Heading towards a per-capita recession. June 9, 2023

0:10Welcome to Motley Fool Money, the podcast that like interest rates, just keeps going up. I'm Scott Phillips from The Motley Fool. He is Andrew Page, Esquire, if you don't mind, the founder, managing director of strawman.com. Mr. Page, g'day. G'day, g'day. How are things? Mate, well, it depends who you're asking. It's an interesting old week on the economy, isn't it? It is, yeah, yeah. Lots of data to digest and a myriad of ways to interpret it. And kind of pointy-endy kind of data too, right? I mean, every move is a move further away from something i guess but uh this is the 12th rate rise in is it 14 months i think it's the 12th out of 13 meetings because i had january off uh a lot going on mate i guess just set the scene though uh just a quick one um what's straw man a private online investment club do you like how i did that i'll have you know do you like i i am surprised i'm i'm fascinated uh you'll have to tell us more about it another time mate given you've only mentioned it once this this once uh Mate, let's get back to that.

1:11I guess I'm just thinking pointy end in the sense that interest rates now above 4%. GDP for the quarter was plus 0.2%. Realistically, the ABS is very good, the Bureau of Statistics, but I'm also going to say that there's not miles away from 0.2 and zero when you think about sampling error and all that kind of stuff. Well, not casting aspersions, but the reality is at those sort of levels, the precision is not as good as we would otherwise like to believe. And negative on a per capita basis. That was going to get to him, isn't it? Let's go back to rates and we'll come forward to GDP. 4.1%. I think if you'd asked people, even 12 months ago, how high rates would go before things flattened out, I don't think many people would have said 4 point anything.

2:02I am not sure, I'm not even on the record as having said, look, at some point the RBI is going to have to stop because they're going to cause too much grief. And I guess I don't know if I was ever asked. I don't do predictions. I probably didn't give an answer. But I don't think I would have thought they would go above 4%. Given they started when rates were at 2%, you get a fixed loan for 1.89 at one point. I don't think I expected this. And there are now prognosticators, predictors, and we should take those with the appropriate doses of large amounts of salt. Yeah, fool me 12 times. Shame on you.

2:32Exactly. But there's now somewhere between one and three more rate rises being reported in Thursday mornings. AFR, we're recording this on Thursdays, we generally do. There's possibly a way to go, mate. I was on record, I think, on this very pod towards the start of the year as saying that, look, I don't know when it peaks, but I was of the view, I think I still am of the view that it rolls over towards the end of the year. and pretty much because the MO of central banks tend to be just, you know, do it until something breaks. And it's kind of like there's a carelessness and a brutality to that, but it's also the point.

3:12Yes, yes, that's right. I mean, that's the very real truth, right? Let's be honest about this stuff. There has to be consequences. You and I had a massive rant off air, which we may come back to, including the consequences. consequences but that that you can't slow economic activity without slowing economic activity that that's kind of exactly the point they don't do it they it's i mean it's never done it's not a um fine operation with a scalpel right it's sort of it's brain surgery with a hammer type stuff so it's like i think in retrospect we we're always able to sort of say well you should have stopped sooner or you should have only done it to this degree etc etc yeah so so i think i think look Look, the elephant in the room, I know my favorite hobby horse, it's just property, right, and household debt, and it's all there, and it's just like they're desperately – they basically said when Phil Lowe spoke earlier this week, was basically, look, basically we just need to get it back to 2 % to 3%, and we're going to do whatever it takes, right?

4:10And if that means lifting unemployment, if that means pushing a lot of people to the wall, they will. They'll do it, right? And so I've got a lot of problems with that, as we sort of discussed previously, But I get – we've also – this is also happening in the face of the mortgage cliff, which has been well reported. So that's really just at the peak now. Like that's – in the coming months, we're really going to see lots of fixed rate mortgages roll over. And they're going to go from very low rates to very high rates in one fell swoop. And I feel as though, yeah, something – you've got to be careful when you say break.

