Mailbag, incl: Should I invest in property for my kids? March 15, 2026

23:59I imagine I'll be holding for another 10 to 15 years. I love this question, mate, because we talked a lot about not minimizing your tax but maximizing your after-tax returns, and you absolutely have to be included. If I had to sell – if I – if I was sitting on a 20-fold gain in CBA, and let's just use the rough tax numbers because it's easy. Let's say I'm on the 30 % tax rate. I'll be paying 15 % tax on that. I would have to – and effectively your whole value is almost all gain. You would have to find an investment that made up for the tax and then some relative to CBA, And that's exactly the question you're asking, Gordon, which I love.

24:35Ram, how much better is AFIC than an index ETF? And is it worth selling the existing position? How much worse? Sorry. Sorry. Yeah, what if I asked it? Is it worth selling paying tax just to change your ETF, which might be slightly better? Should he just think, well, Gordon, sorry, we shouldn't say that. If you had it, would you sell it and change your ETFs? Would you say, well, I'll keep what I've got, but I'll put new money into an index ETF? How would you consider a large long-term holding in an investment company? Yeah. I mean, while it has been a pretty underwhelming return, it's one of those, well, how much worse is it going to underperform or potentially, I mean, miracles happen, I outperform the index.

25:16I don't know. There is a point where it's sort of like there is a duration and a degree of underperformance where it's just like absolutely take it. Because in the fullness of time, when you are looking to actually sell it and draw down and spend it at some point, then you'll still have a superior after-tax return. I can't do those numbers in my head, right? And that's the tricky thing. So if you think it's, look, it's an unfortunate situation, but if you think it's going to be a marginal difference, it's probably not worth it, I would suspect. If you think it's going to be a reasonably material difference, then it's probably, and you still plan to keep that capital working for a time yet, it's probably reasonable to consider taking the pain up front and putting yourself into a better vehicle.

26:03I mean, staying in an underperforming asset to avoid tax is, again, it depends on how bad. If it's going to zero, then you take that taxi at any time, right? But if it's marginal, that's where it gets tricky and that's why I'm tying myself up. And I just don't know. And as much as I was pretty scared, it's funny how I got a lot of feedback on that. People out there are just for companies. Not even the lawyers. Because I'm sure even if they haven't heard of our little thing, they probably go, well, you know what? Truth is a good defense. Maybe we don't want to take this to court. Yeah, but I don't know, mate.

26:42What do you think? It depends. I know it's such a frustrating answer. I suspect it's not going to be a, you know, you could drive a truck through the difference in performance. And if you're looking at selling down in the next five years, maybe it's not worth it. but that's a real tough one, Gordo. Sorry, mate. I got nothing decent for you. Here's what I will share. This is just... This is really unfair. I'm going to be very careful and just claim this a lot. Since May 2009, which is what Google tells me is the only data it gives me on the Vanguard ASX 300 ETF, it's doubled in value plus dividends.

27:19The Australian Financial Investment Company is up about 50 % plus dividends. Okay. You can drive a truck through that then. Right. Well, 17 years, but yeah, it's a pretty sizable difference. I can't tell you what you should do, Gordon, obviously, because I gave you financial advice. If I owned AFIC, I absolutely wouldn't add a single dollar to it. I would be starting a position in an ASX ETF. By the way, brand new one. Vanguard have launched an ASX 200 ETF, which he domiciled here, which the other ones aren't. Oh, no, ASX 200, sorry, S &P 500 ETF. My apologies. So you mentioned you own the iShares or BetaShares one, Gordon.

27:57I think, yeah, the Vanguard has another option. It's brand new, so if you're keen to look at ETFs, have a look at that one as well. What's the difference? Why do I care if it's domiciled here? Because you don't have to fill out any tax forms. It also, there is a slight and probably only theoretical risk that if you own a US domiciled asset, the US estate tax laws apply to you. For that holding in there, you hold it via the ASX. It's a chest depository interest. In other words, it's basically a derivation of the US-listed product. And in theory, if maybe not in practice, although I don't know, inheritance estate tax laws may apply if you're on US-based assets.

28:34We talked about that in the previous podcast. So they're the two major reasons why you might care. I'm not saying you should change receipts around. Sorry, Diesel's having a bark in the background. I agree. Yeah, exactly. Diesel's all about keeping costs low. So what I sell, I... 10 to 15 years.

28:55Probably. Probably, yeah. I think I would actually. If it was less than that, less than 10 years, I'd probably stick with it. And by the way, the problem is we don't know what the future is going to look like, right? So we'll tell you what the past performance has been. In 10 years, we might look back and go, man, I think I had a great 10 years. They smashed the index for a whole decade. I'm like, that sucks. But again, because if you probably hold us as a passive investment, a quasi-passive investment, if I'm investing passively, I'm investing in index. So if I held it today, I'm not going to tell you what you should do, Gordon.

