after the dash line. So if if that comes to fruition, we'll be at a cash rate of 4.6% by the end of the year. That would be the highest in like 15 years. Um, that would mean that and and I've been through this data before, so I won't hearken on it too much, but the bottom tables there sort of show the impacts on the average sized first home buyer mortgage. So in December quarter was 67,500. Four rate hikes this year would raise m month monthly mortgage repayments by $390 per month. The average national new mortgage in the December quarter of last year was 736,000. If you got four rate hikes this year, it adds $473 per month to mortgage repayments. Now, the Reserve the Reserve Bank of Australia also released their financial stability review. Um, that's their bianual, you know, report on the financial system and that's where I pulled this chart from the middle that came out on uh Thursday, I think it was. Um, and and that showed that the massive surge in high LTV lending to first home buyers. So obviously we had the 5% deposit scheme come in uh on the 1st of October last year and you can see that the high LTV lot LVR sorry that's loan to value ratio. So that's basically the size of the loan um, you know relative to the deposit in the loan. So over 90% LTV which means that the borrower has borrowed more than 90% of the value of the home and they've only put in less than 10% deposit. Uh, you can see that in the red line that's shot up and that's to be expected. Like we've had thousands of people have piled into this 5% deposit scheme for first home buyers and that's very risky. Um, and my concern is recent borrowers are going to lose their shorts. Um, least recent first home buyers because obviously we got we've had two rate rises since a lot of those people would have bought. Uh, financial markets tipping two more and I also think we're going to face a big sharp rise in unemployment. Now that's the other data that came out this week. We got the labor market labor force released for uh for February. And the chart on the right from Justin Farber Anybody Macro sort of plots the unemployment rate which rose by 2% to 4.3% against the RBA's projections uh in their um statement of monetary policy that says August statement of monetary policy. I think he's done a typo there. It should say anyway that that should say February but anyway that's all right. Um, yeah, so basically unemployment rose. Um, we had a big shoot up in average hours worked actually declined. Um, although there was a decent amount of jobs created, but they were pretty much we had a big rotation from full-time jobs to part-time jobs. That was the other uh data. Now I'll get into why I think the RBA set in Australia up for GFC repeat of the global financial crisis in in uh 19 in 2008. You can see on the chart on the top left the global financial crisis started it's it started in 2000 late 2007 with the subprime mortgage crisis in the US which hit sort of late in 2007. Now that the the Reserve Bank of Australia back then because we had inflation pressures like we do now etc. the economy was strong, whatever. The RBA actually after the US entered the subprime mortgage crisis in late 2007, the Reserve Bank of Australia hiked rates by a full 1%. Over the next year, so that's four rate hikes. So it's kind of similar to what what we're experiencing now where two rate hikes in. The markets think we're going to get two more. But then what happened is the US subprime mortgage crisis obviously morphed into the global financial crisis which hit Australia officially in September 2008 and that when when layman brothers collapsed and the genesis of labor layman's brothers collapse was the subprime mortgage crisis and when that happened so when the GFC hit in September 2008 obviously financial markets crashed so we stock market was down by about 50%. like h haveved and the Reserve Bank of Australia then did a whole bunch of emergency rate cuts and you can see that in the chart on the left you see the massive decline in interest rates uh after the GFC that the Reserve Bank of Australia actually cut rates by 4%. Right? They did all these emergency rate cuts because of the GFC hit. I've got a sneaking suspicion that we're going to experience a similar kind of scenario. So the Reserve Bank of Australia might hike again in May which is what the financial markets think. And then I wouldn't be surprised if because of this I think that we're going to have a global recession based on this Middle East war and the energy shock and Australia is particularly exposed to that energy shock which I'll get to in a moment. But I think the Reserve Bank of Australia there's a very high chance that the Australian economy effectively seizes up and we have a rise in unemployment. the Reserve Bank of Australia within maybe six months. It could be early. I don't know. I'm just second half of this year is actually starting to cut interest rates and that'll be kind of similar to what happened during the global financial crisis.
Now onto the energy market and this is real worry here. Obviously the the the war in the Middle East isn't going to plan. Um, it's not going to be a short war. the straight straight of Hammuz which is basically where 20% of global oil and gas passes through is is seized up. Iran on one side of that straight has basically blockaded it. Uh, they're they're sinking vessels or they've mined the area as well. They're also doing attacks on their neighbors across the straight on the other side like Qatar which is the one of the world's biggest gas exporters. A few of the oil producers etc have been hit by drone strikes etc. which is which is going to reduce capacity supply capacity for years to come. Soqar actually was hit I think overnight. They've 17% of their natural gas capacity has been knocked out and they reckon it could take 3 to 5 years to rebuild that when it comes on. Uh, on the one hand, that's kind of good for Australia because we're one of their major gas exporters as well. But because we've linked the East Coast domestic gas market to the international market stupidly, it also means that we, if they don't fix that, we're going to get higher domestic gas prices, electricity prices. But where the rubber really hits the road for Australia is that we are one of the most diesel dependent countries on Earth. We're a massive country which relies on freight. So pretty much everything that comes into Australia come comes in via a ship powered with bunker fuel, which is diesel. Then it goes onto a train or a truck which are powered by diesel. The agricultural industry in Australia is powered by diesel. The mining sector is powered by diesel. Um, obviously we got the fertilizer issue which we use for agriculture and everything that's powered by that that's created with gas with combination of diesel etc. So Australia's facing a massive shock to the supply chain and this is a particular problem here because because we've got idiots in charge of of Australia we have for decades. Um, the International Energy Agency has has set a minimum requirement for countries to have 90 days worth of liquid fuels that's petrol and diesel uh on hand and also aviation fuel on hand in case of an emergency. our idiot uh governments, some this is the past governments and the present governments have ignored that warning and they've and they've assumed that petrol and diesel and aviation fuel will be available to Australia on demand in a just in time basis and as a result they only store about 30 well they've only had about 30 days reserve of these fuels. Now that's the chart on the left which shows the the national oil stock piles. You can see that even New Zealand has 90 days but we've got we got about 30, right? And and some of that's not even real storage. It's like it's it's storage over in the US which they can then transport to us or it ships circularly in Australia's territories which don't necessarily have to transport to Australia. They can go, "Oh, we're getting a better price over there. We'll go over there." Um, to make to add insult to injury, Australia has very few refineries now. So back in the early 2000s, we had seven petroleum refineries which produce petrol and diesel and maybe aviation fuel. I'm not sure about that one. Now I've got two. Right. So the problem with it is storing petrol, diesel, aviation fuel is actually problematic because after about 3 months it