4:46It's not like we're all going back to the Stone Age. But I suspect there'll be a lot of pain for a lot of people, a lot of people talking about credibly, certainly in the US, but also here now too, the R word, recession. And I think when they create this recession, and I know you can argue that that's probably what you want to create as opposed to have inflation where we're all paying$20 for a loaf of bread. So I do get it. But at that point, they will stop raising and then they will go back into a cutting cycle. I'm almost sure of it. And the difference these days, as opposed to the last recession, is that household debt levels are so high.

5:25You don't need to go up to 18 % or whatever to have an impact. We're 4.1 % and people are already pulling their hair out. And it's like, yeah, exactly. Can you imagine 5 % or 6 %? I don't think it gets – I've got to caveat all of this because please don't, if you're listening to this in the future. Pay the 8G. please recognize i'm really hyper aware there's no predictive power on that but thumb suck you know armchair sort of uh observation is that i feel as though that's what's going to happen um and yeah you need you need you need to prepare for it yeah yes um and that is a very good summary i think of where we've got to mate the it's funny that the rba has been saying whatever it takes for 12 months and a lot of people going oh oh they actually mean whatever it takes like no no they always meant that you know there is there is some i think i think it's like yeah funnily enough this is this is there's some irony here uh it's a bit like the rba itself you know the rba kind of hoped everything would be okay and hoped inflation would be transitory and hoped things wouldn't get too bad and they did was like oh bugger all right now we've actually you know we just wanted we wanted to believe right it's the old x-files thing we just wanted to believe and then once it started to move the the the what to believe thing moved from the rba to the rest of us where we all went i mean i mean sure they won't do too much i mean you know maybe it'll be a short increase and maybe you know they'll realize they're gonna make some you know cause some pain here and of course they're you know can do what they can to not do x y and z and then 12 months later we're looking going okay we were wrong about that too and they're still saying by the way whatever it takes they they they they very very very clearly see inflation as enemy number one and controlling inflation they believe is far far more important than a short-term recession and that that is we can argue about that we can argue about and we'll actually uh talk to you about that in a second or ask you a question about that but they've been very clear this is not you know if treasurer wants to change the mandate now's the time because if you don't they are going to do what they believe is the right thing to do which is do what they can to get inflation back under control two to three percent is the target now phil i said this week he thinks will be a couple of years so he's clearly not going to raise rates until we get there but he's going to raise rates until he believes the inflationary pressures are on the way down rather than flat or potentially back up and this is why it's important it comes on the on the back of last week's increase to inflation of 6.3 to 6.8 percent month on month um that's you know in that kind of circumstance i i was of the view i don't know if i said this on the podcast i've said it elsewhere i was of the view that phil i don't think phil i wants to raise rates i i think evidence thus far he doesn't like to be the most hated man in the country no but even even just generally like you know he started the cycle late and then he started the cycle late and too softly and and after promising that he wouldn't right and so we didn't say that come on i know i'm just you know let's all the tab words do that um but yes yes so like but you know i i guess i'm just making the point that you know i actually think i'm i actually don't mind phil low i don't i don't know him at all i don't have any particular regard for anything he gets a very hard uh time in the media and elsewhere because he's just an easy bloke to hate which is you know i guess part of the job but i just every every bit of evidence to me so far is like they've come late to the party hoping they didn't need to do it and i really believe or believed i think i still believe that even this time around this week they didn't want to they felt they had to and that's kind of a different scenario i guess it's always true but you know but the pattern so far is he only did it when he absolutely got to the point of like well i guess what i got to do then because that's what the circumstances provide for me i think that's in my mind at least why why they they went up in terms of the next steps though mate there are now people out there now we've talked about crystal balls before um but forecasts are between one and three more rate rises this year to as high as potentially six, sorry, six, 4.85%.

9:09Sorry, if I gave him a heart attack then, 4.85%. It could happen. Well, that's the thing, right? Inflation is 6.8%. It's not five, it's not three. If your view is, well, ever it's that high, we've got more work to do, then as you say, another three or four months, there might be some pauses in between. And again, it might not happen either. It does seem like the RBA is not done. Yeah. And I sort of said before, I think you need to prepare for it. I should qualify those remarks because it can suggest, and I think that plenty in our industry like to suggest that there are all kinds of products that you can do and even profit, not just protect from these scenarios.

