Mailbag, incl: Can borrowing for shares close the gap to property? June 21, 2026

25:00That's right. You're trying to lose money, yeah. Now, in the same way, it's why I'll just sort of try. If you understand that, if that groks for you, then this you'll understand more of my longer term bear case against the rate of property appreciation. Yeah. Because it's the same kind of mass and the mass is so let's just go with some numbers that everyone will agree with here. So let's just say because I just have these conversations regularly and and I have got most majority of friends and family who will argue till they're blue in the face that property will go up at seven percent forever.

25:33Yeah. And and then And I will say, well, how much do you think incomes are going to rise? You go, what do you mean? And I say, one, it's not even on the radar, but then you force it. I don't know, like 3%, 4%. What do they do on average? I say, well, let's call it 5%. From now on until eternity, everyone in the country is going to get a 5 % pay rise each and every year. Yeah, okay. Yeah, cool. What's your point? My point is those lines get further and further and further apart. And so it really just gets to a mathematical. I mean, I'm not going to be so silly as to mean, well, that means in April of 2032 we reach a point of, you know, chronically unserviceable kind of thing.

26:13I don't know where it is. But just rationally it gets to a point where, okay, flip it around. What does it mean when you solve those equations? You solve those two equations. It means that house to income goes from four in our parents' grandparents' day to 12 or 15 in the capital cities to 20 to 25. to 30. Now again, so what are you saying, Andrew? All I'm saying is I don't know at what point, but at a point it clearly, it just doesn't it falls under its own gravity. You might argue that that doesn't happen until prices to incomes are at 4 ,000 times. Like, cool, but you've still acknowledged that there is a point.

26:54There's a point. Exactly, yeah. And I would say that that point is far closer it is not near 4 ,000, it is not near 100, it is not even near 50, and I would say it's probably going to collapse well before it even gets to 20. So it's really just a matter of, so what has to happen? Again, mathematically, this isn't what I think or what I should or extrapolation from the past. Just do the maths on it. It's sort of like, well, either incomes have to start growing really rapidly or the rate of appreciation is going to have to slow. I'm not talking about a crash. Quickly throw that in there. Not talking about a crash, but like mathematically, there is a mean reversion quality to the dynamic here.

27:36And if you accept all of that and if you don't accept all of that, then I just don't know what to say because it's just logic and reason and maths is not. There's no opinion in anything that I just said. That's right. It's just a logician's framework. Then you really have to, I think, at a point, acknowledge that we're not going to grow at 7 % forever. That's one point I just wanted to throw in there. No, I love it. By the way, too, can I just say, and this is a social policy rather than investing, but every year prices grow faster than wages, you push more and more people out of home ownership by definition because you take off the bottom out.

28:11I just get there this year. Next year when my wage goes up at three, houses go up seven, I no longer qualify for the loan. The year after that, when it goes up at three and houses go up seven, Andrew can't qualify for the loan. The year after that, by definition - And there's a compounding series too. Correct. There's a compounding series. Yep. So by definition, that's - Anyway, let's move on. Paul. The only reason I just mentioned it is because it's just like I have this thing to go, yeah, I know it's inarguable. You would think it was inarguable, wouldn't you? You would imagine that there is no comeback to that.

28:42And yet. And yet. And yet it's just sort of like I so often make the point and it's like I looked at like I just, like I've got two heads or something. I say it with exasperation because if there's anyone who can articulate that, and I'm sure you can in a better way because I am clearly not landing with that point. But I, anyway. Sorry, go on. No, love it. Love it, love it. I mean, I talk about behavioural psychology all the time and it is the thing that I find most fascinating for all those reasons. And the answer to your question of why comes down to all of the psychological biases which make us not want to accept a very, very obvious and simple truth because of all the things that are evolutionarily built into our psyche, right?

29:25It's always been that way. I think the future will look like the past. Why? Because I'm wired that way. It's done this before. Why would it stop doing now? It's always been there. It's those things, and I will get back to the property. By always I mean the 20-year narrow lens of my individual life and no broader context on that, you know, temporarily or geographically. But, yes, always do make context. It's perfectly human. And that's, and I was like perfectly human, not like I said. Well, I think it is a defence. It's a very reasonable defence for someone who hasn't had the opportunity to do the thinking and recognise their own biases.