starts to go off and so governments have said oh it's too expensive to store and continually rotate it through the system. So so it's fresh but but you can store crude oil forever because it's already come out of the ground anyway. It's been been in the ground for you know millions of years. or hundreds of thousand whatever it is years however long it takes to make crude oil millions of years and you can just store that doesn't go off right but because we don't have the refining capacity here we couldn't even then turn that into petrol and diesel and aviation fuel if you wanted to so we're basically fully reliant on Asia for our fuels the problem with it is Asian countries now because of the war in the Middle East are now hoarding their own fuels so China basically which used to supplies a lot of our processed aviation fuel has just said, "We're not no more exports. We're going to keep that for ourselves." Which you also got to think, hang on, if we ever went to war with these guys, which hopefully never happens. They they control our fuel supply, so we can't fight back. We're stuffed, right? Um, Thailand and Singapore now have rationed their their ex their supply for themselves. So oil supplies and gas have been hit by about 20%. Right? I say I'll leave gas out because we've got our own gas but all supplies globally the global oil supply has shrunk by about 20%. But for the impact for Australia is probably double that because we refi we we rely on refinering from Singapore and uh Thailand and you know other places in Asia, China for our aviation fuel. Those places are now restricting supply. So we're going to have to we're going to be we're basically facing shortages of this stuff and much higher prices than we would otherwise. And it's particularly problem problematic with diesel because again we're the most one of the most diesel um reliant economies on earth. And I've got the a chart on the right here which is Australian primary energy use by fuel source. Now this is federal government's own data. You can see on the right hand side oil which is the the orange line is actually I should have done the actual absolutes here. I did the shares. So the absolute oil demand has basically gone up like that right for decades. So it keeps going up. It's never fallen right except momentarily during the jeeps uh during the during co for example but even as a share so like 40 I think it's 44% of uh demand of energy use in Australia this this is across everything this is across electricity gas everything right comes from oil and we are massively oil dependent and to make matters worse 56% of our liquid fuels that we burn in Australia is diesel right so most of our passenger vehicles run on petrol They don't run on diesel. Yet as a nation, we out of all our liquid fuels, there's aviation fuel as well. 56% of it is diesel. And diesel, if we don't have diesel, we don't have mining, we don't have agriculture, right? We don't have we're not going to be able to transport things around. To get things into the country, we can't then stock our supermarket shelves, uh, Bunnings, whatever it is, with the goods they need because that all comes through on diesel powered trucks. So we're we're facing a situation where we're going to have shortage severe shortages of this stuff. Rationing and potentially we'll face a situation whereby supermarkets only get deliveries once every three days instead of every single day. Um store shelves will be bare. Uh, you know, we'll already a minor in WA has laid off its staff because it doesn't have the diesel fuel to run its mine. So it's shut down. We're going to probably see more of that across the country. costs are going to obviously go up because of food uh food shortages etc. supply, demand, whatever. The cost of the input costs of um diesel will have gone up already to about $3 a liter. Um, so we're facing shortages and higher costs which will then filter through across everything. If if if we do start getting actual physical shortages of diesel and it was reported today that some servos in New South Wales, even around Sydney now are pumped dry, right? And and there's regional areas have basically got shortages of diesel fuel. We're probably going to have rationing. We're probably going to have work from home mandates. We'll have situations where you probably only be be allowed to fill up your car. Um, you know, odds and even days based on your number plate, and then you might only be able to fill up $30 at a time, etc. Or you'll be r you'll be completely rationed and filling up your car, etc. Um, and they'll try and save diesel for actual industry, uh, or for emergency services, um, or for hospitals, for example. They got backup power generation um for the electricity system. So so one of South Australia's backups in their electric electricity system is diesel diesel electricity generation. So when wind and solar die, they use gas and they use diesel when it gets when it gets really severe to run the power system. So we're facing a situation whereby the the entire Australian economy could seize up in the next few months if not next few weeks. I'm not sure. Um, and if that happens obviously going to have a, you know, a pretty severe impact on economic activity, unemployment etc. and the Reserve Bank of Australia will ultimately be forced to retreat. There'll be emergency um, you know, policies from the government to try and ration fuel and all that sort of stuff and uh, you know, again work from home and all sorts of things to try and ration this thing. And that's why I think the RBA has is repeating its mistakes it made during the global financial crisis and and it's going to have to actually reverse track because the global economy is going into recession based on this energy shock and Australia is going to be particularly hard impacted because we got minimal fuel stoages as that chart shows clearly and we are very diesel dependent um, which is where the the shortages are going to bite hardest like you know, we we could we could live without petrol to a degree because people don't necessarily need to drive. Like it's a bit of a luxury for a lot of people. Obviously, some do, but um, you know, we we we could live with shortages of petrol, but we can't really live with shortages of diesel because diesel literally powers the Australian economy through freight, through mining, through agriculture, and then there's, you know, power generation, uh, emergency services, backup, all that sort of stuff. So, that that's why I'm I'm incredibly concerned about the situation Australia's put itself in. And I hope that after this this oil shock finishes and it could take years to come out of this properly once we build you know, what you can't just bring back uh supply straight away. It might take a couple years to get back to where it was in February. But I hope that our leaders look at themselves in the mirror and say this we're a pack of idiots. We got to change this. We need to have domestic energy security needs to be put front and center in the Australian economy. We need to have big stoages. We need to have refineries that can actually produce our own stuff, right? We need to stop assuming that the world's going to be just in time and can deliver it exactly when you need it because we've got geopolitical conflicts everywhere and the world doesn't work like that. And you know, obviously it's a more uh volatile situation. And we've just shown we've just been shown that if a war was to break out, the the enemy wouldn't have to fire a shot because all they could do is just basically um, you know, blockade us, watch us run out of fuel, and watch us basically capitulate. And that's you know, that that is thanks to our idiotic leaders who can never think beyond their nose and actually plan for these kind of things because the International Energy Agency has been telling us for decades and set a minimum requirement of 90 days fuel. Japan, Korea have got over 200, right? Even New Zealand's got 90 days fuel and our government, our leaders are idiots that are in power who have just she'll be right mate. We said, "No worries. No, it's cheaper. It's cheaper in the short term if we just do 30 days and we just, you know, get it in by the lowest cost supplier when it's available. Well, guess what, guys? It's not always available. And this and this situation has just left us exposed and it makes me angry.