29:21If I held it today and I had a 10-year horizon or less, I would keep AFIC. If I had more than 10 years, I would sell it. Not because I know that's a magic number, just because at that point, the aggregate improved value will probably be better, I suspect. I will make one point. Because of the structures, any of the ETFs have lumpier dividends than investment companies. And the reason is because the trusts have to pay out all their income in the given year. and they can't smooth it, AFIC tends to smooth its dividends. So if you care about that, that's a reason to stick with AFIC. I like my mediocrity doled out in regular installments.

29:59Sorry, to their own. Gordon's second question. Defensive assets, bonds versus cash. I understand bonds aren't expected to beat equities long-term. I've avoided them because they seem very dull. However, my understanding is they're a hedge, so you don't have to draw it down in unfavourable conditions. I went back to episodes with specific bonds discussions. Thanks, mate. And the advice was to hold liquidity just in the form of about three years' worth of cash rather than bonds, which were basically laughed at. Ram's re-dunned again. However, to me, that feels like different flavours of the same thing.

30:30Cash currently around 3.5 % to 4%, bonds fairly similar. But I assume I'm missing something here. I find defensive allocation decisions far harder than growth ones. So any clarity you can bring on this or what the correct thinking is about defensive assets generally would be very welcome. Cheers, Gordon. Under that, asterisk, knee semi-flexed and poised for full bend, depending on whether this gets read out or not. Gordon, that's not okay. Just do it up front, mate. We're not transactional here. Let's prove that we don't filter them. We demand permanent loyalty, not just conditional loyalty, mate.

31:02Come on. What do you reckon, mate? So bonds and cash. Let's unpack that a little bit. Well, the thing with... It depends. Sorry, I did it again, didn't I? on if you're holding for maturity. So if you're going to lock up your money for three years, I'm going to buy the bond and I'm just not going to sell it on the secondary market. So you can buy it. Well, you probably bought it on the secondary. Let me unpack all of this. You can buy the bond from the person who wants to borrow the money, which is a government. You can buy it directly. Actually, you probably can't as a retail investor, but just go with me.

31:36Maybe you can. I don't know. I don't touch the things because they're crap. But if you hold it. So I've got a bond and it's essentially a promise that we'll pay on this date, we will pay you the face value of this bond back and we'll pay you some coupon, what's called coupon payments along the way, which are just like interest. So if that is your intention, I actually agree with you. There's not a massive amount of difference between cash and bonds. The difference might be that if interest rates spike and you're on something like an ING Saver account, you instantly get that higher interest rate.

32:10That would be better. And I'll just quickly make, for me, bonds are like term deposits, which is different from at core cash, which is your point. Yes. So a three-year bond, a three-year term deposit, for all intents and purposes, the same thing, as long as in both cases you don't want the money inside that period. Absolutely. Let's say you did want the money. So you bought a bond and if it's a three-year bond and you wanted it, you wanted to sell it, you wanted to get your money back. Well, if interest rates go up a little bit, the world found this out a few years ago after COVID. Remember, we had zero interest rate environment, lower for longer, blah, blah, blah, blah, blah.

32:44Oh, my God, inflation. Where did that come from? That's so crazy. Who could have predicted that? Boom. Inflation flies up. Bond yields fly up. And bond yields are inversely related to their price. So, what that means is that the capital value of your bond has been crushed, in which case, who cares about the coupon payment? It's like saying, I've got a really good company. It pays me a great dividend, but the share price dropped in half. And I just sell it now to get the money, even though the dividend is great, but I just sell it right now. I have to sell it now. And the shares got for$40 to$20.

33:14I guess I'm selling it at the market price. Yep. And that's what can undo you with a bond. So you're right. Better to think about. Cash sucks in every possible way conceivable, except it is liquidity incarnate. It is, by definition, when we talk about liquidity, we're kind of talking about cash.

33:38and I can use it whenever I want, however I want, and it's pretty much inflation aside, which I'm the last person in the world who puts that aside, but let's put that aside. That optionality is nothing to be sneezed at, whereas there is a very big opportunity cost with bonds and held to maturity and term deposits because you're just like, well, I just can't. Anything can happen in your life. an emergency, in which case you need some money or just a wonderful opportunity that you want to pursue and you can't. Your money's notionally there. I mean, this is how, remember, this wasn't even that far back.

