Addressing the challenge of productivity. May 30, 2025

29:58But if he did, that's exactly what I'd be saying. Yeah, I agree with that. One thing I'll come back to is on your point of a recession, I agree, don't engineer a recession. That's silly. Like you get really, really careful what you wish for there. It's one of those things that's a great idea as long as it doesn't impact me. That's right. It's like, we need a really good recession. Okay, great. Do you want to like not be employed for the next couple of years? No, no, no, not me. Other people, other people. other people fail not mine yeah right like that's that's usually what what the stance is and i think that's so i think it's a really good point but but the point i would highlight is it's it's that i it's that mindset that should also be applied to not engineering a recession but not trying to engineer a prolonging of the boom which is what we do right so it's kind of like oh things are getting a bit shaky let's throw a bunch of stimulus at it it's like whoa so So we shouldn't engineer a recession, but we should engineer an artificial boom is the wrong word, but like an extension of this.

31:00And it's kind of like my view is that it's always well-intentioned and it sounds good, but it just delays the problem and exacerbates the problem. And so I'm, yeah, don't engineer a recession, but likewise, you've got to let things fail that deserve to fail. And I don't mean deserve to fail because they're meany people that are making too much money. I just mean that they're running a business that's not viable. And that's sad. We should definitely have safety nets and look after people that are impacted by all of that. But just like propping up unviable businesses is absolutely the best way to make sure that you have really bad productivity and lower prosperity for the country because you just have, you know, you have, well, look at the USSR, right?

31:49Look at Cuba, look at North Korea, look at these places that try to engineer these things. You generally don't get a lot of prosperity. Now, it's one of those things that's kind of like, what, most of the time? No, literally all the time, every single time throughout the 100 odd years that we've ever tried to do this kind of stuff. It doesn't work. So I just want to make that point as well, because I think that's where we often sow the seeds of our own demise. Yeah, I think that's true. I would separate out the prolonging the boom with using budget measures counter-cyclically automatically, which is, you know, putting...

32:23You take a bit of heat out of the economy when it's overheating just through tax and spend that's already preset. The same on the other way around with the spend and tax on the other way. So you're adding welfare payments, you're collecting extra taxes when it's up, but you're adding welfare payments when it's down. But more than that, yeah, the overt pumping of stuff just to pretend that it can always be, you know, But rainbows and lollipops, that's the stuff that goes too fast. It just creates problems. Yeah, it just does every single time, you know. And it's kind of, you talk about competition and trying to foster competition, which is great.

32:54It's great for everyone. No one likes to have competition in their own business, of course. But, you know, outside of small vested interests, it is a wonderful kind of thing. The irony is, is that a lot of the ones where the competition is a problem, I really need to do a case study on this and back it up with some data but my my view is is is basically it's because you enjoy unfair competitive position because of a degree of regulatory capture or it is in an indirect and unintended actions of government with good intentions yes that actually create that problem in the first place and it always comes from a good suppose our industry is the best example of all.

33:36Because after lots of people getting screwed over by dodgy finance types, society and the politicians went, we should probably regulate that. We can't just have anyone out there giving stock tips and advice because most people are really bad at it. It just doesn't work good. Yes, okay, let's do it. Fast forward 10 years and all you've done now is just like, it's virtually impossible to stand up your own financial services company, unless you've got a lot of capital to get the license. You can pay for the lawyer fees, You can pay for the annual audit. You can do all this. And it just means that the little operator, I'm speaking so out of self-interest here, but the little guy in the basement.

34:10And I've been in this circle. I am in this circle. I talk to other people who are in this space. This is like, they just give up because like, I can't compete against Comset. I can't compete against them. I mean, they've got a whole floor of a massive tower. It's full of lawyers and people making sure that they tick the boxes and do this. And it's just, it's really, it's really pernicious, right? We should be regulated because we've done all this bad stuff. And irony of ironies is it just means that we really solidify our competitive edge because the regulatory barriers to entry are so significant.

34:41So it's kind of like, well, if you want more competition, there's a middle ground there somewhere. It's like, I'm not saying get rid of regulation, but we should also make sure that that regulation doesn't inadvertently stifle the very competition that we're trying to go for. I think it's right.

35:01I really want to be careful. We're both trying to be careful not to be painted as ultra laissez-faire libertarians. Yeah, extremes are stupid and I really annoy them. Oh, so that must mean this. No, bugger off. There is a thing called nuance and context, you idiot. I reject it.

35:20Life is complex, right? So things can't be just simple because we want it to be simple. because they're just, you know, oh, we should just have a flat tax and be fine because it's simple. It's like, yeah, but it doesn't deal with the things that a progressive tax system deals with, for example. No, you're not saying that. I'm just using that as an example. Sure, sure, sure. I say that because generally, financial service licenses are a great example. They have the same job, same pay laws that were so many hundred pages worth of legislation. At some point, there is some element of, you know, just getting way too complex for its own sake and trying to deal with all of the, you mentioned the point about, you know, trying to deal with the exceptions rather than the rule.