M um I mean it's not just the uh uh the straight of Amus which is um which is uh suffering the the problems as you said on the other side of that next to Yemen you've got the uh the straight of um um Babel Mandeb I think it's pronounced Babel Babel Mandeb um which is uh the critical route to get to the sewish canal and that's where the Houthis are and and you know that's now under risk because if that goes then the ships have to go around Africa Africa. Um, and I think the the fear that the commentary has been is that these things just cannot be resolved um in a short period of time. Even if the war were to end tomorrow, I don't even know that it would be a couple of years. I think you've got, you know, we know it's not going to end tomorrow, but I think we've got significant issues going forward. So, your commentary about, you know, well, are they going to slash rates? I mean I think with with I think we are as you say heading towards a financial crisis. I've been forecasting that for years and years in in the um in land cycle investor based on the the uh not only the 18-year uh property cycle but a heap of other cycles as well which sort of tie into that. Um, that strongly always indicated that we would have a peak in real estate prices around 2026 and then after that there would be a crash and and the crash point I had is falling into 2028. But I would say anything in from the timing uh material that I do from August of this year through to the end of 2027, you're looking at a major financial crisis and it would be a financial crisis on the level of um, you know, what we saw in 2008. And now because we're seeing these reverberations happen in the oil markets, I just think it's very very similar to what we saw in the 1970s. And if you remember that time, even though rates were were um reduced, you know, to sort of get over the the 74 crash, inflation just didn't stop. And I think that's the fear is that even if they do slash rates, as they did in 2008 to get us over what would be a financial crisis, and because remember the financial crisis, it's so tied to land and what's going on in the mortgage markets. It always exposes the fragility in the mortgage markets by the time land prices peak because the stock market is made up of a lot of of um land value not just in the form of of you know REITs and uh banking companies and building materials but, you know, on the asset balance sheet of every company you've got real estate, you know, the banks lend predominantly against real estate at the peak of the cycle it it tends to be in America, you know, sort of around 80% of bank lending maybe even more lent against land as collateral Once that market peaks and then interest rates are increased and then you start to see the the fragility in the system and people starting to sell on the margins um, and then, you know, banks writing down loans and so on and so forth as actually we've seen recent with JP Morgan in the US um, then that's where you know, the cycle is basically up and the fragility in the system which is always there because you'll always find mortgage fraud at the peak of this cycle we saw it in the savings and loans crisis in the 1990s is sort of in the subprime crisis. Um, and I imagine that we'll see it again, probably more so in the private lending sector. Um, then it's not just the oil problem that we're dealing with. We're dealing with a a a housing market which has been run up very high on private debt. So, I mean, I'm in full agreement that we're heading for a significant financial downturn. I just think that if they slash rates, they're going to end up having to put them up again because of what's happening in the Middle East. Um, and the the fears, you know, the the inflation is going to continue to push on past that.
Yeah. Oh, absolutely. We're we're we're going to face a pretty big fall in real real household household disposal income because this is inflation shock. So, we're basically into a, you know, stagflationary environment where very low growth, po appalling productivity growth and obviously high inflation. And there's another thing. So, some of some of the solutions is, oh, this is why we need to put electric cars everywhere or whatever. It's like, yeah, okay, fair enough. But even if every single [clears throat] passenger vehicle in Australia was was magically if we replaced every single passenger vehicle in Australia with an electric car, it would only reduce our liquid fuel use by 25%. And guess what? It's not in the area that we've got the biggest problem, which is diesel. Like diesel, you can, as I said, you can do without petrol, right? Uh, to a, you know, large degree. Obviously, it's inconvenient, right? But, you know, um, but you can still run the economy because the economy runs on diesel. It doesn't run on petrol because diesel is used in freight. It's used in mining, it's used in agriculture, and it's used in backup power generation for hospitals, you know, and also for for parts of the grid like in South Australia. So, um, you know, that that is Australia's big key vulnerability here. We need to have diesel availability here. And unfortunately, we don't. And this is just absolute, you know, moronic stuff here from a from Australian governments over a very long period of time on both sides of the political fence.
We need to go back to the era of Henry Ford and hemp. Did you uh have you read about that period of history?
No. No. But is that more about, you know, self-sufficiency and that sort of thing? It was well when he sort of first came out with his idea for the car. I mean it was it was kind of like these plastic based cut that were made from plant materials and hemp was used to fuel them and and the idea was to give the farmers the ability to grow the hemp that would be used to fuel the cars and you know that any someone watching this is going to know more about it than I do. Unfortunately, I don't think that it work that would work at the population level level because you wouldn't you wouldn't be able to power um, you know, what how many vehicles you got in Australia like 12 million vehicles on on there's just not enough land in Australia produce enough I mean the reason why the reason why petroleum is so good
is because you know a liter of petrol or diesel in a reasonably fuel fuel efficient car can get you 8ks actually 8ks isn't even a fuel efficient car but like in a you a fuel fuel efficient car, you can get 10ks. And if you have a hybrid, like a Japanese style oldfashioned hybrid, you can get more like uh 20ks. And there's just nothing can beat that for energy density, unfortunately.
Yeah. There. Well, it's it's actually an interesting history if you go back and read it because um, you know, hemp is very quickly quick to grow, very quick to can be replanted, renewable and the reason that it didn't get um adopted at the time was because of the war and at that point oil was more readily available which had then enabled the cartels to move in and all the distribution and the you know processes to be built on that on using fuel rather than using something like hemp. Um, but even now I think that the the hemp industry is highly regulated because it it can be used [laughter] and uh, yeah, I mean, I've thought about the land question as well as as to you know, whether whether we whether it would be possible to scale it up. Um, it it's uh, but it did put um, it did enable the the oil cartel.