29:54And that's not, I'm no better than anyone else. I've started investing. I suspect if I was off, you know, digging ditches or looking after people in a hospital, I wouldn't have thought through some of this stuff, not because I'm an idiot or not because those people are idiots, just because this is our job is to think in these sort of models. And that's how you get to these places. No one's able to get their head around it or everything in the world. That's fine. So that's what part of this podcast is saying, hey, here's some things we think. We've thought about them a lot. Not saying we're necessarily right, but here's the things we think and here's why we think them.

30:21And if this is new to you, then great, take it on board, consider it for yourself, reject it or accept it as you want to. but that's kind of the idea of it's learning, right? We're learning from each other and that's part of the point. 100%. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

30:41Speaking of learning, Paul's got a suggestion for us, mate, we can learn from. Oh, yeah? Hi, MF podcasters. Do you reckon he means Motley Fool or something else? Yeah, that's a good point. Could you please be a little... I'll go with Motley Fool. Be a little more explicit, Paul, if you would. Not explicit in that sense, explicit in this. Anyway, let's move on. I'm a long-time listener, dating back to the original Paige-Phillips combo, so I'll forever bend the knee and bow down to you both. Thank you, mate. After all, where else can I get my weekly dose of the aforementioned where finance meets fury, which I love.

31:14Thank you, Paul. Speaking of fury. That's the niche that we've carved out for ourselves. You wouldn't think that there's a Venn diagram with, like, fury and finance, but we found it. We found it. Yes, we wouldn't have it together. And frankly, there's not enough room for more than us because that's a very, very small niche. We own the space, yeah. Thank you for listening anyway. Speaking of fury, says Paul, I'm genuinely angry. Not so much for myself, but for my kids and the direction Australia is heading. Young adults today are being set up to fail before they even get started. They're told they need a university degree just to have a half-decent shot at a good job.

31:46Then they graduate with a big hex debt hanging over their heads. On top of that, house prices are so ridiculous, again, reference previous comment, that without the bank of mum and dad, most of them have no realistic hope of ever owning their own home. They look around and say... Oh, frankly, just very, very quickly, even with the bank of mum... Just do that maths that I was before and even with the bank of mum and... And now you're getting to the bank of grandma and grandad and Uncle Ted and Auntie Jane as well, you know, like, anyway. I think so many of those banks are around because Uncle Ted's helping, you know, you can't help with your own kids and around the coast.

32:15What are we? They look around and see a system that feels stacked against them. The most recent budget and the Prime Minister's broken promises with a final straw for me. Now, I'll stop here and say this is a pre-recorded podcast. So we're in the pre-recorded section, as you will know by now, because we've been mentioning it in our weekly pods for a little bit. We've covered some of these things, Paul, already. I'm going to throw, because you've got some ideas, so we'll go with. But I just want, as we have some of these questions come through, frankly, Paul, you may love or hate the comments we made between your email being sent and this question being read.

32:44And, again, circumstances may well have evolved since then, before, between then and now. So I'll just throw all that at you just to kind of contextualise where we are. All right. We keep hearing big commitments during election campaigns, only for them to be watered down, delayed or ditched once the votes are in. It's the same old story, and ordinary Australians, especially the younger ones, pay the price. That's why an idea popped into my head, says Paul, that I think is worth discussing. Its beauty is in its simplicity, I think, although I'm almost certain it would create a minefield of even further spin.

33:18If a government is largely elected, on the back of specific promises, and then those promises are broken or not delivered, the politicians responsible should lose eligibility for their parliamentary pension. No more comfortable gold-plated retirements funded by taxpayers if you treat voters like fools. Make the pension contingent on delivering the key things you campaigned on. Break the big promises, lose the big taxpayer-funded safety net. Think of all the money that could be saved, says Paul, not just the pensions themselves, but the cost of all the spin, advertising and half-baked policies that get rolled out and then quietly abandoned.

33:55More importantly, it might even force politicians of all stripes to be more honest and realistic with the public instead of promising the world every election cycle. I'm not saying every small commitment has to be met perfectly, life and budgets throw curveballs, but the big headline promises that get people elected, those should have real consequences if they're ditched. I'd love to hear your thoughts on this, says Paul. Is it workable? Has anything like it been tried elsewhere? Could it actually help restore some faith in politics? Cheers, Paul. Now, I'm going to let you off the leash, Ram. Before I do, I'm going to take just half a step back.

