Breaking down the Federal Budget. May 17, 2024

33:27Let's not talk about the fact that 80 % of the money that exists today came into existence after COVID. It is the reason. Like everything is downstream of that. And to fix the problem, let's give more money. Let's create more money. And the Romans did this and it led to the collapse of their empire. In fact, all major empires, there is a monetary dimension. Sorry, all major empires, there's a monetary dimension to their collapse. They get above their skis. They start clipping the coins. They start diluting the silver content. Inflation happens and inflation erodes and hollows out society. And then you get into this huge, big reset.

34:11That's the path that we're on. And I feel like I'm over-egging the pudding a little bit there. It sounds very, you know, hyperbolic. If creating extra monetary units solved anything, we could fix world hunger tomorrow. Which just quickly is the modern monetary theory idea of like, we don't have to pay the debt, we'll just create more money. If you haven't completed your own money, why would you bother paying back the debt? John Stewart was on a podcast the other day saying, why don't we just, with so much respect, being such an incredibly smart man, I love everything he does, saying, why don't we just create multiple$1 trillion coins?

34:47I know, pay everything off. Doesn't make more stuff. You do realise that money serves one function, right? It's just a giant ledger that allows us to keep track of everything. It's all it does. I mean, by the way, it's the most important invention humans have ever, outside of, like, language, right? In fact, it is a language, I would argue, fundamentally. And so it's the universal language. You don't even be able to speak English or French or German to be able to swap a euro. I mean, you know, it's more fundamental, I think, than literally language itself, which sounds ridiculous, but I think it's true.

35:20But we are not living in tribes of more than 500 people without money, right? And so it is so important. to so much everything is downstream of it i i would sort of argue and to think that by by just creating more of it we will fix anything i mean it is it is madness it doesn't it doesn't make more wheat it doesn't make more cars it doesn't make more houses it just throws more into circulation and and that would be bad enough if we were pro-ridering all this new money out you know to to everyone but we don't there's a contillion a contillion effect which basically means those closest to the sprigot benefit first because you don't inflation's a lagging kind of thing so if if all of a sudden the government created an extra million dollars and you know which is nothing for them but they did and they gave it to me well i get to i get to have all the benefits before there's any inflationary component to that you know and so so it's it's doubly bad because one it solves nothing and two it just favors people well it favors the politically connected and again i know how this sounds i'm listening to myself talk going oh my god you tinfoil hat wearing nut bag but if i'm wrong man lay it on me lay it on me why am i wrong i think I am less concerned.

36:41I think the direction is right. I don't think the conclusion is necessarily either as close or as certain as it might otherwise be in that circumstance. Maybe not as close. It's possible, for example, to have created all that money and then absorb it and deal with inflation and be permanently worse off, but not necessarily. It doesn't preempt. the things that were done the last decade don't preempt the end of civilization as we know it if it stops happening there there is no there's no need for it to for what's happened to have lit a match that can't be put out a little bit to come for that maybe to put it more more publicly name for me name for me a a monetary unit that has survived more than 100 years i mean the u.s is now currently the world leader um and look what's happening i didn't last that long and and they they lost their current their reserve status still exists yep anyway uh let's not let's not get too far to the rabbit hole no sorry i go you're right i gotta so yeah is the name of it still around yes it is right uh but in terms in what has happened again look at look it up on the um what's the website called the the fred website uh the m2 of the british brand it is it It is expanded to such a degree that it bears no resemblance to what it was.

38:06But my argument is it didn't destroy the civilization, right? No, no, no, no, it does. It doesn't need to end in the end of the Roman Empire in the same ways. A set of circumstances that have happened to this point don't mean we are inevitably going to finish at the same destination. I think we do. And by the way, it doesn't mean that we are where we are today in spite of every major civilization collapsing. Exactly. But what happens is that there are very, very uncomfortable, tumultuous periods where the reset inevitably happens. You know, the Weimar Republic, people with wheelbarrows of money being pushed around.

38:46That's where it ends up. That's mathematically where it ends up. But only if it continues. What I'm saying is to this point, there is no certainty to what must happen next and then continue happening until we end up with Rhyme of Republic stuff. Well, you're right. So you're right. That's all. So if all of a sudden we balance the books and we start living within our means, we will avoid it. And that's my only point. And I don't think that's going to happen. But it could happen slowly enough that it wouldn't. Again, your point about inflating away the dead is real. I think there's, again, I'm not trying to, I'm not saying there's nothing to worry about either.

39:23I just think saying there was some inflation in the Wimar Republic, there was some money printing, there was, you know, dilution of coins in Rome. Those two empires ended. Therefore, anything that's happened to this point must end up in the same situation. You're right if we keep doing bad things. That's my point. That's my, I'm not saying, I'm not saying, but I'm saying we're very clearly on a trajectory. Very clearly. I think everyone can agree on that. Yep. And so mine is just a statement of logic. Not, it's just to say that. If we do, then we will. I completely agree. Unless we change course.

39:49that's where we are headed with all the certainty in the world. Yep. And there is not, and as we've just discussed, you know, we're not, we're not even, we're not even slightly fixing the problem. We're doubling down on the madness. And, and in the U S it's even worse. And again, it's the world's largest economy. China's starting to do some really wacky stuff as well. Gosh, the Japanese, I mean, look what they're doing. Look at their currency, right? Like it is sort of, it is. And that's why I sort of say there is no major fiat-based economy where they don't end up in debasement. Now, could they change?

40:24Yes. Is it possible to change? But debasement is also very different at the end of anything, right? To your point about the pound, the British economy still exists and is, despite Brexit and everyone's best efforts, reasonably healthy. It's not, you know, is there likely to be debasement? Yes, but that's different from the empire must fall. I think that's where I'm just kind of funny a little bit. I just want to kind of make that different point of, Yeah, but it did fall. Are there negative circumstances? Sure. Oh, no. I mean, they're not a superpower they were. They're not even close. It doesn't matter.