Yeah. Well, I mean, another problem is we we just can't like, you know, if we could magically turn every single vehicle in the country into an EV, well, that wouldn't work either because it's just that the power grid couldn't take it, right? So, uh, we just don't have the infrastructure to even do that. You can maybe do it over 40 years, but or even 30 years. So, but we just don't have the power generation or the distribution network. Uh, meaning the the wire that the uh high capacity wires and everything to actually run that much juice through the system to actually power all these EVs. Um, you know, it works when you got a a small percentage of the vehicle fleet is electric, but once you if you want to try and scale it up and make sure make everyone to be on electric, you can't just do it, right? It requires absolutely enormous investment, not just from charges, like you need public chargers everywhere because not everyone can charge at home. I actually looked into getting an electric vehicle uh in my in my home um, because, you know, my I thought my car got hit in an accident and I thought they're going to ride it off. So, I was I was all in on getting an electric vehicle. And then I worked out because of the way my house is set up and I've actually got an off uh a car park in my property, right? Because it's so far away from the fuse box, like we're talking probably 50 meters when you got to do it. It's ridiculous. Um, and then the way they'd have to engineer it and stuff, it'd be like $5,000 for a charger. And then even the charger is in a really bad spot that doesn't work for where the car park is. So I'd have to run this massive long cord up and you know, it the whole thing just became totally impractical and not worth it right and I was just so instead I thought, you know what, if my car gets written off, I got an old you know, 2010 car that I thought they were going to ride off, they actually fixed it, which I'm happy because it's actually a good car. I'm having to drive it till it's 30 uh till it's 20 plus years old but um, you know, I would have just got a hybrid a standard Japanese Toyota hybrid. You get four four liters of petrol, you get 100ks around the city, which which is pretty damn good and on one tank of about 40 liters, you can get a thousand KS right? So to me that's a lot that's a much better system um, you don't don't require any investment in the electricity grid, you don't need to totally rearrange the entire grid uh, it's a reason why Japan like 90% of their vehicles there are hybrids because they haven't gone down the electric route part partly because Toyota's and Honda are absolute leaders in it, but it's just easier on land use and everything, you don't have to completely rearrange your grid or anything like that and you get massive efficiency gains. So, you know, personally, I I prefer I'm a massive fan of just the regular hybrids that have been done since the late 1990s. Um, Toyota and Mazda have been doing them for nearly 30 years. They've absolutely, sorry, not Mazda, Toyota and um Honda. They've absolutely perfected it and they're they've actually more reliable than regular internal combustion engine cars as it turns out. So, um, yeah, we Australia just needs to go for efficiency, right? We need to get more bang for the buck in how much energy we use. And if some people want to get EVs, go for it. I don't care. Do whatever you do to what it suits you. You do you. But for others, I think, you know, hybrids, just standard Toyota hybrids or whatever the way to go. And we'd be able to use a lot less fuel and without the massive impact on the energy system, the electricity system having to completely re refigure the grid and all this other stuff, which is very difficult. And also putting strain on on generation as well.
Yeah, I mean, there's nothing like Australia for being Australia is notoriously behind
backward
on everywhere else in the world on innovation and uh doing this type of stuff. I know
but but we're leaders in property speculation.
Well, that that's what we we kind of sort of build on this and I think the tax system obviously which bends people towards speculation rather than, you know, research and development isn't isn't a great idea either. you know, we we um uh I know we are doing some brilliant things in innovation because I I'm trying to think of a the lady's name. I went to see a lecture at um Sydney University about it. But the uh it's like it reminds me of 3D printing for houses, you know, like overseas they have entire housing estates that are 3D printed that can be constructed in a short period of time. Much cheaper construction, much cheaper property prices. Even in Germany, I think they're 3D printing apartment blocks. here. I think we managed to 3D print a toilet block uh in Darwin. I think that was one of the first things that we 3D printed. And then someone did send me a picture yesterday of a 3D printed house in um Balorat. Part of the problem with that is the uh getting it past council restrictions. We have all these building codes and you know, they the whole thing sort of the whole compliance thing has to be rewritten in order to enable 3D printed homes to be generated on mass in Australia. and then, you know, to sort of get to that stage. We'll get there because the rest of the world is going to get there before we get there. But it it's frustrating when you see that and actually when we get there it will be interesting analyzing data because then maybe it's not going to be so much about, you know, can we construct something in time. We were having this discussion with uh camp last week where we were talking about how long it takes to get building approval. It would be more um, you know, uh over supply of buildings, whether we've got the how much the land cost because I actually think it'll make land costs go higher because it would reduce the the cost of building and therefore there'll be more money to big bid up the price of strategic locations or significant, you know, locations that are very well facilitated. But let's keep moving.
Yeah, yeah, so so the the other bit of uh interesting bit of data this week now, just quickly, quick refresher on last week. Last week I presented the the charts on the left um from these are from Jared Midak. He did a couple of reports. He's an excellent independent economist. Used to be the chief economist, Morgan Stanley, then went on out on his own and he basically showed that population growth is one of the main drivers of house prices. And that's the chart on the left globally. So, he's not saying it's the it's the main driver, but it's the it's the main driver that accounts for the different the difference in Australia's stronger house price growth versus other countries. So obviously interest rates and all that and borrowing capacity which is more of a global thing because we've all had similar increases in borrowing capacity with the barel two capital rules etc which are global banking rules which basically fueled house prices everywhere to a degree but, you know, one of the factors why Australia has experienced much stronger house price growth is because it's had high population growth obviously the chart in the middle. It's the dominant driver of rental growth, right? So we've had this record migration post pandemic at the same time, we haven't been able to build enough homes or anything. And and we've had this massive rise in advertised rents. So, according to Kotality, 47% rise in advertised rents since the end of 2019. So, so far this century, added about $15,000 to the annual cost of renting a renting a typical home versus what it was in December 2019. So, massive hit. Now, this week, that that's kind of the intro point. This week, we got migration data from the ABS. So they they released two bits of migration related data. Now early in the week we got net permanent long-term arrivals. Now what that is that's basically when people come in that are passenger cards and they so it's their they they self-declare why they're coming to Australia. So you can be coming as a returning citizen or you're coming as a permanent or long-term arrival. And what that means is if you intend to stay in Australia for 12 months or more. So it's it's it's your intention not whether you actually end up doing it. But irrespective, um, that net permanent long-term arrivals figure was the highest figure for a January in Australia's history. So for the month of January is the highest in Australia's history. The annual figure which is presented that that chart in the top left in the red, it's basically back up to its highest level in history. So we had 494,000 net permanent long-term arrivals in the year to January, which is just extraordinary. Now on on uh yesterday, which is we're recording this on Friday. So on Thursday we got the official quarterly uh net net overseas migration data from the ABS for the September quarter of last year. And what that showed is that im that net overseas migration is actually reaccelerated. So it looked like at the end of last year it was starting to fall by albeit at unbelievably high levels historically, but actually rebanded. It went from about 304,000 in the second