34:14Remember Silicon Valley Bank and who were the other ones? They got into all this trouble because on paper, they were sort of solvent. It was just in terms of if they had to sell the bonds, it all came, I'm trying to say this in a very simple way. It all really came down to what you perceived their balance sheet to look like. Was it something that you were looking at through the lens of this is fine, they will not need to liquidate anytime soon, and in that case, they're absolutely perfectly fine, or are enough people going to withdraw their funds so that you are a forced seller? Now, your accountants may have classified it as held to maturity or not.

34:52It doesn't really matter. The reality of that came into play in very sharp focus and actually saw banks fold. And that's exactly what we're sort of needing to deal with here. Now, the other thing that you'll notice as well is that when you look around, I haven't done it for a while, but I'm pretty confident of this, the bond yields that you're going to get, they're very close to what you're going to get in a term deposit. Yeah, right. Or even an at-call high-interest savings account, if there was a bond or a term deposit, I'm getting 6%, and in a high-interest savings account, I'm getting 3%. All right, that's something to ponder.

35:30But if it's like one's like 3.7 % and the at-call cash is 3.4%, I was like, oh, man, that's really – give me a reason to lock my money up, you know? So I just think – I just thoroughly dislike. Bonds are okay in normal times, but in the world that we are in and the world that we're headed to, I wouldn't touch it with a barge pole just personally. So, their IOU, stop using the language, right, of like bonds and fixed interest and, you know, defensive and all of the stuff. It is an IOU to someone who is demonstrably incapable of balancing budgets and spends like it makes drunken sailors look like prudent, right?

36:13Like that's who you're borrowing off and they're going to pay you back. But, you know, I'm not even having to forecast the futures. It's kind of happened multiple times just in the last 10 years. like they'll pay you back with printed money and like none it's not give me give me a reason to get excited so i think um yeah i mean i agree with you i agree with you in theory i yeah the point for me is that is the locked up component so keeping three years of cash in bonds is not really three years of cash in bonds it's cash in three years if it's a three-year fixed term bond right and you can redeem it but as rams already said and maybe sometimes while we're going to go up so sometimes bonds are better than cash because the the capital value goes up if rates go down you actually sell$100 a bond for$150, and you feel like you're a genius.

36:53And that can happen, but you also have to sell your$100 a bond for$50 if you need the money. There's two reasons to have - Just very quickly on that. There's a whole bunch of specialist hedge funds that specialize in bond funds. These are the best and brightest people in the game. And these funds don't do that well. I am throwing a little bit of shade at them, but not really. I mean, it's a very low returning asset class. So my point is, even if you're fantastic at that, and you can account for all the things that Scott's sort of talking about. It's like, you know, and I can time and I can predict interest rate movements and what bond yields are going to do.

37:28And like, it's not like you go from like 3 % to like 20%. Like it's just like, even the best of the best still do marginally better than just sort of held to maturity kind of stuff a lot of the time. Sorry, mate, interrupted. No, good, no, good, good, good. So here's the thing about defensive assets, right? Defensive assets do two things. One is they can be used for liquidity if you need them, which we kind of touched on. The other is to reduce the volatility of your portfolio. Either of those is perfectly fine, and both together is perfectly fine, if you know what you're choosing. In a perfect scenario, I intend to, good Lord willing, the creaks don't rise, retire with enough money in my super that I'm going to hold almost no cash.

38:06Now, it sounds like, didn't I just say hold cash? I am hoping that my income needs are met by dividends from my portfolio, for the most part, maybe even entirely, hopefully, a perfect world. And if that's the case, I'm not going to hold any cash. I will hold a little bit to kind of, to allow for the timing of the dividend payments because I'll come and go. But in a perfect world, I don't have to hold any cash at all. So when we say hold three years of cash, it's three, you want to have access to three years of living expenses. And you shouldn't assume dividends are guaranteed. We saw the banks cut and suspend them during COVID.

38:36So I'm not saying hold no cash, but it sounds like an ad and it is not supposed to be, but will sound like it. We run a service called Everlasting Income. And we run that service, basically we invest everything except for 4 % of the portfolio. That 4 % of the portfolio is a cash buffer. It's replenished by dividends and it's drawn down every month. We take money out of it to effectively simulate living expenses, right? And so that's the way that portfolio was constructed. That's exactly – and it started because I did it for my mother-in-law, literally. I went to the team at the firm and said, hey, I just done this for my mother-in-law.

39:06Our members might benefit from something similar. So in a perfect world, that would be my scenario. I'll hold 4 % of my portfolio in cash, the rest invested, and I'll use the 4 % just as a buffer for timing differences on payments. In that case, I don't need three years of cash as well as that because I'm covered by quality income from quality businesses. Again, is everything perfectly bulletproof? No, but nothing is. So that'd be my approach in retirement. In that case, I don't need three years worth of cash. I've got enough cash to kind of make it work. Somewhere between that and three years of actual cash is kind of risk tolerance.