40:50But, okay, so if that's what we're saying, then fine. I'm not saying everyone's living in a smoking crater and, you know, like using stone tools, but the British ruled the world. Before them, the Spanish. Before them, you know, and now they don't. Australia's not an empire. So the implications for Australia are different. I think that's where I'm just drawing that line. The average Britain is far more wealthier and healthier than they were 100 years ago, despite whatever debasement we've talked about. I think that's where I... There is an intellectual idea of... The country debasement, that'd be terrible.

41:21On one level, I actually completely agree with you. On the other level, it's like, well, the average Britain today is not particularly worse off because of whatever happened up to this point. And so, was it a horrible thing the British Empire finished? Colonial issues are not a side, which is a whole different conversation we're not going to touch. Did it matter? Honestly, no. I mean, it's... Do you know what... Yeah, but my thesis is that what... Because, I mean, like everything, there's like a thousand different forces acting on it. So it's very hard to tease apart individual sort of factors.

41:49But I think what's made it so difficult to observe is that we've had such insane, insane technological progress that we have managed to move forward in spite of all of this nonsense. Yeah. You know, the fact that you and I - It's almost my point, actually, ironically, just that inevitability of the so what is not what you might have predicted 100 years ago, 10 years ago, five years ago. Yeah, but it doesn't make it a good policy or good – I agree. It's like the person who says we don't need to do anything about climate change because somehow someone will figure it out. It's like, well, they might, right?

42:27Actually, I'm reasonably optimistic. You know, necessity is the mother of all invention and humans are very ingenious. So I'd like to think so, but I also think that let's just not rest, like put all our hopes on that, on that fact. Now, in terms of our monetary system, we've, we have been saved to some extent we've improved lifestyles in a lot of ways, but it's only because of the technology. If the tech, if we, if we just like said, right, where this is it, there's no new inventions after this is no new productivity enhancements. We would all be substantially poorer and it's only must be course of that.

43:02Now, the other thing to say is, well, it's okay because, well, we do have that. I would say we would today be living in a society of much greater abundance than we currently are if it wasn't for all that tomfoolery. Yes, are we good? Am I living better than King Henry VIII? Absolutely, I am. What would the alternate reality look like without all of this ridiculous money printing? I would say I would be, well, yeah, I'm rich now, but I would be, and all of us would be, society would be, civilization would be, immensely more wealthy and powerful than we are. I'm not sure about that because if you go back to money being a token, it doesn't really matter what the denomination is.

43:41The spread of the wealth is probably different, but I think I would argue the total wealth mesh in physical assets, which is all the stuff can buy, is actually no different. But that's a whole other thing. That's a whole other thing. I hear what you're saying. It's an interesting point, but I still think you're wrong. motley fool money for more subscribe to the free newsletter at fool.com.au forward slash listener

44:05let's go back to the budget because we're a very long way off of that at this point uh we're probably gonna this is probably gonna be a budget episode guys it's uh it's 45 minutes in uh so just if you're waiting for other stuff we might get to it we may not um the other one was the future made in australia thing mate which we kind of touched on at the beginning there's a couple others by the way some positives i will i will recap um i don't know if we talked about this i think i'm pretty sure we do we have yeah so so 23 billion dollars over 10 years apparently on one hand to your point early mate uh very much a um very much a drop in the ocean uh still a completely in my mind i'll go first this one because i just can uh completely in my mind a complete waste of money and a complete mess and an absolutely stupid economics um the idea that all of a sudden, so all we need to do is to have some different industry in Australia, is the government is going to put up$22 billion to make this happen.

44:57Now, I will remind our listeners that one single project was funded by Mike Cannon-Brooks and Twiggy to the Suncabble in Northern Territory. The project's going to cost $30 billion for one project. Done, by the way, because, funnily enough, they thought they could make some money doing it. Rather than government having to say, oh, Twiggy, Mike, if I give you$22 billion, could you put some panels up and put an extension cord to Singapore for us. I mean, that's the idea that there are business ideas out there that are profitable and worthwhile and good for the country, but no business is going to do because the government hasn't thrown money at them yet.

45:33It's just preposterous. Now, it is absolutely possible, it isn't within the realms of possibility, that there is a new idea funded by the government that actually goes on to do good things. Absolutely possible because law of averages and throwing enough money at the wall, eventually some of it sticks, we know that. But what it doesn't take into account is the things that those things, if they were worth doing, at some point the future business will do by themselves anyway, even though they're not being done now. So whether it's green hydrogen or green steel or whatever else the government wants to do with this money, it's going to get done.

45:59Twiggy's already trying to do green hydrogen himself. I'm a Fortescue shareholder for those who don't know. He's trying to do it by himself, not because government's throwing money at him. And maybe it works, maybe it doesn't. Maybe it works in 10 years, maybe it doesn't. It's not going to work or not work because of government money. The second thing here is that anything that they do that relies on scale or price or proximity to customers is going to be done bigger and better by almost anybody else around the world. And that is not me. You know, there's a whole lot of, the Yanks do this better than we do, the kind of American exceptionalism, right?

