An RBA deer in the headlights? February 9, 2024

40:50In a market where the pendulum has swung in favor of workers and there's a million jobs that you can choose from, maybe you've got a bit of a say. But in a situation where the employment market is tight and you don't have much choice, it's like, well, what are you going to do? So it's sort of like, so now we're basically, nothing changes except for the employer having this hassle to sort of deal with now and things getting clogged up in the course. So I can actually see the desire and in a lot of cases the need for it. But I can also – my worry is that the well-intentioned politicians can make things worse by implementing it in a poor fashion, I guess is where I stand.

41:38And I'm not saying they will implement it in a poor fashion, but that I think is a very real risk and it can be very counterproductive to the goals. That's the bit I really struggle with, mate, because I think as much as a difference of opinion would be really helpful here because we'd argue with each other or discuss differently. I completely agree. I 100 % agree. I think it's... Even the legislation. So it's got to be done... So firstly, there's a question about is it relevant to your job or not? So, you know, I don't know. You've got to work that out. And then if it happens, it has to happen repeatedly.

42:08If it happens repeatedly, you have to discuss with your boss first. And then if your boss doesn't do it, then you can take it to the Fair Work Commission. And the Fair Work Commission can then tell your boss to stop doing that. And then if that doesn't work, then the Fair Work Commission can fine the company. Yeah. And that's – I think your point is right. This is – Oh, just very – sorry, just very quickly. And by the way, if that – even halfway along that process, you are never getting a raise, right? Right. You are – It's over, yeah. You are over. You are over. And so you might have a moral victory in the courts.

42:38Correct. But your career at that institution is done. Correct. And so, yeah, exactly. And by the time you get to that point anyway, the whole thing is probably so toxic. Yes. There's a prohibition. You may not roster anyone on a Sunday without paying them time and a half. That's not a negotiation. That's just in the award, whatever it is. That's the rule. That's the rule. So that's what you have to do. When it's like, well, it might be job related and it has to be repeated. And then what's repeated and how frequently is okay. And by the time you get, as you say, by the time you get to that point, it's done.

43:07Now, on one hand, there's two ways to look at it. You say, well, hang on. So the boss gets away with it. because the employee's not going to complain because their career's screwed. So that's not good. True. But how else do you enforce it in a way that makes sense? If you're in a unionized workforce with a really regimented role, that can be written into enterprise bargaining agreements or something, where it's like, you know, if you have a clerical class A position and you work for less than$45 ,000 a year, your boss may not contact you more than twice. You know, again, that stuff can be, it's a yes, no.

43:39This is what's in the rules. The boss knows the rules. The employee knows the rules. it's black and white letter of the law stuff once you start to have this sort of discretion i don't think the intent is bad at all but i'm really really not sure it's even close to doable in the law again i think where this sort of stuff probably belongs is enterprise bargaining agreements for those sort of jobs yeah um where you can say this is the this is the way this has to work for this class of job with this person in this location this is what's necessary a generic right to disconnect i mean they do it overseas a couple of countries apparently france and it might be germany i think but i just i just don't think it's workable mate i don't see how it's workable and i kind of it's kind of the same you know i don't know the the i i tweeted as well and i want to be careful because it gets political real fast but both sides of politics tend to lose their way the same ways each time not not same as each other but the left loses its way the same way every time the right loses its way the same way each time and it's you know take howard's work choices right just the overreach there yeah that literally got cost in the election on the other hand the the labor party tend to kind of over bureaucratize stuff because bureaucracy is the answer for everything yeah it's kind of in the dna and you know i i'm i try to be a pragmatist something in between there is probably you know competition free competition regardless of regulation without rights is rubbish yeah over bureaucratizing something so you have to read a 700 page document to try and understand the obligations is also rubbish.

45:07I don't really even know what's, what's in between. It's yeah, it's difficult. It's difficult. Yeah. I mean, again, I really, I really resonate with the intention here. You know, I think the people who have pushed for this have have come at it because particularly I think there's a lot of exploitation in gig economy kind of jobs and the rest of it. And you look at it and you go, that's wrong. Someone should do something. Yes. I get the intention, right? And it's like, I don't know what the exact proper settings are, but I feel as though the more you try to control something and the more specific you are, the more prone it is for the unintended consequence.

45:50Yeah, yeah. You know, like the best remedy really is to have a very competitive marketplace. This is always the answer. I always land on this. Whatever the problem is, it's like the more the invisible hand of the market can do its thing in an uninterrupted, non-crony capitalist kind of way, the better it is. So what's the best way? If workers have a lot of option for employment, then employers have to offer really good conditions because they need to attract the right people. if there's hardly any opportunity that's sort of out there because we've consolidated to very, very large megacorporations that hold all the power and have regulatory capture and all of these nasty sort of perversions of capitalism.

