Economic advice for the government. July 18, 2025

28:35I think there's 170 countries or something. So the countries that aren't being included here are hellhole despots somewhere, which is just completely failed states. In terms of the OECD, we're dead last. Australia, dead last. So what, Andrew? Who cares? Why is complexity a good thing? Well, it's because you risk becoming what Keating called a banana republic. We do one thing, which is great. I make umbrellas and it's brilliant. And then, you know, I decide to expand into the Sahara. It's just like, that's a bad example. I've got to think through my examples in advance a bit more. No, you're right.

29:14You're absolutely right. When you have a complexity just means there's lots of different revenue streams. It means you're resilient. It means you're robust. It means you've got optionality. We're a one-trick pony. What does Australia do? We dig rocks out of the ground. We put them on a boat. and then we reinvest the proceeds into really badly built dog boxes in the sky that's what we do houses and holes you know and it's been brilliant it's been brilliant because china they're just full stop period i'll just stop at that point because china because china industrialized they needed a buttload of iron ore and other commodities and they were hoovering it up and we're like okay great here you go and now why wouldn't you why wouldn't you sell it to them Why wouldn't you sell it to anyone who's going to offer you attractive price?

30:00But to your point, A, maybe let's invest some of the proceeds. And B, let's make sure that we've got some other irons in the fire here. The trouble is, if anyone actually comes out with something that's outside of houses and holes, eventually they go and list on the NASDAQ because Australia is such a poor jurisdiction to operate in. So we just, you know, we do punch above our weight in terms of our brain power. you know institution our universities i mean we invented wi-fi right we invented like a million things and and and we just don't properly exploit them and and really for anyone who i speak to a lot of small cap company ceos doing some pretty interesting stuff they list on the asx because this is the easiest place to list but if they've got any success they just go overseas right because australia is just not friendly to them so sorry i'm i'm rambling on it at this point in time but I just add those two points to it because I just think it matters.

30:58Yep. Great point. By the way, we get the same with tax rates. People say, oh, if you don't lower the tax rate, people will go overseas. Move to Singapore and pay less tax. And the thing is, but like the miners, just to your point, I'm going to dig myself a deeper hole here before I respond to it, which is it will cost us some mining activity. If you increase the royalties, why? Because the marginal miner won't make money. and the marginal explorer who wants to go and spend a gazillion dollars chasing a, you know, lusted as reef may not do it. Yep. But the reality is the money you will make from those who do do it far, far, far exceeds the lost opportunity.

31:32So people go overseas, if we lose 10 ,000 high income earners to Singapore a year, but in doing so we don't drop tax rates to 15 % that everyone wants us to drop it to, the tax revenue that we will retain is far, far, far exceeds what we would have lost by them leaving. So you've always got to do that mess. the country's job is not to make every single possible miner profitable the country's job is to get maximum value for our resources in total dollars not dollars per ounce or dollars per ton or percentage total dollars how can i maximize the total mining royalty i get that is a combination of i don't care if i lose the marginal explorer i don't care if i lose the marginal mine if i'm making more money overall by charging more for the royalties it's just it's just the math it's all it is companies do it all the time they close underperforming sites and stores and i've seen I've seen it firsthand on a number of companies that I've got shares in.

32:19This is like they'll come out and say, yeah, we closed a bunch of stores. They weren't performing. They were dragging us down. We took the money and we were invested in other high growth areas. Yes, thank you. Do that. Here's the other thing too. It's not like those resources are therefore we're just completely unexploited. Exploited sort of has connotations. I don't mean it in the negative here. But you know what happens? Technology improves. Yeah. In a world where commodity X is being slowly depleted, so the supply is shrinking and demand is growing, price will go up. So even without any technological improvement, you will find that they will be exploited or used, let me use that word, at some point in time.

32:59And even without that, I mean, we can extract things like oil and coal and lithium so much more efficiently and effectively than we could 20 years ago. Why? Because we're just better at it, right? And so it's sort of like, you know, it's not as though we're just saying, well, it's there. It's a little bit marginal now, so I guess we'll never use it. It's like, well, it's not now. Let's just focus on the super economic stuff, you know, the economically positive kind of stuff. So, yes, yes. And you really hit the nail on the head there with it is not our job to make every mine profitable. Just in the same sense, it's not our job to make every retail shop profitable.

33:36Correct. You know? And how do you do that anyway? How do you do that? What does that even mean to say I will make you all profitable? Like you can't do it, right? It's impossible to do. I guess you can do it numerically through accounting tricks. But in terms, if we're talking about real wealth creation here, you can't do it, right? Yeah. So anyway, so I think that point is well made. Up to the next one. Yes. Is it my turn or yours? It's your turn. I would pump the brakes a little on the old population. Okay, good. Now, you and I have debated before, and I'm a big Australia guy. I've got no problem if there was 100 million people in Australia.

34:20But let's make sure we've got the capacity first. Or at least it's going to happen in some reasonable timeframe rather than just, let him in. We'll see if we've got enough houses when they get here. Yep. And I don't even want to, I mean, if I have to say it, I guess I do because it's the world we live in. It's not a racial thing. I don't care where people come from. You know, I'm a second generation immigrant. Third generation? Third generation immigrant? You know, we all are. You know, unless you're an Indigenous Australian, you're all immigrants. We're all immigrants. They're all immigrants.