46:30I think Australian people are great and they're smart and they work hard. And, you know, we're a wonderful country, wonderful economy. I'm as proud as any Australian out there, right? So don't at me about, you know, not being proud of what we do, but think about the maths. if you are going to try and compete with china on hey maybe solar panels ago but spending a billion dollars on what are the odds that we have lower costs per panel produced than china well firstly our workers work for about 10 times the price of a chinese worker secondly they already have an industry over there that is i don't know probably a thousand times the size of anything we could ever do because of they've already got a first mover advantage they've got the lower cost they're probably scale advantage first i was going to get to right so the cost advantage and the next one the last one is proximity to markets where chinese solar panels going to go well they're probably going to go to europe are we close to europe no probably going to america are we closer no okay so in what world do we have either a scale advantage or a cost advantage or a proximity advantage and there's none of those things now we do some things that others don't do so i'm not saying the australian economy grinds to a halt because we can't do anything differently or better what i'm saying is trying to compete in a commoditized market even if it's high quality so it's a high quality panels well the chinese can do high quality panels oh it'd be good workmanship it'll last forever the chinese want to do that too if the customer wants high quality panels last forever the chinese will do that too this is not you know there's that kind of xenophobic frankly half racist thing of yeah the chinese does crap and ours is better it's like well i don't know i mean we said that about japanese products because we wanted to we're racing bands with japanese for a while and the japanese invented toyotas and we did holdens i mean the the the ridiculous kind of and i get people want to make something this is the other thing all right just for those who are yelling at me right now i feel the urge to want to make something as an australian i like the idea the australians make things it would be nice to buy an australian made car it just would like it'd be we'd support jobs and we it's our thing and there's pride and there's all this stuff tied up and there's a soldier stuff we used to do i get all that i really really really do um but there's something and we shouldn't want to do those things why would why would we want to make salt why would we want to have lower wage jobs in australia we've got high we've got a high wage country and people say it's terrible it's wonderful i live better andrew lives better 99 of our listeners live better because we're a high wage country yes businesses whinge about it well suck it up princess because you know your workers get paid more you get paid more your consumers spend more because they get paid more high wages are wonderful things it's a really good thing don't don't fall for the we pay people too much it's great that australians are high wage workers but why would they want to go work for less why Why would we want to pay them less?

49:03Why would we want to create a company that ends up having them go from a higher wage, higher skilled job to work for a lower wage, lower skilled job? In fact, it just makes absolutely zero sense. This whole program is a complete crock. Or is it, Andrew? No, government is really important, right? It's basically let's all get together because there are some decisions we need to sort of make at a very holistic level. and one thing that isn't within that remat is the allocation of capital into a free market because yes yes because the incentives aren't there you're spending someone else's money and you don't get the return so you don't care right like it's it's just you the incentives are never going to allow for that to work out well uh exhibit a cuba communist russia anywhere where it's been tried anywhere in history it hasn't worked it hasn't worked so i get it if we if we were 200 years ago and we're debating the merits of this in a theoretical construct i probably would land on that side of things to be honest with you but i mean after after like you know centuries of evidence it's like i'm gonna call this one done it doesn't work that's It doesn't work.

50:23Now, there are some problems that require a bit of a, you've got to prime the pump on because you've got to get over that initial hurdle. And I think government can play a big role, whether it's through tax incentives or even grants. And I think with a lot of the R &D grants that are out there, at least conceived are sensible as an idea, to sort of help foster nascent kind of things, just so they can get onto their own two feet. But once you start really directing very significant amounts of spending towards the capital stock of an economy, you have malinvestment, you have misallocation of resources, you have immense opportunity cost, and you all end up with inferior products.

51:10And then usually one of the – some genius will then go, well, okay, well, I'm just going to set the prices on things and then everyone starves. It just doesn't work. It doesn't work. So should we want things to be built in Australia? Yeah, I guess so. But let's go back a step and go, what do we do that's really good? Correct. What have we got that no one else can do? Actually, you know what we've got? We've got heaps of rare earths. They're really important to the new economy. That's interesting. Actually, we have got heaps of energy. We are the Saudi Arabia of the Pacific. We've got so much gas.

51:48We've got so much sunlight and empty space. You know, it was up to me. If I was going to spend government money to kickstart things off, I mean, I get the impetus. I would make us a massive power generator for all of Southeast Asia and export it. You just mentioned what Twiggy and Ken and Brooks are doing. They're doing that. But that's my thing, though. If you were in government and you want to do that, you wouldn't do it. You'd say business will do it themselves. But I would say anyone who's going to do it, we're going to give you a tax break, right? If they're going to do it anyway and make money, why would we throw good tax money off the bat?

52:20Like you don't need the tax break. You've got to make a fortune. Two years in White Canterbrook didn't do it for the tax break. They didn't make money. I retract that. You're absolutely right. So I'm starting from a point of we don't have something. We're at zero. We need to get to one. Yes. At that point, I think that's where those things start to make sense. Once you're at one, well, to get to two and three and four and five, then let's just let the market do its thing. Do you know how I'd spend$23 billion if I was given the money? Oh, actually, can I go back a half step actually? Okay. The other thing on your point about, you know, it's never been done.

52:49People yell at the podcast machine right now, but hang on, US subsidise the stuff and China subsidise the stuff. And my answer is, yeah, they do. And you know what? We get it cheaper. Their taxpayers are making our solar panels we buy from China cheaper. That's a great outcome. Why would we want to compete with that? A, we couldn't beat the Chinese and the Americans because they're multiple times our size in terms of the size of the economy and their government system. And they're always going to outspend us. So let's not get... You don't take a knife to a gunfight, right? Let's not try that. But also, if America's put bloody 100 % tariffs on Chinese EVs, what absolute stupidity.

