Latest / The Follio Property Podcast / Australia's Government Is Quietly Engineering a Housing Collapse | Property Experts

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Australia's Government Is Quietly Engineering a Housing Collapse | Property Experts · The Follio Property Podcast

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478,000 came into the country, but there are only 175,000 new homes built. We need to bring these two issues of housing supply and immigration numbers into line.
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Mass migration into a housing shortage, which has caused the worst rental crisis in any of our living memories. We're letting half a million in now. It has to be under 130,000. They've run migration into Australia at just the most obscene rate into a supply restricted market. And that's just crush loaded living standards and productivity is doing a whole lot of damage. We're going to grow a population by 50% in 40 years, roughly.
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The cost of living and the standard of living has declined so much. Purchasing power has gone backwards. Ten out of the last 15 quarters, we've had negative per capita GDP growth. Per capita GDP went backwards by 0.1%. The overall economy grew by 0.3% because we had 0.4% population growth. Basically fleecing us more and more every single year. People are sick of the government spending so much money, wasting our money. We're now seeing One Nation surge in the polls. People are just fed up. Their living standards have gone backwards. They're just seeing this kind of crap. What are we doing here?
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You're listening to the Folio Property Podcast. I'm Rhys Beddell and I'm here each week with my co-host Lachlan Delahunty. Part two of our favorite guests interview Lachlan. Part one, we touched a lot on property and where he sees the market. Part two, we're going to go more from a government perspective. Yeah, we're not a political podcast, but we could not...
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resist to get your sort of view on the Australian political landscape because it is important because it does have a direct impact on property. Yeah, no worries. Hey, guys. Quick thing to share. If you're serious about investing in Australian property right now, you need to see what we put together. It's called the National Investment Report, and it's our brand new monthly deep dive into exactly where the market is moving,
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what the data is saying, and what the smart investors are looking at right now. You can get the first access completely free. Just scan the QR code on the screen right now or click in the link below to fill out the form. First things first, Leith, we're a couple of weeks post-budget now. What's your thoughts from the budget, not just property related, but as a whole? Mate, I think it's really landed like a lead balloon. So I think the government's misunderstood.
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The moon of the electorate. And there aren't too many people who are happy about it, to be quite frank. So the feedback, if you look right across the generations, right across the different cohorts of rich, poor, whatever, it seems to be most people think it was a pretty bad budget.
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And you've seen that in the opinion polls, right? So I think the government will be a little bit shocked by that, and they probably didn't expect it to land so badly. I think one of the reasons why it's landing so badly is if you look macro level at Australia, we've had a really very poor five, six years, right? So basically real wages now are tracking about five or six percent below their peak.
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and yet we're paying, despite the fact that our purchasing power has gone backwards and our living standards are on aggregate, obviously, I'm averaging out, are declining, we're now paying more tax, far more tax than we were, say, six years ago. And I think people are sick of the government's spending so much money, wasting our money, and just basically fleecing us more and more every single year. And I think a lot of people view this budget, and I certainly did,
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as a tax grab because they increased taxes around a whole bunch of areas. And whether you agree with some of the changes or not, I actually don't really mind the taxing property investors on existing properties more. But the government had to do some quid pro quo, whereby the extra money it raised through that and the trusts and that sort of thing, discretionary trusts,
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They've found all these different areas to raise buckets of revenue, but they haven't then delivered that back in, say, permanent income tax cuts. What I mean by income tax cuts is not actual cuts, but just indexing the tax scales to, say, 2.5%, which is the midpoint of the RBA's inflation target.
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Because every single year, the tax system is set up to basically fleece us more every year because through inflation, we get wage rises. We've obviously had five or six years of wage rises where we haven't kept up with inflation. But because of those nominal wage increases to basically inflation induced, we're all paying higher average tax rates than we were previously because more of our income is at our highest marginal tax rate.
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And the federal budget explicitly says that I think 52% of the federal government's revenue was from personal income taxes, which is one of the highest dependencies in the world. And by 2030, they expect to be 54.5%. So they're expecting to get 2.5% more of federal government revenue share from personal income taxes in the next four years. And that just tells you that the system is built to tax you more every single year, even when you're going backwards, you know, once you adjust for inflation, I think...