34:53Yeah. We all arrived here somewhere back. You know, so it's got nothing to do with anything other than we've got a village, there's 100 huts in the village, and we're letting in 50 new families to the village. It just doesn't, there's not the capacity for it. Bigger populations create more vibrancy. There's more opportunity. It makes us all richer, you know. That's why the US is such an attractive market, in big part, because they've got the legal institutions to sort of foster the capitalistic spirit. But also because there's 350 million of them, right? It's just a massive, massive market. The same way China doesn't have the institutional stability, but they do have a billion people.

35:40India is another market as well. So like, yes, yes, absolutely. We're bringing in something like the population of Canberra every year. And it's just, it's unsustainable. And that's why, it's why, you know, again, you don't need to be gaslit by some, you know, senior bank economist here is how great things are because GDP ups. It's like, as you and I have been talking and banging on about for forever, GDP per capita has been negative for the longest time, except for the most recent little blip upwards. Seven in the last eight quarters. Yep. You know, it's just like that is, I don't care how big the pie is getting.

36:10If there's more people than pie, it's like, all I know is my slice is getting smaller. All right. And it's just such, it's such an easy thing to address. And I've said before that one of the great competitive advantages that we have, if Australia was a company, is that we're a super, super desirable place to live. And it's not just because, yeah, Australians have got great beaches, although, yeah, we've got great beaches and beautiful, you know, natural environment and the rest of it. But we've never had a tank drive down Martin Place. Like, we've never had a, I was going to say we've never had a genocide.

36:48And we've never had, we're, we're, hmm. Things are better here than elsewhere. Yeah, thank you. Yeah, I really, I really walked into that one, didn't I? They are, right? And so, wow, you've got, you've got a lot of countries where people can't get out of fast enough. Yeah. And so that, what does that mean? It means that we can be really choosy. Send us your best and your brightest. not because we're elitist, just because we can afford to be picky. There's a hundred people at your door, right? I'm going to, I'm going to let, put it, let's make a really simple analogy. You're looking for a flatmate, right?

37:29You're looking to sublet out your, you've got an apartment with three bedrooms, you and your mate are there and you've got a third bedroom and a hundred people rock up. You just don't take the first person who rocks up. You interview them all. One's an absolute pig whose unemployed is going to sit on the couch all day, making a great mess and continue to miss the rent. You've got another person who's an absolute clean freak, who loves to cook and earns a fortune and just showers you with gifts. I'm like, I'll take that person, right? Like we can do that. We can do that as a country. And then as we build out the infrastructure we plan for, and we do it in a very considered way, mindful of the environmental impact, mindful of all of the sustainability issues, which are super, super, super important.

38:12and then we grow at a rate that is sustainable and reasonable. I just think that is the easiest thing in the world to do. 100%. And there's no reason not to. That's the other thing. It just makes no sense. Housing affordability, housing availability, infrastructure, social services. I'll talk to the small Australia, big Australia thing very quickly and we can move on because we're both in furious agreement on population, at least in the short term. I, again, speaking of being Pollyanna, right, I just, I don't, I think if you have to, if you do the maths of, well, actually, I'll explain the whole thing.

38:45If you do the maths of what it means for more people to arrive, you say, and by the way, we say more people arrive, immigration is not only valuable for all sorts of things, we actually have a declining fertility rate. We've got a negative replacement rate. So even just to keep the population steady, even if you're a steady population person, you're still in immigration because that's going to make up the numbers of the declining local population, native-born population, currently arrived population. So regardless of what you think, and to your point mate the superpower of immigration is just spectacularly good for every every reason you've said my my my challenge my open question i don't have an answer to this i don't have a solution i don't have a number i don't have a firm total view but kind of like your point like build the capacity first i would extend that capacity to social and economic and environmental capacity and that's that's where i don't know what the final number is right because you look at a certain country size of australia say well that's big yeah we don't have a massive a couple of rivers running through it like the yanks do so so something like 85 of the land mass is effectively uninhabitable at any meaningful scale and size you can have a farm out there you can have a you know aboriginal people live out there and they're very happy doing it i'm not saying people can't or shouldn't live out there i'm saying you don't you you can't put a functioning modern city in whatever the number is 85 odd percent of the country so you're already kind of coming back from that to some degree so right what have we then got okay we make our cities bigger well we can that means maybe more high density which is great if people want to live in that if they don't force them to because you want to have population grow is not a great idea it's okay you have sprawl well okay but how far do you sprawl before traveling to the city becomes economic and you destroy too much uh environmental value whether that's um you know native bushland or whatever and the pollution that causes so i'm just i kind of i just find myself on the fence if we were able to responsibly constructively helpfully positively whatever word you want to use put a great new city in the middle of, I don't know where, just for the fun of it, the Simpson Desert.

40:38It's not going to happen, but you know, I don't care. I can't think of an example. Flinders Rangers. Don't let that stop you, mate. I just barrel ahead when I don't have a good example. Exactly. Mount Isa. I mean, if you could do that with water and power and everything else, there's no reason not to. So by all means, do it. So I'm not saying we couldn't or shouldn't grow. I'm just, it's far from clear to me that the benefits of that growth exceed and outweigh the benefits of maybe not growing or the cost of that growth. So that's, for me, I'm just, I'm not a big Australia or small Australia guy necessarily.