9:47And I want to clarify, that's not what I'm saying. In fact, some people may be on the point already of preparation. I think those who are prepared, we're just simply the ones who are realistic and conservative in the debts that they took on relative to the dependability of the incomes and the quantum of the incomes that they had and just have structured themselves appropriately. If you're not in that situation, and this is what sticks in my craw a little bit, the media loves to sort of jump onto Facebook, find a sob story. AFR had it the other day, you know, some bloke who borrowed up to the eyeballs a few months ago is now whinging and blaming everyone but himself that I might have to sell my property as if the world's smallest violin is playing for you, mate.

10:32Yeah, yeah. I know it sounds brutally hard, but I think we sow the seeds of our own destruction at times. And I said to you off air that I like this quote a lot from Munger, which is that capitalism without loss is like Christianity without hell. It's a great line. You need to have it, right? Because if you don't, it just leads to all kinds of really, really bad outcomes. And the risk just moves up the spectrum to a structural level where it's rather than having frequent and small failures where warranted. And that's just the reality of the world we live in. I mean, I buy shares all the time and they go down and I'm not on the nightly news saying it's not fair.

11:12The government should bail me out. I get that as an investor. This is the game I'm in. And there are no free lunches. It's just the reality of it. you know so what my heart where where i have the sympathy is that i think people are enabled maybe that's not the right word almost encouraged through vested interests yeah whether that i don't maybe i shouldn't name professions but you know never stopped here before all right mortgage brokers real estates banks you know accountants and like before everyone writes you with that i mean obviously some great awesome people in all of those sectors but i think it's also fair to say In our sector as well, more than any other sector in the equity sector, right?

11:53So people in glass houses, I get it, but there are a lot of bad actors in our space. Aaron, you're not going to be wrong. You know, and there, I'm sorry, but in those other ones I mentioned, there's a certain percentage that are too. And it's just, he who's bread, I eat, his song I sing, right? And if I'm going to benefit from these things, I'm going to encourage you to do it. we've got decades of a phenomena of this view of risk-free ticket to wealth. And that if you want to get ahead in this country, you buy property. And there's no level of debt that's too high. There's no price that's too high.

12:27And I just, it's a banquet of consequences. to quote a book by um is it Sajid Duss I think um and uh um where I I I guess what I'm saying is you either have been appropriately structured in which case you've bought a bit of a price on that because when the when the bulls are running you don't want to be up to the eyeballs and take the riskiest positions possible right so it's a hard it's a hard thing to do but or you haven't and if you haven't done that what do you do now i i think you seriously look at deleveraging to some extent or or prepare the the process the very real prospect of of default and that's a really that's a really crappy choice to make but i don't know what to tell you man like it's it's kind of you've you you you can't change the past but i think people need to if you're if you're look our listeners are way too smart but if you're know of someone who has has pushed themselves to the absolute wall where another quarter or a half percent interest rate rise is going to wipe you out financially you have made a mistake and you want to think very carefully about how you structure yourself and what you can do to at least make sure that you're not you know one feel low decision away from from being wiped and times of the essence too harsh i don't know no you're right No, you're absolutely right.

13:48Time is over the essence. Look, you know, I think you're right, mate. One of the things, this can get very deep, very broad, and very philosophical very quickly. But one of the things I think is interesting about, you talk about the encouragement given to people to do these things. It's almost more pervasive than that. It's been normalized to the point of almost not needing to be thought about. The combination of, and you know, I don't, I think there's often. it's seen as a guarantee right and there are often bad actors there and then but i think what the maybe the maybe the more pernicious thing is not so much the bad actors because you can almost spot them it's when those things become self-evident truths even though they're not you know you no one needs to go out there deliberately and say to you hey you should do this thing because i'm gonna make some money it's the bloke at the barbecue who says to the other to his mate who says to his wife who says to her friend who says to his sister-in-law who says to the taxi driver who says to someone else, we all know now that X, Y, Z, whether that's property doubles every seven years or whether that's, you know, or just whether that's, you know, the government will bail us out or whether that's whatever those things are that become self-evident truths.