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So the average punter to understand that, because that's a really good point, is the tax rates and the thresholds are set. Yep. And each year, and they've been set, you know. For years. We did get that 10 grand adjustment to the top rate after the stage three, but effectively, you know, you go back to, I think it was 2010. Yep. When they first raised them to 180, which was the top marginal tax rate. Now it's 190. But...
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So they've increased that threshold by 10,000 centrally over 15 years. Yeah. Yet over that period of time, wages and inflation's gone up by, you know, what, five, six times that? Yeah, yeah. A hundred percent. So it's so absurd now that the median full-time salary in Australia now, according to the ABS, so this is cash earnings. So that's basically your earnings from your wage or salary before taxes, right? That is about $100,000 now.
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So you only need to earn 1.9 times the median full-time to now pay the top rate. Which is the highest, one of the highest in the world, if not the highest. Yeah, well, it's sort of up there with some of the Scandinavian countries, but it's way higher than other English-speaking countries. And the absurd thing about it is if you use the federal budget's wage forecast, by 2028, 2029, I think it is, the end of the forward estimates, you only have to earn 1.75 times the median.
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to pay the top rate if they don't adjust the scales. That's assuming that the median full-time earnings go up with their forecast wage growth. And if you extrapolate over, say, a decade, by the end of the decade, you'll be earning about 1.35 to 1.4 times the median to pay the top rate. So if they don't change this, we're just going to get dragged on. Get around to a higher threshold, therefore more tax income tax payable. And it's a massive disincentive. So,
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Why would you want to work hard? Why would you want to earn more money if you're going to get taxed at the higher threshold? Yeah. And just to give a personal example, I'm often asked to do extra, write a report or whatever. Often, you might get offered 10 grand to write a big report and you know it's going to take you-
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oodles of hours, have to give up weekends for six weeks ahead so I don't see my family as much. I already am very time poor. But I often look at that equation and go, it's not worth it. Because if you get paid that 10 grand, I'm on the top rate. I've got to give 4,700 Albo. And this is where these memes have come out where Albo is my business partner.
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And it kind of feels like that because you don't have to... I'm 48, so I'm at my sort of peak earnings in my life, I guess, that sort of age. But I've also got peak expenses. I've got two teenage kids, paying for schools, all this sort of stuff. You know, I've got basically three other people to support. Luckily just paid off a mortgage, but a couple of years ago I was paying that as well. And, you know, you sort of go, well...
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Why would I bust my nuts to spend countless weekends on a report for when I've got to give up 47% of that to the government? Do you think that'll go ahead? Because that's been the big talk. That's probably had the most momentum, I would say.
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With these memes, I guess, through social media specifically about the CGT on businesses, do you think that'll hold up? And not only that, sorry, just the whole budget itself, like you said, the government clearly underestimated the backlash that would come with it, which surprised me. I don't know who they thought was going to be a winner out of that budget. Yep.
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Where do you think this will land and could it potentially be reversed on the basis of that? So they're already talking about, and I mean, I don't want to give them too much credit, but to their credit, in the fact sheet to the CGT changes, there was a paragraph in there which said they're going to, they understand it'll impact startups and they're going to consult, right? So at least they weren't set fully in stone on that. Now there's been a massive backlash in the startup sector and that's fully understandable, right? If you have a startup,
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you start with a valuation of zero. Often, if you've got to employ people, you have to give equity because you can't pay them the market rate salary. So people buy into that, taking a share in the company, knowing that if it's successful and it wins, and most of them don't win, you're gambling, you can then, when the company's eventually sold and you hope to sell it for a good amount, you're going to win.
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they'll then get their money back then. So you give up salary to hopefully get something down the track. And with them increasing the capital gains tax, they make that equation a lot less enticing. And basically, you don't want, especially in Australia where we have very poor productivity growth, the last thing you want is to have an economy whereby someone working as a bureaucrat in a public service or in a big company, whatever, doesn't want to...
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Go, you know what, I'm going to risk it, give up this steady job to try and start up something new because I think there's a gap in the market here, and to not do that because it disincentifies to do that. You don't want to stop the next Adlesian or Canva. I use them as examples, but there'd be thousands of companies across Australia that are medium-sized that...