41:08I do, to your point about capacity, that's a great word. I just, I think the precautionary principle says, if we're going to grow, let's actually do the work. Let's have a population policy that says, we want to get to 50 million people by 20, 58, pick a year. Here's how it's going to work. Here's the implications. Here's the whatevers. I actually think making people live four hours out of Sydney or in a dog box in the sky to use your phrase neither of those feels like a good reason to grow the population or a good justification say we can have more people all we're gonna do is put them out in you know but Sydney sprawls to the point where it's actually closer to Melbourne than Sydney probably not great uh families of four living in a two-bedroom unit you know on 10 square meters probably not great and again I'm not I don't think those are going to happen I'm using those as stupid examples extreme examples to say that if you're going to grow the population, work out where they're going to go, what they're going to do, how they're going to be supported, what the infrastructure needs are.

41:59Can we supply water and electricity and power? Can we deal with the pollution? All the stuff that goes with it, none of which we're having the conversation about because we're just saying, as you say, just walk around the Canberra every year and just, yeah, things will probably work out because they always have. It's madness. It's a little bit off topic, but I had to say because it's so stark. So South Korea is going to cease to exist in about 50 years. Did you know that? I did not and I can say that I can say that with extreme confidence not as a geographic region but as a population as a culture as a society because the replacement the birth rate is well below replacement oh fascinating and one of the things with demography is that it's very easy to foresee right because there's not enough kids being so you just have to go well okay let's go forward a generation and then there's this many people and then those have the same amount of people and then that has a generation then there's this many people and in fact to reverse it you stuff just it's not just a question of oh well we all need to have a few more kids like you'll need to have a lot more kids and and like yesterday and like now uh or you need to rapidly increase immigration which is why the the the cultural aspect will will invariably sort of change there japan's on the same path china's on the same path from very high levels as well so it's kind of a big deal right like this isn't about this isn't the malthusian kind of doom loop argument that, you know, we're all just, there's going to be, you know, unsustainable population growth and we're just going to crowd each other.

43:23It's actually not. In fact, most of the developed world is going the other direction. Yeah. You know, so it's kind of, it's kind of scary. And why does it matter? It matters not that survival of the species way too hyperbolic, but it matters because those people in the future, someone who's born today in Korea is going to be, I think I'm going to make these numbers up because I forget it. It's a great Kurskisart video. If anyone knows that YouTube channel is really great. A big science-based kind of thing. But at the moment, the average working age person is supporting, I'm going to make it up, 2.3 retirees.

43:59The person born today is going to be supporting 4.8. Right. So is it like the amount, because you know what, 80 year olds aren't that productive and not having a goal at them. They're not, they're not so in the fields, they're not in and nor should they be, frankly. But what it means is a horrible, horrible existence for young people today because so much of their energy and time is going to be spent on supporting other people. And it cripples and destroys societies. And so it's kind of a big deal. Anyway, that's a little bit off topic. That is, but a good one. And I think that's the - Not that Australia is anywhere near that, by the way, right?

44:41Well, so I just looked it up. According to the UN, we're 1.64 babies per woman. Okay, so we are. Because they're giving birth. And replacement is 2.1 when you consider mortality rates. Yep. So, and this is, again, a hackneyed and generalized. A couple, two people having two kids. When they die, the two kids will remain. The population stays steady. A tiny portion of those kids, unfortunately, die before they get to childbirth age or effectively just having kids. So 2.1 gets you roughly there. We're 145th in the world. Not only, it was almost that for complexity too. Not only for complexity, but also for replacement rates, according to the numbers out of the UN in 2025.

45:17So pretty, pretty new data. Can I go on another little tangent here? Why? You could ask, why Japan? Why Korea? And why increasingly Australia? And when you look at those birth rates in Australia, it's really more of a recent fund. When I say recent, I'm not talking like yesterday or last week. I'm talking about sort of in the last decade or two. it all comes back to economics. The way I always bang the table around my mates is this is not sort of like abstract conceptual thing. This is like real world implications. Korea had all kinds of monetary debasements and failures following the Korean War.

45:54They tried to print their way out of it, right? And then like, again, I won't get into the mechanics of it, but the bottom line is, is that everyone just has to slave their guts out just to stay ahead. If you ever wondered when you go to Korea, why is$1 worth$1 ,000 ,000 ,000 won? Like the exchange rate or yen? Why is the number so high? That's like runaway inflation and monetary debasement for you. And not just to pick on the monetary thing, but it's the economic stupid. Do you know who has lots of babies? People who feel really confident about the future and have a high degree of confidence in their capacity to support themselves and build a future.

46:32Do you know who doesn't have a lot of kids? It's people who are like just so busy trying to pay the rent, save a mortgage, and people aren't having kids now until well into their 30s. Nothing's really changed other than it's just like, well, I can't afford to do it. And then usually it's a two-person kind of affair, right? It's like, well, both of us are working now, so who's looking after the kids? It is why economics matters because it ultimately gets back to very important things. like the number of humans that are around and the quality of life that they have. Yeah, yeah. Motley Fool Money.

47:09For more, subscribe to the free newsletter at fool.com.au forward slash listener.

47:17Mate, let's move on to another one. This is a two-prong kind of finish, one that I brought up and one that you brought up. And they both come down to output per unit of input. And then we'll talk about cost about productivity here. And this is one that I find really, really difficult to wrap my head around and also resolve policy-wise because productivity is, for the most part, you're talking about economics, it's self-interest, right? Of course it is. No company employs more people than they need, unless you're a not-for-profit or a Russian. Or a government agency. Yeah, right. But that's the choice.

47:58So productivity kind of solves for itself because self-interest means any company, any individual wants to have as much good stuff and spend as little of the bad stuff, i.e. any spending as possible. So I'm going to buy the things that make my life better. Companies are going to spend the money that makes their profit better, but not more than that. And so productivity kind of gets resolved by itself, at least in theory. Now, there's a couple of pieces where this gets more difficult. And this is, I don't really, this is why I don't have a particularly strong solution for the government. There is some government spending stuff I know you've got to get to around, but it's hard because there's a couple of realities going on.