46:43And then it's kind of like, well, maybe then we do need some of these kinds of things in place to sort of counteract that. Do you know what I mean? I do, I do. But even then I'm saying, well, okay, how do you make sure that that happens? Yeah. And, you know, the reality is things like the minimum wage were required because even in 1900, I can't remember, the harvested decision, for those who know that phrase, which set the minimum wage in Australia, there weren't big mega corporations. It was a very agricultural economy with, in theory, hundreds of potential employers. And yet the market worked to a degree where the court found, I completely agree with it for what it's worth, maybe some don't, that left to its own devices, the market wasn't paying a living wage.

47:26yeah and so so there was there was action required eight hour days that same sort of stuff the uh i'm far from a trade unionist but some of those some of those hard-fought wins early in the piece um had to happen with collective action because the market in itself wasn't wasn't solving it now some people will say well the union movement is part of the market and the market loses all definition at some point so you know um but that collective action or the legislation sitting outside that was necessary so you're right i i don't know i my sense is that fewer bigger more black and white um rules are best thereafter you kind of got to say guys i get it but i can't help you with that you know it's difficult yeah again because of the unintended consequences you know just at the end of the day you don't fix it you make everything more complicated and productivity is worse than it was before.

48:21Yeah. HR departments get bigger, yeah. And government, we've now got another government department that needs to be funded, you know, and they only grow those things. And another couple of hundred of fair work commission requests or cases because you've got to try and legislate it. Oh, my God. Yeah. And it's one thing to sort of pick on a Woolies or a Commonwealth Bank, these mega employers, you know, but the reality is that the majority of businesses are small businesses And that accounts for, in fact, the majority of GDP. And it's easy for someone like BHP who has a whole floor of an office dedicated to HR and the rest of it.

48:57It's another one for someone running a fish and chip shop. Bloody hell, I've got to do what now? I mean, I'm desperately trying to keep my head above water here. I'm employing people. I'm creating value for society. And yet you want me to do this now? It's like, help me out here. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

49:21I've said this before. You've done this. You had a cafe at one point. I can't imagine if I, I'm not going to do it, but if I was going to start a cafe tomorrow between the planning regulations, when I can be open and closed, the workplace health and safety, the food standards, I can't imagine trying to get my head around the number of things i would have to know and do just to open the door on day one and then try to keep across every change for everything over time and again those rules there for reasonable i'm not saying they should go away necessarily but you know it is a really it's a massive impediment to innovation and new businesses because the guys are already there know it the ones who are kind of starting it's like the number of hoops i gotta jump through i'm just not gonna do it i'll just i'll not bother you know and again i'm not saying they should go away we need food standards and we need workplace health and safety and we need you know there's there's appropriate rules for these things but just the number of them must be just mind-boggling absolutely mind-boggling i i i i i'm gonna say something and then you know tomorrow i think no it's completely wrong so i'm i'm shooting a bit from the hip here but i do wonder if it is better to have post post-fact punitive measures rather than trying to prevent them from happening.

50:39Usually in most things you'd say prevention is better than cure. But I wonder if what the solution is, at least in character, is you say, look, largely do what you like. But if you are found to have, you know, broken these sort of guidelines, then there are very serious impacts. So now I don't need to sort of send, you know, I don't have to have these huge bureaucracies and regulatory apparatus eye to sort of monitor and try and catch everything before it happens. But if it does happen, you're going to jail or you're suffering a big fine or your business is going to be, you know, bankrupted or something.

51:13That is a very powerful incentive to do the right thing. And I don't need anyone looking over my shoulder from day to day. But if, and maybe it's easier for me to get away with things, but if I am caught, I am toast. As long as those things can be understood in advance. You know, you got the gotcha rules where it's like there was 85 different rules. I missed the 71st because I just didn't know it existed or whatever. And so now I'm in the drink. But you're right. I think there is, speaking of getting in trouble, you know, the term I really have is wage theft. Not because I think it's wrong to thieve wages.

51:52Of course it is. But we apply it to things where, and take some of those big companies with like, you know, 85 different awards that they've got. And someone's on the wrong award. Or they've entered the wrong permutation of data in the system. Now, if it's done deliberately and specifically to try and make money for the employer, then that's absolutely wage theft. If it's just, you know what, we just screwed up. That's not wage theft. It's just underpayment, right? And I think when we try and make these terms so incendiary and so clickbaity and reality TV-ish, to use your term from earlier, it just makes a huge, huge difference.

52:25And I think that's something to be just really thought about carefully. Can I read you something? Yes. i i um i've been reading poor charlie's almanac recently which is the book of kind of some charlie munger speeches oh i need to reread that yeah it is just it is just brilliant i he talks about misery in one of his one of his talks which sounds which sounds badly enough and bad enough it kind of is but he basically talks about the fact that you kind of you can't solve for everything then you can actually create some to your point before unintended consequences so i'm just going to read this um this piece i don't necessarily agree with it entirely but i can't find myself disagreeing with it and i guess you got to come down on one side or the other but here it is this quote take the workers it's a you know what's the example you'll work you'll work on it take the workers compensation system in california stress is real and its misery can be real so you want to compensate people for their stress in the workplace it It seems like a noble thing to do.