34:29To disappoint you, Paul, slightly, the big taxpayer-funded pensions are kind of done now. So they get a more generous contribution to superannuation, but their super is effectively the same as the rest of ours. As of, I want to say it was 2000 and something, I think Rudd might have brought it in. It might have been Howard. That kind of time, that kind of stopped it. So there may be one or two polis in parliament who still get the old scheme. Anyone elected since at least 20 years now, I think, maybe a little bit less, since then are on the same accumulated pension as the rest of us. So they get a higher contribution.

35:03As I said, you may still want to go with them on that, Paul, but there's no kind of Commonwealth car and income for life type stuff. The defined benefits pension that they used to have has gone away. The defined accumulation scheme that the rest of super is based on is what the polis now get. So just to put that in context before we try and take things away from what they're not actually getting, that's kind of worth throwing in. But the broad question is a valid one, Ram. Should we take away their benefits if they break their promises? No. You might be surprised to hear me say that. Andrew Payne is the politician's friend.

35:36That's a good way to it. I mean, I very, Hayden, I love the, I'm a massive fan of think, what does Munga say? Don't think about anything when you should be thinking about the incentives. Yes, yes. Right? So we want to align incentives really well. And I'm also not someone who thinks, I have no qualms whatsoever if the Prime Minister got paid$10 million a year. Zero. Zero. But if it was sort of tied to some kind of KPIs or something, it's more about return on investment than it is about anything else. So there are some Prime Ministers I think aren't worth a single cent, and that they probably should pay us back.

36:18And there are others that have been, you know, okay, and worth their money and arguably worth more. So I like the, look, it's very easy for me to throw up big, hand-wavy ideas and if you start pushing me on the specific, I just haven't thought about it enough. But, you know, it's a podcast. That's the format. I'm going to go with it. And from a big picture idea, I don't, it's the same with CEO pay. People get too, what's the word? Too myopic, is it? Or just too narrow in their thinking on it. It's like, yeah, oh, this person's on 10 million. That sounds like a lot more than me, then they're therefore bastards and they're not worth it.

36:59It's like, well, how much value have they created for society and shareholders? And it sounds a bit wanky, but it's just like, well, there's a lot of cool stuff that a lot of us like that came from a company that someone thought of and created and you decided to buy it and, you know, You're better off and they're better off and everyone's better off and what's wrong with that? I don't get, you know. And by the way, paying the CEO 100 grand and letting him run the company to the ground is still overpaying. Yes. There's a return on investment in both directions. Yep, keep going. So it's just, it's got to, sorry, was it Hayden or Paul?

37:30Hayden. Oh, now you've stressed me. This one, Paul, Paul, Paul, Paul. Paul, sorry, Paul. Sorry, mate. And you're not saying that. I very quickly hasten to add, but most people do. So in terms of the promises, here's what's tricky about that. I have built an entire self-image and business on the idea of trying to break my ideas. And there are things, I mean, as a long-term listener, you'll know better than anyone that I feel very passionately about that change my mind on, right? And the trouble is we've got to, with the broken promises thing, there's two dimensions to it. There's the promise that was broken because it was never genuine, it was never any intention to follow through, and they just lied to get elected.

38:16And that's the easy one to kind of say, yeah, that's totally wrong. There's the politician in all good faith, hand on heart, thinks I really, this is my, I'm going to do this. And then the circumstances change around them, in which case my kids do this all the time. You know, it's like a couple of weeks ago, it's like you promised we could have takeaways tonight. It's like, yeah, but this has happened and this has happened, so we kind of, but you promised, but you promised. I'm like, yeah, but when I, well, A, I didn't sign a legal document here. I just, I said, yeah, we can do takeaway next Friday.

38:48That's all I said. And, you know, turns out that this, this, this, it doesn't matter what happened. The circumstances changed. And so it's just not tenable anymore. So to do it, there are, there is, it's not hard to think of examples where actually honouring the promise would be a massive own goal and a shot in the foot. It's like, well, I said I was going to do this, I'm going to do it. It's like, but, but, but, there's a war and there's like... Yeah, yeah, yeah. There's landers on the beach, the troops are coming in, but you promised everyone a free sun. I can't think of an example. I'm not smart enough.

