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Josh vs the News: BUDGET BONANZA! · Uncomfortable Conversations with Josh Szeps

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Get a humans, welcome to our gigantic budget finance, last night was budget night.
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The night of night in Australian politics, let me tell you, and I've been reading all
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day.
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Everything you want to know about the budget, and I'll explain to you if you're in America
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what the hell I'm talking about here, you're going to find out here, including my hot
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take.
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This is going to be everything you ever wanted to know about the budget, but we're afraid
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to ask.
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If you are outside of Australia and you think, what is a budget in this context?
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It's kind of like the state of the union in Australia, and I guess in other parliamentary
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democracies, do they do it the same way?
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It might be an Australian thing where the government essentially lays out its priorities
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for the coming year and what it intends to do.
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An unlike a state of the union where the president can say what he wants to do, but ultimately
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is hamstrung by Congress, at least in theory, in the theory of that pesky constitution
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that America has, where Congress is actually a co-equal branch instead of a lap dog of
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the executive branch.
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Here the government can do what it wants to do, because by definition, it has a majority
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or at least a plurality in the House of Representatives.
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In this case, a full majority, a thumping majority.
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It's likely to get whatever it wants through the Senate, although the current governing
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party does not control the Senate, it's a large enough, you know, has enough seats in
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the Senate that will be able to get this stuff through.
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So the government usually faces a choice.
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Do they just keep things quiet and do they just hum along and not rock the boat?
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Or do they sometimes swing for the fences?
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Sometimes they don't have a choice about swinging for the fences because external events
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force them to, like COVID, for example, where you have to do all kinds of emergency stuff
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and then you have a big budget and, you know, everybody pours over it and figures out
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whether or not you're doing the right or the wrong thing.
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And sometimes they just swing for the fences because they can.
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And this is one of those.
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This is one of the most important and significant reshapings of Australian policy in at least
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a decade, perhaps a generation, and everyone's trying to figure out exactly what it means.
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The sort of the short answer is they're really going hard on this idea that there's intergenerational
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inequality, which of course there is.
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The boomers have done very well.
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Young people are struggling.
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In particular, the housing market is, you know, crazy.
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I think Sydney has one of the highest house prices in comparison, either whether you measure
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it by square meter or whether you measure it in comparison to the average income, it's
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right up there in like the top three or top five.
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And that obviously is a source of immense frustration.
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The far right has been doing better than it ever has in Australia.
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In fact, it just won its first seat in a by-election in the House of Representatives.
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So there's a lot of hand-ringing about, you know, what exactly the government should
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do to placate the rowdy masses who are upset that they can't buy a home.
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And to essentially rob Peter to pay Paul to take money away from the very well-off boomers
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who have enjoyed decade after decade after decade of house prices effectively doubling
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every decade since the 1950s and now sit on properties worth four or five million dollars
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which they bought for a shekel, for a hapony, for a loaf of bread.
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So this is that.
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And the government felt that they were able to do it because they do have a massive majority.
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The opposition is moribund, it's confused if not now when was the kind of sentiment.
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So there'd been a lot of leaks and a lot of chatter and a lot of sort of secret polling
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by the government of whether or how these changes would go down and I'm here to explain
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what they are.
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If you're not Australian, it'll also be interesting to think about the kinds of reforms that your
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government may want to implement in the future or just to see what this craziness is all about.
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So part of the background to this is that the next election, which will be in 2028,
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will be the first election in history when Gen Z and millennials and Gen Alpha voters
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will outnumber people, older than them.
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So I think the government, which is a center left government, is thinking, you know what
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we should cater to the voters of the future instead of shoring up the voters of the past.
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And in doing so, we can probably snooker the opposition, the center right party, into
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attacking us for throwing grandma off a cliff.
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And then at the next election, they're going to find themselves in the awkward position
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of having to defend an ever-ever dwindling, increasingly dying cohort of voters while
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we present ourselves as the party of the future.
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The tiny catch, the teeny tiny catch in all this is that when the government went to
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the last election, which was not long ago, was that last year, John, or was it the
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election last year?
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Man, time flies to tell you what, did Donald Trump become president this year?
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Is that actually, no, was that, I mean, seriously, things are just going too fast, ladies and
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gents.
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When they went to the last election, this government said was asked many times, are you
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going to consider these kinds of big gigantic, kick grandma in the teeth, steal her purse
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and kick her into the front of a truck on the highway policies?
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And they said, no, categorically not, you can take that to the bank, we're done with
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all that.
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We tried it a few elections ago and we lost an unloosable election.
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This was the last victory of the previous prime minister, Scott Morrison, who beat the
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Labor Party in what should have been an easy one for them to win because they took to an
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election essentially this whole suite of reforms.
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And I'll explain what those reforms are in a moment, but needless to say, that made
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them extremely leery about going to another election with that.
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So the election in which they kicked the coalition government, the center right government out
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of power, after being in power for over a decade or almost a decade, a while, that
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that election they had nine and into any policies, they were like, we're just going to be the
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other guys and we're going to put it, put up a, you know, a nice sunny face and say vote
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for a change and nothing offensive, we're complete, we've done, we're done with all of
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this class warfare into generational inequality nonsense.
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We're just going to be calm stewards and so they did that, they got into power and then
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at their second election victory, they went to that one and everyone was saying, well,
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are you still just going to be those guys or are you going to start being, you know, far
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leftist communist reformers again?
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And they said, no, no, no, no, no, no, there's no reds under the bed, we're just going to
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do nothing.
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And in the 12 months since the last budget, they claim to have had a change of heart and
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awakening, things have changed on the ground.
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And who knew that they would ever arrive at these, at these conclusions that actually what
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they had been proclaiming all their lives, they still did believe and now is the time
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to do it.
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I'm a fan of governments trying to do things.
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So I'm generally a fan of this budget, I am a fan of audacity, I'm a fan of governments
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swinging for the fences.
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And so there are a lot of problems, there are a lot of problems here, which we will get
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into.
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But on the whole, if you believe in something and you're in a position to an exchange,
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better to do it than to just be part of the kind of blob, the elite class of, you know,
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do nothings who get everyone so frustrated that they end up voting for extremists.
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So there's the broken promises thing.
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And there's the them trying to jump on the bandwagon of a voting population that is increasingly
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young and that at the next election will be a majority millennial at oldest.
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So the tax reform piece, they basically come at this by saying, you don't want the tax
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system to be distorting what people do with their money.
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You want taxes to just be a background way for the government to collect the money that
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needs to buy the nuclear submarines that are never going to be delivered to invest in all
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of the stupid white elephant projects that it wants to, and to pay a staggering eye-watering
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amounts of money on national disability insurance schemes and whatnot.
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You don't want people to be going, well, if I get, if I earn money this way, I'll be
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taxed that way.
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If I put it here, then I'll be taxed at a different rate.
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If I create a trust, then it'll be taxed at a lower rate.
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So let's pay lots of accountants to do lots of fancy footwork to protect my assets
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because of the tax code.
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So their attitude was at the moment, it's not fair because Australia had a capital
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game's tax discount on assets that you've held for longer than 12 months.