53:24All you've just done is said to the American consumer, speaking of cost of living, your costs have just gone up. If you want to buy a Chinese EV, it's gone up. And if you can't buy the Chinese EV because it's too expensive and you buy a Tesla or a Ford that's more expensive than the car you would have bought, you've just spent more money. They have literally just successfully said to the American consumer, your life is now more expensive. Congratulations, I've helped you. And the same here. if americans are throwing subsidies at wheat or corn if the germans are throwing subsidies at cars if the chinese throwing subsidies at solar panels great we get cheaper audis and solar panels and like it's it's a it's to think we should think that's bad and do that as well it's like oh man i and i get people by the way i i'm saying this kind of with a laugh but i get people who who don't kind of necessarily get the economics of it that's cool you shouldn't have to right not andrew i do this for a quid not everyone has to get the economics of this stuff uh but just when the politicians say it listen to the experts who have a different view and really think about it if you're a labor supporter you're probably thinking no they're great guys because and there are some great people in the labor party great people in the lmp as well um but just because they come up with a policy doesn't make it smart listen to the experts and don't listen to us there's people different views to andrew and i listen to them as well um but if you're not economically literate that's not your thing don't swallow the line of they do it so we should do it too i mean that's talking about mutually assured destruction just madness um thing i was to say um actually completely lost the thing i was gonna say uh where was i going with that don't know anyway you go what are you what's on your well i i guess i guess it's these um i remember they they're they're very they're very difficult concepts they are and i've spent decades thinking about them and my thinking's involved i'm i guarantee i listen i'm not going to but i bet you if i listen to this podcast it's very podcast five years time probably three years time probably tomorrow i will cringe you know what was i thinking right i take it as a sign of growth i think if you don't if you don't look back on your your five-year younger self and cringe to at least a little degree you're just not growing as a person so that's you know don't beat yourself up too much about that you've had a lot of bad takes and i'm sure there's plenty of bad takes that are being had here but i just there are i i guess i guess what where i've found great value is in trying to ask the dumb questions that everyone is too afraid to to to ask or feel too stupid to ask or just accept certain platitudes from people in expensive suits as the answer when everyone's got i i reject the premise that economics is beyond anyone sure okay you want to talk about quantum field theory okay okay uh yeah there are some topics that you you kind of need to be a super brainiac at the fact that that i i i don't think that economics is that it's not you have to have done the reading and the thinking that's all it's you can't you can't you won't instinctively pick it up by looking at chalmers and saying made in australia is that good or bad you had to have i mean you and i've been doing this for a long time um well people the 300 buck um energy rebate's a good one right on first place it does feel like it reduces prices so of course it will reduce cpi yeah it's when you kind of go but hang on aren't they going to spend that money somewhere else oh yeah that's a good point you're right you're absolutely right i don't ever want to condescend to our audience or say you can't understand stuff oh i didn't mean we're doing haven't yeah until you've thought through some of these things and frankly read a lot behavioral finance again i'll mention it um it's hugely influential unless you've actually done that i saw people on twitter tell me they're really rational of course they wouldn't do this they wouldn't do that it's like well you're probably kidding yourself and but also you might be the fact that other people do is also important you know keep going yep yep i mean it's it's like nothing to be cynical on is the modern education system you know it's just like you can't believe because my my kids going through it now and some of the stuff that they're teaching him all right that's not true okay yeah exactly no it is because of it not because he knows everything of course and and it's just like one of those like the assignments he's doing is like what no like why don't we just teach some basic things like supply and demand incentives like the power incentives i'm just going to make him watch he hasn't done it yet i've tried to get him to watch Charlie Munger's speech on the power of...

57:29Oh, nice. Yeah. Gone blank now. Psychological misjudgment, what it is? Yeah, yeah. Thank you. Yeah, that's the one. Thank you. You know, like these concepts are actually very intuitive. Yes, that's right. Eternal. Once you open your eyes to it, you can't unsee it. You can't unsee it. And it explains so much in the world. So, you know, they're getting them to do these really arcane, I would say, far from tested and proven. I've long said that economists have physics envy. They're really desperate of the hard sciences. It's not. There are very few things that you could take as fact in the field of economics, but too much of it is taught that way.

58:08What was the idea was that numbers into economics? Once the econometrician turned up to try to create formulas, it was like, you speak of political philosophy. It's literally a study of the way things act and work. Like the interplay between actors in a circumstance, literally it is. It's just what are people going to do in this circumstance? Well, supply and demand will probably do this. And you've made the point lots of times, you can't add up an economy. You can't, but you can say, well, look, generally speaking, if I give people money, they're probably going to spend it. If they spend it, they're probably going to push prices up.

58:40That's all you need to know. Whether it's 0.14 % or 0.36 % or, you know, it's the exchange, it's interaction that matters. That's what we used to call economics. Now it's all bloody numbers and formulas and all that sort of rubbish. I find this is probably frustrating to the listeners, but we start off with an agenda and we always end up at the same point. We get very foundational. And, you know, I guess we sort of pitch our flags in slightly different camps. But it's not by design. It's really, I just feel as though you can't really get to the nub of the problem without a foundation, a firm foundation to stand on.

59:19and too often the debate this is why i said i don't watch the 730 report after the budget because everything that's being discussed is with with lacks context it lacks a shared framework for how the world works so when someone says a bunch of words that are very technical and sound impressive and they said it really confidently and it's backed by this department and that person and this person with the phd it just sort of like i guess it's right it sounds good and you you kind of need to keep going you need to do the five-year-old but why okay oh but why and just keep going yeah and and and i think when you do that that that's why we sort of you and i always end up at these sort of very basic sort of yeah uh uh philosophical kind of areas because to me it's sort of like no you we can't even really discuss the the the the energy rebate yeah or the rental without at least saying, okay, we have a shared framework on how this whole thing kind of works or how we think it works because everything after that is nonsense.

1:00:23It's like you and I trying to arrive at the same mathematical answer except that you think that 2 plus 2 equals 8 and I think it equals 6. We're never going to agree and we're never going to have a fruitful discussion on that. So it's sort of, I guess that's my little apology to the listeners. I'm sorry I always end up in the same thing. Exactly. Yeah, the thing I remember I was going to say, mate, which is just simply if I had$23 billion burning a hole in my pocket and I wanted to improve the lot of Australian industry, I'd go and spend it as tied research grants at universities. If you want to improve our ability to do the next things, go and do the research.