53:31But the trouble with such a compensation practice is that it's practically impossible to delete huge cheating. And once you reward cheating, you get crooked lawyers, crooked doctors, crooked unions, et cetera, participating in referral schemes. You get a total miasma of disastrous behavior. And the behavior makes all the people doing it worse as they do it. So you were trying to help civilization, but what you did was create enormous damage net. so it's much better to let some things go uncompensated to let life be hard than to create systems that are easy to cheat i love that and i well it's hard right like because because the point is do you do you or don't you have a workers compensation scheme and and frankly you mentioned ndo yes i i remember this when i was tweeting about it only only today um for exactly the same reason you've created this system that is makes it really really really easy to cheat now munger then goes to give an example of a friend who made a product in texas he moved it to utah where the mormons were and his workers compensation expense went from i'm trying to find it really quick as i scroll here about 10 percent give or take down to two percent when it moved from state to state and was it any less any more safe maybe let's assume you know there might be some element of that but more broadly that that very idea of you know once you once you remove the culture of that then the then the prevalence of it starts to fall so what do you do do you do workers compensation probably well maybe not and again it's not just about workers cop in what is in charlie's example but to your point about what rules do you put in place and what do you try and stop and what are the unintended consequences yeah it's really really really there is no perfect answer right and you will have people at either end of the spectrum yelling at each other and they want their thing they want their thing i don't care how much it costs the workers should be protected well i can't afford to pay that i can't employ people so i need not to have it i don't know i don't know how you do it um i will just tell you ndrs for a second is an absolute debacle of a structure where cheating gold plating raw teasing is absolutely incentivized for a dozen different reasons and so this is this is the sort of outcome you get not because you shouldn't look after people disability but because if you structure it incorrectly once you and charlie's point he says this sort of quote this sort of tragedy is caused by letting the slop run you must stop slop early it's very hard to stop slop and moral failure if you let it run for a while it's not true it's fascinating i you know one of the things i picked up there i think is a difficult truth to to grasp uh to really internalize but it's one that we need to internalize whether it's these kinds of things or just investing and um economies in general is that And, you know, we're apes on a rock hurtling through space in an uncaring, random, chaotic universe.

56:21And we like to think that everything, we can control everything. And we can't, right? We just can't. There is always going to be bad things that happen in the world. And does that mean that you just throw your hands in the air and go, oh, well, it's just how it is, you know. We should have a purge every 12 months or something like that. I'm not saying that, but in an attempt to control what in many cases is uncontrollable, we ended up making the situation worse. Yeah. And you get some really, really bad outcomes. I'm not really, honestly, I'm not trying to dovetail into this, but I think in trying to protect homeowners, for example, and certain investments in that class, we pervert markets and make bigger problems down the track.

57:13And it's just like, well, the reality is investing in anything is going to contain risk. Oh, but that's not fair because families are working hard and they're doing this to sort of better their future. It's like, yep, but there's risk in that. And that will always be the case. You can't get rid of risk. Oh, there's a massive downturn in the economy. Government should come in and stimulate that and fix that. It's like, okay, well, they can try. You can put a thumb into the dam wall and stop that little leak there, but does that fix the problem or does that make a bigger problem down the track? And I just feel as though, I guess I'll make this more about the investment side of things, is that we need to really just understand that poo happens, to use the appropriate language.

58:00And it just does, and it always will. And it always will, and that's the reality of it. And so plan accordingly, plan accordingly, because you won't always be bailed out. You can't always be bailed out. You can't legislate to protect things that nothing bad will ever happen to you because things will. And you know what? Life is unfair. The economy is brutally unfair. Systems that we have of all kinds of, you know, unfairness sort of built into them. And let's strive to make it better, but understanding that we will never get rid of all the wrinkles. like that you know am i being am i being too no well you again you want to have slightly different ideological perspectives on how much involvement and what's you know what's worth doing not worth doing and what side effects you're prepared to accept but but it's the right question right it's absolutely the right question of you know if too much too much medicine can kill a patient as much as not enough right there is there is a there is a balance to be found uh you and i may never agree on what exactly that balance is but conceptually we're both in agreement that You need to be very, very careful about those unintended consequences.

59:04100%. It can be really ugly. Mate, we're dealing with stuff today in 2024 that you can trace the origins back to the GFC. Yes. And you can trace that back to the tech rec of early 2000. Yep. And you can trace that back to some of the stimulatory efforts that came out of the mid-90s recession. They're like, you know, as they say, history is just one damn thing after another. Yeah. And, you know, these things are always bailouts and all of this stuff are always done, at least with the veneer of wanting to do the right thing. It's funny that it's the mega rich bankers that get bailed out. But anyway, that's a whole other kettle of fish.