48:37Firstly, we're already a very successful, mature country. For all of our problems, I'd rather have our problems than anyone else's. So what does that mean? Well, it means that a lot of our spending, a lot of our GDP comes from services. Now, we've talked about this before. It's wonderful to have a fantastic health system. We have a better healthcare system than most countries around the world. Now, what does that mean? Well, a couple of things. Firstly, we have a lot of people employed in healthcare that doesn't actually produce a thing, a measured thing. Now, health is immeasurable and far more important than economic outcomes.

49:07So don't get me wrong, but it's not adding to a country's productivity. Not only that, but as you continue to have more and more of it and more services in the economy, they're harder things to improve the productivity of. So not only does healthcare not add to productivity, it also is harder to improve because you want one nurse for every four patients, or whatever that number's in the brain, the ratios as they call them. How do you improve that? We have one nurse per six patients or 10 patients or 48 patients. I'm more productive. Right? And genuinely. But what is the implication of that to health, to recovery, to unexpected deaths, all that kind of stuff that goes well?

49:41I don't actually stand it further and say it's actually counterproductive. Right. At a point, it's actually unproductive. Correct. Well, I think fewer units of input if people die, but that's a bit macabre, so let's not go there. Now, it's not to say you can't improve the productivity of services, workers with technology. You absolutely can. my physio when I went I wrecked my hill is tendon a little while ago was using AI to record notes as he spoke now that means he's been going to spend less time after I'm there typing up the notes and so he can use it so you absolutely can improve the productivity of services businesses but they're much much harder if it's a one person if it's a service provided by an individual you know you can get rid of an individual in a factory and put in a robot and that's infinitely more profitable and more productive.

50:24You can't do it easily with a physiotherapist or a nurse. Again, little bits around the edges. Headdresser. Headdresser, right? Exactly. You can't do it. I've done my bit to improve hairdressing productivity, mate. That's good. Thank you for your sacrifice. You're welcome. I don't know I have precious little hair. That's none. So, yes. It is a real challenge, right? Firstly, companies should do it just because they want to. Secondly, governments find it hard to do because we're a mature a developed economy where services are a larger and larger share of now services include banking services you can make that more productive not say it can't be done but it's really really important because you and i've talked about before mate productive is the only thing that improves an economy over time yep in in any in any in real terms uh the only way you can become richer is to do more with less or more with the same or the same with less whichever version of that you want which is poor productivity that's how we become wealthier over time it's not a really big challenge So productivity should be behind, I would say, maybe even in front of, behind fiscal discipline and that kind of balance of the budget over the cycle.

51:30The next for me is productivity because those are the things that have really, really, really long-term payoffs. You can't see them in action, but if you can improve those things, you put your country on the best possible footing. And I'm not a small government guy, but I'm not a big government guy either. I'm a right-sized government based on what we need and want. But the best thing governments can do is do that in the smallest possible footprint and get the hell out of the way. So, again, regulate. Do important things. Just do it as lightly as you possibly can. As, yeah, just try it. As sensibly as you can.

52:04Sensibly, yes. Yes, same way. It's just, I think most regulations that we have, most requirements, much of the red tape, it's actually there for a good reason. It's really easy to shake your fist at it. Oh, bloody council wants me to do that. It kind of came from somewhere and probably for a good reason. And it's just sort of been the original reason's been lost. It's been layered up in bureaucracy and it's just computer says no at this point. And it's just, it's sort of not fit for purpose anymore. But yeah, it's not so much, I really, it's one of my bugbears when some politician opens their mouths and we're going to improve productivity.

52:36It's like, you know, people, people need to be encouraged to be, you know, it's like, oh, I was going to chop down all these trees with an ax. But so you're saying I should use a chainsaw. Well, okay. If you say so, what, it's good for GDP? like you idiots of course anyone is naturally going to do it and and the best thing you can do is rather than like telling people to be more productive is just to get the hell out of the way not to abandon regulation not to abandon oversight of very important things but to do it in a far more streamlined efficient way you know what what's the idea here what it's not great that people put toxic pollution into a river okay we should probably regulate that but i don't need 18 different departments across 400 different jurisdictions with 4 ,000 different 8 ,000 page forms that I need to fill out and then wait 18 months for various stakeholders to give feedback.

53:28And it is a nonsense. You ask anyone, and I've literally not found ever an exception to this rule, anyone in business, right? Who basically says, oh yeah, government makes it really easy to do what I want to do, which is create value, employ people. You know, generally that's what it is, right? Because, again, call me old-fashioned, but, like, the best way to generate wealth is to create value for other people. Correct. It's kind of what you do, right? Like, either that or you're just a, you know, you're just politically favored and you effectively steal from other people, which happens in a lot of countries as well.

54:06And that's not a good thing, right? So it's, yeah, get the hell out of the way. We really, of all these, you know, someone sneezes and we launch a Royal Commission. I would really love to have a really big Royal Commission at various levels just to sort of say, listen, what are the things that we feel as though need to be monitored and regulated? And there's a lot of them. Again, every time I say this to my mates, they assume that I'm some laissez-faire libertarian. I'm not. Obviously, I'm not. There are really good things to sort of check and have. But what is it? And then what's the simplest way that we can oversee this?