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That sounds a little bit complicated, but the simplest example is suppose you're a nurse,
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you're earning $90,000 a year, you will pay income tax at a particular rate, or suppose
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you get, well, we don't need to get into details.
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You're earning $90,000 a year, you pay income tax.
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Now suppose you're an investor, you earn $90,000 in profit on shares or some other asset
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that you own.
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If you hold it for longer than 12 months, then you only pay half the tax rate.
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So capital gains tax is halved on assets held more than 12 months.
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Now this was introduced for a couple of reasons.
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This was introduced by Peter Costello when he was treasurer in the Howard government in
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the late 90s.
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They basically wanted to simplify the fact that capital gains tax is normally levy in a fairly
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complicated way, which traditionally is you have to look at how much the asset has grown.
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And if it's over the long term, you also have to subtract inflation because it wouldn't
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be fair to tax people on the inflated portion of that asset.
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That's fiddly, and it's annoying, and compliance is hard, and it creates extra work for the
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tax man, or woman, or they, the tax non-binary, can't forget about those.
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And so what Peter Costello and John Howard said was, we'll just halve it.
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It just makes the maths simpler.
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If you have it for less than 12 months, you pay the full capital gains.
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It also discourages frivolous investments where you're speculating and just flipping things.
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If you're holding it for a long time, then you just get about half, it's hard.
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The problem was that enabled, that basically rewarded people who had money and were investing
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it, especially in property.
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The elephant in the room here is the property prices, as I just said, how expensive it is
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to buy a home.
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And it puts up with pressure on house prices.
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If wealthy boomers are going around to auctions and they're competing with first home buyers
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with a massive amount of cash that they've built up as equity in their own home, which
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they can then go around buy a property with knowing that if the property grows by a million
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dollars over the next eight years or 10 years, then they're going to have a 50% tax discount
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on that profit.
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That didn't seem fair.
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So they wanted to realign capital gains tax to be the same rate as income tax, especially
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on property.
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So everybody knew they were going to do this to property.
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That was the first bit of the tax reform.
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The second bit of the tax reform was to abolish negative gearing.
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This is a funny system that Australia has had for a very long time, where if you buy
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an investment property, and the rental yield that you get from the investment property,
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you know, is the rent that you get is less than the amount that you have to pay the bank
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for the mortgage repayments, then you can deduct the difference, the loss, the ongoing loss
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that you're making on that investment property because you're hoping that the price will rise
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and you'll end up ahead when you eventually sell the property, but in the short term,
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it's a cash loss for you.
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You can claim that cash loss against not just the expenses that you put into the property,
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which would make sense, but against your own income, as if you yourself were an income
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and asset generating machine, as if you were like your own investment fund and your income
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from this unreli- your income as a nurse, you could deduct the losses that you were making
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on an investment property.
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In other jurisdictions, like in the United States, for example, setting aside the fact that
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they also have a home interest deduction, which Australia doesn't have, you can't deduct
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any of the interest that you spend on your own home in Australia.
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But in the United States, if you buy an investment property and it's had a loss, you can deduct
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that against the buying a dishwasher for that place, fixing the roof for that place,
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but you can't carry those costs over and deduct them against your salary.
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That was what negative gearing was in Australia, and the fact that I can say what negative
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gearing was is headspinning.
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If you're not in Australia, this is a bread and butter way for Aussies to invest.
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This is like the thing that you do.
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As soon as you have bought your own house, you're saving up enough money to be able to buy
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a second property to negatively gear it, meaning that you can deduct all of the interest payments
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that you're paying the bank against your own salary, perhaps pay very little or no income
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tax, and then sell that property in the future for a huge capital gain, which will only
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be taxed at half the tax rate.
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As you can see, as I described these things, this was tailor-made to increase demand for
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property and to push house prices up.
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So it was a totally reasonable center left ambition for a very long time to get rid of negative
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gearing when say people can't deduct the losses on an investment property against their
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own income.
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To get rid of the capital gains tax discount on property, it's going to be taxed the same
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amount if an investment property goes up as you would be if you were making that money
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from a wage, and the third tier, which is much less controversial, is to tax trusts the
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same way.
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Nobody has trusts unless you're super wealthy, it's a way for them to hide money, it
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goes might be a scam and it's right now those are going to be taxed as well.
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So it's robbing Peter to pay Paul, robbing the old people, to pay the young people, he
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is the problem, he is the problem.
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There's a war in Iran, don't if you've noticed, have you seen your pump prices, have you
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seen the gas prices at the pump lately?
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Oh, Nelly, actually they're not that bad, they're not as bad as I would have thought they
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were.
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I would have thought they'd be a lot worse by now.
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Where are we getting all our petrol from, conversation for another day.
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Anywho, inflation's bad.
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So if the government robs Peter and then actually pays Paul right now, not only will they increase
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inflation because they're pumping more money into the economy, but they'll also not do
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anything to reduce the deficit, which in the wake of COVID obviously everyone is still
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in the red, and they wanted to be able to have a plan to say, you know, we're being
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responsible fiscal stewards, we're not collecting all this money and then splashing it out.
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We've got a plan within 10 years, we're going to Australia is going to be back in the
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black, we're not going to have any more national debt in 10 years.
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You can question those figures, they're a little bit fuzzy, but you get the gist, they're
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in a bit of a bind.
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So they've done the robbing Peter bit and they're not doing the paying Paul bit yet.
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What their hope is, and they're not saying this, but reliable sources all agree their
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hope is that before the next election in 2028, the wall be over, inflation will be back
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to normal and they can go into the election with a big tax cut or tax reform and they can
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pay Paul then, but it's not that popular, I don't think, certainly among business-minded
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people to have money, lots more money taken away from them, lots more taxes raised from
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them without those taxes actually going back to anyone.
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Now the government says the taxes are going back to say there are five tax cuts, five
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tax cuts here.
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One of them is you get 250 bucks, literally you just get 250 bucks every year in your
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taxes, they're just going to give it to you, but okay, great, 250 bucks, how fast does
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inflation eat up, $250, yeah, that's one grocery shop.
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The other is you get to deduct $1,000 off your taxes, no questions asked.
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Now the Australian financial reviews political editor Philip Cury had a column in which
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he said, better than I can, rather than do something about lowering high income tax rates,
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which drive people to such vehicles as property and trusts, the government has chosen to push
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the other way and match the treatment of assets with income, right?
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So they had two choices, either they go the systems unfair, wage earners are getting
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screwed and investors are making out like bandits.
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So the logical solution is, well, okay, make sure that the investors are paying just as
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much money as the wage earners and then give the wage earners a break, but they've only
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done the first bit, which is getting people in a little bit of a, you know, a little hot
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under the collar.
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The other tax cuts that are coming were already legislated that they were part of a stage
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three tax cuts that were passed by the previous government, then amended by this government
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when they came into power, but they're touting them as if they're new, they're not.
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The impact on house prices, the government estimates, is 2% less, in other words, the
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growth will be 2% less, so if house prices had gone up by, say, 6% a year, they would
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never be going up by 4% a year, that's probably a small enough impact to not totally alienate
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older voters or homeowners.