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none of us have, well, most of us haven't heard of. They just exist and they're successful. But you don't want to stop those sorts of companies from starting in the first place because you're taxing potential capital gains punitively. They do still have the small business exemption. So I think if you sell for under $6 million and you have turnover under $2 million, there are still some discounts there. But really, if you're a startup, you hope to get bigger than that.
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Yeah, they shoot for the stars, right? Yeah. That's where the momentum comes and they live through the dreams of Canva, et cetera, if you take that away. Yeah, yeah, that's it. And especially if you've got to offer stock options to someone or whatever. So you don't want someone to go, well, why would I work for you whereby I'm taking a massive pay cut for a dream, basically. But then at the end of that dream, if it comes true, I've then got to give up heaps of it to the government. How, and you'll take this out, but how much of...
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This government, you said we've spoke before, they underestimate the impact of the budget. They've got so many issues around migration. It appears they're pretty incompetent at this point. Useless. Is this the worst you've seen in terms of your expertise over the last 30 years, studying markets? So I'll be honest. So I'm 48, right? So I'm old enough to remember a lot of governments now.
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I remember the last couple of years, the Howard government thought they were useless. Oh, God. Because they'd been in for a long time. And I thought, they made some decisions that were dumb at the end. And I thought, man, this government's terrible. We're going to vote them out. Now I look back at the Howard government with just rose-tinted nostalgia glasses. That were the good old days. Because I reckon every government we've had since then has gotten progressively worse than the one before.
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And I thought we'd hit sort of the low with the Morrison government. But let's be honest, that government was pretty useless, but so were the ones before that. But now, I almost look back on the Morrison government with rose-colored glasses, because I reckon this Albanese government has been an absolute disaster in so many areas. So, obviously, they've...
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They've run migration into Australia at just the most obscene rate into a supply-restricted market, obviously, because of all the stuff we just talked about.
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And that's just crush-loaded living standards and it's crush-loading productivity. It's doing a whole lot of damage. It's one of the reasons why they've got this rise to One Nation now. Also, the other thing they've done is they've obviously bought in this 82% renewable energy target, which to me is just one of the dumbest things you can do. When you're in an economy like Australia, and I know you guys are WA, right? So...
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When you're an economy like Australia, you're 1% of the world's carbon emissions. You literally pay your way in the world. The only reason why we're a rich country is because of WA mostly, but we literally sell our fixed mineral endowment to the rest of the world. If you look at Australia's top 25 exports...
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80% of them, 79% to be precise, as I looked it up the other day, commodity and agriculture based. So pretty much the lion's share of Australia's wealth comes from the regions. The regions are why Australia's wealthy, but this idiot government, A, runs a policy that is all about growing the cities aggressively. So we grow our imports without expanding our exports because our exports come from the regions, right? And B.
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exports where we pay our way in the world, because ultimately your exports pay for your imports, right? The reason why we're rich is because of all the stuff we sell out of the ground mostly. The demand for that is independent of our population size. So I honestly think Australia would be richer if we had 20 million people than we do at 28 million now. But sorry, I just went on a tangent there. But the other thing that we do, we're 1% of the world's carbon emissions. And we've got a whole bunch of Muppets in there who now say, oh,
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We want you to stop burning your coal for stable, reliable power that is not dependent on the weather you can run it 24-7 when they want us to also be a data center place now that needs 24-7 power. They want us to stop burning our coal, but they're happy for us to sell that same coal to Asia to burn, who is burning more and more coal every single year. Asia now is burning about 80% of the world's coal.
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And they seem to be happy for us to export seven times more coal than the rest of the world to burn than for us to use, which has given us expensive power.
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They, we are, we got the, we're the world's biggest coal exporter, we're the world's second biggest gas exporter, we got 30% of the world's uranium, and we're being told by these muppets that you can't use it effectively. And that you got to rely on windmills and, you know, the sun to power the economy. And ultimately, you can't run an economy with a decent industrial base. You can't run a mining sector without hydrocarbons. Just doesn't work.