54:41And in a way that gives us the best bang for the buck, us, the taxpayer, the people who are footing the bill for all of this kind of stuff. I just think the gains to be had there are so, so, so, so significant. And I just, I feel one of the most visually telling ways to see this, and now that I've seen it, I can't unsee it because I saw it once and now it's just everywhere. Whereas like when you go into a Westfield, for example, because you don't really have any high streets anymore, do we? You don't really have certain country towns. Up where I live, there's a beautiful place. It's got all these lovely little – you walk down the street and they're all small businesses.

55:21They're great, right? But you go to Westfield. I was there actually a couple of days ago. I reckon at least 95 % of businesses belong to a large listed business. And if you don't know that, it's only because they're not traded under that name, but they might be a conglomerate, you know, a banner head that's under a various, you know, under another company structure. But they all are, whether it's sending candles or jeans or groceries or travel related services. Like you do it. next time you're at a Westfield, you Google every single name that you pass. And I guarantee you, you might be lucky to find one in 20 where that shop is just that shop.

56:07It's just owned by one person. They don't happen. They don't happen anymore. And it's sort of like, what's the point that you're sort of getting at here? It's getting to the point where it's very, very difficult to start a business. And it's very, very difficult to compete against these monsters because they're so structurally advantaged, either with access to capital or they've just got the legal and administrative teams to navigate their way through all of this nonsense. That for them, they've got the economies of scale. Well, we can engage with the various departments. We've got our level four in the city of our massive glass tower is full of accountants and lawyers.

56:48They can navigate through it. Our PR execs will put out the press releases. We'll get it done, right yeah yeah barbara who's trying to just run her you know food delivery business it's so hard i'm just trying to just do the job i can't do it anyway it's just it's really really really depressing and and it's it's something that would move the dial in such a such a significant way for australia yeah i um i think that's largely right i think you know the best best thing government's for productivity is to find ways to smooth the paths. And I want to be clear here, this is not a pro-business view in the sense of...

57:26It's really not. It's not done to try and maximise profits for companies. No. It's to make business more successful. And I think it's a really, really difficult one. You come into the past, throw money at research and development and that kind of stuff. And some idea that, again, I really, I balk at that, mate, I've got to say. Because it's kind of like companies are going to do the research development if they think they can make money from it. And if they don't think they can make money from it, then we shouldn't be funding it. There's a sense from a lot of people, including probably I'm sure some of our listeners, who are like, you know, governments need to do more to help business.

57:57I don't think that's the right approach. I think it's saying out of the way a business where you don't need to be in the way. But also smoothing the path where it doesn't need to be rocky. Not because business needs, deserves smooth paths, because you don't need rocks. You know, I know that sounds like I'm saying the same thing, but it's just kind of like saying, you know what, let's let people do what they want to do as free as possible from involvement from others or unnecessary obstacles. And that's kind of what productivity is, right? How do I get more with less or the same? It's just, well, let's stay out of the way.

58:27Let's make those things work. I do think there's roles for infrastructure. So we talk about roads and rail and ports. There's modern infrastructure, NBN and that kind of stuff. There's places where the public good is served by efficient delivery of those things that help us all do our things more easily. But I do think it's overdone. I think it's overhyped. I guess my concern, mate, I think part of me is giving this advice to government at the same time saying, yeah, it's not going to help, which sounds like I'm being, again, speaking at both sides of my mouth, is because of the structure of the economy, we are spending more and more of our money on things like, and this can, let me contextualize this, the NDIS and healthcare have been something like 88 % of new jobs created over the past year.

59:15Yeah. Now, well, here's the problem, right? On one hand, it's not because you can't think if that's what we want to do as a country. If we are post-growth, post-productivity, maybe we have to make that deal with ourselves. We're not, by the way, but yes. Well, but that's the thing. If we think those services are required to be provided, if we want to say, well, we were young and scrappy and sort of, don't worry about the mess, don't worry about who loses while we're all growing. And you get to a point where it's like, okay, now we can afford to take care of the proverbial family. And so I could go and spend another 20 hours a week working and be more productive, in air quotes.

59:52Or I could say, well, I'm going to work my usual hours and I'm going to spend some time with my son. And that means I'm not going to be as productive as I could be. Why? Because I'm comfortable after I don't need to do the second job. Now, at a national level, if we're saying we want to look after those people who need that care, and that's what it costs and we're going to create jobs to do that we just talked we started talking about nurses you know india is not making anyone more productive and maybe on the very very edges because people with support then can do work they colorless couldn't do so maybe there's argument for there'd be some gross increase in productivity probably not net because the net bit takes off the money we're spending to employ those people working in the ndis so you know i'm not saying no one can individually be more productive but overall health care spending increased or welfare spending increased doesn't make us more productive does it make us a better country well maybe arguably And again, that's why I'm hedging here.

1:00:36A lot of our lack of productivity growth has been because we've done those things that are, in theory, kinder, better, more useful and valuable and give us better outcomes. Is that enough to deliver the – can we trade off productivity for that? Yes. Should we? I don't know. And again, I'm not saying we should or shouldn't. I'm holding out the reality that if we think it through properly, maybe our lower productivity is just a function of being more mature, more caring, more thoughtful, helpful. having a better quality of life to find that broadest of terms, not higher living standards, i.e. dollars per hour or things per person, but a better quality of life measured in all those non-economic ways.

1:01:18Yeah, I hear what you're saying. I should probably explain my what a joke comment. Oh, yeah, I'll be critical. It's not a joke that we choose to support people who need support, right? It is a joke in how it has been executed and how inefficient and how obscenely inefficient it is. That's the part that's the joke. So, yes, you're right. And the other thing that I need to round out a bit more is that I'm so glad you made the point because it's really easy just to kind of see that everything we need to be doing is maximizing productivity and economic growth. And it's like, no, because the really important things in life aren't show up in GDP.