quarter of last year up to 311,000. Um, so that's firmed as well. Uh, it you can see there in that chart, it historically tracks the net permanent long-term arrivals data, but for some strange reason, which uh is a mystery to me, it has decoupled over, you know, the last year or two. Um, but irrespective, net overseas migration 311,000 is the second highest would if if we looked at just the period pre-pandemic in Australia's history, so before 2020, um, that would have been the second highest level in Australia's history, right? The highest was uh in like June 2008, I think it was. We got 315,000. So it is still extremely high, like historically high. And you can see in the middle chart there, I've got net overseas migration per day in office. So that's for the all the the the former five governments and all the way back to the 1980s. In in the first three and one quarter years of the Albanese government, so three three years and one quarter, we've had 1,145 net net overseas migrants land in Australia every single day of their term in office. That is insane. It's almost double the level under the Abbott Turbo Morrison government. And I've excluded the pandemic closure there. So that's Abbott Turbert Morrison Turble Morrison is from the end of 2013 up to the end of 2019. So you leave out the pandemic closures because that distorts it. It's almost double the RD Gillard years, which was considered big Australia. It dwarfs Howard. uh, it's nearly triple the Howard government's annual uh daily arrival rate and it's what's that like five times plus the hawk heating net overseas migration. So we so we are running migration super hot in Australia and it's actually rebounding again and you know, often I get I I get you know, pro migration shills like Abel Risby and they always attack me and call me a racist and that sort of thing. uh he always goes, "Oh, you shouldn't quote net permanent long-term arrivals. It's, you know, it's not the measure that matters. It's net overseas migration." Well, actually, net permanent long-term arrivals is probably more economically significant to the housing market than overseas migration. So, the difference between the two, as I said, net permanent long-term arrivals is people arriving and stating their intentions, right? Net overseas migration is what happens to those intentions and they have a very restrictive definition. So, you're only a net overseas migrant if you stay in Australia for 12 out of 16 months in a 16-month period. So, if you stay for 11 months in that 16-month [snorts] period, you're not counted as a net overseas migrant. But I'd argue for the housing market, it's the people in the country that matter, right? I'm not not including tourists who stay in hotels and stuff, but it's the total number of people in Australia that matter. So, if you come here and you stay for 10 months, you're still putting pressure on the housing
market, but you won't be clown as an overseas migrant.
Now, the the bottom chart there, the one in the the uh dark color chart, that comes from T Brooker, right? Who who writes for MB and he's that runs his own shop on Substack called Avid Commentator. He's an absolute gun and he's actually plotted this. He put this up on Twitter or X on Thursday. He plotted the growth in Australian advertised rents, uh, I'm presuming you use Kotality, versus the the the growth in net permanent long-term arrivals. And you can see there's a pretty damn strong correlation, right?
So, we've had this rebounding rental growth and that's shown on the top right-hand side, sorry, bottom right-hand corner, Australian advertised rents. It's rebounded. And you can look compare that to the red line on the top left chart of net permanent long-term arrivals. It's a bit suspicious, isn't it? Net permanent long-term arrivals has rebounded. Advertised rents has rebounded. That sort of suggests that that actually has a bigger impact on the rental market than if you're officially a net overseas migrant, which is measured later by the ABS, right? And it's based on that restrictive 12, 16 month rule.
But irrespective, um, I show in the top right-hand hand corner from Kotality, the rental vacancy rate according to them is tracking its lowest level in recorded history. Right? It's fallen to a new record low. We've had a 47% increase in advertised rents since the end of 2019. Advertised rents are now reacelerating as the bottom right chart shows. They're now tracking at like 5 and a half percent, which is higher than wage growth, obviously. So the rental crisis is just getting worse. And it's getting worse because our idiot government keeps the immigration spigots, you know, on on nearly on full blast, right? They're still running incredibly high net overseas migration. They're they're keeping the borders wide open. And this is pressure in the rental market. Of course it is.
And in fact, just today, um, or last night, I should say, Treasurer Jim Chalmers did a speech in Melbourne to like an economic society or whatever, where he basically said that the federal budget is going to upgrade the migration forecasts, uh, because it's running stronger than they thought. So, they they thought the net overseas migration this financial year would fall to about, I think it was 260,000 by memory. It's tracking in the first quarter of this financial year, which is a September quarter, ship data for it's tracking at 311,000. They they expect it to um, I read in the in the press, they expected to be around 300,000. So, it's obviously running well ahead of the budget.
And remember, uh, I said previously that National Housing Supply and Affordability Council, their latest state of the housing system report, which was released last year, forecasted we'd have a 79,000 shortage of homes over the five-year period. That was based on the Centre for Population forecasts and and um, which is the Treasury. And they said that if population growth grows 15% faster than Treasury assumes, instead of having a 79,000 shortage over 5 years, that's in top of the shortage you already have, we'd have 200,000. Well, looks like Treasury Chalmers has just admitted that migration is going to run significantly faster than what the Treasury forecast, which ergo means the rental crisis is going to get worse.
Now, the reason why this annoys me so much is because, A, it's never talked about, right? Like, you know, the the mainstream media, the government always paints this as a supply problem. They always, they they always winge about the housing crisis. "Oh, housing shortage. We still got to build more homes." No, I mean, yeah, that's great to do that, but it'll take years to do, if you even can do it. The solution is to cut immigration because you're running it way too hot and you've just reacelerated again. Through like, why are we doing this? It's just stupid.
And and there is, as I've said in the last few podcasts, there is a complete counterfactual in Canada. And in fact, we got migration data from Canada this week, right? So, previously, I think I talked about last week, uh, or the week before, we had migration data for the September quarter in Canada. Well, guess what? We now got the December quarter in Canada. Literally was released this week. And that's the chart here in the middle. And what it showed is that Canada had recorded its first ever population decline. Well, first since the Second World War. Well, I think the the data goes back to the 1960s. The first recorded population decline actually had because they've Canada has basically put restrictions. They've they've cut the permanent migrant intake and they're basically trying to reduce the uh, the number of temporary migrants in the country. So, in I think it was 2004, at the peak, they had 7.6% 6% of Canada's population were temporary migrants or they call them non-permanent residents over there. Now they're trying to manage that down. It's fallen to, I think the latest reading is about 6.4%. So they're actually having they're actually booting out temporary migrants. They're trying to shrink the number and as a result, the population is falling in Canada.
Well, as I said last week, um, the the chart, the chart on the top left shows that that chart's taken from 2004, early 2004, when Canada's rental crisis was at its worst, like Australia, where they just had a record immigration boom. Rents were growing at the fastest level in history. They had record low rental vacancy rates. The difference is the Canadian government in mid-2004 slashed immigration and now they've had the first ever population decline, or the first decline in, you know, 60 odd years of records. And their rental crisis has been solved. And there that's all the charts on the right. And I've already been through these previously, but, you know, Canada has recorded uh 17 consecutive months of falling rents, right? Which accords to the cutting immigration. Their rents are down, I think $172 per month versus what they were at the peak. So tenants are saving what's that, uh, over two grand a month in their rents now because rents have fallen. Their um, their rents are tracking at a 33-month low, right? So, great news. If you're a renter, you're paying less. You got rental affordability.