39:36It's also a size of the portfolio. If I've only got 100 grand in super, I'm going to hold all in cash because I'm going to need it all at some point. I'm not going to risk it on the share market rising or falling. If I've got$25 million in super, I'm going to hold no cash at all because I take the income from the dividends and I'm going to live like a king. I'm not going to have$25 million in super, unfortunately, but that's a wishful thinking. Somewhere in between is just the decision you need to make. So if I was going, but to Ram's point, if I'm going to hold cash because I might need it inside three years, I'm not holding it a fixed term instrument of any sort because I want to have that money available in a high interest savings account, which is close enough to determine deposit rates, I'm going to happily trade off whatever reduced income yield, percentage yield interest rate I have to trade off to have that liquidity because that's why you're holding it.

40:21So that's how I'd kind of think about it. The volatility thing and the hedge thing, I don't need a hedge because I'm not hedging volatility. So if you're hedging cash flow, that's what we just talked about. Volatility, I'm like, I mean, bonds tend to work in different directions to shares, but overall, they'll probably give you a lower overall return. So you're paying a fee to have lower volatility in your portfolio, which is fine if that's what you want. I wouldn't do it personally because I don't need it. But if you're someone who needs to sleep at night, then go for it. Pick whatever works for you.

40:53I wouldn't use bonds. Just remember the compromise, right? Yes. Because it just sounds, and this is what lures people in because it sounds great. It's like, hey, do you want to reduce volatility? Of course I do. I wouldn't know. I don't like volatility. Volatility is scary. I like upward volatility. I don't like that it's a nefarious cousin down volatility, right? And that's the old joke. Volatility is how stockbrokers say down, right? We don't talk about it on the way up. And I'm not even saying there's anything wrong with that, but like everything in life, and particularly in investing, there is a trade-off.

41:25If there is anything out there that can reasonably reduce your volatility, it's going to come at the expense of returns. And that's not a bad thing, but you must accept that bargain. There is no free lunch where you reduce volatility and get all the upside. It doesn't exist. It doesn't exist. It's a fiction. And if anyone sells you that, they're an idiot or a con person. Yeah, exactly. They're telling you what you want to hear. Yeah, so I hope that helps, Gordon. That's why I understand the issue. I understand the concern. If you need a lot of volatility, you can just sleep at night. Go for it.

41:58Do it. I would happily trade off returns to sleep. That's not a difficult decision. Just know that's what you're doing. There is a price to the hedge. And that's fine. If that's what you want, knock yourself out. If you are retired, you're like, I can't be retired. I'd say my portfolio would go up or down by 10%, 15%, 20 % in a year. I can't. That's too stressful for me. They're cool. Then make that decision. That's completely reasonable. No criticism for me at all. Just recognize to Ram's point that you know what you're doing and you're paying a cost. You're incurring a cost to do so. don't be the person which is a lot of people in my life where it's sort of like the moment markets crash it's sort of like oh haha this is why you don't do that and then when it's going really well it's like that's not fair it's like isn't it like you could have done that too it's like i didn't want the voltage i was like okay fine but this is this is the trade-off i mean what do you what do you want to don't don't say it's i bristle at it when you're when people like you got lucky or, you know, it's unfair.

42:54It's like, Oh, was it? No one was saying it was, I was, it was luck or unfair when like my net worth had dropped 50%. Like that, that doesn't seem to come into it. Right. It's just people are crazy. Right. And it just, it's worth sort of remembering that. And I say it at every opportunity because that's just the reality of it. We're up here to idiots talking about how great shares are to invest in and everyone gets it until they suffer a 50 % drawdown, right? Everyone gets it. Oh, I can handle it. Oh, the market's so dumb. It's so irrational. I wouldn't do that. I'm going to be greedy when others are fearful.

43:30It's so easy to say. It's so easy to say. It's like, oh, I've lost half my money. It's everyone's fault except my own. And then I'm going to sell out in a panic. It's all a big con. And then when it's up 50%, it's all the world's, it's all rigged. And it's just like, You've got to take a bit more of a mature view with these things. And frankly, it's, again, talk about easy to say, lean into the volatility, embrace it. We were talking the other day about where is your edge in an increasingly, in a world dominated by artificial intelligence and just so much data and everything. Your edge is an emotional temperament.