35:55I think that's kind of where we got to, and bureaucracy tends to, the size of the tax code has ballooned. I don't think we call it tax code, I think it's an American thing, tax law, has ballooned. Because we've all tried to go, well, this, well, this, well, this, well, this. At some point, the administrative burden, the hassle, I'm with you. Financial service is a great example. Should we regulate it? Absolutely. Should we be held to account? Absolutely. Should they be forced to have undertaken so much educational qualifications so that they can be held out to be experts? Absolutely. But again, I've said a million times, why is there more regulation on financial services than law or medicine?

36:28It's probably not, but it seems like there is. Because no one thinks lawyers and doctors are doing anything other than acting in the patient's, or the client's best interest. So, you know, for all the financial services thing, the simple law is no one can pay you except for your client. That, how many words that is, is all you need in law, and everything else can go away. Because, you know, I'm not going to tip you into something dodgy because I get a kickback. So that removes that stuff, right? And why would I give you bad advice if you're not going to use my services next year if I suck? Because I'm not going to be paid by someone else to do that.

37:02It may be the only law that's required, but you could get rid of 95 % of the financial. Even the statements of advice that are stupid, thick, this risk tolerance, that whatever, they're good concepts and good financial planners will do it. But why is it necessary? Because the pollies and the legislators didn't have the regulators, they didn't have the guts and the other things to basically say, they try to dance around, okay, you're going to get paid by someone. all right, so if you get paid by that person, I have to design hundreds and hundreds and hundreds of pages of bureaucracy to try and tie you in a little box to make sure that when you get paid by that person for being conflicted, let's be honest, and before someone complains, the planners don't get paid, but the dealer groups get paid, and the planners overwhelmingly recommend their own groups' products.

37:39There is – it is not – you know, the fact that hard dollars don't change hands between a kickback and an individual planner is not enough. But the fact that there's money changing hands is why we have to have all these rules. a doctor doesn't have to give you a 400 page statement of treatment right a lawyer doesn't have to give you a 400 page statement of legal advice qualifying why they gave you that advice and what you told them about your situation and why they did it because you don't need it there's no one else there and irony of irony is it doesn't solve anything like that's the other thing is like oh so well but I guess I hear what you're saying Scott but at least that means that there's no dodgy behavior anymore right exactly no no it's rampant it's unfortunate when you get bureaucrats designing these things it's like the bloody superannuation tax that i swear to god still is driving me nuts unbelievable i don't know how much of a tangent on that one other than to say unrealized gains not indexing it's a it's a political slash i'm not gonna say uninformed or under-informed view which doesn't mirror the real world because someone thought it'd be clever and tricky and bureaucrats come up with a you know in a yes minister so i want to be like this and this and this and this and this so it's got to be within these rules and the bureaucrat goes but that's going to end up with a really crap policy yeah but that's what you need to do well i guess we'll tax unrealized gains we'll index it then okay let's do that so it's just you know the the the lack of the lack of real world thought on that and and just a lot of this every every bit of regulation is bigger than the one before it because someone's trying to walk around the outside of some of these things not offend a special interest group or not deal with the root cause but try and band-aid over band-aid over band-aid that that's where the most of the challenge comes from i reckon that's to your point about paperwork that's that's where it comes from you're not prepared to have the hard conversations and fix the the raw you know underlying problems we're trying to try to throw band-aids over and that means more and more legislation more bureaucracy more forms more of this more of that yep and unfortunately it just keeps getting bigger and bigger and bigger again it's there's there's who knows where the exact right part is to put the slide up but it just it's just a very i mean who knows what the future holds but observable fact is to date that these entities requirements bureaucracies just grow and grow and grow and grow and grow you know and it's kind of like it's sort of it's not it it's not a burning what's the word i'm looking for it's not a massive issue until it is kind of thing and it's so slow and it creeps in it's hard to kind of notice because it is so sort of gradual you wake up one day and it's like this is an absolute nightmare gosh you know i was going to start a business and try and do all this i guess I just become a real estate agent.

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40:24The other problem with productivity, and this is, I think I've said this before, but it's also something we need to recognize and make peace with or not, is productivity is measured as economic output per unit of input, right? So it doesn't allow for service jobs a lot, a little bit measure it to kind of half measure it but health care right i've said this before you make nurses more quotes productive by having them deal with five or seven or ten patients rather than four in intensive care but careful we wish for yep by all reports the vast vast bulk of jobs created in the past few years have been government jobs now i'm not suggesting for a second they're not necessarily valuable useful jobs they may or may not be i suspect some probably aren't but i expect a lot probably are the reality is though that is not that does not add to productivity now on the edges maybe it's in health care it gets people back to the workforce more quickly because they've all rehabilitated.