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And ultimately, that is the reason why we're rich by selling that stuff to the rest of the world. So we've got this government who's pump-priming us with immigration into the capital cities, which, to be fair, don't produce much. And then at the same time, they're trying to reduce our ability to operate a functioning economy with a proper industrial base by giving us expensive energy by doing this net zero crap.
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And Labor has gone headlong into both of those things. And it's one of the reasons why the nation's productivity stinks. It's one of the reasons why we're de-industrialising, why our manufacturing base is shrinking. We've got the smallest manufacturing base in the OECD, and it's shrinking at a rate of knots. We're losing our industry offshore to places that we sell the same stuff to, to burn instead of us. Like, to me, it's just the most moronic thing ever. And, you know, mate, I'm all for Queensland, because Queensland's basically said, if you'd a...
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the whole net zero thing. That's effectively what they've done. They haven't done it officially. WA has kind of done the same. Good on you. Because ultimately, Queensland and WA are why Australia's rich, because that's where most of our exports come from. And I live in Victoria, which is the most woke state in the country that used to have one of the cheapest electricity prices in the world, because we've got thousands of years worth of brown coal on the ground that's basically non-tradable. It's free, but it's incredibly cheap. And we used to have oodles of cheap electricity. We had...
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We had very cheap gas, but that's running out, but we're not allowed to, you know, we haven't been able to look for any more of that stuff. And we used to be the manufacturing centre of Australia. Now we've de-industrialised and we're just a sinkhole. Right? We've got... And our idiot Victorian government has decided that by 2035, we're going to run 95% renewal. At the same time, so, you know, as we're taping this, this is a gloomy Melbourne winter's day.
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where we're going to basically get no solar power today because it's dark, the days are short, it's cloudy. And yes, it's windy today, but often during winter, there's no wind. We have these, what Germans call Duncan flouters, which are basically no sun, no wind. And our idiot Victorian government thinks we can shut down all our coal within 10 years and then magically become a data centre capital of Australia, which needs 24-7 power. This is the clown show stuff.
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that this country is dealing with, right? We're going to grow a population by 50% in 40 years, roughly. We're going to convert most of our combustion cars into EVs that need electricity. We're going to have data centres everywhere, which need 24-7 power. And we're going to need to build desalination plants everywhere for the 50% growth in the population data centres, which needs electricity. All those things need more electricity. And our idiot government is going, you know what? We're going to have a lot of energy.
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You've got to shut down your coal because we've got to save the planet while we sell that same coal to China to burn and India and Japan and Korea and all that sort of stuff. They're allowed to burn it, but we can't. We're not allowed to touch our uranium, which would give us 24-7 cheap power with nuclear. We've got 30% of that. And guess what? We're not going to go and look for more gas and whatever and try and give ourselves cheap gas-fired power. This is the moronic system we work in, in this country. And this is why Australia, in my view, is going down the toilet.
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But does it get that bad for people because the cost of living and the standard of living has declined so much that there's going to be a change? Do you think we're at rock bottom or do you think it's going to get worse before it gets better? I think it'll get worse before it gets better. But I think this is one of the reasons why we're now seeing One Nation surge in the polls. I think people are just fed up. Their living standards have gone backwards.
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And they're just seeing this kind of crap. Like all the white garbage that's going on, that's a whole other issue. They're seeing the energy policy that's making their lives worse. They're seeing the mass migration into a housing shortage, which has caused the worst rental crisis in any of our living memories. And they go, well, what are we doing here? And I think that's one of the reasons. So look, I'm not saying One Nation's got all the answers. They probably don't. But they're just saying, look, the status quo that we've had, the Labor-liberal duopoly, the Coke and Pepsi,
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hasn't worked. So we're willing to look at anyone who offers something different. And that's basically why One Nation is rising in the polls. And it's basically, look, Australia's managed to climb, mate. Like, if we keep this going for another generation or two, like I think I said in the Carl Stefanovic podcast, 100 years, but I don't think it even takes that, we're going to be the next Argentina.
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Argentina at the start of last century was one of the richest countries in the world. Now it's just a rabble. But we're going down that similar road where we've been gifted so much wealth with what's in the ground and everything. And we just...