59:43But there is, I get pretty firm on the view that, speaking of Charlie, I'm very much with Charlie, that, you know, capitalism without failure is like Christianity without hell. You're going to have to have it, right? Oh, that's really brutal and unfair and people could lose their jobs and their businesses. Like, yeah, but what's the alternative, right? The threat of failure really sharpens the mind, you know, really makes people focus on the downside, not just the upside. Will there be misery and suffering? Yeah, there will be as a consequence of that. But as a society, I think we are better served.

1:00:21We are more robust. And here's the other reality is like, we'll try and fix it because you can't. Because by trying to fix it, you just create a much, much, much bigger problem down the track and much, much, much more pain. So it's sort of – that's why I'm sort of saying we have to acknowledge that there are just some really nasty things that can happen in life and business and markets. And an attempt to fix them can only – can usually, in time, make it a lot worse. And, you know, the rise of populism and all kinds of really nasty things happen in the wake of that. And I think we're living through very interesting times as a consequence of these things.

1:00:55Yeah, that's right. That's right. And look, only for the sake of completeness, I agree with the risks. I think they can be ameliorated with sensible, proactive, responsible government. And I think probably, you know, the story of the last 30, 40 years can be rewritten differently with different actions taken at different times. Yes, partly with the benefit of hindsight, partly, frankly, just with the benefit of common sense. When populist politics and other things take over or hard decisions are ducked, there's a range of... I won't go any further, it doesn't matter. But there's a range of outcomes, pressures, actions, and those things in combination can, as you say, magnify things or ameliorate things.

1:01:39You should be careful you choose the right one, otherwise they can get meanfully out of control. Well, you will desperately want to say right now that the property market in Australia is part of that story, right? The idea of solving affordability by throwing more money at it every time just makes the fire bigger rather than smaller. And it's not that people shouldn't be able to afford homes. It's just working out how to manage that. A benevolent dictator makes different decisions and different policy tools are more effective in the hands of such a person as opposed to people with other incentives.

1:02:09just speaking of Charlie, always follow the money or just the broad incentives, not necessarily even monetary, but the broad incentives absolutely matter. Yeah, they do. And again, it's just there's no easy answers for this stuff and bad stuff happens. And it just sounds really uncaring. I don't mean it to be, but that is always going to be the case. And there's nothing - We're in a world where - Correct. We're in a world where - I mean, it's the same with unemployment interest rates and inflation, right? Yes. The RBA knows that cooling inflation means slowing demand and slowing demands for more people out at work.

1:02:41That's the Faustian bargain. There is no third option. Now, to your point, you would say, well, don't do anything, and that's fine too. But there is no solution where everybody's happy all the time. No. Which, by the way, why safety nets are important, where you just say, hey, for capitalism to roughly work pretty well for most of the people most of the time, some of the people are going to lose from that system. and you so you say okay well let's try and make it as painless or as you know as little pain as possible for those who do lose because of a structure we impose on them totally appropriate the people who say well let's change systems then it's like okay well show me the better system show me one that works better for everybody and that's where it falls down it's like well this sucks yes yes it really does we should have something better yes we should and when you find it let me know until then everything else we've tried so far is worse so just care for what wish for this is the least worst outcome that's as you say mate we're apes on a rock i love the uh you've not expressed that way before we have to deal it's not quite laws of nature but it's not far off right there are there are realities to the way our world works that creates outcomes good outcomes or bad outcomes because that's just that there is there is no you know what is it every action is an equal opposite it just is right just it just is and so you've got to say right let's let's find the least worst system and then let's ameliorate because we're nice people let's ameliorate the pain for those who aren't going to win, but that's the best we can do.

1:04:06Net-net, running a system, that's how you do it, right? There is no perfect, oh, let's just make it, if the economists were right, it'd be great. You put everything in a, the efficient markets would be fantastic. You put all this in a formula, the formula works, and therefore, E equals MC squared. Oh, great. Secrets of the universe uncovered. We can fix the economy now. It just doesn't work that way because it's not a physical system in the same way that science or maths is perfect in itself. It's really not. And here's the other thing as well is that we're not a closed system in this country.

1:04:35We are 2 % of global GDP. We punch above our weight population-wise, right? Well, you know, go Australia. But we're a tadpole in an ocean. Yeah, we are. And, you know, even with the best policy and, you know, we are a sock in the wind as to what policy decisions may be made in the US or China or Europe. and there's just absolutely nothing that you can do about those kinds of things. And so it's just a recognition, I think, of reality and what do you do about it. Exactly. That's exactly what it is. And I think what you do, for me, I'm very big and we've talked about it a lot. I'm very big on the idea of prepare, don't predict.