41:12Maybe you can draw a long bow and say that a portion of that spending is actually adding to productivity because it's improving the people's ability to participate in the workforce, for example. So, you know, I'm not saying it's not. And I'm not against some of the uses to which that money's been put to be really, really clear. My point is actually an administrative, an analytical point, which is if you're creating jobs and the bulk of those are created in non-economic output-related industries, then you have the same economic output and more hours of labor which means productivity must go down now we can make our peace with that i i there is an argument to say in a modern mature sensible caring society we will create away some productivity we will trade away some individual economic benefit for broader social and community and national benefit that's that's completely fine sure but also if that's the case let's call a spade a bloody shovel and not pretend that we can go chasing productivity for its own sake and just say, we have decided to have a step down in productivity as a one-off to input, to add to those non-productive parts of the economy because they make us better, more caring, more healthy, safer, all those things.

42:16And then we'll get back to growth again. And if that's what you're going to do, cool, then do that. Where you've got a politician with the word salad of productivity, productivity, productivity, we should do something about it. Let's have an inquiry. That's where it gets silly. Well, even you mentioned growth. and growth for growth's sake, I'm kind of against it. Again, card-carrying capitalists right here, hand up in the air, you know, but it's just sort of like we, you know, what do we, peel it all away, right? You're in front of a year seven class, you know, what do you really want? It's like, is any kid there going, sir, it'd be great if we had higher GDP.

42:50I'm like, no, it's just like, I just would love a higher standard of living, please. I would like to be able to have more for less work, all on, you know, all things being equal. That's what I kind of want, right? And when you have a myopic focus on one or two metrics, it just distorts things. You said before, life is complicated, right? We need a holistic view of this thing that we call the economy. Everything that we do in service of, quote, unquote, the economy is just sort of like we're pandering usually just the GDP, which I've ranted on before is incredibly flawed. But productivity is the same kind of thing.

43:26It's just sort of like, you know, it's sort of like, is it important? Yes. Is it the only thing that matters? No. And there are problems in the way it's measured, the problems in the way that we try and stimulate it. Again, it's just a matter of just stepping back here a little bit. And I think it really starts with just a reasonable understanding of how we got to where we are before we start planning for the future. why is it that I can sort of that I can enjoy this like the level of material wealth that I a pretty uninspiring un not very capable person like most Australians I'm not trying to be too harsh here but we're just we're just people right and and yet we enjoy a standard of living that would would make our grandparents weep when they if they were to understand that and I don't think if you were to put a lot of these people on the stand and say, draw me a line between 1925 and 2025, and don't just go because people invented stuff.

44:28That's part of it. Absolutely, it's part of it. Technology is the driving force, but it's far more than that too. There's systems, there's processes, there's organizations, there's institutional frameworks, there's all of these other kinds of things. And I think, how can you possibly plan for where we're going to go without having a good working mental model of how we got to where we are. And I don't think people do. Politicians especially. And I've got to say, on the productivity thing, I am hopefully going to be less productive in my later life than my earlier life. Yes, please. And that's okay.

45:03Do I want to work as hard? No, because I've managed to build and save and pay off my house at some point and save for retirement at some point. But the economy, Scott, how dare you say that? What about the economy? Exactly. And this is – You won't be contributing to GDP as much as you should be. Exactly. We've talked about GDP before, and even its inventor said, don't use it too widely because it's only this narrow use and we can't make the Holy Grail. But I just think it's important because, I mean, we want to be more productive as a country because that makes sense. If we can do more – get more stuff with the same inputs, that's just great because we create more wealth.

45:39That is a useful idea. Sure. If you want to make growth for growth's sake, I think that's where it's become bastardised is, I want my companies to try and grow. The profit motive is really important to make sure we have this, as you say, the effective allocation of scarce resources. That's really important. But at some point, you don't apply that everywhere, right? Do we want to grow the population forever? Probably not. Do we want to grow pollution forever? Probably not. Do we want to, you know, there's limits where you kind of go, you know, am I going to grow my family forever? Do I have 14 kids, 18 kids, 25 kids, 104 kids?

46:07Or do you kind of go, you know, you're more productive, more people working? Or do you go, well, no, I'm happy with the number of children I have. that kind of works for me. Yes, the growth fetish has been bastardized from individual enterprise, which is where it makes perfect sense, to some sort of national objective that must forever grow. And to not do so is somehow un-Australian or un-American or un-whatever. And it gets a bit silly at the end. Well, it really does. And to understand all of that, you really just have to point to a couple of things. And it would be that our GDP today in Australia, in 2025 is about as high as it's ever been.