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On the other hand, if there's a housing market correction and house prices go, which
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there sort of might be in Sydney and Melbourne already, and if house prices go back by 6%,
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and because of these changes, they go back by 8% instead of 6%.
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Does that become an electoral liability?
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One other interesting reason about the Iraq war and the reason why Australia is in the
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fiscal position that it is, Australia is actually doing pretty well out of the Iraq war,
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the Iran war, rather, you know, it's not great for prices, it's not great for inflation,
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it's not great for interest rates, it's not great for mortgage repayments, mortgage
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repayments in Australia, by the way, are almost universally variable, meaning they actually
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float around, you have no idea what the interest rate is going to be next month, it's not like
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in the States where they just fixed for 25 years.
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But the government is making a lot of money because we are a resource rich country and
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we sell a lot of natural gas and we sell a lot of, you know, stuff that people need.
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And those are all gone high.
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So the tax receipts that the government is bringing in is an unexpected windfall.
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In fact, the government's touting how there are so many savings in this budget, we're
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making so many savings when we're bringing in lots of money.
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Well, 90%, I heard this on a television from a very important sounding, po-faced, gray-faced
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man, and I didn't fact check it, but I trust him because he seemed authoritative.
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He's at 90% of the savings, but by the end of the decade are actually from revenue,
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from resource tax increases and from inflation, so that's interesting.
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So you get your $250 deduction, your $250 in the pocket, $1,000 deduction, you get a tax
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cut that was already legislated.
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The problem is what economists really wanted was tax reform, meaning our highest marginal
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rate is 47%, plus an extra percent and a half to pay the Medicare levy, so 48.5% is
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the highest marginal rate.
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It kicks in reasonably low in the hundreds something thousand, it doesn't kick in
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it like half a million dollars in income.
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The tax-free threshold, the amount that you can earn before you start paying tax is quite
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low, it's less than $20,000 a year.
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This extra $1,000 deduction is a de facto way of increasing the tax-free threshold so
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that people have slightly more money to earn, but because those points at which you hit
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a next, the next band of more tax are not pegged to inflation, you get every year, well,
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every day, what they call brackets creep, where the tax bracket that you're in gradually
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just inflates, because as inflation and wages naturally rise, the cutoff point at which
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you enter the next highest higher tax bracket does not, and therefore the government just
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rakes in more and more money as people who are effectively making less and less or paying
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higher and higher taxes.
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So a big reform, and maybe this is what they've got planned for the budget before the next
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election.
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We don't know.
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The big reform would be to rejig the tax code altogether, dramatically increase the tax-free
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threshold so that poor people get to keep more of their money, increase the highest,
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the amount that you need to earn before the highest marginal rate kicks in.
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And most economists think you should also increase consumption tax.
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We have a 10% goods and services tax in Australia that's low by global standards.
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If you increase that a little bit and maybe you compensate poor people in some way, maybe
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you remove food from it or you give vouchers or something like that, but if you nudge
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that up to 12.5%, can you then tax income less?
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The problem is income tax as a share of tax revenue is going up and up and up.
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I quote from the Australian financial review, the federal governments become increasingly
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reliant on taxing individuals as other sources of income, such as the tobacco excise and
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the GST have either declined or grown at a comparatively slower rate.
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In the next financial year, this coming financial year, individual income tax will be 52% of
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all tax receipts.
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By 2029 to 30, our financial years go from July to June, which is weird.
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By 2029 to 30, it'll be 54.5% of total tax from 52 next year.
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That's the highest level since 1999, which was before the goods and services tax was introduced
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and income taxes were slashed.
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When the goods and services tax was introduced, a broad-based national consumption tax,
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they cut income tax so that it was revenue neutral and they couldn't be claiming to be
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raising taxes.
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We're now paying the highest amount of income tax as a proportion of the overall tax burden
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than ever in a post GST environment.
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Why is that bad?
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While I'm glad you asked.
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You're supposed to tax things you want less of.
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That's the effect of taxing things.
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There are other reasons to tax.
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You need to raise the revenue, but why do we tax cigarettes, why do we tax booze?
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We know that people will use them less if they're more expensive.
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If you tax employment, that's not good.
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People will work less.
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People have less of an incentive to work more.
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If they know that almost 50 cents on every dollar that they work extra is going to go
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away to the tax man, then they're going to be less productive.
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Economists don't like income tax being such a high proportion of tax receipts.
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The fin review goes on to say there are no real attempts to lessen the budget's reliance
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on income tax.
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There's no consideration of a broader GST with proper compensation.
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No thought of replacing inefficient state taxes.
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No economy-wide incentive for business investment.
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If you think that that's just the economic wonks at the financial review speaking, the
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City Morning Herald chimes in.
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I'm just going to go through a few of the different takes so that you don't have to read
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all of the articles about this.
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The City Morning Herald chimes in saying that, and this is a center-left paper, charmers
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is claiming this budget cuts taxes in five different ways.
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It's a garbage line.
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They say this budget contains three one percentage point tax cuts that were already announced.
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Offers tax payers the chance to accept a $1,000 instant tax deduction and introduces the
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working Australian's tax offset of $250 from the next financial year.
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The total estimated value of these five changes is a bit over $2,000 a year to an individual,
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but that's a best case scenario.
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It'll be a lot less for most people, $2,000 a year.
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Robbing Peter, not really paying Paul.
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The rich will do okay.
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That's the thing.
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It's a rhetorical budget.
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It's a budget that seeks to say we're not doing nothing about intergenerational inequality.
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It's also a savvy rhetorical punch at populism in Australia.
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It's a way of saying, you know, don't feel like the elites are ganging up against you.
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This is where we hear your pain.
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I liked this quote.
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The subtext of this budget is that it's time for boomers to take one for team Australia,
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which is fair enough.
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But its central irony is that it does little to alleviate the income tax burden increasingly
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born by younger workers.
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Needless to say, boomers don't pay income tax.
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Boomers no longer work.
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In this financial review, probably the best piece that I've read about the many, many,
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many, many, many opinion pieces that I've read about the budget, Joanna Mathur or Joanna
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Maier in the Fin review writes a piece entitled Where the Shrewd Money Maybe Headed After
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the Budget.
26:24
Subtitled investors will likely respond to the changes in two key ways, relentlessly
26:29
upgrade the family home and buy property through superannuation.
26:35
She quotes from the budget, saying one sentence in the budget papers gives a lot of way about
26:40
who benefits from the proposed property tax overhaul, quote, from the budget, the reforms
26:46
to negative gearing and capital gains tax are prospective and respect previous investment
26:52
decisions.
26:54
That makes sense.
26:55
The reforms kick in, they kicked in as of 7.30 p.m. last night, which was the moment
26:59
the treasurer took to the floor of parliament in order to deliver the budget.
27:03
If you bought a property at 7.29 p.m., it's eligible for negative gearing.
27:09
If you bought a property at 7.31 p.m. yesterday, it is not eligible for negative gearing.