44:06That's where your edge is. Having a longer timeframe than some stupid hedge fund and not being able to throw the toys out of the cot on every kind of 5 % wobble. If you can do those two things, you are so far ahead. You are structurally advantaged over everyone else. And again, I say that knowing because I do it as well. But everyone goes, well, that's me. Are you a good driver? Yeah, that's me. I'm a great driver. We're all that kind of person in our head. but just like acknowledge it and own it and internalize it and really, really sort of think on that because it is an absolute guarantee that that's the journey that you're going to go on.

44:48And that is why I will applaud you and you deserve every success you have when it eventually comes. When everyone else is calling you lucky, I will be there bending my knee and saluting you and just saying, well done, you deserved it. You went through hell to get this result. And that's why the gains are yours. Sorry, mini-ramp. No, it's good.

45:08Yeah, I don't think I have anything to wait for that one. Let's go to a question. Luke sent us an email. It says, hi, Scott and Rampage. Long-time listener. First-time writer. Thanks for writing in. I've got to work out another way. If I say a something take, does everyone know what I'm talking about? If they're taking a Mickey take. Let's go with that. A we take. Thank you. I know it's become a little bit of a we take. now to kiss the ring at the start of every question. That was Andrew's fault, by the way. I never proposed that sentence, but that's entirely... You're the one that emphasizes it every week.

45:38No, I require compliments, but kissing the ring and bending the knee, that was your phraseology. Let's be clear. I know it's been a bit of what we take now to kiss the ring at the start of every question, says Luke. However, truth be told, within the space of three years, I now put you two in front of my rugby league podcasts. That is high praise, Luke. Thank you very much. Very kind of you to say, and the money is in the mail. In fact, you have led me, he says, to be much nicer to those within the crypto cult. At least I understand their perspective now rather than immediately concluding they've just watched too many YouTube videos while their homemade aluminium hats cook their brains.

46:15I don't think I'm crypto... Can I... Don't. Don't. It's such a trigger word. Stop it. Bloody crypto. Crypto is everything you think it is, everyone. It's such a scam. It's not crypto. It's Luke. It's Bitcoin. right? Bitcoin's a crypto. Anyway. I don't think I'm crypto curious just yet, says Luke. Perhaps more a crypto ally. Maybe we said Bitcoin ally. Would that make you happier, Ryan? Yes. I mean, they're just different. They are qualitatively different and I will die on this hill. And if you don't get that, then you've got no business being anywhere near this thing whatsoever. It's like saying that your mining speculative ASX mini cap is the same as Woolworths.

46:59They're technically equities. That's right. So if I say shares, I'm worried about both, right? I like shares. Do you like every share, Scott? No, some of us are good shares. So you advocate for people buying cash-burning mining speculators? No. No, you don't. But shares are still shares. I'm not going to tell you that mining speculators and shares are also shares. They're both shares. All right. All right. Maybe you two guys can get another recipient to give you their Nobel Prize Prize. Like, never mind, says Luke. Anywho, I wanted to get your take on the previous comments from New South Wales Premier Chris Minns.

47:28warning that Sydney is on track. This is, by the way, this is a massive... Look, this is about the... Last question of the pod. No, no, it's a left field, right angle turn, tangent change of... So it goes from crypto, right? So it's all about crypto from Nobel Peace Prize and then it goes to Chris Mann's warning that Sydney is on track to become a grandchildless city due to their housing crisis. I just think that's a massive kind of left wing. There you go. Yeah, yeah, yeah, I like it. The stats seem to back him up, says Luke, with twice as many 30 to 40 year olds leaving Sydney as arriving over the last census period.

48:03Brings me to my two-part question. First, is this actually a crisis or just the natural maturation of a nation? I have an unvalidated theory that Australia is simply 50 to 100 years behind civilizations like the US or Europe when moving interstate or to tier two cities for opportunity becomes standard practice. We seem stuck on the idea you must live in a capital city, but surely as our population spreads out, the economic development follows. Is this the exodus? I'm sorry, is the exodus actually a net positive for Australia in the long run? Yeah, that's an interesting question. Good question.

48:39Yeah. I mean... Look at Florida. Florida's kind of just grandparents central, right? One big nursing home in large part. cities have always been the breeding ground of innovation um and growth and enterprise because of network effects it's just if i'm trying to do a business and all of my suppliers are well you know within an hour or two sort of drive and i can um i can just coordinate much more effectively than i can if i'm running if i'm operating in a village with 50 people and the nearest one is like 100 miles away you just that that is why Amsterdam London Paris Madrid you know you go through the ages you know Constantinople like these were all places that they they attracted people because there was more opportunity there the more opportunity was there more people came more people came the more opportunity there was it just there is more there is there is a greater likelihood of valuable networks forming.