46:44I think it's actually as high as it's ever been at a record because it just tends to go up. That's right. We haven't had a recession. It's defined against GDP and we haven't had one for 30 years or something. By the way, we're using population to juice that. So when we say it, there's reasons for those things. Wow, that's a whole other thing. But GDP, even on a per capita basis, it's kind of like it's gone sideways and down a little bit, but it's kind of up there. Yeah, draw a line of best fit and you're still on upward curve. Okay. so I guess that we're we've all got we're all having to work a lot less or something like what's the inference that I'm trying to make from that and again as we've mentioned many a time before in terms of the hours worked per household and what that money needs to be put to use to mainly just for things like housing itself and shelter it's kind of like I don't I don't know if we have moved forward in that way.

47:39And I know people go, yeah, but you've got an iPhone and Grandad didn't. It's like, yeah, but that's a spurious argument to my way. It was an unfair comparison because it didn't exist back then. What mattered then in terms of the technology that was available, what constituted a reasonable, comfortable life on that metric relative to the hours sacrificed in work, whatever work was being done at that point in time, is that we've gone backwards. We've just gone backwards. If you want to normalize the technological progress, and we shouldn't be careful to do that too much, but in terms of all I really, again, back to the year seven class, all I really care about is, sir, what kind of standard of life could I expect for an average 40-hour kind of week?

48:23And that's gone backwards. I would say on a technologically normalized basis. And my point is that's at odds with what a myopic view of GDP will tell you. Yes, yes, that's true too. Genie people tell you we're as rich as we've ever been and there'll be at least, you know, a third of the country is going, well, I feel as though I'm certainly not better off than I was 20 years ago, right? I think that's mostly right. I'm somewhere in between, I think. I don't think you should normalise for technology because technology is an output of the things that we've done and the way we've got to this point.

48:57If technology being gifted us by aliens arriving, it's like, here's an iPhone and here's the internet and here's whatever, you're welcome, humans, we're leaving now. I would 100 % agree with you. I think we need to allow for the causal or the, not the causal, the inter, what's the word I'm looking for? Iterative nature of the feedback loops of economic progress. Take health, for example, right? You'd much rather be alive today than 20 years ago, let alone 40 years, let alone 100 years ago. And I think you're right about GDP as the only measure. I suspect the average Australian is better off than the average Australian 50 years ago at a whole of life level with all of those things included.

49:34I suspect that if, and I said the average deliberately, so there are people who aren't, obviously, who can't afford housing, the home ownership rate, I don't think we should fetishise home ownership necessarily, but the fact it's dropped when I think it's reasonable to believe there are more people out there who'd like to buy a home than can buy the home. That's a much better sign of wealth, right? It's like, wow, as we have progressed as an economy, more and more people own their own home. Like that would be a really good signpost. I used to say before, some people would like to rent, And that's, I don't get the buying versus renting, but on the assumption there are people who are renting who would like to buy a home but can't, that's a pretty good sign.

50:09Now, that was always true, right? That's always been true. The workers' cottages in the city of Balmain, you know, 100 years ago, they would all like to buy their houses too. And, you know, so there's a whole lot of that. I would still posit that we are better off overall and on average than we were 50 years ago. But I think your points are absolutely valid that there are very specific and frankly very important areas where things have gone meaningfully backwards. And I think housing is absolutely the poster child for that one without probably that peer. I mean, cars are cheaper, food is cheaper.

50:40We spend less of our incomes on those things than we ever did. Frankly, if houses were as expensive and those things weren't cheaper, then people would be on the streets. So I think there's a reasonable, and I've done the research, I can't back it up, but I think there's a reasonable view that we have more than our parents and grandparents did in material and non-material terms, despite the very real drawbacks and despite the very real worsening of inequality over that time. It's hard, isn't it, to... I sort of said you've got to normalize for technology. How exactly do you do that? How do you qualitatively judge and rank that stuff?

51:23It's easier perhaps if you just do it from the absolute subsistence level. It's like, well, what do I want now? What did people want 100 years ago? What are people going to want in 100 years in the future? It's like, well, they want security of tenancy. They want somewhere that they can live and they want to be able to eat. They want a basic medical standard relative to what is available at the time. and it seems and i've i've trying desperately to google some of the the charts that are out there where it's like if you want to talk about and again don't talk about in money terms because like inflation just always changes things around but in turn and and you can't talk about individuals because now it used to be that it was one member of the household worked and now it's absolutely two yes so if you say the amount of energy or hours being spent by the household to account for those things, removing the iPhones, the iPads, and the advanced cancer treatments, and all of these kinds of things, I strongly suspect and think, know that we as a household are having to invest more time.