27:16
Ditto capital gains tax, all of the capital gains that you've made on a property up until
27:21
yesterday will be honored and then they will have to do some fancy footwork at the tax
27:26
office to measure what the capital gain would have been between the valuation of that property
27:34
or that asset in any class today versus in the future.
27:39
So everything is prospective, nothing is retrospective, everything changed last night.
27:45
Joanna writes in the Australian financial review, the first part of the sentence is a dead
27:50
giveaway for who wins.
27:52
To remind you, the sentence is the reforms to negative gearing and capital gains tax
27:55
of prospective.
27:57
First part of the sentence is dead giveaway for who wins existing property investors.
28:01
She says, which is exactly the opposite of what the government wants you to believe.
28:07
Taking advantage of a period of low interest rates to make highly leveraged property purchases,
28:13
they will still enjoy a generous capital gains tax discount on at least part of their
28:17
holding period, plus have access to negative gearing because any property is the one and
28:23
pricey yesterday while prior to today are still eligible for negative gearing.
28:30
For the most part, the benefits will be retained by existing landlords, she writes, and
28:34
the spoils presumably passed on to their children and grandchildren.
28:38
For everybody else, it's too late.
28:41
The argument goes like this, Joanna says, and she gives the example of the nurse paying
28:46
$90,000.
28:47
This is the argument the government makes as to why to bring capital gains tax into alignment
28:52
with income tax.
28:55
She gives the nurse's example, nurse paying $90,000, pays $0.30 on every marginal dollar
29:00
she earns, property investors selling an asset held for more than 12 months, generating
29:04
a $90,000 capital gain, pays tax on only half of it, an effective marginal rate of 15 cents
29:09
in the dollar, half of what the nurse pays.
29:11
But she writes, but this is the bit labor won't say out loud, labor being the ruling party.
29:20
The nurse continues to pay the same rate of tax, but loses the potent wealth accumulation
29:26
and tools afforded to the people who came before her.
29:30
So if she saves some of her salary, and she wants to do anything with it, now it's the
29:37
younger person who hasn't gotten into the property market who doesn't have the opportunity
29:41
to benefit the same way that the boomers did.
29:44
I suppose this is just a regrettable side effect of the fact that they don't want to make
29:48
things retrospective because people would absolutely howl if they bought a house six
29:54
months ago, expecting that they would be able to negatively gear at and all of a sudden
29:58
they can't.
30:01
Nonetheless, it does mean that you lock in the gains for all the people who came before
30:06
and lock out the same opportunities for the people who come afterwards at the same time
30:11
as you're saying that you're trying to address intergenerational wealth.
30:15
In other words, just to clarify, you're a young person, you're saving up money and you
30:20
want to buy it, you want to put some of that into shares, you want to put some of that
30:23
maybe into an investment property, obviously that's, you have to be wealthy to do that,
30:26
but let's say you just want to buy some shares.
30:29
Those shares are now going to be taxed at the high rate, which is being introduced in
30:34
order to address intergenerational wealth, you're never going to have the same opportunity
30:39
that the older people did to invest them with a 50% discount on your tax.
30:48
Then it goes on to write in the fin review, returning to budget paper number one, it speaks
30:54
to how investors will likely respond to these changes.
30:59
They will relentlessly upgrade the family home or the owner occupied homes of their children
31:06
and buy property through superannuation, superannuation is like our 401k here and that's exempt
31:12
from these changes.
31:14
A byproduct of the budget changes will be a turbocharging of the flight of capital to
31:18
the principal place of residence.
31:21
This is because the family home remains the last truly tax-free asset.
31:26
It's exempt from capital gains tax and land tax.
31:30
So all of this only applies to investment properties.
31:34
Your home, if you buy your home, it goes up in value, then when you sell your home, you
31:40
don't pay capital gains tax on that.
31:42
So Joanna, the columnist in the fin review, is saying all that means is that if you're
31:47
wealthy and you've got lots of money to splash around, you're just going to spend as much
31:50
on your home as you can because whatever improvements you make to it, you put in a swimming pool
31:54
and you're just going to sell for another $300,000, you put on another deck on the home,
31:59
you put another floor on the home, you do it up, you improve that if you put half a million
32:04
dollars into improving your home and that yields a $1 million higher price when you eventually
32:10
sell it because it's your home, it's going to be completely capital gains tax-free.
32:15
She writes, we've already seen a trend to over-capitalization of the family home, particularly
32:19
in Victoria, where property investors have been hit with higher taxes.
32:23
The strategy is simple, buy a $20 million mansion, spend $5 million on a renovation,
32:29
and wait.
32:31
It's a sensible option for the owners of those homes, she writes, but it hardly helps
32:36
solve Australia's productivity problem, instead of money flowing into businesses or shares
32:41
in companies, it becomes trapped in the walls of huge houses.
32:48
This brings us to perhaps the biggest concern that many business people have about this
32:53
and that I share, which is not everyone divides cleanly into these two groups of old boomer
33:01
who bought a home for a happening 50 years ago and is now sitting on a $4 million
33:07
asset or young struggling poor person scrambling to save up enough money to be able to buy a
33:14
home and spending every single penny that they've got on doing so.
33:20
There are a lot of young people who don't want to be hard-scrabble poor young people
33:24
forever and would like opportunities to maybe they want to open a cafe, maybe they want
33:28
to open a fashion line, maybe they want to become sub-stackers, who knows, and maybe
33:35
part of their goal is that they're going to build up their new business and it's going
33:40
to increase in value and someday they're going to be able to sell it for a profit.
33:44
When they do sell it, they're going to now have to pay twice as much tax on it as they
33:48
would have, which makes hungry enthusiastic innovators less likely to innovate.
33:57
If you could do so here where our capital gains tax is now among the highest in the
34:00
rich world or you could go to the United States or Singapore or wherever else you might
34:05
go and do it there where your tax burden instead of the government taking essentially half
34:10
of a million dollar profit, it might be 10 or 20% of a million dollar profit.
34:15
Is this the best way to foster innovation and productivity in Australia or is it a good
34:21
way to rhetorically pander to fed up young people and disillusioned voters by, as I said
34:28
before, kicking granny in the teeth?
34:32
It also ignores the fact that there's a lot of people in the middle who have just bought
34:37
a house.
34:38
I'm not pointing any fingers.
34:40
I'm not saying that as the oldest flavor of millennial myself, certainly in my financial
34:48
affairs, I'm a millennial in the sense that I just bought my family home.
34:54
The fact that I've just got into the market makes me less enthusiastic necessarily about
35:01
being rung out to dry as if I'd made a huge profit already.
35:05
There are all kinds of things that I now can't do that I would have been able to do if
35:09
I'd known that there was a capital gains tax discount.
35:12
That doesn't mean that my personal preferences should dictate the nation's policy agenda, although
35:17
I sort of wish they would, but it does mean that it's a little bit simplistic for the
35:22
government to frame this as old rich people versus young poor people when there's quite
35:26
a lot of people who are also in the middle who are aspirational and who haven't yet had
35:30
the opportunity to enjoy the asset boom that the boomers did.