14:59Again, untruths in the end. Well, maybe not. Depends on what governments do. But that's almost the more insidious part because the guy out there saying, you know, I'm selling timeshare property. You should buy from me. It's like, well, I know where you're coming from. When your brother-in-law says, hey a mate of mine's got a couple of best properties he's done really really well and i bought one two years ago i've done pretty well so far you should think about it too oh yeah and you're kind of like well i mean i guess so and i don't again it's it's no excuse for um deliberate ignorance or not doing you your homework but the yeah we talked about the financialization it's just a social it's a social norm backed by a very long period of of objective fact and proof like for the last 10 20 30 years anyone who's done this has done well it's a very very difficult to be the the one who's going to sort of throw shade on that and go well i don't know if that's always the best idea it's like you're an idiot because anyone who's ever done that has done extremely well you speak of the barbecue mate i've literally been to barbecues where you know it's an australian barbecue right so yeah people are talking property and i'll be having a chat to some bloke who's going like oh i've got eight investment properties and you and you know it's just everyone nods yeah great and then and then you say oh they're envious not just nods they're like oh wow that's fantastic no one knows about the debt structure or how that worked or anything like that.

16:15And you think, wait a second. And it's not to make judgment on anyone's profession. You think, how do you afford that? That's just really amazing. And then also, we don't have any. We've all got our money in shares. And people's jaws drop to the floor. What's wrong with you? Look how risky they are. It's just like their money's in shares. This guy over here leveraged 90 % on 12 different properties. He's a quarter of a percent away from bankruptcy. That's really smart and sensible. The bloke with no debt in a range of good quality companies, you know, it's just like, that's insanity. But it is, it's the social norm.

16:50And that's exactly what you're getting at. It is 100 % normalized. And there's nothing wrong with it. It's a real, I've got to be clear here. There's a really, really, there's a lot to be said for building wealth in property or in shares or in any sensible asset class. No one's got any, let me be 100 % clear, no one's got any problem with doing that. And I think it's a wonderful, wonderful thing to do. But like with any investment, there is risk. And with any investment, it's not just upside. And you need to account. We often and regularly preach. It's just like, don't just look at the upside.

17:22Look at the downside and factor that into your considerations. You don't want to risk everything you've got to hopefully make 10 % a year and double your value every seven years if the downside is you lose 80 % of your net wealth. The asymmetry is my favorite word, is very unfavorable. sorry mate i had to insert a rant in there i broke i broke your rhythm before no it's perfect man it's perfect i guess and i find this is a really tough conversation to have too mate because the the the reality i mean the motley fool has spent 30 years literally from the u.s and then a decade plus here saying to people take you can take control of your finances no one better place than you to make your decisions um you know don't let the don't let the the air quotes helpers or others you know kind of get in between you and your money or like that's all absolutely true 100 absolutely absolutely true i will say though i have and i'm not not resolving from that for a second i do think though that you know we talk about the financialization of property when we say that we really mean things like shelter housing's gone from shelter to you know financial asset and that's that's problematic yeah that's i think the other the other side of that that i've not really given enough weight to at least i mean i've talked about a lot but in terms of really just filling it down in terms of my thoughts is we've kind of we've financialized housing, but we've somehow kind of, I don't know what the right word is, we've kind of consumerized finance, maybe too much.

18:48You know, the point of, do I really understand what risk I'm taking when I borrow a million dollars to buy an investment property? I mean, the sheer dollar numbers there alone and think about who do we let borrow that money? Almost anybody. What do we require? Can you fog a mirror? Right. What do we require of them to understand when they do that you know um if you want to get financial advice in this country you've got to go through rightly i think you know a whole lot of training courses and the company's going to be licensed to do that and all that kind of stuff the motley falls an australian financial services license i've done a one rg146 qualification and that's 100 appropriate but you know and i'm not saying we should step another one's way and there are people out there who hate regulation saying less regulation is better and i don't know but it does it does worry me a lot that we say to people you can take on this debt as long as you can show that your income exceeds your expenses by by a reasonable amount uh based on what you might be able to earn from this and based on a buffer knock yourself out you know there was really no there was really no requirement on anybody to show that they have and again i know what people are yelling at this podcast machine now saying no people should be able to do what they want they can make their own mistakes on one level that's right on the other level i don't know you know i know a lot of i know a lot of really really really really good people who just are not financially savvy.