1:05:19And it's just about, you know, chipmunks put nuts away when they're plentiful. They bury them all over the place. They prepare for the future. A lot of them won't be dug up again, but they're there if they're needed. And I think in our just-in-time world, and, you know, I expect, you know, a theatre room in every house and a heated swimming pool and spa. It's just like we live right to the edge of what we're able to do, and then we cry foul when something goes wrong because we've got no slack that we have provided for ourselves. and then we shout at the politicians that you know you need to fix it for me and i it feels like i think as a parent you you get it more right it's just like i would love for my kids just to have mcdonald sundays you know morning they would love it too kids we're having maccas every single day morning noon and night you can sit in front of a screen do what you like and they would love it you know i would be i would be if they got to vote on their parents i would be re-elected you know every other every day um i'm probably not doing those kids any favors by doing it they're just like well there's just consequences like it's life isn't like that you know that's really unfair like yep that's the crushing reality that dawns on you as as you are as you age and uh the weight of the world crushes your spirit and your will to live and you and uh uh yeah maybe this is just my middle-aged angst and midlife crisis sort of speaking but it's sort of like it's just how it is exactly man we're going we're going long um but i'm gonna i'm gonna keep you for another 10 minutes because uh the other thing we need to cover this week is the competition review done by alan fells oh yes um which is a massive topic we're not going to do it anyway 10 minutes okay another hour on it but um so the most fascinating thing for me so far on this one is the actu we I know that's the Australian Council of Trade Unions, asked the former ACCC chair, Alan Fels, to do an inquiry into competition in Australia and price gouging in particular.

1:07:24So, okay, the union wants it, Fels does it. Okay, so you can kind of imagine. They released the report on Thursday morning and the first full-throated support was from David Littleproud, the nationals leader. That was not on my 2024 big go card. It is a hell of a thing when the unions are Littleproud up. Right? The unions and Little Prater are in the same story. So that was interesting. And what really sucks, and you and I both do some work with the media. There's some really good people in the media. We've talked about that. There's a lot of unfortunate headline grabbing with the phrase price gouging appearing a lot.

1:08:02And it's notable that Fels almost never says price gouging. And he says other people are overcharging, so the media grab it. You want a headline. Woolworths overcharging or Qantas price gouging, whatever you want to go with it. But so I kind of went, oh, I'm so kind of sick of it. What I did do, though, was I kind of went, well, actually, I want to see what Fells actually says. And I'm just going to read a couple of these things, mate, and get some general thoughts. There's a lot of stuff in that massive report. We're not going to do it justice. We can do a whole podcast on it, so I'm not going to do it justice.

1:08:37So the least useful, in my opinion, is his first recommendation, where he says, establish a national competition and prices commission, which has a standing review of the market and examines the reasons behind high prices. And he says it wouldn't replace the ACCC, it would take some pressure off the regulator. Without a, so what? Without a, this is what it's going to do. Without a, you know, really, so wheat's expensive or there's not enough competition in airlines. I don't really, it may function to put some pressure on politicians to make some changes to competition law or something else. So there might be kind of a tangential benefit.

1:09:13That's not the one I loved. That's the point we were just making there, right? Exactly. Well-intentioned, but sometimes prices of wheat is just going to go up and there's not like someone twiddling their evil mustache there behind it all. It's a consequence of very real supply-demand dynamics in a market and a global and ruthless market at that. And by the way, if you ask a former regulator what you should do, you're probably going to get regulate as the answer. Yes. But for all of that, I actually really loved almost all of the rest of it. So I'll read each one and get your thoughts. Next one was strengthen competition law.

1:09:49So this is fascinating. So he wants to strengthen the competition law by boosting the provisions of the merger test to stop more potentially anti-competitive mergers. He wants to reverse the onus of proof in merger cases so that the merged entities have to prove it's good rather than the ATWC having to prove it's bad. Yes, like that. Introducing a law that means big businesses found to have breached competition law can be broken up and revive the national competition policy the government is currently preparing, as well as shortening the competition provisions, which are currently about 20 ,000 words long.

1:10:21That sounds pretty good to me. Yeah. Yeah. Happy about that or got issues? I mean, I very, very strongly believe that the antidote to high prices is more competition. Very fundamentally. I really believe that. And where you get, the more market power you have, the more you trend to a monopoly status, more potential there is for gouging and unscrupulous behavior. Yes. The trouble I have, the hesitation I have is where you draw the line. It's very tricky. So let's look at Bezos, right, and Amazon. I mean, have they created value for the world? Well, yeah, I could get something delivered in a day and probably less than that in the not-too-distant future.