35:37
This brings us to spending, which is the other wrinkle here, the government is spending
35:42
a lot of money, the government is a high spending government.
35:48
They're talking about savings, they're talking about spending less, but allow me to quote
35:53
for you, Bernard Kean, who is columnist in Craky, which is a, I wouldn't say Santa
36:00
left, I would say thoroughly left wing working class oriented, you know, traditional lefty
36:07
online newspaper.
36:08
They do great reporting and Bernard is often, he's always insightful and articulate and
36:12
I frequently disagree with him, which I love.
36:15
In this case, I don't disagree with him.
36:17
This is coming from the left, right?
36:19
This is not the business community taken a pot shot at the government.
36:22
This is from the left.
36:24
Uh, Kean writes, this is still the biggest spending government in Australian history on
36:29
a consistent basis, even with the now standard additional tax revenue compared to previous
36:35
forecasts.
36:36
He's suggesting that the governments routinely underestimate how much revenue they're going
36:40
to get so they can be pleasantly surprised on budget night.
36:44
Even with that, forecast budget deficits remain high.
36:47
While we've been told of all the savings in the budget, they are beyond the NDIS changes,
36:52
relatively modest.
36:53
Meanwhile, the government has crammed still more spending into the current financial year
36:57
than forecast another two billion on top of the 786 billion at forecast in December,
37:02
from the 786 billion in estimated just two years ago.
37:07
And he says, spending next year is now expected to be a monster $18 billion higher than
37:13
December's forecast, leaving spending stuck at 26.8% of GDP.
37:20
Budget forecasts have spending stuck above 26% of GDP all the way out to 2030.
37:27
And he writes, this is a lefty columnist.
37:31
He writes, this is a government addicted to spending at a higher level than any previous
37:37
government on a sustained basis.
37:40
He says, fortunately, he keeps getting showered with additional revenue, an extra 8 billion
37:44
in the current year alone, a 19 billion next year.
37:48
Much of this is derived from higher company tax, from higher energy prices, an extra $19
37:53
billion over the forward estimates.
37:55
As I mentioned before, Australia has a lot of, Australia isn't a net energy exporter.
38:00
We make a lot of money off energy, a lot of money off natural gas when those prices go up.
38:06
The government sees a windfall of tax receipts.
38:09
So the revenue intake is exceeding 25% of GDP.
38:16
Spending is just below 27% of GDP.
38:19
It is the highest spending as a proportion of the size of the economy since the 1980s,
38:23
except for the during the pandemic.
38:26
And the financial review points out even those numbers are under estimates, because they
38:32
exclude off budget spending.
38:34
The government has this fancy trick, I mean, it's not a very fancy trick, it's pretty
38:39
rudimentary trick.
38:40
It's pretty obvious trick when you think about it.
38:41
It's the kind of trick that my eight year old son would come up with if I asked him,
38:45
how much money have you taken from the piggy bank and he just lied about it and just said
38:51
gave me the wrong number.
38:53
This is what the government does, they have things like the National Reconstruction Fund,
38:58
the Clean Energy Finance Corporation, Snowy Hydro Scheme, the National Broadband Network,
39:05
which all don't appear on the government's books, they're off budget spending and they're
39:09
worth $114 billion, $114 billion.
39:14
Total spending is only in the 700s billion, so it's like, you know, one seventh of total
39:19
spending is just not even accounted for.
39:22
So they're spending a lot, they're taxing a lot, they're taxing income a lot, and now
39:29
they're taxing assets more, more robbing Peter, still no paying pull.
39:36
One thing that the treasurer does have going for him is he's big into the abundance agenda.
39:40
You know, he likes talking about the abundance agenda that the left has to get back to building
39:44
things.
39:45
We have to, we need to slash red tape, we can't just be a party of saying no.
39:51
The assistant treasurer is Andrew Lee, the assistant treasurer, I think he is, he's
39:55
the assistant, he's got one of those long titles where he's like the assistant minister
39:59
for charities, productivity, family, cats, the assistant minister for looking at the way
40:06
that the leaves are pointed on the trees outside Parliament House.
40:10
He's got a lot of portfolios, let's just say Andrew Lee, but it's a very clever cookie
40:14
and he gave a speech last week, last year, rather, to the Chiffley Centre in which he was
40:18
talking up as reclines abundance agenda and saying we've got to get more, we need a left
40:22
that builds things.
40:25
And the treasurer Jim Charmers, who ostensibly is responsible for the other budget, well,
40:28
not ostensibly, the butt does stop with him and the prime minister.
40:32
He is also on the abundance bandwagon, but he seems to only focus on the cutting red
40:38
tape part and not on the, how could we think about what Australia might be if we were
40:44
really to shoot for the stars?
40:47
What would a sort of moonshot vision of Australian productivity, opulence and flourishing look
40:53
like in the 21st century, if we wanted to go out on a limb?
40:56
There was none of that.
40:59
He loved saying yesterday that this is an audacious budget, it's a brave budget and I want
41:03
to give him credit for it.
41:04
It is.
41:05
I mean, he believes in these things, these are long overdue changes, many of them.
41:09
And so credit to him for taking a swing even though he knew that there would be backlash.
41:14
The swing is limited to milking old people.
41:20
That sounds a bit sexual, doesn't it?
41:21
Milking old people.
41:22
Should we just say like ringing, ringing blood out of the stone of the elderly without
41:28
doing anything to reform the tax code to make it easier for young people to get ahead,
41:33
young people who were paying income tax and without doing much on productivity?
41:38
Does any morning Harold, Santa left newspaper, was critical of his productivity agenda,
41:45
giving it a C minus in last night's budget and writing vastly every government promises
41:50
to reduce red tape, the focus on building a national single market and harmonizing standards
41:56
and laws.
41:57
So it's easier for businesses to work across state borders is sensible and overdue.
42:03
This is expanding the use of the government's digital ID and slashing fees and wait times
42:08
for getting more homes built.
42:11
But here's the kicker writes the Harold.
42:14
Charmer says these reforms will boost productivity in the Australian economy, finally, which
42:20
will in turn start to rebuild Australians' wages in real terms.
42:23
This is a big problem.
42:24
Productivity is not high enough.
42:25
It's not as bad as it is in much of Western Europe, it's not as good as it is in the
42:29
United States.
42:30
I think, unless Trump has turned that around in the United States, but we, you know,
42:36
like the Federal Reserve in Australia, the Reserve Bank we call it, their estimate for Australian
42:41
productivity growth is like 0.7 of a percent.
42:44
In the budget yesterday, the treasurer is more rosy, he calls it 1.2 percent.
42:49
But as the city morning held writes, unfortunately, as treasurer's budget paper number one makes
42:53
clear, quote, the long term productivity growth assumption remains at 1.2 percent.
42:58
That's still not good.
43:00
It's still not the kind of productivity that you would want to see if you're going to
43:03
usher in a flourishing future of pleasure and plenty where the lion sleeps with the lamb
43:08
and we're all, you know, it's about, it's the old battle between economic drives and
43:14
economic wets, meaning, you know, people who want sort of neo-conservative economics
43:19
versus soft lefties who want progressive policies.