52:31Now, that time might be in an air-conditioned office behind a computer and not down a coal mine, right? But again, I didn't have the option to work as a social media influencer in 1932. So it's hard to make that comparison. But if you just say, well, mum and dad in the day, dad worked 40 hours a week. We had a house. We had all the food that we needed. We took a family holiday every now and again. If anyone ever got sick, we had access to decent medical care. Now to provide for that, it takes both mum and dad and they're working more than 40 hours a week and that the hope of actually owning this thing outright is being pushed further and further back on that metric.

53:16I don't know if the progress is as obvious, even though given the choice, I'd probably rather work harder and have some of this affordability challenges, but have the benefits of technology. So if you say, well, put you in a time machine and now the year 21, 25, and you live in this AI nirvana, but unfortunately you do have to work 80 hours a week when you're not in the simulator. And it's probably going to be like 68 before you can put a deposit on a home or something like that. It's complicated, right? It's complicated. It's 100 % complicated. I completely agree with you. Again, we should actually find some numbers rather than just spouting it off.

53:56But I still struggle to try and normalize technology, right? Because you say that the 40-hour week, that's absolutely right. But also don't forget, mum was at home and she wasn't allowed to work if she was in the public service, she wasn't married, and she couldn't get a job anywhere else for anything like the pay. And she was at home and she was beating the clothes over the, washing in the copper and then beating over the drowning board. And the kind of, I don't know, we shouldn't rose-colored glasses the past but i also don't think we should you know do it about the present either it's it's just it's trying to work out the right balance of both those things it was like mom was sitting home going i'm living the life of riley and hubby's that hubby's out down the coal mine he's gonna die at 67 with two two years of a pension um and you know the kids i lost three kids at childbirth i just i just think it's kind of you're not wrong um but i i don't want to give up some of that stuff because you i understand the desire to normalize for it but i think that's still kind a part of it right women's women's liberation is a thing just just you know what do we want to wish away um for for a middle-aged straight white bloke with a decent job in a decent level of a company like you and i probably we are probably worse off frankly than we would have been back then because we would bring back their good old days we would have whiskey at work and and pas and and you know typists and yeah all that kind of stuff and the book by hat um yeah i again it's no i'm not I'm obviously not advocating for that.

55:20That's another great irony, isn't it, with the women's live movement? It's just like, sign me up. I'm the first one in the protest march. But it's kind of like, it's not a choice anymore. It used to be about choice. Women should have the choice and the ability to pursue their goals and dreams and aspirations as a man does. Like, who's against? I'm not against that. But it's like, you don't have a choice now. It's like, I need you to work. You've got to work. Options or obligations. Yeah, exactly. And for me, yeah, for me, that's the kind of thing I would imagine in a better marker of progress would be whatever is available to us, given the technology of the time, we can achieve that with much fewer, just back to productivity, with much fewer hours of input.

56:04Totally. But I just feel as though we're working easier jobs and we're getting better consumption items, but we're still on the treadmill running faster and faster. And that's been the great misfortune of this pure, you know, chase for growth for growth kind of sake. It's kind of like you talk about, you know, the old 50s housewife at home raising the kids and, you know, washing the clothes in the river or whatever. It's like that was always work. It was serious, hard, backbreaking work. It just wasn't part of the GDP calculation, right? So I was like, GDP is much higher now. I was like, yeah, but I'm still having to do that.

56:43In fact, now I've got to work and then pay someone else to do it because I'm at the office 50 hours a week. It's sort of, it's just, it just doesn't, it just doesn't really get to the heart of the issue here. And I would like to, for me, I would love it if my children could have my standard of living, in fact, a better standard of living and work less if they choose to. If they want to be workaholics, they love their job and they want to dedicate 100 hours a week, fill your boots. But if you just want to get by in life, you know, and have a house and some food, as I say, an odd holiday, a toy every now and again, you know, access to decent medical care, good education, these kinds of things I think are always kind of eternal.

57:25And if I can get them reasonably or easier, given what I am able to contribute, given the structure of the workforce and the economy at that point in time, that needs to be getting better. And I feel on that measure, I'm probably not explaining it well, I feel as though it's getting harder. Yeah, no, I think that's right. I think it's, yeah, I was coming to Twitter with a couple of economists, oh, geez, a couple of years ago now probably. And we were having that exact conversation of imagine our, and you can't just separate the incomes. because if I buy a house, someone else gets the money for that, they get to spend that.

57:56So you can't just kind of say housing is less expensive but the economy is the same size and everyone's spending the same amount of money because it doesn't work that way. But there is some idea. Go back 20 years and say, imagine house prices haven't changed, mortgage prices haven't changed and the number of hours you need to work to pay for that therefore is reduced. The four-hour week we were promised is actually possible. Well, maybe. But yeah, if we had genuinely our parents' standards of living, we might not want to. but you probably work a day a week. Maybe grandparents, one day a week. Because technology, productivity has actually improved a whole lot.