49:40And I'm not talking in a computer science terminology. That's what it's sort of come to mean these days, but just network effects. So I sort of lead with that because I don't know if that's as true as it was because of this wonderful thing. I mean, Scott's in barrel. I'm in the mountains. And you, dear listener, are God knows where. You might not even be aware. You're in a when and aware. You're three months hence in Antarctica, for all I know. Softball for Sunday morning, right? I like it. Yeah. So I don't know if you need to do it, but I also don't worry about it because I just think my philosophy is generally that people will, on average, make decisions that are relevant and appropriate to themselves.

50:22If someone decides that they've got more opportunity in Dubbo, then do it. Great. And as more people do that, then more opportunity will follow that. Why are people doing it? It's the only issue that you really need to know about when you've got 90 % of economic considerations these days really come down to housing. It's like young people, I mean, this is not just the sort of the economic thing. There's the cultural benefits of, take it from someone who grew up in the country, right? I just came to the city and, oh my gosh, like just the things you could do and the people you could meet. It was just so vibrant.

51:01And, you know, you just didn't get that in downtown Tamrath in the 90s. I know. Shout out to Tamrath. Tamrath's a great, great town, but it's, you know, it's not Sydney. Right. And I'm sorry to sort of be that focus. I haven't lived in any of the other beautiful capital cities that are out there. But my point is, right, like it's sort of, I think of a lot of people also appeals to them greatly. Now, as you get older, the country becomes more and more appealing. Take it from me. Take it from Scott. But I don't know. I'm guessing here. But I'm assuming that the reason people are going is not because they hate all of that vibrancy and culture that you get in the big centers.

51:37They're going because they just got no choice. What? A one-bedroom dog box for$10 million? No. Or I can move to Orange and have a four-bedroom house on three acres of land for the same money. Yeah. Oh, and they've got the internet there. Yeah. Yeah. That's a pretty easy decision, right? So, yeah. I think sometimes we worry too much about what everyone else is sort of doing. These things are more thought of as a continually unfolding process rather than something that should be directed or steered or this or that because some old man in Canberra thinks that that's a good idea. You know? So, it's interesting.

52:25What am I trying to say? Let me tie this all together. Yes, it's interesting. Yes, it's an observed fact. Why is it happening? Because of housing. Is it a bad thing? I don't think so. Are there much disadvantages as there used to be from going away from a highly networked center? I think less and less so with the rise and rise of the internet. Yeah, I agree. You should have just said that at the start. No, no. Well, we don't know yet. We think that's likely to happen. There's still a question about proximity and to what degree that does actually benefit the physical proximity. I know there are times when I'd rather be in a room with someone with a whiteboard rather than online.

52:57And maybe that's just because I'm a non-digital native. And maybe the kids these days will be equally at home and useful in both. I agree. But would you pay three times the mortgage for that? I don't think it's an equal one-for-one relationship. But I 100 % agree with you. Yeah, to your point, I've gone to Bowery, you've gone to the mountains. We've made our choices, right? We express preference, reveal preference, they might say. Reveal preference, yeah. So, you know, it's funny. I'm not sure whether it needs to be resolved in this issue from the angle you're looking at, Luke. But housing affordability should be, and then people's revealed preferences would be different because they'd reveal them differently based on different affordability levels.

53:37So, which sounds like I'm saying the same thing. Do I think we need to be worried about grandchild cities, not in and of themselves, to Ram's point? Should we worry about the forces that are causing that and the distortions that are leading to that result? Yes. Because of their own, in and of themselves. The impact of Cranjaholocity is not, to my mind, is not super relevant or necessary as the impetus or stimulus for that piece of work. The piece of work should be, I've got to spend 10 million bucks for a dog box in the sky. Okay, well, that seems bad. And that's 184 times my income. Okay, that seems bad too.

54:12Maybe you should address that issue. And if we did, we'd probably have more kids in the cities, not because they needed to be or we wanted them to be necessarily, but because they would just choose differently because they could afford to choose differently. I think fixing that would allow for – maybe we should have grandchildless cities or maybe we don't, but that would let people make those choices in a far more reasonable way, a far more affordable way, without feeling like they have no choice. So the grandchildless city is the result of policy, not about grandkids in cities, but about affordability of houses.

54:42So fix the affordability and then let the market decide is probably what I would say. Sorry, quick interject. Yes, yes, yes, yes. I'm nodding furiously. We talked, you touched a bit on Friday. I was like, we should have more kids. Bugger off. What happens between me and my partner is none of your business. Here's the reality of it. Everyone's different, right? Everyone, do whatever lifestyle is appropriate to you. But I think it's a reasonably obvious thing to say that, you know, a very meaningful majority of people want to have kids. If people aren't having kids, it's different when you go from a rural subsistence lifestyle where you had to have 12 kids because half of them were going to die.