20:03And if an accountant or a bank manager or a property spruiker says, Hey, it's really easy. I've done it. So is your mate. So is your brother-in-law. You should do it too. They kind of go, okay, then I guess that must be okay. Plus it's a story you want to hear, right? Everyone likes the story of I can make you rich. Like that's a very easy story to sell. We're all susceptible to that. I struggle to blame those people. That's all I struggle. Not that you are, but as I think about it. It's just incentives. I think we've let people down. I really think we've kind of just gone, no. Well, on the regulation front, I agree.

20:33I mean, there needs to be regulation, right? But I think there's too much in our industry and there's not enough in property. So if you or I get onto Twitter and say, I think you should buy Kogan drink, you know, you could be sued. You could be sued. You could be directly responsible. Now, if I get onto TikTok and make a bunch of videos how you need to sort of access equity and wash it through this and do that, there is zero consequences for that. So it's kind of like, that's, I mean, that's part of the problem, right? That why have we seen, I think a couple of reasons. Why have we seen the financialization of it?

21:07I think there is just that. It's a free for all when it comes, it's as bad as crypto when it comes to property. There are no regulations. Do whatever you like. Very little, very, very little regulations. I don't mean the spruikers though, man. I'm actually thinking about the people who do these things. You know, if you want to take on margin, back to shares, if you want to take on a margin loan you've got to fill in some forms and you know the the lender has to some degree at least make sure you know what you're doing right and i just think if you're borrowing a million dollars it could be half a million could be two million whatever the number is to buy an investment property there's just there's just no there is zero requirement for any independent assessment or education or whatever the thing is that just says hey are you sure you really understand what if rates go up to hey by the way maybe 4.1 percent or maybe 4.85 percent by the end of this year what would happen then who actually did that exercise was you know and you and i say we did it because we know and lots of listeners will say well of course you should we know that i'm just going to say i know dozens and dozens of people who don't have the financial sophistication not because they're stupid just because it's not their thing like you know we do this because this is our thing right if i if i was doing brain surgery so i've seen a couple of brain surgeons on youtube and uh and i spoke to a mate who who did one the other day he said it was okay i'm gonna give it a go you know you'd be like well no no that's the right idea yeah stay stay in your lane there right no but that was how i don't want to exclude people i'm absolutely not saying don't worry sweetheart leave it to the professionals that's not what i'm saying but what i am saying is i just i don't think we've done enough i think a lot of people a massive disservice by letting them trip their way in because they really haven't understood the risks that come with the opportunities they're regularly told about well this is this This is where we might get back into our off air debate.

22:48I would say, I would say the, again, you need, you need failure. You need consequences. Now who's, who in a, in a make believe world, who is it that the bears the brunt of making a bad loan? I lend you money, the pub and you don't pay me back. Right. I break. I lose. I lose. That's my calculus, right? Will he pay me back? When will he pay me back? Will he pay me back the full amount? The more trustworthy I think you are, the more favorable the terms and the better the interest rate. The more dodgy I think you are, the more – and so I would say the natural – we need certainly some degree of regulation, but the natural balancing force here would be the threat of loss, which is why we always come back to the big, very all-powerful banks, which is of the moral hazard, which is, well, stuff it, I don't, yeah, can you fog a mirror?

23:49Boom, I'm going to lend to you. Why? Because I don't care. Because even if the only way this really goes bad is if the whole market collapses and we get wiped, but government's going to bail me out anyway. And if I don't do it, Westpac will or ANZ will. So it's just that it is the story of it. And so that's what I would say that we would probably, let's not, let's not blame people who were sort of egged into this. I would say the people who are, who are making these calls and lending out, by the way, our money, deposit is money. They're lending out our money, right? It's just like, well, go for it, man.