39:23But, you know, there'd be some promise that just makes no sense under that context. and so I think it's a really great idea. Just the practicalities and the messiness of the world and the complicated nature of the world is going to make it hard. I mean, the ultimate penalty for a broken promise is not to vote for them again. Yeah, correct. I suppose is the way to look at it. Yeah. I mean, clearly that's not working either because he's got the unit party. He was just like, they all suck. I mean, give me a politician to get excited about and I can't find one at the moment. So, you know, it's not a perfect system, but I don't know, mate.

40:09I've got nothing to say. What do you think? Yeah, no, I think I get what you're coming from, Paul. I'm with Ram, though, unfortunately. I think good policy preempts promises. The rule in, rule out stuff is a nonsense that the journos love to do, right? That's the other thing. I've got to say, for all of everything I just said then, so I agree with Ram. do the right thing, don't just do the thing you promised. If the thing you promised is no longer the right thing, don't just do it because you promised it. That's madness. Now, own it. Own it. Yes, exactly. Don't weasel out of it. Yes, I know I said.

40:36Be direct. I said this. I've changed my mind. This is why. And make the case for it. Don't, oh, well, I never said this. And, you know, the usual crap that they do. National interest comes before not breaking a promise. I don't think that should be controversial. Now, you can argue whether it's national interest or not, but that's kind of the point. So if circumstances require it, do the right thing. Just bottom line, right? that being said you made the point around about the rule in rule out stuff the pollies also are equally responsible for making stupid promises we won't do this why did you say that here's the other thing by the way Phil Lowe gets absolutely tagged with this every time and he doesn't deserve it right Phil Lowe said we will only increase rates when prices rise and we don't think that's going to happen until 2024 was the long version of the phrase all the papers reported that subsequently kept reporting was Phil Lowe said rates won't rise until 2024 He didn't.

41:26He literally, you look up the RBA statement where it says, we think this will happen, we're going to do this thing when this happens, we think that'll be 2024. Now, he could have corrected the misreporting, and this is where I'm going to get back to the politicians. He didn't, but he never said that, right? The pollies could at least say, we have no plans to touch negative giving capital gains tax unless house prices become unaffordable and we need to do something about it, or just say, I'm not really getting anything in or out. I mean, yes, you're right, it's on the journos, Ram, but it's also on the pollies for being gutless and not actually saying, I'm not playing your stupid game.

41:55You know, the Adam Bant, when he was asked about the price of milk and eggs, just said Google it. I'm not playing a stupid game. What a brilliant answer. Wasn't it? Gosh, that was such a, you know? So just do that. Just genius. I hear you on both sides, Paul. The stupidity isn't breaking the promise, it's making the promise, right? Now, are we dumb for listening to promises? Probably. And if we don't have any integrity in politics, are we worse off? Yes, it's all true. So I get where you're coming from, Paul. I'm completely stuck in the middle with no clear answer other than when push comes to shove, if something is in the national interest, do it whether you made the promise or not.

42:28As you say, Rem, I'm up to the promise. But do the right thing. You know, I'm not going to help you. You're drowning, but I promised I wouldn't jump in the water. Well, I mean, yeah. You've got to break a promise or save someone. Choose carefully, but it's not a difficult choice, right? And then you can explain why you broke the promise. It's a really, really simple one. So, yeah, I agree with you. I think, yeah, do the right thing. Pay polish what they're worth. I wouldn't use pensions, Paul. I know the kind of general view is they're getting paid too much in pensions, and I don't think that's necessarily right, frankly.

42:59We all love to hate pollies, and they deserve a lot of it, so they've only got themselves to blame. But, yeah, I think there are things that I would rather do, and to Ram's point, democracy is the final answer, right? The arbiter is the elector, the voter. John Howard said the voters always get it right. We are seeing some different options in politics, both the potential till party was, and again, we're recording almost a month in advance, So anything could have changed pretty now and then. But hopefully there is more choice at the next election. Hopefully those choices are quality choices. Hopefully we can at least tell the pollers we expect better, but we'll have to wait and see what happens.

43:30I like the idea of referencing it a lot lately, but I think Singapore's got it pretty right, where what you do is you say, broadly speaking, so I was like, actually, I'm going to make sure that at a certain level of responsibility in government, you get paid extremely well and, yep, you get a really nice, you get a really good pension. However, two howevers, if you are found to have broken the law or be corrupt, it's not a slap on the wrist and a little bit of public disgrace. Like you'll go to jail. Like jail. Oh, don't break the law. That's the argument you guys tend to use for various things.