1:01:56And as you've heard me ransom rape before, GDP is one of the most stupid economic measures that you can actually have. So I'm the first on that, right? And you and I have many times discussed on air and off air that, you know, if once I hit a certain number, I'm done, right? Like it's not potentially leaving money on the table. But why? Because the things that the really thing that the only thing that's really finite is my time. and i'm very mindful of particularly there's that saying you know a man has two lives you know and the second one begins when he realizes he only has one like yeah as a middle-aged man i'm at that point it's like oh time's really what matters you know so like could i be more productive could i make more money if i did this this and this yeah but i don't want to because i really value the time with my family and i think that's i think it's a perfectly good statement to make so it's not about saying we as a as a people as represented by our government should maximize productivity What we should do is we should allow people who choose to engage in productive enterprises to be as productive as they can be.

1:02:59That's what we should. So there's a subtle difference there. It's not saying let's mobilize everyone, everyone down the salt mine. Let's just crank it out because growth is good and growth is good for its own sake. I'm not saying that. But there are a lot of people who have dreams that they want to start a business. They want to do things. And in a fair, proper, true capitalist system, they'll only be successful. as I say, they create a huge amount of value for people. Barbara's driving a Porsche because she's the, you know, the best physical therapist in the block and everyone loves her and they'll pay any price to have her and her services.

1:03:32Like that's not a bad thing and her success is not a bad thing. And if she chooses to do that, she should enjoy all the spoils that society has to offer her as in recognition for the risks she's taken and the work that she has done and the value that she has provided. That's perfectly fine. if she decides to go, you know, I'm 42, I'm done. I've got enough. I just want to spend my life doing watercolors by the lake. Fill your boots, you know, great. No, no problem whatsoever. So it's a better, just I'll make, I'll summarize it just by saying, we want to make sure that people who do engage, who want to engage in these kinds of activities have the chance to really focus their efforts on creating that, that value as opposed to filling out forms and jumping through hoops and spending all of it in delivering service or product x they spend most of their time in the delivery of that service or product not in the satisfaction of bureaucratic you know uh wasteful efforts yeah i like it i like it but let's finish off with one that's a subset of that um it's it's you talked about you know governments uh employing people you know that private companies will employ as few people as possible government departments not necessarily as much and it leads us down the very rocky and dangerous path, which you and I have tiptoed through before, and we'll probably do so again, about government efficiency.

1:04:52Now, Elon Musk has given government efficiency a very, very bad name, other than amongst a few absolute diehards, so-called Doge, which if someone's naming something for fun after a meme coin, and they then want to do that seriously, you've got to ask about their maturity. But that's a whole different conversation. A whole different conversation, yeah. It is not an unreasonable expectation that governments are efficient. It's not an original explanation that our tax dollars are spent as efficiently and sparingly as possible. Sparingly? Sparingly. Thank you. That'll do. Sparingly as possible. It's also not true that the, oh, government workers are bludgers trope is right.

1:05:32Of course. But there is a point in between that. So I won't, this is your idea, not mine, so I'll stop there. What do you want governments to do in terms of efficiency? I actually, I don't know what the solution to this is. Other than to say, as you've laid it out, it's important. And it's not an ideological thing. It really just, you know, again, all of these services come at a cost. And the cost is borne by us, you, me, and everyone listening right now. Different capacities and in different ways, each according to their means. But yeah, whatever it is, we've just, we've got to, we've got to, we can do it smartly and effectively.

1:06:09It's really that simple. Okay, great. I'm on board. So I'm out. What do I actually do? I don't know. I don't know is the answer. Here's the thing about the market economy is that you don't need to know because the market will know. And by the market, I just mean, it turns out that Scott's business is going great because he's just really good at what he does. My business is failing because I'm not very good at it. And so kind of sorts itself out, right? That's what the market does. Not by any adjudication of any one individual or group or centralized control of anything. It's just sort of like, look, turns out that you'd spent all this time and effort trying to do this stuff and no one really cared or wanted it.

1:06:44And it's not a bad thing. It's not an evil thing. It's not a judgmental thing. It just is what it is. No, no one wants, no one wants the stuff I'm making. And so I can't cover my costs. And so I stopped doing it. And so magically, wonderfully, Adam Smith's invisible hand corrects the inefficiency and directs it towards your business, which is creating a lot of value, which is going to grow as a result of all of that kind of stuff. It's beautiful. It's elegant. It's lovely. It's a miracle of human cooperation. You don't have that in the public service, not through any other reason that you just don't have the feedback mechanism.

1:07:18There is one environmental protection agency. It does what it does and there's no competition. And if it does a bad job, there's no one, it's revenues are just whatever they need to be to support the costs. And so this is what I, you know, I wouldn't say I've spent a long time meditating on it, but of the time I have thought about it, I actually don't know how to put that sort of, how do you incorporate a feedback mechanism into the delivery of public services such that inefficient systems are penalized and efficiency is rewarded. I don't know how to do that. I don't know how to do it. I'm sure other people have thought of ways, but I do know that that what you tend to find with any private or public is bureaucracies tend to get larger and grow of their own volition.