55:21And then you like, they were your social security, you know, like that's, that's, that's very different. Right. But, but, but the fact that like people are only having one or two kids and they're waiting until their late thirties to do it isn't for any other reason than it's just, they can't afford it. Like the economics is like, well, one of us is going to have to stop working. well, how are we going to do that? It doesn't make sense, you know? And again, I'm trying to, I'm being very careful not to sort of assume that everyone must sort of go this nuclear family route. Each, honestly, genuine, each to their own.

55:50But I would bet pounds to pennies that if housing was much, much more affordable and there was much less financial stress on the younger generations, they'd be having more kids. Yeah, right, yep. Because people want to have kids. We are wired in exactly the same way as we were 10 ,000 years ago. Yes, exactly. Nothing has happened in the last 30 years to all of a sudden, biologically and evolutionary, to go, you know what? I don't want to procreate anymore. Like, it's madness, right? So to think that you can have, you know, like, there are very real demographic challenges with all of this. Ask South Korea.

56:26Ask China. You know, those places are on a path. Japan. There are very serious economic consequences. The solution is not a baby bonus. The solution is not getting up behind a podium and saying, have one for your mom, one for dad, and one for the country. Yeah, that's right. Screw you. I am not having a baby for some, because you're going to try and play on my patriotic heartstrings here. Give people the capacity and the means to do what they would otherwise want to do anyway, and they will do it. Sorry, mate. I had to get that off my chest. No, it's good. I like it. Cut your flow. No, I was finished anyway.

57:04Second question from Luke, a second point. Despite my theory, I selfishly want my kids to live near me. I want the Sunday dinners and I want to be on the sideline watching my grandkids play sport. If the Sydney exodus is real, how should we handle the bank of mum and dad? If we eventually have the means, is it capital F foolish, Lucas said lovely, to buy an investment property now to essentially lock our kids into our postcode later, even though we have a Sydney-sized mortgage already? I prefer to keep paying off the mortgage, DCA-ing into my favourite two ETFs, and maxing out the concessional caps within super each year.

57:40I know, Scott, you seem to be wrestling with this too. I'd love to hear your thoughts on balancing the financial logic with the emotional desire to keep the family unit close. Fool on, fellas. Luke. I'll jump in first, mate, just because you mentioned me in the comments. I don't necessarily want to lock my kids in on my postcode, although, you know, I think every parent wants the kids to be around, the grandkids to be close, so locking might be too harsh. I've said before and I kind of hold this view still I have an ongoing conversation in my brain that I probably will never get around and do anything about and that might be to my and my kids detriment which is the housing future potential asymmetry and I've talked about it before and you've mentioned that Luke so I'll just look really quickly for those who are new or haven't heard it I think housing is overpriced and I think it should be cheaper as a function of incomes, whether you talk about the prices or the repayments, repayments are the more appropriate one to measure because that's the portion of your money that goes on shelter.

58:38That's the only thing that matters. The price is immaterial to a large degree. It's all function of the same thing, but I think the key measure for me is affordability measured as repayments as a percentage of your income. If they don't go up, then housing will should be unaffordable, won't get worse. And if it doesn't get worse, then that sucks, sucks, but most kids on above average incomes or average incomes should be able to buy something within Kuwait somewhere, right? So that's, I know there's a very vague here, but you get the broad idea. If they go down, then great. And if I buy now from, not buy for my kids, but if I were to put my foot on something now for the kids and say, right, I've put a deposit down, I've started paying this thing off.

59:16That means there's a property that's linked, whose value is linked to the overall growth in property prices. So if they double from here and that becomes obviously unaffordable in 10 years time or 20 years time i've locked in today's price and so the asymmetry goes if the price doesn't move up from here then i will have there be a significant opportunity cost because i could have invested somewhere else if the price goes down i'll be a bit annoyed but at least i know my kids got somewhere to live and they asked they have an opportunity to be on the property ladder just to annoy andrew uh so you know to have a property that that they can either inherit from me i'll say like i've i paid the first couple years of repayments now it's up to you, here's the house or unit or whatever it is.

59:55But if the price goes up and they get locked out of those areas permanently, then I will have been better off doing that for them in the first instance so they have a chance. That's the bank and mum and dad you're talking about, Luke. So that is absolutely what I'm struggling with right now, wrestling with, to use your word, which is better. I don't know what I will do, but I can imagine myself, as you are doing, foregoing some of that additional saving and putting that money into an investment property intuitively geared, as much as I don't like it, I'll take advantage of the tax break if it's available, to make sure that my kids have the opportunity to start from that position, at least that position, right?