44:07So it feels a very straightforward thing. It's like if the prospect of going to jail for breaking the law is a disincentive for you as a politician, you have to really seriously look in the mirror as to what it is you think this office expects of you. Well, I should be able to break the law. It's like, no, you shouldn't. And that's fine. And so I just think I would have extreme, extreme punishment for black and white, you know, you broke the law, you were corrupt, don't do it and you'll be fine. And also the second thing is after office you cannot work. 100%, yep. For another company. And that's why they deserve a good pension.

44:52It's like we expect the best 10 years of your life. We expect you to give this faithfully to the nation and we'll pay you very well for that. We'll make sure that you are okay for the rest of your life. And maybe there's, I mean, there's yummy too black and white about it. Maybe they want to open up a local hair salon. Work for charity. Yeah, absolutely. But I would say that, you know, you could probably do it as simply as saying you do not get to work for a company or on the board of a company or advise to the company or consult for a company that's worth more than$100 million or something like that.

45:21Yeah, yeah. You know, I think right away that gets rid of a lot of problems. Does it mean that we get brilliant politicians? No. But I think, again, back to incentives, when you are, I mean, you think about the calculus here. Think about some of the I could wrought the travel allowance and I can do this. And you know what? What happens if I get caught? I might have to pay it back. The newspapers are mean to me for a month and then the news cycle rolls on and that's it. Like, okay. So what you're saying is there's not much downside. Okay. I mean, it just, even the more noble amongst us, you kind of think, well, I'm a little bit tempted to do it.

46:02It's like you're going to spend five years in jail. Well, I'll just pay for the helicopter myself or catch a train like a normal person, you know. Well, mate, to that point though, I would go as far as, say, double their salaries and cuddle their perks. Yep. Yeah, it's easier, isn't it? Well, the incentive is obviously, so you're talking about the disincentive and the stick is really important and the carrot and stick matters, right? Or you just kind of go, we are putting a system in place which incentivises the potential to at least think about what can I get away with. Remember the phone card thing?

46:30Was it Peter Reith? I think. I don't want to slander anybody. Peter Reith's son, I think, used the phone card or something. And it's kind of like I get the, yeah, look, there's people, they work away from home 40 weeks a year and I know there's lots of stuff going on. We kind of think pollies have this really cushy, easy life, and I'm sure all of it is. But I know a lot of them regret not seeing their kids more and kind of doing all that sort of stuff. So it's not the easiest job in the world. And I just kind of think at some level, yes, absolutely punish them for breaking the rules, but also remove the temptation for rule break.

46:58There's no living away from home allowance. There's no travel allowance. You get paid double. We get double your salary tomorrow. Let me explain to you how money works. It comes from the taxpayer. There's a thing called money, and it's kind of like a gift certificate that you can use anyway. It's really cool. So if you want to use it for travel, you can, or if you want to use it for that, you can. It's what we call fungible and it's like, it's this really, it's really complicated but, you know, trust me, it's an easier and better system for you. Well done. I feel better. I do. I'm glad I'm asking.

47:27I'm always bad when you feel better. I'm always bad when you feel better. So, yeah, great question, Paul, great issue. And some of those things, I think it is really solvable. It just requires, and you never get benevolent dictators, but the biggest problem with our democracy is actually the majors have no incentive to improve it. and I don't mean I don't mean a cynical taking over the military coup tunnel just like I could change the nation reform laws but I benefit from so why would I and I can convince myself they're okay so I'm not going to change them I change the travel rules but we all benefit from it and the other mob aren't going to make me do it because they're getting the benefit as well it's all that so David Pocock's been lobbying you mentioned politics getting excited about mate I'm a big David Pocock fan he's not a party politician he's just a bloke who's trying to do the right thing he's desperately trying to get them to declare lobbyist access and they might do that and it's like that's you know that that's the biggest impediment to i think any meaningful change yeah hey let's um i've got a really long question from anonymous listener which i'm going to cover because it kind of relates to the budget i'm going to try and do it in a little bit of a truncated sense so anonymous thank you for sending it through um it's longish it's there's some interesting points i do want to cover them but i'll probably try and cover them in a truncated way uh please keep me anonymous says our listener I'm genuflecting with such enthusiasm my chiropractor is preemptively scheduling appointments.