1:08:08And, you know, so it's actually against organisational productivity, it just really pushes it the wrong way. We spend more and more and more to do the same, you know. Yeah, I just, I don't know what to do. But my best thing is like, I mean, think about it. I'm sorry to be so local here, but Sydney's the biggest city near me. There's Sydney water. You can't have 12 Sydney waters all competing. You can't. You shouldn't. I mean, I don't want 12 different service pipes coming into the house. So whenever there's a natural monopoly, it's just tough. Maybe the best way to do it is they have very clear measurable goals that when are achieved, those that are employed in the satisfaction of those goals get well rewarded.

1:08:55and when they're not, they get, you know, it's a bit of a mix of carrot and stick somewhere in there. There is just like, wow, you took in this much money from the taxpayer and this is all the value delivered and it's like well above what we wanted you to do, you all deserve big fat bonuses and I'd be the first to celebrate it, right? Or, wow, you blew up a bunch of money doing this stupid thing that nobody wanted and it's like maybe you should lose your job. I don't know. I don't know. I actually don't know what the answer is, but I don't want a system where it's like, you know what, good or bad, you're going to get your job, you're going to keep your job and you're going to get a raise and your team's going to grow larger is not the path to be on.

1:09:32That's not the answer. So I've got a couple of things. I'm going to actually say two areas I think we should spend more money on is actually giving them a decent working environment and paying them what they're worth, public servants. And then I'll make some cuts. But you've got people who work at Bloody Centrelink or in schools having to bring their own tea and coffee to the staff room. you know it's just stupid it's stupid for just basic respect and morale and it's stupid for trying to attract the best people which blows my second point which is pay them what they otherwise deserve because otherwise you end up with people who leave the public service for better pay and once you can't leave stay and you dumb down the public service same with any redundancies right voluntary redundancies people who can leave do people who can't leave stay sort of end up with worse people so that's just as a starting point do both of those things for your own sake because it just makes no sense.

1:10:23In terms of customer, what I like about, again, I've got to choke on my words here, what I like about the Doge kind of idea is a separate department whose job it is to actually help slash make departments improve. And that's, you're talking about incentives. This is the problem. There is no department head has an incentive to shrink their department. No worker has an incentive to help cut out costs which might cost their job. So at every point in time, Every bureaucracy ever, and it's not a, I'm not being anti-bureaucracy, it's just the reality of it. It's not even bureaucracy. Any employment, any team.

1:10:59If you ask any team, hey, I need to make some job cuts, anyone in your team can go? Oh, no, no, no, we're really busy. We do lots of work and we work really hard and we're really valuable. No team says, actually, yeah, John and Jenny over there haven't been doing any work for six months. No one's noticed yet. Let's get rid of them. And so that's, work always fills the available space is the other problem. So you've got these really, not just in bureaucracy, in all companies. The difference is that companies, someone up high enough up the tree is like, I want to make some savings so I can get a bonus so I can give them money to shareholders so I can look good.

1:11:26There's a natural incentive in that that doesn't exist when there's not a profit motive. And that's good. I don't want public services with profit motives, right? Again, go back to our nurse example. A hospital administrator who gets a bonus for being more efficient can do a great job for the first year and a half until patients start dying, right? So you want to be really careful what you incentivize. But I think a separate division or separate department, And there's two, I'd take two points to this one. First is go and actually find areas of waste. And waste can be people who don't need to be employed, outcomes that aren't working, services or tasks that are duplicated across multiple, again, multiple departments, right?

1:12:00You get the bigger view. What can we combine? What can we get rid of? What can we fix? All that stuff is really, really valuable. I think that matters a lot. And then simple things like, and this is obviously on computer systems. By all reports, the US government saved a fortune by tendering a whole of government computer system that Google won the contract for. I know she has an alphabet, not that it matters, but just for what it's worth. I mentioned the company's name, so I do the disclaimer. And apparently the government saved a fortune by simply saying, actually, let's do a whole of government tender.

1:12:27The systems and processes that one learns from another, that you can combine or benefit from, the things that won't be discovered by a single departmental head doing their departmental stuff. Because no one's looking at the organisation saying, where can we save some money? And they arguably should be, but equally arguably, if your job is the defense department, you're going to maximize the money you can get because you're going to do your best job of defending the country. If you're in Centrelate, you're going to maximize your ability to deliver great services for your clients. Those things are really appropriate and normal.

1:12:57And someone else who comes in and says, all right, guys, I get it. But I mean, take Telstra. Telstra is still, I don't know how many they've got now. They had 200 odd computer systems at the mutual at privatization, right? And they've still got, I think they've still got five or six because just making these changes is really, really bloody hard. and that's one company that was affected was the government department once upon a time grew out of the postmaster general's department so those things I think that's where I would be focusing to your point of I don't know what specifically I would do or needs to be done but I've said before and the mandate would be you find a senior caring thoughtful constructive person which is not Elon Musk in any of those descriptions I'm being deliberate here a Ken Henry sort who's like you know he cares you know he wants the best for the Australian people and the Australian government You know he's going to balance fairly, not pro-Ken Henry for the sake of it, but he's going to balance fairly the needs of efficient tax collection and quality service delivery.

1:13:50So you're right. Okay, Ken, what do you reckon? Go have a one-route. Go speak to some people. Go look at some stuff. Find me some opportunities. And I guarantee a Ken Henry or someone who feeds ilk with a team of people would find very significant amounts of savings by saying, do we really need to do this? What's this really benefiting from? What's the cost benefit of this? There's some taxes that are levied on food production, which generate tens or hundreds of thousands of dollars a year, which sounds like a lot until you think about the cost of administering that stuff. Yeah. Those are the kinds of things I'm very, very sure.