1:11:13And I pay hardly any prices for that. I don't pay a very high price for that. I think all of us are better off because of that. And you think, well, that is a consequence of very, very large scale. and you think okay but if if if we now look around and go oh you've got too much power we're going to break you up it's like okay that seems good but then there are they're going to be costs to that at the same time so i'm again i'm speaking intentionally out of two sides of my mouth here because i i don't know where that philosophically i i'm with you right but i don't know where you draw you draw the line um uh so we'll say quickly mate in this in this piece he's not saying we should break up dominant players he's saying you break them up if they're found or breach competition law okay it's almost your your argument before about the employer who you know does the wrong thing and goes to jail because he because he got did the wrong thing and done after the fact yeah this is kind of one of those ones where it's like you know if you've done the wrong thing if you've breached competition law the implications for that business is well oh, guys, you did the wrong thing.

1:12:17Here's the... Not your... Amazon probably is doing bad things, I suppose. Oh, I wanted to add that, actually. I'm not a fan of some of their workplace practices. Yeah, yeah. But if it's not breaching competition law under this rule, they wouldn't be broken up. It'd only be in cases where they've breached competition law, they've done the wrong cartel behavior or whatever else they've done that's breached. Then you can be broken up as a consequence, which I actually don't mind. I think it's going to... As long as you know the rules up front, you play by the rules, there's costs, there's fines, there's whatever.

1:12:43Breakup seems like a not unreasonable antidote to deliberate breach of the law. Yeah, yeah, that's fair. I mean, I feel as though if you or I were the only two board members of Amazon, right, and our job is very, very specifically to maximize shareholder wealth. Yeah. And you look at your business and the competitive advantages you have, you say, you know, we should use our market power. Why wouldn't we use our market power? What is the point of being the king if you don't get the privileges of being the king at the same time? So it's sort of like we can do this. We've almost got a duty in a certain way to do it.

1:13:22But that's not breaking the law though, right? That's what I'm saying. There's a difference between using market power and breaking the law. I'm putting a very hard line. I'm okay with anyone using their market power up to the point at which time it contravenes a law. Well, you've still got to set the line though. Where's the line? But as long as it's known in advance. I mean, you're still something, you go to jail. You break competition law. Oh, yeah. Yeah, yeah, yeah, yeah. I don't know. The next one was... Okay, go on. No, no, no. You've given me... I think I agree with you. Yep. Next one. No, sorry.

1:13:52I wasn't trying to be too... Mate, we're doing this live, right? I'm forming opinions in real time here. I like it. Increase banking portability. Oh, 100%. Force banks to make accounts fully portable. Yes. So customers can switch banks in the same way they can switch telcos and retain their same phone numbers. Follow the regulator's advice and make banks more transparent, comparable and proactive in how they alert customers and the public about changes in deposit and bonus rates. Yep. Can I just say, though? Yeah, please. It's not happening. No, it's not. No way. Like, I don't want to say anything that I'm going to later regret.

1:14:29So I'll just go with the usual, I'll eat my hat if that happens. No chance. my only issue with this mate is if you're a if you're a commercial business if you're a bank and let's let's i mean you know you have your views on the banks i'm using the banks but so let's make it about the banks let's try and try and leave some baggage at the door you've got your commercial you built a brand you built a business everything else when you say to a bank customer you know other businesses have you you love trapdoor moats right your idea of like how is it to move from you know this erp to that erp if you made every enterprise resource planning system interoperable so customers just move their data at a moment's notice it's the same with cloud accounting you did the same with every other part of our lives i don't think we'd think it was necessarily fair and frankly i don't actually know what it does to capitalism at some point when you effectively make every business a commodity because everything can be moved at a moment's notice yeah the the i don't know i don't know any bank shares i've got no dog in the fight but i don't know at some point you know at least with the telcos there's a different network right there's a different uh you move from the opposite of the telstra network or whatever you kind of you're getting something different you've got it you can take your number with you but there's you know you're signing up for something different you're paying a different amount based on different uh fees and charges or benefits or whatever i don't know it makes me a little uncomfortable that we're saying you're we're stripping your competitive advantage your competitive benefits with no compensation or you know uh justification not justification there's reasons to do it i know it just makes me a little bit a little bit on a little bit draconian to say we're stripping away that competitive advantage and saying to you bad luck now deal with it and whatever it does to your profit margins because your customers can move to very easily x x x years centuries after banking started we're now changing this one rule you these are multi-billion dollar businesses that to me feels a little bit i don't know how i like people around the move easily full portability where you just kind of press the button and go oh i'm now an az customer oh now a nab customer oh now a cba customer i don't know i don't know what it does i don't know how i don't know how reasonable it is in a capitalist society to remove some of those competitive moats yeah advantages uh castle walls whatever you want to use i don't Yeah, it is a really hard one.