48:41Is that like... Chiropractors will schedule an appointment whether you need one or not. I'm going to throw that in there for another favourite whipping boy. But anyway, please continue. I was going to say, I saw a chiropractor and thought, I know where this is going. I'm against pseudoscience. Excuse me. Long live the pod machine, he or she says. I loved the deep dive into the budget recently. I was looking forward to it all week. I love nerds. It sounded like you gents were broadly in favour of the changes, but as someone staring down the barrel of some of them, I've got a few grievances I'm struggling to reconcile.

49:10I love your thoughts. I love how anonymous you took away that we were positive about that. I didn't think we were, but I guess relatively, I suppose. Some of them. We actually covered some of this stuff. Number one, the immigrant penalty. He says, we're skilled migrants. I think I said, hey, yeah. I'm an engineer and my wife is in the medical field. My wife studied six years for her degree, did two years of community service, then another four years to specialise. We moved to Australia for a better life. We lost countless hours with our kids while she redid those exact same exams. We worked at the, quote, immigrant rate, end quote, well below market until she re-qualified, then ruthlessly saved 40 % of our income to invest.

49:49The problem is sequencing, says our listener. We arrived halfway through our working careers with no way to transfer foreign retirement savings into super and no decades-long runway to compound inside the 15 % concessional environment. To chase financial independence, we maxed out super where we could, but the vast majority of our wealth had to be built outside it, mostly in ETFs. Now, the CPI indexation and 30 % minimum CGT floor hit us hard. I ran the numbers on my own portfolio with realistic market-related growth over the next 10 years comparing the new regime to the old. I'll be paying roughly 38 % more tax than I would have under the old rules.

50:28And that's just outside super comparison. Peers who spent more than 40 years compounding inside Super are sitting even further ahead of where the old CGT regime would have left us. The whole reason we put ourselves through that grind was to give our daughters a better future, but with housing costs swallowing and wages, zero meaningful productivity growth, and living standards actively going backwards, even they may afford to struggle to afford a home as average earners. We have no bank of mum that has fought back on, no parents who rode the housing boom, blah, blah, blah. To be clear, I'm in favour of a right-sized migration program.

51:01and we don't need more people in the country who can sensibly absorb, but part of the reason skilled migration exists is that Australia simply can't domestically produce every type of highly skilled professional it needs. If we want that pipeline to keep flowing, should we be making it easier for people like us, not harder? I'm going to not challenge the calculations, Anonymous, because for all I know, you've done them perfectly well. I would ask you to make sure this is a mistake I've seen. No one actually call out, Ram, and it's a mistake in the assumptions implied in the answers. When you think about the return you're getting from your investing, you've always got to subtract the dividends before thinking about the capital gains tax.

51:39And I don't know, honestly, if you've done that or not, but what I will say is let's, for fun, Ram, take the average market return. The average market return is 9 % per annum, okay? I know nothing's average, as you said before. Let's assume it's 9%. And you're an ETF investor you've mentioned, Anonymous, so let's say it was roughly market index ETFs. And let's assume those ETFs are about 5.5 % capital growth, about 3.5 % dividend. Is that a reasonable split, you reckon, Ram? Yeah, yeah. And let's say inflation was 3 % on average over the life of the, so market's 9%, which is 5.5 % and 3.5%, and inflation is 3%.

52:12Now you're asking. In that environment, the average investor is better under indexation than the discount because people look at the 9 % and go, wow, that's much more. the break-even point here is when your return is double the inflation rate if your return is more then this capital return not total return because dividends get taxed differently that's why this is really important if your capital return is double the inflation rate you break even if your capital return is more than double the inflation rate you will start to be worse off under the new regime and if it's less than double the inflation rate you're better off under the new regime so just it's just worth thinking about that now if you're getting 15 and it's all capital growth then yes you're much worse off if you're getting uh i don't know eight percent but it's all you know six percent of that's dividend income from wherever you're finding it then you're much much much better off under indexation than the discount so i just want to throw that because i'm not saying your 38 numbers are wrong anonymous if you've done them just on capital that's fine i i i don't know that i suspect an etf investor is going to pay that much more tax in that environment i gotta I don't want to suggest you're wrong.