1:01:01And tie that research, by the way, to a federal government. I've always said we should have equity for R &D grants. Go and do that. Go and actually invest in the stuff that's being made or being developed, but don't pick the winners after the fact or try and get us to that point. Go and fund some research. You know, we famously invented Wi-Fi here and a whole of other stuff. I mean, you know, that's the sort of stuff that we can do. CSL, great example of a, you know, compost serum laboratory. Cochlear. Right, exactly. Yes, even better example. There's stuff that's been spun out. We should absolutely have equity in it, but go and do that stuff rather than trying to pick winners.

1:01:36I had to try to hear that. You did, you did. Made in Australia. quickly on some positives um uh i mean a billion dollars for domestic violence is just a no-brainer super super great um three billion dollars for the pharmaceutical benefit scheme i think is important uh we are a higher wage higher cost country um one of the great things about being a higher wage country and a more wealthy country is we can afford to subsidize more medicines and more drugs for people who are having some really serious conditions i think that's a really really positive one um much past that i don't i don't mean they're the only two good things but realistically they were kind of the only only two that grabbed me that were large enough to really kind of comment on there's always the you know uh half a million dollars for you know this and five million dollars for a road upgrade and all that kind of stuff which is just budget stuff that generally kind of happens uh rounding errors as well too this is where i think too much of it gets close to something gajillion dollars towards the numbers are irrelevant and you know a million dollars sounds like a lot to you and i yeah right actually actually what you can't even buy a two bedroom unit in some parts of sydney for that it's sort of yeah it it's yeah some announcements just are there to say hey we're doing something and it's always you know you got to make sure you tick all the box right so every state's got to get something and every community's got to get something and it's one of those you know we don't have anything for tasmania yet yeah we have okay tick that box what about the farmers okay we've got some money in there for farmers let's tick that box um the other one i want to call out mate was half a billion dollars being spent to map the geology of Australia, which I was really torn on.

1:03:04I think I'm still not a fan of it because we're going to go and not charge anymore for our resources that could dug up. So the resource rents are going to remain stupidly low. And we're going to give a map to miners and say, knock yourselves out, guys. And when you find the stuff, pass a little bit, but you can have the rest. And on one level, I kind of, like part of me is actually, you know, you mentioned rare earths. If we can genuinely produce more of this stuff, we are going to be wealthier as a country as long as we don't screw the environment doing it. That's not something we should take for granted because we haven't got a very good record on that one.

1:03:33G'day to Rio. Might be blowing things up. Excuse me, hang on. That was a good cough. So on one hand, making it easier for miners to find the stuff is good for the national checkbook, the national balance sheet, right? It does improve our ability to mine, because the quantity potentially, given we get paid. oh it makes sense to do an inventory of of our of our warehouse my issue is two things one is we're not going to charge the miners for access to it so here's a free treasure map uh we don't want it you have the treasure map so um and we get a little bit of resource rent and royalty now those two norms i have to use them separately because they're different things slightly resource rents are the amount you get from minerals royalty is what you get for uh hydrocarbon so oil and gas and they're kind of the same thing i use them separately because it's someone will say one day what about royalties or what about rents and it gets a bit silly but that kind of idea of the amount of money the government gets per unit or per dollar of oil, gas, iron, gold, copper, rare earths, everything else, actually is still stupidly, woefully low.

1:04:34If the government was going to say, we're doing this, we're going to do the map, and we're also going to make sure we get more than our fair share, or at least our fair share of the proceeds, I'm all ears. That's ROI. That's an investment, right? If we put a map out there and they mine more stuff, we get more money. The Australian people are better off. If we can get more than half a billion dollars worth of additional revenue it's it's absolutely it's a no-brainer so i get it the fact that we are charging so little for those resources um drives me kind of spare oh sign me up to your newsletter i 100 percent agree i disagree about okay yeah i mean they are they are completely in the pocket i mean hi to our west australian listeners your government is completely in the pocket of santos right like it is it is embarrassing and how how overt and obvious it is and by the way not we're not covering ourselves in glory on the east coast either like it's just it is a nonsense and and like i'm this isn't a i'm saying let's let's it's got value let's sell it absolutely and and you know what i don't think government should be mining this stuff i think the private sector We should absolutely be doing it.

1:05:47We're all there. And do they create jobs? Well, yeah, but not nearly as much as what we expect. And do they pay tax? Yeah, they do, but not nearly as much as we like to pretend. But it's just like these organizations could still be profitable and viable by having to pay a lot more. And Norway has proved that. And I'll call the bluff. I'll call the bluff. I'll do it right now. I'll say, okay, we're going to double the amount of resources, rent, and royalties. and every campaign under the sun will hit your screens and you'll be terrified into thinking you're going to be poor or you're going to lose your franking credits or some nonsense.

1:06:24And after all is said and done, if we manage to withstand all of that, they'll continue to extract that stuff. And we, the owners, you, me, everyone listening, everyone who's a citizen of this great country of ours, will benefit from it. Not some foreign investor, right? Like we'll benefit from it. Or not even the local investor who happens to own shares in it as opposed to the person who doesn't because it belongs to all of us and why would we give it away for free virtually or for pennies on the dollar and and there is a natural tension there is going to be between if you charge too much well then it's not economically viable and no one will do it no one benefits okay that's that's too far on that side of the spectrum but we're we're way at the other end where it's just laughable that we are giving this stuff away And by the way, it won't be there forever.

1:07:13And we should have a sovereign wealth fund the size of Christmas. Oh, I'm glad you mentioned that. The size of Christmas. Even if just up, you know, you just did it over the last 20 years, which is the blink of an eye, you know, and we don't. Norway's is$2 billion. You know, the population of Norway, there's 5 million people from memory. Yep, there is 5.5 million. So there's more people in Sydney, greater Sydney, than there is in Norway, right? and they have that sovereign wealth fund. $2 trillion. And so we wonder why they have such a great standard of living. You know, it's like they have this, they were just gifted, you know, that is geological luck and they played it really well.