Now, all the government's done is cut immigration and the percentage of income required to um, you know, required to serve to service the median rental in Canada has fallen below their 30% affordability threshold. That's the chart, the bottom bottom right chart. So, it was tracking at 34% of income to rent the median home in Canada two years ago. Well, now it's 20 29%. And you can see it's the best in probably 10 years. Unfortunately, the chart doesn't go back that far, but, you know, this is just proves without a shadow of a doubt that if you run an immigration program that's too high and is a bond beyond the nation's capacity to build housing infrastructure, you end up with record low rental vacancy rates, soaring rents, and a rental crisis. Right? And that's what Australia is exactly what Australia's experienced since since the start of the pandemic, right? We've got a 47% increase according to Kotality in advertised rents. The typical renter now is now paying $11,000, $11 and a half thousand more to rent the median home than they were in December 2019. Wages have gone up at one-third the rate of rents. So rents have risen three times faster than wages, right? So they're getting absolutely crushed here by high immigration and immigration's accelerated again. So the government has just literally spat on renters by running this absurdly high immigration program.
Yet over in Canada, which has a left-leaning government as well, like their Liberal government is the equivalent of the Labor government, whereas their their coalition is the Conservatives over in Canada. So, their Albanese equivalent, the Liberal Party in Canada, [clears throat] saw the error of their ways and has deliberately cut immigration and it solved the rental crisis. But our idiotic government is running a high immigration program and and and uh, you know, Jim Chalmers has just come out and said, "Ah, it's going to be higher than we budgeted for." By, you know, great. So that's not so you've missed the target again.
And to add insult to injury, he's also said that um, previously Treasury forecast that Australia's productivity growth would return to its long-run trend, which is poor anyway, in two years. Now he's saying it's going to return in five years. So our productivity growth sucks as well. It's going to be worse than what they forecast. And one of the reasons why he said our productivity growth sucks in his speech is because we've had declining capital deepening. And capital deepening, one of the reasons for the declining capital deepening is high immigration. So capital deepening has basically been one of the main drivers of Australia's productivity growth since the Second World War. And not just Australia, but advanced economies. And I've said this previously, capital deepening happens when you supply your your workers with more or better capital and technology, etc. So more tools to work with, more machines, whatever. It makes them more productive, right?
>> But we've actually had a decline in in capital deepening. And in fact, we've had capital shallowing whereby the it's measured by a thing called the capital to labor ratio. So capital is all your machinery, tools, you know, that sort of thing. And then the labor is just the number of workers. And the numerator, we've had very poor business investment for about 20 years. That's the the numerator of that ratio. We've also run the highest immigration in the nation's history, which is the denominator. So if you have a falling numerator and a rising denominator, your capital to labor ratio crashes. So, so here we are. Treasury Chalmers does his speech saying, "Oh, sorry guys. Immigration's higher than we thought. Productivity is going to be lower than we thought." One of the reasons why we've got poor productivity is because we, you know, we've had less capital deepening in, which is capital shallowing. Well, one of the reasons why I got less capital deepening in is because we've run higher than budgeted, higher than you know, expected immigration, which has increased the denominator of the capital to labor ratio. If you don't grow your capital stock as fast as you grow your population, you get capital shallowing and you get lower productivity growth.
So this this country of ours, our leaders are just morons and they're creating a rental crisis. They're killing our productivity growth. They're destroying us through poor energy policy. It is just infuriating. It it's uh it's funny because I was watching um talking about rents rising. I was watching Tom Panos on Instagram um yesterday and he was sort of doing this uh face to camera thing on um the CGT and saying he's already getting phone calls from agents saying that they've been called by their landlords saying, "Put the rents up. Put the rents up because if they hit CGT, then rents are going to rise." And I had a little bit of a back and forth with him sort of saying that, you know, landlords can't just put up rents on a whim. You know, it's it's only in very tight rental conditions that you have any power to do that. And of course, we do have very tight rental conditions.
And we've discussed this in quite a bit of detail before, but because of the phase of the cycle that we're in now, where we are heading to this um oil price spike, uh, which is reminiscent of what we had in the 1970s. I mean, if you go back to the 1960s, 1970s, we had very strong immigration at that point. But when that crisis hit um between sort of 1973 and 1975, the Whitlam government uh cut back on immigration quite sharply because the conversation at the time was that they wanted to protect jobs, um, you know, and it sort of was this, you know, got all these immigrants coming in. And it wouldn't surprise me if we saw that again. So although we're sort of forecasting this and saying, you know, that the these conditions are what is driving is making the inflation worse because obviously rent rents are taken into the um inflationary data along alongside everything else. Uh, that in my opinion would absolutely change if we have a downturn and we have a shock. You know, we're going to see rates slashed. We're going to see um, you know, change in policy. We're going to see because of the outcry of people, we can't continue to have um this type of pressure on rents.
And, you know, it's it's not just in the long-term rental market either. I mean, in my job, I I view a lot of uh rooming houses because rooming houses became very popular. They became popular during the pandemic because investors were searching for um yield and and uh there was um a sort of rush to go in for rooming houses. I had a lot of investors that were buying in cash at that time as well. Um, and uh, there's no room. I mean, the [laughter] there's no room in the rooming houses. Even the rooming houses are doing well where they've they've got a high demand. They're they're fully rented out. It costs an absolute fortune. So all of these dynamics, I've I've even seen um uh special disability accommodation, you know, it it's getting turned into uh rooming houses as well. So it's it's it will be interesting to see how this this turns out. But I do think that if we have a downturn, that the migration statistics could change like they did.
>> Yeah. And also not just that for the rental market, um, you know, whenever there's an economic downturn, you get more you get a rise in the number of people per dwelling, right? We saw that at the start of the pandemic. Well, we saw at the start of the pandemic and then it switched and we had a fall in the number of people per dwelling because everyone wanted space, etc. Right? But but but but generally, um, generally when you get a recession, you people like you'll have kids will stay at home for longer, for example, right? So instead of moving out, they'll stay with their parents for as long as they can, which means more people per dwelling, all other things equal. You'll also have more rooming houses, that sort of thing. You'll have people bunching up to save money because, you know, it's cheaper to rent a home with, you know, someone else than it is by yourself, etc. Um, and that could actually, I wouldn't be surprised if rents actually, you know, fall or rental growth tanks, right? But it but it won't tank because uh anything the government's done. It will tank because we're in a recession and people trying to minimize costs and they're and usually do that by staying at home for longer if you're, you know, someone who would have moved out, or yeah, or you move back in with your parents, or you move move in with roommates, etc., because it's cheaper. So you try and pull your costs, all that sort of stuff. Um, so yeah, that that can certainly swing very quickly.