43:24
The left tends to focus on redistributing the pie and, you know, the people who aren't
43:30
in favor of that will sometimes say, well, what about just growing the pie?
43:34
Last night was very much oriented towards this social justice or perhaps economic justice
43:41
vision of redeviding the pie so that we can, I don't even say redistribute the gains
43:48
because as I said, the gains weren't redistributed, they're just going to pay down the debt
43:52
and to spend more.
43:54
But to harmonize, shall we say, the way that the government collects revenue, to de-legitimize
44:01
and to basically render impossible the accumulation of wealth inside property at a rate greater
44:08
than you would acquire it through other mechanisms like your own labor, without actually then
44:15
handing that money back to anybody.
44:18
Another thing that I forgot to mention when I was talking about these tax reforms, it's
44:21
very, very important.
44:23
Everybody knew that Australia needed to get rid of negative gearing, most people.
44:29
And even if the impact, you know, you hear people who support negative gearing and who,
44:34
you know, you hear rich, rich shitpokes talking about, you know, how they just oppose the
44:39
idea of abolishing the capital gains tax discount on property or whatever.
44:44
And they'll say, well, it's not going to have a huge impact anyway.
44:47
The real driver is housing supply, immigration, all of that might be true.
44:52
But it could also still be true that you would not want your policy settings to be actively
44:57
pushing people in another direction.
44:59
Like if you were going to pull on every lever in order to try to get property prices down,
45:04
you would have to include negative gearing and the capital gains tax discount on property.
45:09
But here's the thing.
45:12
The government didn't only include property in the capital gains tax discount abolition.
45:19
They included all assets.
45:21
So it's understandable if you're trying to get property prices down and address intergenerational
45:27
inequality.
45:28
So young people can buy a home that you might want to discourage investors who, you know,
45:33
or older people who have built up equity in the home that they bought in 1980 for a
45:38
company, discourage them from buying property.
45:42
But why would you want to discourage them from also buying shares or anything else that
45:45
might grow in value?
45:47
And in so doing, prevent or punish young people who might want to invest in things from
45:52
doing so as well, what would have made more sense to me would be target this narrowly
45:57
at property, get rid of negative gearing, get rid of the capital gains tax discount
46:01
on investment properties, allow people to keep the capital gains tax discount if they're
46:06
investing in shares so that people can build up wealth over the long term, including
46:10
young people, build up wealth over the long term, inside other asset classes that are
46:15
not property.
46:17
The fact that it includes shares and the fact that it includes a company that you create
46:23
like a tech startup, for example, and the only reason you're creating it is because you're
46:28
hoping that the $50,000 that you've saved up that you're using to create it with is
46:31
going to turn into a million dollars and you'll be able to walk away.
46:34
Now the government is going to take half of that million dollars when you sell it instead
46:38
of one quarter, which it was yesterday, then how much motivation do you have to do that
46:43
versus just leaving?
46:44
I mean, you might as well buy an investment property, you know what I mean?
46:48
It's sort of by equalizing everything to be more punitive, they've actually missed an
46:54
opportunity to make property investment uniquely punitive.
46:58
It would have been more effective as a way of discouraging property investment if they
47:04
had allowed you to maintain the capital gains tax discount on shares and other assets
47:09
because then people with money would have gone, okay, now that the calculus is, I probably
47:13
end up ahead if I just put it into the stock market instead.
47:17
So that's weird.
47:18
I should note that the treasurer was asked on Tuesday by journalists whether or not he
47:24
would consider amending the capital gains tax increase, the doubling of the capital gains
47:30
tax on assets for tech startups and he said he would, he said he wants to talk to the
47:35
business community, hear them out and he's open to changes.
47:38
So I don't want to preempt this.
47:41
I hope that if he is into the abundance agenda and let's all have a flourishing economy
47:46
and let's get productivity up, I really hope that he will listen to the concerns of venture
47:51
capitalists and entrepreneurs and startups who say, well, hang on.
47:56
If I invest $50,000 into a business and the business goes south, it's not like I get
48:01
that money back, I lose that money.
48:03
But then if it does well, you take half the money.
48:06
So it's like heads you when tails I lose, like either what it's not fair, there's speculative
48:13
investment and the whole point of the speculative investment is that you're going to make a lot
48:17
of money if it goes well because it usually doesn't go well.
48:20
So I'm going to make speculative investments if they are nine times out of 10, they lose
48:25
their money and the one time out of 10 that they don't, the government takes it anyway.
48:29
So I hope that the treasurer has thought about this and is open to amending the rules
48:34
that he announced yesterday on that basis.
48:38
The financial review writes about this particular concern saying labor has tried to deflect
48:43
some of the heat from the business community.
48:46
The package of business measures, it says is designed to encourage risk taking, particularly
48:51
by the early stage companies that mostly younger voters might start in the coming years.
48:57
Well, they might start them or they might go abroad to start them there.
49:01
In addition to the permanent extension of the $20,000 instant asset right off for small
49:05
businesses with a turnover of up to $10 million, that means you buy a piece of equipment,
49:09
you can instantly write it off from your taxes.
49:12
Businesses has announced two key changes to the treatment of tax losses.
49:17
Startups will be able to get instant tax refunds for losses they generate in their first
49:21
two years of operations.
49:24
While businesses with revenue of up to $1 billion will be able to offset a loss against
49:28
the tax they've paid on profits in the prior two years, that's good, that's excellent.
49:33
So you make money in your business, you make money in your business, third year, you
49:38
make a loss times a tough, you get to deduct that against the taxes that you paid and
49:44
you'll get a refund on the taxes that you paid last year and the year before, up to
49:48
the amount that you lost this year.
49:50
That's good, or the tax that you would have paid on that.
49:54
There's also changes to research and development under the R&D changes.
49:58
The tax offset for core R&D, meaning uncertain experimental work that generated new knowledge
50:04
will lift from 25% to 50%.
50:06
They're doubling the tax offset for research and development.
50:10
That's great.
50:12
But in another piece, airing, you know, reflecting the concerns that I just raised about
50:17
entrepreneurialism, entrepreneurs, investors and tax experts warned that the government's
50:21
plan to abolish the 50% discount on capital gains in favor of one index to inflation,
50:26
or with a 50% floor, I didn't mention that, just to get more in the weeds.
50:32
Not only is there going to be a doubling of the capital gains tax on assets that you
50:37
hold for more than a year, but there'll be a minimum tax on it, 30%, and that is basically
50:42
designed so that you can't just hold it until you retire when you're not making any income
50:46
and then pay zero, you know, or pay very, very little tax on it.
50:49
So minimum 30% tax on all growth in assets.
50:54
This makes Australia a very high tax environment.
50:59
I hope this is just like a one to two year blip and that the treasurer and the government
51:05
have plans for an overhaul of the tax system before the next election.
51:08
That's where my smart money is.
51:10
But without that, this is really a nonsensical, lopsided half-measure where you essentially
51:19
it's like, why are these rich people paying a different, a lower rate of tax than these
51:24
hardworking, struggling workers?
51:27
I know what the solution is.