1:07:57Now imagine if you just, you own a quarter acre block and you discover oil on it and, you know, someone comes in and says, I'll dig it out for you and I'll pay you some of it. you need to have your head red if you don't extract the absolute most that you can do. This is like sensible negotiation here. You need to find that common ground where it's worth it for them and you can still maximize your value. And we've just sort of said, no, you can have it for basically nothing. And it's one of the biggest scams in modern Australian history. And the fact that we're not marching across the bridge and holding placards on this stuff kind of strikes me as a little bit odd.

1:08:36yeah i think that's um i think that's i think that's pretty right that's yeah so i was gonna ask you next what would you want to have seen in the budget so for me structural balance is the first thing uh i plan to pay down the debt is the next thing which comes from the first uh which actually means kind of probably a structural surplus honestly for at least a little while till we pay down that debt um the sovereign wealth fund is an absolute freaking no-brainer to your point mate um a couple of reasons one we're not charging enough so just charging more just makes sense right why would you not uh by the people who think we're not charging we're already charging enough i'd ask you why do you specifically think from first principles the royalties happen to be exactly right what are the odds that every royalty for every mineral that's been in place for x number of years happens to be precisely correct there is zero chance that's true some might be too high probably not but they could be right if you're if your starting point is no we already charged enough it's like well i'd like to know that i can't get i don't understand the people who defend the miners and this is the thing i'm not anti-mining at all i'm just i'm just pro australia getting actual fair value for it right people defend myself oh you're just taking miners just doing this no no i want lots of miners to do lots of stuff i want to pick up a truck like i was gonna say something else load of iron ore sent to china and do it really fast do a really high prices that's a great idea we make a lot of money from doing that fantastic but the but the chance that when it costs i'm a fortescue shareholder fortescue was it 14 17 bucks a ton to get out of the ground save for 100 what are the odds we're getting a fair price for that absolutely zero um just quickly too on the on the sovereign wealth fund mate the the opportunity for us to do that is just enormous uh the think about the returns you're going to get from that sort of fund over time right i increase the increase the royalties and the rents put those into a sovereign wealth fund let that compound for 10 20 30 40 50 years um someone tweeted at me during the week because i've been banging on about sovereign wealth fund for a while actually one of the best response i've had to a tweet in ages right which is not about me it's just the issue is really resonating um well someone's an article done about you know you know that fire thing financially independent retire early yep that someone's done some analysis they reckon in 20 years norway sovereign wealth fund will pay for their entire budget like literally that norway can retire in 20 years time based on the holdings of the fund it is it is extraordinary and to kind of defend or disagree with that i just i find ridiculous the other thing last thing i'll say quickly on sovereign wealth fund this is not economic but it is i think ethical or moral we're digging up iron ore now that's been left in the ground for a gazillion years to show your new favourite was a gazillion what was your new favourite yeah I'll go gazillion gazillion gazillion years through the forces of time and nature and all those sort of chemical things that happen and left there by our forebears right literal forebears and national forebears we dig it up once flog it off and spend the money on a tax cut so we can go and buy a new car right we're taking out minerals that we inherited that have been there for millions of years we use the money one year and they say sorry kids we've already taken out of the ground um you have to make up make do for yourself it just on an intergenerational basis makes zero sense we're taking an eternal asset and using it for a one-off frankly wasteful amount of spending in 2024 or 2025 we could actually instead say we're going to replace an eternal asset which is the mineral with another returnal asset, which is a sovereign wealth fund, which could preserve that value effectively literally in a perpetuity.

1:11:58And I just think the idea of not doing that, the idea of like, sorry, kids, we just wanted them. We wanted it now. I mean, it's a very Australian thing to do. It's a very modern thing to do. There are some Japanese things we talked about last week. The Japanese companies have been around. Imagine if the Japanese companies, a thousand-year-old companies, said, yeah, no, we're going to use all the profits now. We're going to worry about the future, stuff it. That idea is just crazy. Yeah. Both economically, it's a no-brainer. I think, frankly, intergenerationally, responsibly, ethically, morally, choose your term.

1:12:25It is an absolute no-brainer. Anything else you would want to have seen in the budget, mate?

1:12:31Oh, gosh. This is where the rubber hits the road, isn't it? Because it's so easy to sort of criticize. I really love that tool that they had a little while ago, which gave you the ability to play treasurer. and so that was everyone so you're spending time okay well we're in deficit what are you going to cut yeah oh well i do like that you do that and i do like it's hard it's real i try to do it as well it's like oh gosh i don't know so i i don't have any easy answers i i think i think i think the problems that they have identified i.e cost of living um let's just call that inflation because that's what it is, is important.

1:13:15Domestic violence is important. Pharmaceutical benefits, that's important. Housing is important. All of the things are important. It's just I don't think what they're targeting is wrong. I just think the way that they have gone about it is fundamentally flawed. So I think I would still focus on more or less the same things.

1:13:33Yeah, that's fair. But it's hard. I just, I don't know. I mean, I could riff for the next two hours just on one of those topics and how I would do it and then probably still changed my mind. But it needs to always, I guess, we talk a lot on this podcast about business, obviously. And really the driver of shareholder returns is really the efficient allocation of capital. And that is, capital allocation is sort of everything, really, to my mind, when you boil it down to it. And so I would like things to be framed through that lens when it comes to the government and budgetary spending. when it's like, okay, this is deemed as important.