53:19I don't want to talk down to you. I just don't know how that math would work in a broad market ETF. But if I'm wrong, tell me I'm wrong and tell me how I'm wrong and I'm happy to correct the record. Broadly around, though, that immigrant penalty that our listener talks about, is that something the tax system should allow for? Yeah, well, as a general principle, I think, I mean, there's the reality of just needing to fund the things that we want government to provide. But outside of that or within that, we've made the point, both of us many times, that you want to kind of be a bit more heavy handed on the things you want less of and at least lighter touch on the things you want more of, you know.

53:56And I would, you know, people have their own view, but I am of the view that if there is a smart, hardworking, enthusiastic, motivated person who happens to be born in another country and wants to make a life here and in doing that is going to work their butt off and save. and build a family and it's just like, why are we making it hard for these kinds of people? No, you say the word immigration, it just conjures different, you know, there'll be some people out there, oh, the ISIS brides or this or that. You know, it depends, right? Like, am I saying that we should just, like, open the floodgates to anyone who's just, like, eyeing off the welfare system and, like, I could live my best lazy life in Australia?

54:36I'm just to use the sort of hackneyed sort of stereotypes. Why do you hate Australia, Andrew? Why do you hate Australia? You know, it's just like immigration is a big word. It's a big word. Yeah. But I very much agree with you, Anonymous. I think that it is one of, I've talked about, well, a lot on the pod in terms of moats and competitive advantage and Australia Incorporated has a wonderful competitive moat and advantage and it's a great place to live. It's beautiful. There's never been tanks rolled down a main street of any of our capital cities, you know. We've never had a civil war. We've got incredible climate.

55:11Like we've got, you know, a crappy, dumb government and politician but better than most other places in the world, you know. So there's, what am I trying to say here?

55:29It's something that I would leverage as the dictator of it and I would say, wait a second, there's 8 billion people on the planet. Australians are great people. We are, but there's only 25 million of us. And wait a second, country X, Y and Z has just spent all this money training this person to be a heart surgeon. Wait a second. England has just spent all of this money giving education to this physicist who's just working on quantum gravity. You're like, yes, please. You can come here. In fact, here's a free back rub when you get here and a red carpet out of the plate. Why? Why would you do that?

56:08These people, these kind of people are additive. They are going to make all of us richer. Correct. You don't like being richer? Now, do I want someone who's just going to come, suck on the government teat and, I don't know, murder people? That's a stupid example. No, I do not. Call me crazy. I don't want that. And I love the way that Anonymous has sort of framed it there. We have the opportunity to be hyper-selective. Do you know who doesn't have, I don't want to pick on countries, but there's plenty of countries where they would have to pay you and some countries do to come over. Because no one wants to live in dot, dot, dot.

56:50And that dot, dot, dot is a lot, like hundreds of different nation states. You know, if you're worried about, there are tax regimes that are far more lenient than Australia. I was like, I am not going to live in that place. because I will be killed or, you know, I'll get a toe infection and die. You know, the world is a brutal, harsh place. And we have this incredible moat of stability, prosperity, you know, all the great things. There's so much I crap on about Australia, you know, going in the wrong direction. But what we do, we're pretty special as a place. and to leverage that for our own self-interest.

57:34Yeah, I'm for that. I'm absolutely... Let's do it. Me too, me too. Yeah, yeah, absolutely. And so imagine, I don't know the specifics of your wife there, but clearly that's a lot of training and we would love to have more people in the healthcare sector. And I'm not just saying that, oh, okay, I got a degree in failed dictatorial Latin American country and therefore I should all of a sudden walk into Prince Alfred Hospital and start performing brain surgery. Like, no, let's be sensible here. Let's be reasonable. But are we going to make them do all of the exams again? You know, are we going to make them jump through all of these hoops?

58:09It is a tragedy every time you get into an Uber and you find out that the driver is like a mechanical engineer or a GP. It's like, what the hell are you doing? It's like, well, I thought I would come here and I had something to offer, but it turns out that the powers that be think I'm better served doing this. So I'm doing this, all right? And it's madness. Yeah, you make a very good point. I don't know, Anonymous, whether that's a sufficient reason to change the tax system for all of that. And I agree with everything Ram said. I don't know if you said it first, Matt, or I said it first, but we both agree immigration is a superpower, something you probably would have said first, I suspect.