51:29
Let's just make everyone be in an equally bad situation without actually mitigating
51:34
the harm on anybody so that everyone is worse off and that way it's fair.
51:39
As long as everyone is equally in the shit, it's fair.
51:43
That's socialism for you, ladies and gents.
51:47
So the piece goes on to say the venture capitalist Paul Bassett, a high profile, square peg,
51:54
venture capitalist who co-founded the employment website Seek, said that the change would
51:59
set back the start-up ecosystem in Australia by a decade or more.
52:04
And the tech council of Australia launched a lobbying effort to ensure that startups should
52:08
be exempted from the capital gains tax.
52:11
Again, the point is poor young scrubbers don't want to remain poor young scrubbers.
52:17
So this kind of old school almost marxist idea of the fat cat industrialist old boomers
52:25
sitting in their mansions, chomping on cigars, jumping into their scrooge mcduck swimming
52:31
pools full of cash, waiting for the trucks full of pallets of Krugerrand to come knock on
52:40
on their door with their retirement wealth.
52:44
And these poor, hard luck young kids who are never going to get ahead.
52:48
The kids are going to grow up and they're going to want to make money as well.
52:51
They're also going to want to accumulate assets.
52:52
It's not like fixed in stone.
52:54
This is not the 19th century where there's a factory owner and people toiling on the factory
52:58
floor with no hope of ever getting out.
53:00
We live in a dynamic industrialized economy where hopefully you want young poor people
53:05
to not be young and poor for very long.
53:08
And the budget doesn't seem to recognize that.
53:11
I will leave you with a great piece by Bernard Keen.
53:15
Again, I mentioned Bernard Keen at Crikey.
53:18
I would say far left in the context of mainstream Australian politics.
53:23
And this is about the political implications and this is probably the most interesting
53:26
for non-Australian listeners and viewers.
53:31
I thank you for all of your comments in the substack chat as well.
53:35
By the way, if you're listening to this and you're not a subscriber on substack while
53:39
I've been talking, all the substacks subscribers have been leaving fabulous messages and questions
53:45
which will get to in a future, I'll come back to them, but I don't want to ramble on
53:50
now by getting to too many of them.
53:52
You too could have access to that, including one extra episode a week and never hear an
53:57
ad if you subscribe on uncomfortableconversations.substack.com.
54:01
I've got to say, if you do subscribe, thank you.
54:04
It literally is, it's 80% of the revenue of this show.
54:07
And nothing would happen without the subscribers advertising wherever you use a piece of shit.
54:12
And if you have the option of subscribing on Apple or like another platform, you can do that
54:17
but just be aware you don't get all of the benefits.
54:19
You get the extra podcast episode and you don't get any ads but you don't get to be part
54:23
of the community, you don't get to get notified when I'm doing live streams like this and
54:26
so on and so forth.
54:27
So do it on substack if you can.
54:29
We get to keep more of the money, we get to have your email address so that we can keep
54:32
in touch with you and you get a better experience.
54:35
So a huge thank you to the people who actually bother to click through and throw a little bit
54:41
of money out way.
54:42
I mean, in this environment, am I right?
54:45
In this economy, get out of here.
54:48
We need every shackle we can get.
54:50
So Bernadkin is commenting about the impact that this has on populism and on the far right,
54:56
the political rather than the economic impact of the budget.
55:00
He writes, there's little in the budget that will directly deal with the drivers of populist
55:04
discontent, fueling one nation's rise, one nation being the anti-immigrant, I wouldn't
55:10
say it's far right.
55:11
It's not anti-Semitic, but you know, it's a white nationalist or Christian nationalist.
55:16
It's just a populist, socially conservative anti-immigrant party.
55:24
He says there's little in the budget that will directly deal with the popular discontent
55:28
that's fueling the far right.
55:31
There's certainly no gas tax of the kind demanded by pretty much everyone, and gas here
55:36
means not petrol in the American sense, but liquefied natural gas.
55:40
It's a big debate in Australia.
55:42
We basically, we don't keep any, we keep very, very, very, very little of the profits of
55:48
gas.
55:49
We have a tremendous amount of liquefied natural gas.
55:51
We sell it and we tax it like a normal resource, but we don't have what many countries do,
55:57
like Norway and even more recently, the United Kingdom where they say this is our resource
56:02
that belongs to the people and we're going to have a proper tax on it that goes into some
56:05
kind of an investment fund for the benefit of future generations after the gas runs out.
56:14
There's certainly no liquefied natural gas tax of the kind demanded by pretty much everyone
56:18
across the political spectrum, including Pauline Hanson, the leader of one nation.
56:22
Remarkably, the budget actually downgrades this year's forecast revenue from the appalling
56:29
petroleum resource rent tax.
56:32
This is a, the petroleum resource rent tax was a piddling and pathetic attempt to placate
56:39
people who thought that we should be keeping more of the profits from our resources on
56:43
shore.
56:44
It downgrades the revenue from that tax by $100 million.
56:49
The current energy price spike is only going to increase petroleum resource rent tax revenue
56:54
by $400 million.
56:56
Next financial year, $400 million, the budget is $700 billion.
57:00
It's a rounding error.
57:03
Burning King goes on to write, if the independent senator David Pocalk has made Australians
57:07
familiar with the fact that the beer excise raises far more revenue than the petroleum resource
57:12
rent tax, there are plenty of other revenue sources far bigger than what we impose of gas
57:18
multinationals to tobacco, spirits, the bank levy, the petroleum resource rent tax in Australia,
57:28
barely raises more than the passenger movement charge at the airport, which the government
57:34
is increasing from the first of January.
57:36
By the way, here's a, that is amazing as well.
57:39
Do you know what it costs?
57:40
Do you know what the departure tax in Australia is to use the airport?
57:44
It's going from $70 to $80 Australian, that's about $50 US just to use the airport.
57:52
And that raises about as much money as the total amount that we bring in from this gas
57:59
that we impose on multinational corporations that rape us of our gas, of our natural gas.
58:05
For alienated one nation voters, Bernard Keen writes in Crikey, there's $700 million
58:10
in the budget for regionally targeted community infrastructure.
58:14
If that's less than the savings from killing off the inland rail, that was a project that
58:18
was going to go from Brisbane to Melbourne, they got rid of that, too expensive.
58:22
The major new spending is on defence, health and medicines, or that's good.
58:28
Some of the health spending will go to new urgent care clinics and bulk billing practices
58:32
in major regional centres, also good, but writes Bernard, and this is the paragraph against
58:37
which I've put asterisks, two asterisks.
58:40
That means you need to listen up.
58:44
But the core problem of unskilled people, mostly men, living in areas with limited economic
58:52
opportunities and lacking the population size to ensure decent services, is an intractable
58:58
one that governments of both sides have failed to deal with for decades.
59:05
Certainly, writes Bernard Keen, one nation has no ideas about how to do anything other than
59:09
voice their grievance, but as mostly former coalition voters, obviously the far right voters
59:16
would have previously voted for the centre-right party rather than the centre-left one, their
59:20
Angus Taylor's problem, the current opposition leader of the Liberals.