1:14:15What's A, the return on investment? And in that, I include not just dollars, but sort of intangible societal benefit within that. What's the return on that investment? Followed very quickly by what is the opportunity cost of that? I.e., if I do that. So, I mean, I can get behind a policy that gave every Australian a new pair of Ugg boots because who doesn't like Ugg boots? It's coming into winter. It's great. A good lead recovery. I like it. You know what I mean? But, so it's not, I guess, I'm not against Ugg boots, but does that mean that there are no fun, like schools don't have chalk or something like that?

1:14:49You know, so it's got to have that opportunity cost kind of thing there. And I think when you have those as your North Star, it will lead you into a better direction. It's a very vague, wishy-washy kind of answer, but it's about the best I can do. No, I love it, mate. I think that's exactly, and I think that's actually it. The sovereign wealth fund thing falls purely into that idea of if you had some money and you could do something with it for the betterment of the country, which is frankly what our politicians should be trying to do, you've absolutely got to balance today and tomorrow. There's no point.

1:15:21We've said a lot of times about retirement. Don't put off your life just to retire with another couple of shekels. But the opportunity of this one is actually to have intergenerational value, right? And you think about some of the big – we talked about this a little while ago, ages ago actually. i was um in sydney oh i don't know when it was might have been even months ago i can't remember i took a photo of the harbor bridge and it's beautiful and we like it it's symbolic and that kind of stuff and then i was driving across the bridge and there's like six or eight lanes eight lanes this was built in 1932 as an eight lane bridge if this was built today it'd be built well sorry so let's change the the context if i love that if we took this society back to 1932 we would build a two-lane bridge because that's all we needed or we might have thought ahead and gone in five years time there might be small cars let's build a four-lane bridge and the hard bridge would have been knocked down three times between then and now we wouldn't have built it with beautiful sandstone foundations and the ornate street lamps and that think of the return on investment of that spending and the fact that frankly we haven't had to tear it down since resurface it whatever it got to stay as it was because we built something that was built to last with an eye on the future how many generations i mean you know i don't know the bloke who cut the ribbon he probably died 10 years later and it's probably been seven eight ten premiers since then i mean that you know that is real leadership real vision so um quickly you're right about mate there is no way to easily answer or quickly answer the question we're already pretty deep into this one um i would have a sovereign wealth fund i would increase resource rents really really easy the government it should have committed to and again do i expect them to no because this is politics but that's not an excuse they should have committed to a structurally balanced budget if not this year at least a path to doing that so in year x it will be structurally balanced and from there on and they should have committed to a plan to pay down the national debt because it is unconscionable to carry that and leave it which we will for our kids as you've nicely pointed out no matter how dire the future circumstances whether they're your version of dire or my version of dire they're both bad and we open ourselves up to your point about you know could it go this way yes well wouldn't we do something to stop that then yes i think climate change is a perfect example it's a really really perfect analogy uh for what we're doing with with the budget right now which is maybe we'll find a problem to solve maybe we'll maybe we'll solve it maybe we won't let's maybe not make the problem worse in the meantime would be a very very good place to start so those things um yeah i think i'm going to bang the drum one more time on population growth the budget should have unveiled a very sharp and very quick reduction in population growth until such time as we have enough houses for people i read this morning a tweet from a lady who's again anecdote only but you know working couple both got jobs cannot find a place to live and you kind of you know again that doesn't make them any more worthy than someone doesn't have a job for example but they're not running out of a place to live because they don't have a job it's not you know it's not they can't afford unemployment benefits by the way that's something i'd change i'd increase the unemployment benefits and haters feel free to hate on that one too um we are we are paying people way too little given the circumstances so yeah i i um i just i just think in the current circumstances supply and demand if you can't fix supply fix demand for god's sake the the the every now and again i kind of think about this matt and i i tweet about it in in some sort of surprise because if you really think about it and you say we know what's happening with housing we know right we know you and i know our listeners know our politicians know we know we know we know and yet Jim Chalmers I don't mean him personally necessarily but he was the bloke with the speech got up smiled and said about all the wonderful things the government was doing to fix the country and help the country and yes they put$1 billion into some sort of future house building program as if it's going to matter but they did effectively $1.9 billion for rent assistance that becomes landlord assistance and then smiled and said how wonderful a job we're doing and you just think even the sovereign wealth fund that's a 20 year 40 year 60 year you can be excused for maybe not thinking about that if you were you know if you had other priorities your point about opportunity cost is real right so maybe you say well not this year not yet if you can if you can deliver a budget and not fix the housing problem effectively immediately given the people are in tents and in cars and you can actually say and we've done a great job thanks please vote for me again i and again as i've said many times on online the opposition are no better literally no better at all and and you can say we think we've done a good job i i don't know how i don't know how you can frankly sleep at night let alone deliver a budget and ask for applause from someone um i'll finish with this mate i tweeted this morning um and i'm trying to find the tweet because i worded it um let me see if i can quickly find it no i don't think i'm going to uh i basically said that every every single politician's obituary should start with a list of the policies they voted against for political reasons or didn't implement because they were worried about the politics if you know the good policies they didn't do or voted against because for political expediency that should top every single politician's obituary this person died by the way they voted against housing and they voted against making sure that people had a living wage and they voted against you know fixing the climate that that's the stuff that should be top of every and that's you know if that doesn't focus what do you want your legacy to be remember the first paragraph of your obituary is going to be all the things you didn't do should have done i don't know if it'll make any difference but it'll make me feel a lot the trouble with it i like your idea the trouble with it is is like you can interpret it differently so like i voted against this but it stopped that it was the right it was a difficult decision but it was the right decision you know like it can be history is written by the victors and uh so you had someone ask that i'm happy to be the person who decides those things yeah if you can be like the objective arbiter of the obituary then yeah hell let's let's have at it um oh it's a very big problem mate i i don't know i the only real problem given the the system that we operate the only real solution given the system we operate in is to try and be as engaged as you can and and you know have have your views heard if you're against some of this stuff yeah i mean you know it feels very um ineffectual but you can vote democratically but you can vote with your wallet you can do you know be the change that you want to see and it's very hard because it's just like what am I going to do?