And then also, um, what was the other thing I was going to say? Uh, and then also, yeah, of course, migration. So if Australia goes into a deep shock, well then it's going to be less attractive to come to, right? And some some migrants who maybe can't get jobs or whatever might go home, um, potentially. But so we could get a slowing migration because of economic conditions. But yeah, as it stands now, it's just crazy that our government continues to bring in more people than is possible for the economy to absorb. Right?
So what I mean by absorb is not just the housing market. That's the obvious thing. Right? We're not building enough homes. We we haven't, the federal government's own advisory council, National Housing Supply and Affordability Council says that we're not going to build enough homes and we haven't built enough homes. And in fact, if immigration's higher than they expected, which it appears it is, and the government thinks it's going to be, well, then we're in it's going to be worse, right? Um, but it's not just that. It's also our ability of infrastructure to keep up. Hasn't kept up for 20 years. And also business investment. We're not building, we're not businesses aren't expanding their investment as fast as the labor force through immigration is growing. And that's one of the that's the reason why we're having this capital shallowing problem, which is then dragging down productivity growth.
So it's just a terrible situation we've got ourselves in. And one of the solutions is certainly not the only solution, but we've got to cut immigration and we got to make sure it's much better targeted to the skills that we actually need. We we should be running immigration that is, you know, less than 150,000 a year. Right? That's not even extreme because in the, was it, 80 years after World War II, or from end of World War II to about 2005, net overseas migration averaged 90,000 per year, right? That was the norm. I don't have the very long-term chart here, but and, you know, during the say, in the in the year of the Sydney Olympics, overseas migration was 110,000. That was the highest it had been for 10 years. And it had taken 12 years to add 1 million people to Australia's population as of the year 2000, which is when the Sydney Olympics was on, right?
And I I haven't redone the data because I just forgot, but I'm going to I'll write up next week. But as of the June quarter, so the quarter before the latest data, it had taken only two and a half years to add 1 million people to Australia's population. So, so we've grown the population in the most recent period more than four times faster than we did in the year 2000, which is the reason why you use year 2000. It's obviously the millennium. It's also when the Sydney Olympics was on, so a lot of people remember it. And also remember that being peak Australia, like that was Australia was awesome back then. We didn't run this high immigration rubbish that we're doing now. And there was none of this worried about, oh, you know, this talk about, oh, racial harmony and blah blah blah and social breakdown, social cohesion, all. We didn't need to worry about this stuff because we weren't running it so hard and we weren't stressing infrastructure, stressing the housing market, making people angry and building racial enclaves in different areas of of, you know, where where in this area it's it's it's all these people with this area, it's these people, this, it was more spread out and we're more intertwined with each other, right? And everything worked.
Now we're just doing the opposite. We're just bringing in massive volumes of people more than the the country can digest, more than the housing market can digest, more than than infrastructure we can build. The energy system can't cope. We don't have enough water. So now they're talking about water building diesel plants everywhere, right? We don't have enough water. Um, and business investment hasn't kept up. So we got lower productivity growth. It's just >> moronic.
>> Well, I mean, the reason the business investment hasn't kept up is because, as we've discussed previously, it's >> going to property. Yeah, [clears throat] it's the same, you know, the sort of houses and holes ideals that the the system is kind of built on it on the property market, the real estate sector.
>> The tax system's broken as well. So, >> yeah. Well, the the tax system has rewarded speculation. >> And that's why, you know, whenever you see discussions about changes to the CGT, everybody's up in arms because the tax system dictates how you invest.
>> And also, can sorry, sorry to cut you off, but also like people look for those things because they we we tax workers so punitively through personal income taxes. So, when you're getting absolutely smashed on personal income tax, you're like, geez, I need some tax dodges, right? So, that's why you look out for those things. it I mean, that that's that's always been that's the problem with the tax system. When I say t people invest, I mean, you make those decisions yourself as you go through, you know, you realize that you're not going to be able to retire on your income alone, you need to go and speculate. And, you know, the the discount and the capital gains discount, um, the fact that even though land is taxed in Australia, we have high thresholds. Nobody would invest in land over here if they didn't get tremendous capital gains from it in some of the boom phases of the property property cycle. And we know living in Melbourne that um, there's been periods of time where you seem well, like the story I said last week, where a client called me up and said that he was going to buy an apartment in in Surfers, you know, in in 2019 for $600,000 and he got back knocked back recently offering uh $2 million on it. So, I mean, those types of gains, who wouldn't go and invest in property? And then when they want to change the settings because everyone's up in arms about housing affordability, you know, you you hit people like Tom Panos who says, "Oh, no, don't do that because it's going to hurt housing affordability." They can't argue it on the fact of we don't want our capital gains taken away. And who does when you're investing in housing? It it's totally understandable. It's exactly the same as what we saw in the um taxi cartel where they where Uber came in and and the licensing system broke down and they took away those gains from the licensing system and the shortages went. And all of a sudden the people that had invested in those and were hoping for their retirement income from them were up in arms about it. It was better for the market for the commercial market to have Uber come in and increase the supply of of um private vehicles that you could uh use to get to places, but it it didn't suit the investors. And that is the core problem that we're dealing with. We we sit here and we talk about housing affordability. And my argument, I mean, particularly as president of Prosper, that was always my argument with that. We don't need to convince renters that we need housing affordability. We need to convince the the property speculators. Then that is your mom and dad investors that own, you know, one or two properties and that have set themselves up for retirement. That's they're the ones that we need to convince because once people get a a foothold into the property market, they don't want affordable housing. They want to see their property go up. I don't want to see properties that I own go down in price. Even though I'm sat here talking about, you know, with you talking about, yeah, we need to cut migration and we need to improve affordability.