59:24
Jim Charmer's Anthony Albanese's challenge, the traitor and the prime minister from the
59:28
centre-left party in power, is to ensure that Trump's inflation shock and Labour's mild
59:33
reform ambitions don't add to their angry number in electorate's closer to our cities.
59:41
I think that's a pretty good summary of what's going on.
59:45
The government is seeing that there is discontent.
59:49
They're noticing that centre-right voters are going far right.
59:54
They're worried about seeming like a clueless and out-of-touch government.
59:58
They're worried about a populist anti-allet mood.
1:00:02
They're hearing from their base of growing Gen Z and Millennial and Alpha voters, who
1:00:10
at the next election will outnumber older voters for the first time ever, that intergenerational
1:00:15
inequality and wealth disparities and house prices are driving them up the wall.
1:00:22
So they've come up with a fairly clean, pretty audacious, rhetorically consistent pitch,
1:00:30
which says, let's put an end to all of the ways in which smug boomers were able to accumulate
1:00:37
wealth and we'll give it back to you somehow, maybe eventually just look over there.
1:00:45
There's a dog playing a trumpet, don't pay any attention to us.
1:00:50
Will that work?
1:00:51
It's probably better than doing nothing.
1:00:54
Should it have been done?
1:00:55
Yes, probably.
1:00:56
I mean, I think on balance, even though this is a bad budget for me, it does things that
1:01:01
Australia needed.
1:01:02
We needed to get rid of negative gearing, we needed to get rid of capital gains tax discounts
1:01:06
on property.
1:01:07
I think it's a shame that the capital gains tax discount didn't target property and remain
1:01:13
on other asset classes to further discourage property speculation.
1:01:17
I think it's an even bigger shame if it continues to apply to startups and venture capital
1:01:22
and young people who just want to create a business to get ahead, especially in the tech
1:01:26
sector.
1:01:27
And I think the biggest shame of all, which I'll be writing about in my column in the
1:01:31
Australian financial review this Saturday, which I hope you will buy a copy of if you're
1:01:35
in Australia, or subscribe to even if you're not.
1:01:39
The main thing, the main missed opportunity is that I do feel like if you're going to swing
1:01:43
for the fences on an abundance agenda.
1:01:47
Then why not actually swing for the fences and think big about how to grow the pie?
1:01:53
Don't just carve the pie up in a different way and try to make life as difficult for old
1:01:59
boomers as it is for young people without actually alleviating anything.
1:02:02
Don't keep spending very high and refrain from doing anything about an outdated tax system.
1:02:10
Think about what it would take for Australia or any country for that matter to really
1:02:14
flourish in the 21st century.
1:02:16
I mean, the point of my column will be what would a conversation sound like that actually
1:02:22
was aspirational enough to encompass the spirit of audacity and ambition that Ezra Klein
1:02:29
and Derek Thompson were calling for in their book Abundance.
1:02:33
Could Australia be a hyper power of green power that sells solar power generated artificial
1:02:44
intelligence tokens to the rest of Asia, for example?
1:02:47
I don't know if that's a good idea, but I'd like to hear it being discussed.
1:02:53
I'd like to hear what it would take for prefabricated and modular homes to be part of the housing
1:02:59
supply in Australia, the way that they are in Japan and Sweden, for example, so that
1:03:04
you didn't have to get compliance and approval separately in every state if you want to produce
1:03:10
prefabricated homes.
1:03:13
There are technological and practical things that could be done in all of our countries
1:03:20
that so far outstrip this petty, persnickety, legalistic, technocratic view of abundance
1:03:28
that this budget takes that I just wish we could expand the conversation to include those
1:03:31
as well.
1:03:32
If you're going to go into a budget as a treasurer, as a government and really try to do something
1:03:36
big, do something fucking inspiring and big.
1:03:39
I'd do something sort of mean and petty and intergeneration and let's take more from
1:03:44
these people because they were successful before us and we can't get ahead.
1:03:48
It's a sort of impoverished sad view of the world where I just just make sure that everyone
1:03:53
is doing as badly as the worst, most deprived, young, struggling person is and let's penalize
1:04:00
people who want to accumulate wealth and do something.
1:04:04
I'm not saying that it's, again, on balance, I think the budget is worth doing rather
1:04:09
than not doing, it contains very important reforms.
1:04:12
But alongside those, give us some hope, give us some vision.
1:04:18
This whole idea of becoming a solar superpower, I'll break it down for you in case you don't
1:04:24
just in the unlikely event that you are not a subscriber to the Australian financial
1:04:28
review purely in order to read my columns every other Saturday, I'll give you a little
1:04:33
preview.
1:04:34
This idea, it's not my idea, the idea is Australia is drenched with the largest amount
1:04:41
of the cheapest energy of any rich country in the world, that's solar.
1:04:46
It's hard to export energy, you lose a lot of it along the way, so you don't really
1:04:51
want to build transmission lines from Australia to Singapore or Hong Kong or India or whatever.
1:04:58
What's one thing that is very energy intensive, that all of those places need and that is
1:05:04
very easy to transport, data, so you build huge data centers which are really just factories
1:05:12
that produce AI tokens across northern hot dry northern Australia, they all have their
1:05:19
own solar arrays, their solar powered massive AI factories, data centers powered by solar
1:05:26
and you become the indispensable exporter of artificial intelligence to the entire Asian
1:05:33
region and it'll be a little bit slower, it'll be 50 to 80 milliseconds slower for a person
1:05:41
in Hong Kong to send their AI query to Darwin than if they did it on a local server, but
1:05:50
the query is probably taking five to ten seconds to process anyway, so a few milliseconds
1:05:54
isn't going to make a difference one way or another and if it did that might be a price
1:05:58
that they were willing to pay, if the energy was so cheap, that the data was cheap and
1:06:03
we could provide AI services cheaper than anybody else because we have cheaper energy than
1:06:07
anybody else.
1:06:08
It is already the case that solar plus batteries is the best, is the most economical pathway
1:06:14
to fueling to the energy needs of data centers, we have tons and tons of solar, the problem
1:06:22
is not, I'm not saying the government should be investing in this, the problem is that
1:06:25
there's no coordinating vision from the government, you know, there is the private capital that
1:06:29
would do this, but you could only a government can manage the transmission lines, the rights
1:06:38
of way, the easements, the water, all of the stuff that no private actor could possibly
1:06:44
do, so it doesn't have to cost anything, it just has to require the treasurer and the
1:06:50
government to stop pouring over numbers on a chart and to start thinking more bigly,
1:06:58
should we say, about national ambition, national aspirations and what productivity actually
1:07:04
looks like, and so to the extent to which I can facilitate conversations that enable
1:07:08
us to think more broadly about what flourishing in the 21st century could look like, that
1:07:13
is what I will see my role to be.
1:07:16
So I hope you've enjoyed this little budget breakdown, I'd love to know your thoughts,
1:07:21
you can always hop on sub-stack and you can email us or you can email us at uncomfyconvows
1:07:25
at gmail.com if you're a free subscriber, take care, we'll see you next time, thanks.