1:21:37And I very much often end up in that kind of negative frame of mind, but at least, at least, you know, next time you're at a barbecue and someone's there firing off these half baked thoughts, you know, challenge them in good nature, be, be the difficult person. You know, we, we too often slide into mediocrity and sometimes disaster, you know, while whistling Dixie it's, it, it, it needs, sometimes you need to have uncomfortable conversations, not, not to do annoy people and get into fights, but just to sort of seek truth. And these are super complex things and they need to be talked about. They need to be talked about intelligently and it needs to go beyond, I need more money from the government.

1:22:19That's what it needs to go beyond. And please don't be a barracker. Please don't think your guy's right and their guy's wrong because he's your guy and the other guy's their guy. Challenge your own party, challenge your own beliefs, really try and understand the bottom of some of this stuff and don't give your guys free passes. plenty of you know oh well the lmp would have been worse or well you've got an election to fight or well whatever those things may even be true again i don't want to don't get in the argument of the lmp versus labor but those things may well be true it doesn't mean you have an excuse for doing a slightly better or slightly less worse job than the other guy that is not the standard for political discourse it's not the standard for policy setting and if we let it well if we let it be it will be our job is to make sure we don't fall for that rubbish i can't i'm gonna offend oh good 90 of the audience the ones on the left it's okay just that much now they're hard to offend i've never understood the person who says i'm an ex-voter yeah period like what do you mean now if it's like well it just turns out that every election i've preferred their policies correct then okay cool that's cool i mean you know i've i've tended to vote a certain way my whole life but i would like to think that next year i or next election i would change my mind and i have in the past.

1:23:27To say that I will vote for you no matter what, you might as well just put a tattoo on your forehead that just says idiot because I'm incapable of thought. I am just team blue, team red, that's me, no matter what is the most stupid thing in the world. Now, again, you may vote one way your entire life because it just so happened that every year they provided a policy platform that you happened to prefer. That's fine. There's nothing wrong with that. But the person who just doesn't pay any attention and just goes to the box and into the booth and ticks that box because is just like i have no words i that's that's just sort of like it's like being that they're the kind of people i want to have as friends because i can treat you any way i want and you're still going to be my friend right like i'm going to borrow money i'm going to be mean to you i'm just going to completely abuse the hell out of you right and it's kind of like you kind of deserve when you're that kind of person you kind of deserve those kinds of outcomes right like think think think everyone think it's funny mate this week i've been called a lnp shill i know lnp stooge a socialist and something else are you doing something right you're doing something right that's the thing so two things one is they looked at it from their lens right and for some people i had someone repeatedly tell me well labor's done two surplus in a row lib did nine deficits therefore labor's great i'm like well anyway um yeah not not clearly not true um no they're not great not they are great just that those numbers don't tell you that that number um but it's it's the other thing is you know people sort of trying to identify my political leanings based on my policy views and it's i've said before i'm to the left of labor on the climate the left of right of the lmp on fiscal responsibility not because i've moved because they've moved like this is the other thing is you know have a have an objective view based on the policy and then where the parties happen to falls where they fall if i if i happen to align with 75 % of labor's policies this year i'm no more a labor shill or a labor voter or a lefty than if i identify with 75 % of them because that's the way the political winds shift i mean i tweeted this morning i said we're in a weird situation where labor wants non-means tested handouts and the liberal party's complaining about money being thrown at business i mean that's actually what's happened in the last 24 hours you think what what world is this right and again you know so so which which which side am i on well a year ago if i'd said i'm for one against the other you'd say oh you're obviously a labor voter this year i said the same things and the positions of both parties have changed what am i now an lmp voter you know the whole idea of being left or right or liberal labor because you happen to agree with some of those most of the policies in the circumstance that's just that if the net results i vote labor at the at the end of next election because that's where the policies line up vote liberal that's where the policies line up i'm not a labor voter i happened to have voted labor or i happened to a voter liberal or frankly, I've got to say, mate, right now, I'm far more likely to vote independent.

1:26:20Now, someone's going to get my preference eventually. Neither of them are doing that well that they can deserve my first preference vote, I've got to say. Yeah. Yep. Have we done this long enough? I think so. We actually had an agenda. We had four or five things to talk about. I wanted to talk about the GameStop. You did. Yeah, we'll get to that. Can we hold that over? There's not a lot to say there, but it is funny. And so much more beside. But yeah, there's always next week. it's always next week and or Motley for Money after dark which may be coming up at some point true very true our Motley for Money in the US colleagues did a thing they called apropos of nothing where they actually just had a podcast just talked about other stuff that wasn't finance related oh nice you know the Mount Rushmore of comedians and all that sort of stuff and it was purely just because they were funny guys liked each other's company and they kind of tangented so frequently we've just endorsed the tangents and embraced the tangents that's it we've taken a very very different path exactly hey mate despite a very long and detailed podcast will you come back on Sunday?

1:27:16Yeah, you know I will. If you've stuck with us, listeners, thank you. We hope you've at least figured we thought reasonably thoughtfully about the budget, have something of value to add. Hopefully we've made you at least think a little bit. Maybe not a few times would be nice as well. That's what we're trying to do in the pod. And if it's entertaining and engaging, then even more the better. If you are a dyed-in-the-wool Labour or LNP voter and we've offended you, well, I'm sorry. All you do is call it straight. That's what we've tried to do. So that won't change, by the way. So if you got to this point and you're still cranky at us, maybe unsubscribe because it's a long time to be mad.

1:27:47But if you want to hate listen, that's good for the numbers. So you do you. Until then, we'll see you on Sunday. Cheers. Fool on. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General 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 License 400691.