58:30If you want a single car and a black and white TV and a nice house without being spectacular and you have a local holiday rather than an overseas holiday, you pare all that back. How much would you need for that? Now, housing is the key one. I don't think you can do it. One day a week, no chance with housing. No, that's what I'm saying. So if you went back and said, if it's normalized all that stuff and said, I want their standard of living, which is your point, Their standard of living, including the cost of their housing, again, in an inflation-adjusted way, not even in a nominal way, just an inflation-adjusted way, you can do it on a couple of days a week, maybe max, because two incomes in a household.

59:03Now, if you want to work more than that, you can, but that idea of that's all you would need to have that standard of living, the improvement would have been, however, the last 60 years, we've all managed to work a whole lot less. How great is that? Except we've gone to, in the last 60 years, we've got a whole lot more staff. We're paying more for our staff. We're all still having to work as much or more. it's a the other hardest part mate is that none of this is actually well the vast vast vast bulk of it is not a choice it's we talk about markets all the time we talk about markets finding their level it's kind of what's happened I mean we are our own worst enemies right like you and I could just agree to go to the next auction and only pay half the asking price for the house and the owners go sell it or not sell it they'll sell it to one of us who pay offers like half the asking price and that's the new market priced and we're sweet except someone else comes on and says I'll bid more than they do and you're like oh I need a house or I'll bid there is something really kind of, speaking of growth for its own sake, the answer is not socialism, by the way, but there's something really ugly about the whole outbidding each other to just kind of, you know, climb the greasy pole.

59:59That's kind of the problem, right? Because there's, I mean, there are more houses, there's more people. There's not that many more houses per person. So it's unlevel. It's just our desire to outbid each other to get the thing which has caused the problem in the first place. Yeah. I mean, I know, we've got to go on to a next topic here. But I would, a big point, a big factor of it, me, would be just the money is largely broken. But what we have done is we have created a lot of money. The banks have created a lot of money and we've put it into one area. And it's sort of like, so that's why it's this illusion of...

1:00:32We've chosen to, right? There's cheaper housing in the US and the same banking system. There's something very particularly Australian about the result we've ended up with, which is not, yeah, housing is not as expensive. It's all more expensive everywhere than it used to be 50 years ago, right? But in relative terms, it's not like we have a more accommodative financial system than the Yanks do, for example, or the POMs or whoever. Yeah, although they've got a lot. Yes, that is true. There's only just very specially Australian about a level of household debt, I guess, is my point. We have, again, I mean, the RBA and the Bureau of Stats, they measure, it's called M2, right?

1:01:06And that's just when you add up all of the cash, which is bugger all, and largely deposits out there. It's grown massive. The chart is exponential on it. And it's kind of like, it's not that these other things haven't increased as well, but it's a relative increase of money versus stuff. And it's just like, it's called Wittgenstein's ruler, right? In other words, the thing that we're using to measure the other thing continually changes. It's like, I'm going to start building a house, but every week I'm going to change my definition of a meter. a meter's going to get longer and longer every every month and i'm going to wonder why the house isn't being built properly like and we kind of do that with money and it's a whole other big big topic but i i think that is a big part of it it's this this idea that we should create money that we give a particular part of the economy special privilege to create that money and then give them the direct discretion as to where to put it and they'll do it wherever is the most profitable thing and as we've talked about before housing seems to be pretty good collateral pretty low risk, I'm going to put it all there.

1:02:13And then I'm going to self perpetuate this, this thing where I use the very thing I'm lending against as the collateral for the next person. It just ramps up and up and up and up and up and up. And it's kind of like, and it's an illusion of wealth. It's really good if you're early on, like all good Ponzi's, if you're in there, if you're in there early enough, it's a wonderful thing. But for everyone else, it just makes it harder. And that's, that's, that's, to me, if you really want to boil it down, that's it. But that's a whole other conversation. So there are national differences, which are not explained by that, because that's a large international but directionally they're the same we probably have ours so yeah in terms of magnitude true but still household debt by country we are miles ahead of most other countries and that's not a which is also why our property market is out because of the debt because we created money for this so it's sort of but the AFP didn't so there's something different between Australia and America given the same system well actually they did do it it's just they had wiped out in 2008 right you know and then have been slightly but we never did right Because why?

1:03:11It's China. Because they like our rocks. Let's boil it down to it. Really, we are the lucky, the dumb country. Because it's like when everyone else was having to pay the piper and just collapsed under its own weight, it just turns out there was a massive customer, super, super hungry, who itself was a command economy who could do whatever they like. He's just sort of like, great. I guess we don't have to worry about that kind of stuff. And again, it's back to that other point of just like we kind of have avoided a reckoning, but have only just created a bigger one down in our future, I would say.