Now, I've worked for many, many years. I you know, stood as president of Prosper Australia and shot myself in the foot as a real estate agent arguing for higher land taxes and and but in in arguing for that, that's where the argument comes from as in if we increase uh land taxation, if we start to take speculation away from the property market because we are taking away the the incentives, the cap the capital growth incentives that you know, which you do through land taxation or um increasing the, you know, changing the capital gains settings, then we need to have a compensatory drop in the punitive taxation against productivity and labor. There needs to be a a tax switch um that we need. And that that has always been Prosper. I give them a plug um even though I don't serve as president there anymore, but, you know, that that has been the argument. It's not only the argument of of Prosper Australia. Prosper Australia is built on the premise of Henry George. And I think Henry George was only reiterating in his time what most of the classical economists were saying. I mean, even the Henry tax review argued for this. It argued for less taxes on income and productivity and more broad-based taxes on things like land and uh, and the the mining industry. And after that, that was when we saw that massive campaign from the mining industry saying, "Don't touch the mining industry." And I remember people, ordinary people getting behind that campaign. And it was so >> Yeah. I I I'm I'm I'm in the pocket of Gina Reinhardt, the billionaire. That's right. Like, come on, guys. What are you doing? Yeah. Yeah. I know. I know.
>> But the point about this is you cannot have both. You can't you can't. And this is this is so it's it's not so much about knowing what you need to do to change this. Like it's it's a no-brainer to say, "Okay, we need to cut migration. We need to change we need to take speculation out the property market. That's going to give us affordable housing." Isn't difficult to achieve. You can get affordable housing. you can get housing that is is cheaper in price, you know, through a number of policy settings. The problem is is the transition from for those policies because once you start transitioning, then people are going to get caught in that transition and they go into, you know, they're approaching retirement, you suddenly change the settings and then what do you do with those individuals? How do you have this sort of compensatory change? But unless you change that, you're not going to change the boom and bust cycle. And that's the problem that when we get to these points um historically where we do, okay, we've got war, we've got oil, oil prices going up and we've had um undue, you know, property speculation and so now we've got uh fragility in the mortgage system. If we didn't have the property speculation going alongside with that, then when we hit these times, these recessionary times, it would be a much quicker recovery from it because the property market wouldn't crash alongside it. And give evidence of that, you'd have to look back to the, you know, say the the, you know, uh, 2001 recession, the dotcom bubble, which didn't have a property crash, so that it recovered very quickly. Even the COVID recession was a V-shaped recovery. It wasn't a property market crash. We, it, it recovered, it recovered very quickly. The early 1980s recession recovered very quickly compared to the early 1990s recession, which was a property market, severe property market, commercial property market crash. Um, and uh, so I mean, and when property crashes, it brings down all the industries that are tied to the property industry. So not just, you know, the financial industry and everything, but the moving companies and the [laughter] you know, anything that's that's uh that's tied to uh, you know, people moving and buying furniture and renovating and doing all of that. So a lot of small businesses get caught in it as well.
>> Do we have anything else to >> No, that's pretty much it. That That's uh all the data I want to go through and all the all the topics. A few rants in there. It's always good to get a bit spicy.
>> It is. It's great to get a little bit spicy. Uh uh I I would say and what what we might do, we we've discussed this um as well. We had anyone that hasn't watched last week's um uh the macro, the mortgage uh podcast, go and have a look at that. We had Cameron Murray in as a special guest. There's some gold golden information in in uh these podcasts that you're not going to get anywhere else. I mean, Cameron Murray is an absolute expert in his field, but I would say that there's only a few economists and Cam is one of them that are really up there that can think outside of the mainstream field. And the problem that you get when you're watching um the media, when you're watching television or when you're just reading the the mainstream newspapers is you're just getting mainstream views. you're not getting uh uh this type of information and this type of data which is really going to give you a a solid understanding of what's happening in the economy and where things are heading and it's giving you that forewarning. I mean, we're now giving you that forewarning that is almost inevitable that Australia will enter a recession. It can't help but do that with rapidly rising uh interest rates at this point in the cycle and then, you know, coupled that with the inflationary pressures of the um of oil prices as well.
So what what we discuss is we might get TK on um to join us um one week and we'll do a session with TK and I think what what we and I forget it every week, don't I, to do questions. I will do it. I promise I'll get get round to it. But I think what would be good is it is if we did this live at some point as well.
>> Oh yeah, for sure.
>> Yeah. >> And and then then we can get live questions.
>> Yeah. Which would which would be really good. That that would be a lot of fun to do as well. And and one the other thing that I've not done is what you don't know about Leath. Uh, so I'll do that quickly now. And that is that Leath is a champion undefeated boxer.
>> I wouldn't say I'm a champion, but
>> You are a champion. You're undefeated.
>> Yeah. Okay. Okay. So So I'm 48. I don't I don't fight anymore, but um I basically done three amate Well, not I don't want to say they're amateur. I don't have an amateur record, so it's not really amateur, but I've done three amateur style bouts. So two interclubs where you go and just fight some random guy. and also a charity fight night where I was the main event on that. That was a couple years ago and I basically retired after 2022. So, I had to get a disc replaced in my neck, which is here. Uh, they they basically cut here, moved my throat to the side, went to the back, jacked up they jack up your vertebrae, they took out the I had a herniated disc, a totally ruptured disc and it was basically causing nerve pain and everything. Happened during my January holidays then. Um, absolute agony. They replaced it with a flexible um disc that cost like 20 grand. It was insane. Luckily had good private health insurance, so it's all good now. But I promised my wife I wouldn't do any more boxing. And then and then the opportunity came up to do a charity fight night and I said to her, "Okay, one more. One more." Uh, and that was my retirement fight. And uh, so I did I did my first fight at in 2019. So I was 40. So I'm 48 now. I was like 44 or something. I can't remember. I'm losing track of time. Um, was that six years ago? Yeah. So yeah, 44 or something. And then I did one more in 2020. So I did one just before I went into lockdown, literally the March two weeks before we went lockdown and then did did my retirement fight in 2022 and yeah, I won them all. So well, sorry, I won the first one, got a draw in the second one. The second one was against a 26-year-old guy and I got a draw, and then won the third one. So yeah, undefeated. Um, I still train. I actually trained this morning. Um, but I don't fight. I don't do any sparring or anything, just because I'm worried about my neck and I'm also too old and and and everyone else is getting young and I'm getting older and I'm getting slower and you just can't. So now I've gone in doing weights and other stuff. So that's pretty much yeah that >> to silence the text messages coming on my computer. Um, okay. Well, we'll wrap it up for today and uh and uh we will uh reconvene next week for another exciting episode of uh the money and the macro and the mortgage podcast.
>> Too easy. Speak to you then.
>> See you.