58:47Yeah, yeah, yeah. Because for all the reasons you just said, we get to choose the best in the price who want to come here. I was like, yeah, come and make us better. Why would you not want to do that, Ryan? Think about it as a company. It's just like I'm going to hire the worst possible candidates for this company, you know. 100%, yeah. So, yes, love it, love it, love it.

59:06I mean, realistically, the CPI indexation, I said, will only hit you hard if you're getting a higher return. But, again, it doesn't hurt anyone harder that started investing at 40 rather than at 25. I mean, you talk about sequencing, you're right. but if, you know, my neighbour started basically at 45, the same issue applies. And you say, well, you would have started earlier if you'd been here earlier and that person starting at 45 has sequencing risk trouble. I mean, it's all true, right? So it doesn't minimise or reduce your issues and I think you're right about the qualification recognition and stuff like that.

59:39It makes perfect sense. Why would you not? So I'm agreeing 100 % with you. But I don't know that we can say if you don't have long enough to save you should get more of a discount somehow. Think about the slip or certain moral hazard of that one is I'm 35. I'm not going to bother investing until I'm 50 because then the government's going to help me out because I started late. You're incentivising people not to start investing, right? So, yes, it makes you worse than someone who's got a lifetime of super. I don't know we fixed that. I don't think we should fix that. I don't think we should be giving immigrants, you know,$400 ,000 super portfolios when they arrive to make them equal with everybody else.

1:00:11Not because I don't like immigrants, just I don't think that's a good use of Australian taxpayer funds. Unless, to Ram's point, you find an immigrant who's worth more than that. And, yeah, if we've got lots of heart specialists and we need lots of heart specialists and you want to give them a – well, come to the country, we'll give you a super fund. I mean, I'm okay with that as long as the numbers add up. So I'm not against it, but I don't think we can use that as a reason not to change those tax laws you mentioned, I have to say. The 30 % minimum CGT flaw, I hope we've talked about this before.

1:00:37I think it's a bit like taxation of minors. It's the right thing. They're using the wrong thing to fix the right problem, which is people are using the sales of capital gain to, sorry, they're using proceeds from capital gains in zero income or very, very low income environments to try and take advantage of two or three tax free thresholds. It's like trust distributions. And so while anonymous, I absolutely hear your question. I would actually change it. I wouldn't do what they're going to do. So I'm not defending it, but I will defend the intention or the rationale, which is, you know, if you can stream effectively a capital gain to a non-paying, non-income receiving spouse or something else and therefore take advantage of two tax-free thresholds.

1:01:19I can't do that with my job. I can't say, well, half of my job is going to be done by my wife. So she gets half my tax-free threshold and I get the other half. The reality is it's a tax lurk and the government's trying to close that loophole. I think it's done clumsily and I wouldn't do it despite the loophole. I think sometimes you've got to live in the grey. Whacking people who are going to sell assets is probably not great. Last thing I will say very quickly is while that's also 100 % true and I wouldn't do it, as I say. Remember, of course, that the 30 % tax rate kicks in at 45 grand a year in income anyway.

1:01:49There are very, very, very few people who are going to have capital gains and not have some degree of income that goes somewhere close to hitting that tax-free threshold anyway. So if you've got dividend income, if you've got a large amount of capital gains anyway, that hits you over that 30 % threshold, then you're already taxing a minimum of 30. The dollar impact is relatively muted for most people, but not none, which not, again, I still wouldn't do it. It's not as bad as it seems because it's not like there are a whole lot of people out there who are only going to live on, you know, 50 grand a year's worth of sales of BHP shares, for example, rather than dividends from BHP plus other income plus plus plus whatever else you're getting plus super plus other things.

1:02:28So it's not the absolute tragedy it's made out to be. They use the example of some fictional pensioner who's earning zero and all of a sudden sells 50 grand a BHP and has to pay a higher amount of tax. It'll happen to some. And I said I wouldn't do it. But it's not as bad as the headlines will have you believe. it seems more draconian that it will end up being for the vast, vast, vast bulk of people who this will even slightly impact. OK. Make sense? Yep, makes sense. No comment. In that case, that might do us for this episode of Motley Fool Money. Will you come back next Friday, Ram? Hell yeah.

1:03:01Of course you will. Until then, have a great weekend and fool 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. Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services Licence 400691.