1:03:44We're going to start today on a very short topic and see if we can get it done in less than an hour and 45 minutes. Let's do it.

1:03:53It's a nice segue, actually. So some numbers are from Baron Joey Capital, a research mob fund manager, I think. They've tracked, largely for their own purposes, for the purposes of valuing real estate, the return to the office, office occupancy rates over the last five years, five and a bit years now, since the onset of COVID. And they reckon now they are in part making a forecast and prediction, which we can take with as much salt as is necessary, but they've also provided some data. They reckon that the office occupancy and the CBDs of the country are now at 76.9 % of pre-COVID levels, effectively three and four, four and five, something like that.

1:04:32And they reckon it's effectively plateauing. So the last quarter was up 1.1 percentage points, which is still up, but, you know, whatever moves that are being undertaken to get people back to the office seem to be stalling. And I think there's something, it goes to productivity, it goes to two incomes in the household, it goes to everything we've kind of just been talking about. Frankly, it goes to some of the richest people because they're trying to get us back to the office as well to make sure we can put backslides on their seats. I thought it was interesting, mate, for a couple of reasons.

1:04:58I don't... the ideological argument of whether people should be in the office, I think, is largely ideological rather than pragmatic for most people. There are jobs that you have to be in the office for, there's some you don't, and a reasonable boss and a reasonable employee can kind of work that out for the most part. Now, different levels of power between unions or non-unionised labour and other things, so I don't want to get into that necessarily. But it seems to have played at a level that, in theory at least, bosses and employees seem to be pretty happy with, otherwise it would continue to change.

1:05:26Wait a second. Well, if they're both happy, maybe we should come in and we need to help. We need to help here. Wait a second. Correct. And again, what's the problem we're trying to address? It's a change. Things have changed. Yes. And usually the starting point is, well, that's bad. We don't like change. But it's like - Especially if you invest interest in the status quo. Well, exactly right. So it's kind of like this change was always happening. We just got massively catalyzed by COVID when everyone was forced to stay at home, right? So it was just, it was always happening. and the people who are upset are the people who own all the commercial industrial properties and and i get it i'm not having a go at them like i would be too right it's like god damn it i bought this asset thinking this and i was wrong and and welcome to the party dude because that's the game i'm in i can tell you there's plenty of assets i've acquired that haven't worked out how i liked and that's that's capitalism right and it's kind of like you you want the upside you got to you got to bear the downside and so is it is it you don't have to if you can avoid it but if you're If you're going to talk to a politician, a friendly politician maybe, and maybe get them to change some rules so that your vestiges isn't necessarily undermined by a change, that'd be something you'd do.

1:06:34That's why I often say we don't have real capitalism because, again, it's just sort of like – let's say that you do have an imbalance, right? And you have an employer that's just an idiot and just wants people in the office for the sake of it for no other reason, even though it'll probably make people upset or probably lower morale, probably indirectly impact productivity. and ironically increase your fixed costs as a business because you're choosing to rent office space when you don't need to. And people are saying, I will let you have my personal home space for free and I can work there. But anyway, they do it.

1:07:09And it's just sort of like, well, in a free and open market, other bosses will go, actually, there's two ways to attract people. There's pay and there's conditions. And we'll do what we can on pay. But here's a real, actually, it turns out if we give people a bit of flexibility where we're able to do it, that we attract really good people. And the people who are really good go, well, screw you. What are you going to make me come in? Why? I'm just going to go over that. It fixes itself. This is always the thing that I think politicians misunderstand. It's just like these issues resolve themselves in the open and free market, right?

1:07:44And to come in there and say, no, no, no, we need to make this a thing is just blatant, self-serving vested interest, which is just so egregious. And again, I have sympathy for people who have these assets that aren't performing to their expectations. But you know what? Sell down, reallocate, find a different use for those assets, adjust. Or let's artificially put this back to my earlier point. Let's artificially point it in one direction and directly undermine the very productivity that we're trying to improve. or, you know, it's just so infuriating that of all the things that we could be doing, we started this conversation by talking about some of the big structural reforms that were made in the 80s, 90s and early noughties and stuff and like the immense value that that kind of created.

1:08:35And here we are having these big stupid debates, which really doesn't involve anyone except the two people, the employer and the employee. That's up for them to work out what's appropriate for them and people will go where they can best satisfy their paying conditions and employers will find the you know the thing that best suits them it doesn't need you know a busy body in between to kind of say no no no this is bad and by the way i'm really just trying to help my mate out here it's it's really egregious i think that's the problem right because it's i mean i'm sure some police have the god complex and think they can fix things the way they think they should be fixed and i'm sure there are a group what are you thinking what there's not a problem to be fixed That's my point.