1:16:50I mean, my view is that world is coming anyway. Right. You know, be your own bank. Let's not go there. Thank you. But I do think there is, while that is, your comments are generally true for other industries, I think banks enjoy a very privileged position within our society. I mean, they are the gatekeepers of money, like the oil of the economy. It is such a systemically important industry. Yes. And it is one in this country, at least, that is hyper-concentrated that I feel as though – and it's also one that is pretty profitable too. Yeah. And more profitable on a margin – and I'm just talking, you know, make up, say, large billion-dollar number and go, ah, that's bad.

1:17:42I just mean, you know, in terms of margins, they tend to do pretty well compared to other international peers. I think that anything that can remove frictions and therefore you now need to compete much more with each other. Yeah. Because if you don't, people are going to leave and they're just going to press a button and leave. Now, at the moment, you can do that. I can switch from CBA to Westpac and there's nothing stopping me to do that. except I need to go into a branch and open this up and do this and then contact all of them. It's a nightmare. You just go, it sucks, but I can't be bothered.

1:18:23And they know that, and they know that. So I actually am in favor of portability for banks. But you're right. It's a slippery slope. Where do you draw the line? He also made comments about supermarkets. he basically said the government should keep going with the review that already announced, which is fine. Also make the Grocery Code of Conduct mandatory and legally enforceable. I want to add that, and I want to talk about that and the banks at the same time, mate, because my only other thought with both those industries, bank margins are already under 2%. Supermarket margins are probably 5-ish percent.

1:18:58I don't know who we think pays the bills in either of these cases. You know, if the banks compete harder against each other, Maybe we all save a tenth of 1 % or something. There's not that much room in their margins for saving. Same with the supermarkets. What do we kind of think is going to happen? So part of me thinks, yeah, more competition is good. I think that's always the case. I'm not even saying but or accept. More competition is absolutely good in any of these cases. But at some point, given the – you made the point before about the national network and you pay something for that. we pay I wrote you know I've never really thought about supermarket margins this way before but effectively we get food for 99 % of us whatever it is there's a supermarket within a certain drive so we get we get the benefits of a supermarket and we take it for granted but think about what that is and we only have to pay 5 % above cost to get that is that not the best deal in the world you're paying you're paying a dollar for 95 cents worth of cost So all I've got to pay is an extra 5%.

1:20:04I get like a supermarket and it's like five minutes away and everything's there and it's cold and it's fresh and it's reviewed and it's staffed. And I pay 5 % more than cost for that. That's brilliant. And so I just kind of think with those guys in the banks, part of me just thinks, what are we, we kind of intellectually or sometimes even just, we kind of want it because we want it. We kind of want to have a win and we want to stick it to the bastards and all that kind of stuff. I just, I don't know. I'm not entirely sure what we think we're getting out of it. maybe margins go down a tiny tiny amount does it matter in the overall scheme probably not is it all sound of fury for nothing I don't know I'm not sure it's not too close we can and we'll get to energy in a second probably other things we can look at how big is the pot at the end of the rainbow I don't know it's massive yeah it's a question of degrees and these are the thing fund managers know this very well they'll go and say yeah well it's only a 2 % fee that's hardly egregious Like, well, except it kind of is, given that when you're managing, you know,$500 billion, you cover your costs and then some and to such a significant degree.

1:21:10So it's sort of, I absolutely get your point. And I think you're right. But it is about setting the framework in place that ensures that competition will do its thing the most efficient way kind of possible. So these aren't ultra obscene levels of taking advantage of whatever market power you have. They're not. But it could probably be better, right? And maybe I'm going to work harder and to offer value for my customers if I know that they can leave much easier. So I'll still be profitable, right? I have to be because otherwise the whole system fails at a point. Each competitor is eyeing the other going, well, I'll go as close as I can to the bottom end of what's possible as a margin, but no further because then I'm not viable.

1:22:06But it drives me in that direction where at the moment I can probably sit a decent distance away from that just because I can. So, yeah. It's hard. It is. Mate, energy. so this is interesting I completely agree with him I don't I've got to say his first suggestion I get no context for so I can't even have a view on this review the wholesale energy market which makes sense to see whether it should be redesigned or switched to a system of capacity market like in the US and Western Australia I have no idea what that means so I'm not going to other than we should review the wholesale energy market yes absolutely this is interesting though give ASIC the Australian Securities and Investments Commission a direction to investigate the energy derivatives market to ensure players are not misusing their positions.

1:22:54I have a suspicion. You know what's interesting, mate? This is where you kind of go private versus public provision of that kind of stuff. In the past, governments would have absorbed the swings on raw material price. When coal price went up and down, the government didn't need to make a profit every year. And so they just kind of absorbed the impact, right? So the energy price were reasonably flat and stable, even though the price of oil or coal might have fluctuated. A little bit like the RBA making money on their, you know, currency just it's it kind of just it would have fluctuated within public hands now in theory you'd hope they would have covered the costs over time and you know but there's a straight line right and there's zigzag above and below it they make some money and make a lot of money some years make massive loss another year kind of nets out um so while fell's talking about the you know checking the derivatives market which i'm sure derivatives well with energy futures right so basically the company's bet on what the price might be i'm not entirely sure we haven't just created like all there's other artificial markets a way for the investment bankers to skim a bit of money off the top.