24:24That's your business model. This is actually a wonderful thing for society and growth and capitalism and, you know, banking services are very valuable, but guess what? There's risk and you need to be a very, You need a high level of prudential responsibility in what you do. And there are consequences when you don't. I think that's true, mate. I think that's absolutely true. But again, I would just say that at that same time, we probably, those people still lose their homes. So there is still, you know, the good about being a banker is you lend out 100, you get back 99, that's enough. Because, you know, the numbers work.

25:04so you factor in some loss. I just think those people who are the 1 % who don't or the$1 who doesn't get paid back and they lose their homes, the banker still says, I was responsible overall on average and not that every loan should be guaranteed to be paid back because circumstances happen and people are bad borrowers and all that stuff. That's the model. That's why payday loans are so expensive in interest rates. They factor in a certain amount of loss. And that's the only point I want to make is just that you can still screw someone else's life up by lending the money they shouldn't have and your overall bank balance still looks good because you got back most of what you lent out and the interest bill covered the interest yeah payment covered the cover the losses so happy days who cares um again i know you're not saying that i just want to make that point that it's sure at a at a borrower level i think we owe i will say i think as a society we owe a duty of care to people who borrow who are lending money sorry um who borrow money let me get the clear a duty of care people who are borrowing money to make sure they actually know what they're getting themselves into and i don't think we've done that as a society as a banking industry as a finance industry i think we're only too all too happy to sort of shovel it out the door because hey what could possibly go wrong, which is not a rhetorical question, but is expressed that way too frequently.

26:07It's not even hard to do. And we could argue about the details, but if, I mean, like, by the way, it should be like, you know, a set threshold of household after-tax income with an appropriate buffer applied, you know, like that's a pretty good starting point. We actually do have buffers from AFRA, but they just keep lowering them whenever things look shaky. So it's sort of, you know, there's a good plan and there's also a sensible execution of the plan as well, which, which needs to be said, but they're, they're the more, then after, after some basic things like that, I sort of think have better, but again, this is just going to make me sound like such an unfeeling bastard, if I can use the word, but there, I fundamentally believe that we, look, we, we're just monkeys scratching out a living on a rock, right?

26:53Like bad things are going to happen. Not all investments are going to work out. Some ventures are going to Like it just, you know, I want everyone to win all the time, you know, but it's not going to. Now, you don't want, when people fall through the cracks, obviously you want a good safety net, you want to make all of that kind of stuff. But by trying to wrap all of us in cotton wool and protecting us from the consequences of bad decisions and then pushing that up the chain where it becomes a structural issue and a society-wide issue, it's just not the way to go. The reality is there are going to be consequences for bad decisions no matter what.

27:31How big do we want them to be and what level do we want them to play out is the question that we need to do. And again, neither are really great, but I'll keep coming back to often early and small. That's what we want. And then absolutely support for those people that tried their best. I mean, most businesses fail, right? So diabolically hard. But this is one of the real magic ingredients of the US, despite all of its problems and the rest of it. they foster entrepreneurism because you can climb back out again. We'll make it easy to start a business. We'll make it easy for bankruptcy and we'll make it easy to start again.

28:06Those people who are going through that process, it's not a pleasant process, right? But what I guess I'm saying is you want to do what you can to foster all of these kinds of wealth creation kind of activities, but you just can't protect and protect people from bad decisions. and when they happen, let them happen, right? Let them happen and I'm sorry, you made a bad decision and there's loss. You'll learn from it, you'll be a better investor, a better entrepreneur at the end of it. The loss won't be catastrophic to the entire economic system and we'll go on and in aggregate prosper and survive.

28:41Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

28:50Mate, let's go to GDP because this is the next part of the economic news of the week. You've already talked about the fact we had a per capita recession or not recession, but a per capita negative GDP. It's only one quarter so far. So it's not a recession yet. But when, so let's break it down. GDP, gross domestic product. I always have to remember to do that. I had a member of one of our newer services say, it's kind of love you guys on the podcast. I don't always understand what you're talking about, but I love it. Which is very kind, but I also need to do a better job of being clear. Just know that it's really, really smart and always 100%.