1:09:15Yeah, I think, well, I suspect there is a lot of, we know this, right? People are interesting. And I think the idea of, the status quo is its own powerful, even without best interest. The idea that things are changing and that's uncomfortable, I'm sure it's part of it, right? It's just like, the city's being hollowed out. That seems terrible. We should put it back the way it was. There's a decent proportion of politicians who that is just their worldview of, I liked it the way, speaking of me saying good old days twice at least in podcast, those things were good I liked I like going to the city I like putting my suit on and going to the office and holding court a lot of other people will be like that too be the change you want to see in the world right create a business start a thing and then attract people and go for it no one's a politician for that basis by definition you can't be the change you have to make the change that's why you're a politician yes no I'm not I'm not defending it all I'm sorry I think there's a range of motivation that's one motivation is just, I like the pork pie hats and the tyres and we should do that.

1:10:18Think about every politician who gives every... Women in the kitchens and men in the city drinking all throughout the day. That's why. Bring it back. Bring back the good old days. In part, yeah. But in part, that's ideology in general. Why are you apologizing? Because you're trying to impress your view on the world. This is how policy... In whichever direction, right? Conservative or progressive. I think we should change for this. I think we should keep this. It's all that. I think there's part of that. I think it's absolutely what what makes me slight very slight tangent an hour and 10 minutes in um articles in the uh fairfax nine newspapers about the cfmu i don't know if you've seen those this morning on thursday morning uh just allegedly i think i have to say allegedly um office bearers at cfmu were filmed taking bribes from from uh construction companies and it's headline news it's like i said oh bad this guy got a five thousand dollar bribe for doing this thing and it's kind of like it's objectively awful and illegal if it actually did happen allegedly and it should be clamped down on people should go to jail if they allegedly did what they're alleged to have done and yet we have political parties receiving multiples 10 100 times those amounts right in in in and then things get done it's just the the egregious to your point i don't there are some who just think people go back to the city because people should you know you've been on social media but whenever i mention work from home, there's a meaningful minority who say, no, you have to get back in the office so people can keep an eye on you.

1:11:44There'll be politicians who think that as well. Yeah, because it's impossible to skive off at work. How do you do that? No one's ever cracked that egg. But all the things, there are people who genuinely believe that, even if I think mistakenly, right? And that's not vestiges. That's just kind of like, that's just how they think the world works. But yeah, you're right. I'm more productive at home than the office I've ever been. A hundred times more productive. So what do we have for productivity? But it doesn't, the point is it doesn't matter. It just, it works for us between ourselves and our employers.

1:12:12In my case, it's one and the same, but you know, it's still, it works. I don't need anyone else to tell me, hey, no, you need to do this for X, Y, and Z. It's like, I'm actually perfectly fine here. Thank you very much. You worry about you. I will worry about me. What's the problem you're trying to fix here? That's, you know, you don't like that. I get that, but it's got nothing to do with you. And that's, well, again, you're a politician. that's they're not in politics to say I'm not going to decide anything today you just do what you want to do they're there to make laws and change things but as I said the business card is egregious not even so much that bit I mean because that's just politics which shouldn't be acceptable for me it is the vested interests it is that idea of well we say we're going to arrest someone in jail for two and a half years taking$5 ,000 from a paying$5 ,000 this guy apparently was convicted paying$5 ,000 to a union boss he gets two and a half years jail and someone who donates money to a political party and gets to inform its policy that way is like, no, that's part of the democratic process.

1:13:12That's the bit that frustrates me. Oh, yeah. Well, let's, I won't name the bank, but you'll find it as at least one of the top five always in the paper every other week for rigging FX markets or charging dead people. It's like, and all it gets is, sorry. Oh, we'll try better. We'll try better. And the bloke who gives a$5 ,000 bribe gets jailed for cutting. That's like, how outrageous. It's sort of like, you know. Again, let me be very clear. He should be. I have no time for fraud and corruption. Of course. But yes, it shouldn't apply just to... Oh, man, if you look at any aspiring criminals out there, go into white-collar crime.

1:13:47That's where you want to go, right? Don't... Aim high, right? Get a financial planning license or financial services license, and then there's a lot of optionality on there. And if you get caught, there's not too much downside. Don't rob homes. Just don't mug people. That's a mugscape. On that happy note. We're pretty done. Pretty much starting. Will you come back on Sunday? Yes, I will. Awesome. Unless I'm in some white-collar prison somewhere. Yeah, that's it calling on the phone. Anyway. Until Sunday. Full on. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned.

1:14:29General advice only. Please speak to your financial professional to understand how it may pertain to your situation. Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services Licence 400691.