1:14:19I couldn't know because I'm not an insider. I don't know the machinations well enough. But you find a really good retired senior public servant who's going to spend a year or two and do their job, they will pay for themselves a thousand times over at the very least. Yeah. the only reservation i have there is that it does rely on finding a person yes that you like and is competent yeah and you you're i don't this has got nothing to do with with poor old ken it's just but i'm sure there's plenty of people out there massive detractors don't like him at all well no he's hopeless yeah so that's that's always the hard thing um yeah as i say it's sort of like we're on the same page.

1:15:03Like we should really strive for this doge kind of stuff. We just, I just don't know how to do it. I really don't know how to do it. Yeah. Yeah. Maybe, maybe it could be something where it's just like we, we force a cap on things where it's sort of like after just through shade all over GDP, sort of saying, look, the department of defense, your budget is 2 % of GDP. That's just what it is. So it right sizes. It gets bigger as the economy gets bigger. It shrinks as the economy shrinks. And that's got problems too. So again, I said, I throw out solutions and then I can immediately see, issues with it.

1:15:33But I just, again, I think it's like where we started with a lot of these ideas is it's just, there is probably no perfect solution for any of them, but just to acknowledge that it is important and could be improved is a really wonderful first step on all of these kinds of things. And we're not even on that page. We're not even in the library, frankly, let alone on the same, in the same book on the same page here. So that'd be, I mean, you just take any one of the things that we've discussed here i'm not saying again it's simple but not easy simple to talk about in podcast land god help the people who have to actually implement this kind of stuff and do it effectively um but let's have the conversation let's let's at least know where our north star is i think that's right i don't mind that i don't mind the juni of the cap although i guess i'm i'm hopeful that someone oh a group of people council dollars i don't know who it is you're right maybe it's not henry maybe it's someone else but i i suspect we could get lower rather than just maintain if we actually found it and again not because no one's doing the wrong thing no one's out there screwing the system right it's just one of those have we asked the question and and again i know what happened every time you see redundancies in private businesses by that's because they've done the same thing you know we can't talk about private businesses if the profit motive is always paramount and will always give us the most efficient workforce it doesn't otherwise there'd never be need for redundancies because you wouldn't hire the people or there'd be natural attrition anyway it takes the shock sometimes we're like all right guys we're gonna have to get some costs under control here.

1:16:58Let's go through and see what we don't need in the workforce. And just that decision to do that alone doesn't just keep, you know, staff numbers at a percentage of company revenue. Sometimes they go up, sometimes they go down. But it's that question of what can we do differently? And that's the only bit I would probably, I don't mind you percentage is a cap to keep it at least from growing. But at some level just kind of go, hey, can we just kind of just make sure we've pruned back where we can before we let the tree kind of grow again from there? It's how I'd probably start. Yeah. And one good place, an easy place to start would be, is this, to my mind, the government should only be involved in any kind of service delivery where there are sort of natural monopolies and the private market can't do it.

1:17:39It's either something super important like defense or welfare or something like that, where it just doesn't make sense. I do not want to live in a world and a society where private enterprise runs out our prison systems. right where you know well think of any number of examples along that but you know the Australian government has no business in producing coffee mugs and thank goodness it doesn't right because the private market is really really really good and efficient at doing that kind of stuff and it's a silly example but the fact is there's a whole bunch of stuff that's out there that it's just sort of like it's not our business to do it's not it shouldn't be the concern of our elective representatives to worry about a lot of things I'm trying to think of an example I can throw out there's not going to be too contentious because people will have strong opinions on it but it's sort of like look this is a natural monopoly it just it doesn't make sense to have more than one we kind of it's it's as unpalatable it is it kind of it is a naturally centralized kind of operation okay that falls very neatly into the hands of government and that is what government should should do if it doesn't then the private sector will provide like it just will and it's It's not like an item of faith.

1:18:51It's like it's an item of observation of the last hundred years that these kinds of things are good, open, free markets with healthy competition delivers really, really, really great goods and services. That's why, you know, Gorbachev was so surprised when he came to America. It's like, wow, everything's really great here. Why? How do you organize? It's like, well, we don't do it. We let people just own things and trade with themselves and follow their own passions and interests, and it kind of just all works out really, really well. Anyway, that's all it takes. There you go, PM, Treasurer. You're very, very welcome.

1:19:28Six ideas you can take and hopefully will, at least in some way, shape or form. By the way, as always, we say, if you're listening to this and you're enjoying it, thank you. If it helps inform some thoughts, great. If you disagree entirely, tell us that too, right? We don't pretend we know all the answers. You're allowed to be wrong. That's okay. I was going to say we're always right apparently we are, we're always right, you're welcome Australia, you're welcome world yes, but hopefully just a chance to deal with a few more issues that aren't particularly time sensitive as I said, brand new government, relatively new hopefully maybe we pre-recorded this six weeks so early maybe by now, at least it's all been done I'm sure we're not debating some asinine little fringe issue that no one cares about and won't move the needle at all on our collective prosperity I'm absolutely convinced you're correct Oh dear So you were Pollyanna for a bit during this episode Just couldn't quite keep it together Drooping with sarcasm Am I wrong?

1:20:22Am I wrong? We'll tell the future We'll tell We will know by the time we get there And you will know by now Because you're listening to this in real time Even though we recorded a little bit earlier Thanks for listening Thanks for being with us Mate, will you come back on Sunday? Yes I probably already have You probably already have Until we speak again Have a great weekend And full on Cheers 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.

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