29:24If you're not sure, just assume I'm right. Yeah, exactly. So gross domestic product is the total stuff that we produce in a given period as a country. They add it all together and go, that's the number. Now, they kind of sample it and literally everything together, but close enough. And they work out how much we make in a given year or quarter in this case or both. And that is the total gross being total, domestic being Australian and product being the stuff we do. It's not just physical products, of course. Now it's services as well. it was up 0.2 % for the last quarter. Now, I don't know about you, mate, that's a pretty small number and you've already talked about the fact that population is growing faster than that.

30:04So if you think about the gross domestic product, the amount of stuff we make, and then say how much, we don't all get an equal share of it, but per person, there's a dollar value to that. Year on year, the amount of things we made was larger. I've said before, the pie got bigger, but the number of people eating the pie, grew an even faster rate. So guess what? We all get less as a result. So the country grew, the population grew faster and our share, at least technically, of all of that has actually gone down. In other words, our living standards effectively got worse. They lowered. Now, not just inflation-wise but in terms of the amount of stuff we produce per person.

30:39Mate, this is a big deal for millions of different reasons. Part of this is purely cyclical. It's true to say. The other thing that's been talked about regularly and I'm really glad because this has been a policy-free zone for i want to say 15 20 years correct me if you remember differently but we haven't talked about productivity as a nation for a very very long time and i'm reasonably sure that coincides beautifully with well partly just rubbish focus group based politicians but but actually probably in more in the real world more with the fact that inflation was so low you didn't need that much productivity because you didn't you weren't you weren't trying to chase anything down but but when you think about what what standards how do we increase our standard of living the only way on a per person basis to increase your standard of living is for an economy to increase its productivity.

31:24And again, let's define that. Productivity is the amount of output per unit of input. So if I work one hour, how many widgets can I make? Now, you've given the example before of farming, mate, where there was a time when one person could probably farm an acre of land a year by themselves. And then you add a machine, you could do two. And you add a tractor, and you could do 10. You add a tractor and long haul and fertilizers, also you do 100. The productivity per person per hour worked has gone up dramatically in agriculture for exponentially for a while i mean you know it's still getting better a couple centuries yeah yeah i mean that's that's the seed of civilization right there was increasing productivity over primary products primary products and that's what makes us more successful as a society it's how we can afford more things you know prices go up wages go up but that really just kind of keeps track productivity when i can do more per hour so my boss can afford to pay me more per hour because i'm more valuable do that on a massive scale um not necessarily a capitalist system, just if it could be done in the communist system, you could do exactly the same thing.

32:20If we produce more output per unit of input, that's more productive, more productivity. That's the one that now we're starting to talk about. So just curious your thoughts, Matt, on the GDP numbers, the per capita result, and maybe how we think about addressing it. So many different directions to go. Yeah, I mean, look, it's not a good thing. One swallow does not a summer make, as the saying goes. So you've always got to be careful with these sort of quarter to quarter or whatever. period economic data you get. I think the broader directional trend is what's interesting. But yeah, it's a negative, right?

32:53Like it's on average, we're all poorer as a result. There's no point growing 5 % if the population grows 10%. So it's, you know, we'll see what sort of happens there. We've also seen a lot of interesting stats sort of around consumer sentiment or it's not an encouraging picture on on on a lot of fronts i do think the productivity debate though is very infantile clearly productivity is great right but there's no you can't you can't dictate productivity right productivity like do we need more productivity well what we're really asking is do you want more for less like yeah of course i do okay let's do that let's do that what do you think people have I mean, that is the story of capitalism.

33:42Someone tries to come up with a better way. You're selling potatoes. I'm selling potatoes. You're doing it with a horse. I'm doing it with like a whole bunch of John Deere equipment. You know, I'm not doing it because of the economy and I want to boost productivity for, you know, standards of living per capita. No, I'm doing it because I get an edge and an advantage. This is an organic bottom-up system, right? This is what we so fundamentally misunderstand, I think, when we talk about economics. And so am I for more productivity? Yeah. You know, now that some senior politicians and bureaucrats say that we should do it as, oh, OK, well, I guess we should.