1:23:51Think about this, the NDIS, think about water rights. What else am I missing? There's a million of the ETS, Emissions Trading Scheme, Carbon Credits. Oh, yeah. You know, all these things are just artificial markets created in theory because people believe that markets are best. And often, as we've just said, they are. Just not always. I don't know. Energy derivatives market enough? The right idea? I mean, I once many years ago tried to look into that and i'm just not smart enough that is gosh that is so complicated but it is um same with options and futures right like they're just degenerate gambling for the most part yes correct but but dressed up in nice suits yeah you know but but they're that started for very good reasons because farmers wanted to yes hedge away some of their i'm going to grow a crop i don't know how much I'm going to grow.

1:24:43I don't know what the price of wheat is going to be. I will take a contract and I will hedge that. It means I lose any potential upside beyond that point, but at least I can operate with some certainty. And there'll be someone on the other side of that trade who's happy to sort of take that bet. And that's a good thing. And they're not speculating on the price of wheat, the farmer. They're doing that because they're trying to lock in certainty and the market has created a product that helps them do that. And I think I'm actually very open to that i think people who use those contracts are doing so for very sensible reasons um and i think that's probably the same when you look at a retailer who has to deal with a lot of fluctuations in in demand and supply and all of this stuff's like we're not we're not gambling here we're trying to very sensibly hedge our exposure and give the business a little bit of certainty um but but there's a big spectrum of of that very sort of reasonable standpoint through to no I'm just taking a punt because I can and I'm on a trading desk and I'm going to try and make some money where's the line drawn I don't know let's try and get these other ones pretty quickly stop paying more for electric vehicles I don't know this feels like a bit of a sop to the kind of cool kids but apparently there's a restriction on parallel importation of electric vehicles and apparently we might be able to buy them 10 grand cheaper if we didn't do that and it benefit the environment I don't really know the context of that one seems like if it's unnecessary it's unnecessary I assume there might be reasons to ban parallel implementation of EVs but I don't know what it would be yeah I'll take I'll take Fels's word on that one I don't I don't know enough about it yeah keep a close eye on early childhood education and care give the competition regulator the power this is by another one another artificial market that's been screwed up give the competition regulator the power to investigate pricing decisions made by the for-profit providers to ensure they're not involved in gaming the system have the competition regulate continuously review price in disability care disability support and aged care kind of gets the ndis thing um yeah i think that's pretty self-explanatory yeah yep this one that's fascinating regulate airport prices the same way other utility prices are regulated take advantage of the existing aviation review by removing international and domestic restrictions on competition reviewing your remaining restrictions under the treasury-led competition policy review.

1:26:59So basically, set airport prices and remove any restrictions on other airlines flying to and from Australia and around the country. That's big. For the sun that comes at the end, we've had massive restrictions on domestic and international airlines for years and years and years. The government basically hands out slots. We had the Qatar Airways thing not long ago. This would take all that away if Fels gets what he wants. Seems pretty reasonable to me. Yeah. Yeah, I think so too. Airports infrastructure is interesting. Anything that has a natural monopoly is more for regulation the closer we get to that end of the spectrum.

1:27:42We've said before, it just does not make sense for me to have 12 different companies providing electricity to my house. It is in power lines, infrastructure, because then the streets are just covered in wires. It doesn't make sense for us to have four airports next to each other to foster competition. They are natural kind of monopolies. And so, yeah, I think that in this instance, it seems reasonable. Last one is studying medical specialist fees, which is pretty much all he said. Just do it. I assume there's an expectation that maybe there's some profiteering or collusion in specialist fees. I don't know.

1:28:20I don't know the context there, but that would be probably worth doing, I would assume. yeah yeah again i'm just gonna make some ill-folved comment i can't fault the intention but i'm not close enough to it to know whether that's a pro whether there is a a problem that needs fixing or not i don't know but apparently the actu and the nationals agree so that's all that other means they've got it absolutely right or god help all of us i'm not entirely sure yeah i don't know what that means yeah there you go mate we are we are this is the longest podcast by a decent margin we will wrap it up here um thank you for listening thanks for spending a bit of time with us.

1:28:53Hopefully it was interesting. There's so much happening this week and hopefully we got through a decent chunk of it and gave you some thoughts and some ideas. I haven't publicized the socials for all that occurred to me during the week. So follow Andrew on Twitter at Sage underscore Simeon and at Strawman Invest. Go to strawman.com as well, of course. You follow me on all of the socials other than Facebook at TMF Scott P. On Facebook, I'm forward slash Scott Phillips Money. until next week. Until Sunday, actually, I should say. You come back Sunday? You know it. Good. Fool on. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned.

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