1:00:30If it could have been better, I've dusted some dough. If it gets worse, then at least I know I've locked them in at this level as things continue to escalate. So that's the conversation in my head. To answer your question, is it foolish to do, Luke? It's all guesswork, right? It's all speculation. What will prices be in 10 years' time? So I'll know looking back, look back at this 2026 episode and go, oh, man, I wasted money or, oh, man, I'm glad I did it or, oh, man, I can't believe I talked about it and still didn't get around to it. And now the dog box in the sky is worth 20 million rather than 10 million.

1:01:01And my kids now have to live another hour away because I didn't do anything about it at the time. And regret minimization framework came in the Bezos thing of like, you know, which is least worst. If I had all the money in the world, I would do it now. I would do it now because where's the downside, right? I don't have all the money in the world disappointingly for me and my wife and kids I don't know what I will do there was a detached semi sorry duplex in our neighbourhood and we actually did a look at that not even seriously we kind of drove past and went maybe we should buy that and rent it out and maybe that would be good for the kids I don't know what we will do Luke I will say there's no specific immediate plan to do anything about it all my money remains invested in shares.

1:01:46I think the return of shares would be better than property. The risk is if I'm wrong, then there's real implications for the kids. So I don't know, Ram, where are you at? But even if you are – well, I mean, history would suggest that's not a terrible bet. Right. That's what worries. And so – but like I don't – I guess where I struggle with that is that let's say you don't do it and you just keep all your money in shares and shares continue to outperform property. Like on a relative basis, your capacity to buy it later improves. You didn't have to buy it now. As long as you just outperform. But that's the asymmetric bet, right?

1:02:24Because if they do, I'm fine. If they don't, then there's meaningful downside in that context. So what do I do? Well, that meaningful is different as well. Like if it's a slight underperformance, it's probably like, well, it would have been more optimal, but it's not chalk and cheese kind of stuff. I mean, again, all we can do is – you said it. You nailed it, right? All we can do is speculate. Yeah. And so that's, Chris, what do you think is going to happen, right? If you think that property is going to race ahead of shares, then, yeah, put it into – I mean, forget the kids. I mean, the conversation is different right from the get-go.

1:02:55And if that was the case, you'd do it anyway. Here's one thing I'll say as a parent as my kids getting older. Your kids are going to do what they want to do. like to assume that they're going to want to live near you is, you know, and I'm not saying cause there's a bad family dynamic. I'm just like, dad, I fell in love with a girl from Spain and we're moving to Madrid. Like it just happens. Ask anyone who's got adult kids, right? Like they just life planning for what your future adult children will want to do is dangerous. And think about what you did relative to what your parents wanted you to do.

1:03:32I think about this a lot, right? Because I think, oh, I would do this. They're just like, the kids, they're their own people. That's why you have a trust one with conditions, though, Ram. All right. There's a house over there for you. You can get it if you live in it. If you don't live in it, you might sell it and go to Hawaii. Oh, yeah. I'm kidding. They do like your kids live close, but then they just resent you. For me, by the way, just to really clear on Luke's, I don't care where the kids live. So for me, it's not a matter of close necessarily. It's just within the price bracket of the sort of area.

1:04:03And look, you know, I'm in barrel. I'm out of Sydney market already. But just having something that appreciates roughly in line with others. I don't care if my kids sell it and go and buy something in Spain, to your point. It's just being able to have that. Effectively, their opportunity ratchets in line with the rest of the market and doesn't fall behind it. That's kind of my starting point, no matter where they end up living eventually. I said I saw one we drove past. I would happily buy one in Sydney or suburbs or somewhere else. It's not a matter of close to me. I'd like them to live close for all the usual parental and grandparental reasons.

1:04:32For me, it's just the financial bit, not the proximity bit. The way I've always – we get a lot of questions, understandably, about estates and kids investing for that. And I just – You just don't care about your kids enough. That's what you're saying.

1:04:49Toughen them up. Tough love. Get out of the streets, huh? Get out of the street. You've got to never hurt me. That's right. Exactly. Thank me when you're older. I've always thought it doesn't change what I'm doing because I'm already trying to maximize returns not in some hedonistic capitalistic I just want to be super rich for the sake but I'm already trying to max I think anyone listening who's gone through the four billion different podcasts on offer in the world and landed on something called Motley Fool Money I'm going to go out in a limb and say you're probably interested in in like you know building a financially secure future for yourself.

1:05:26And it's not a bad thing, right? Like I think we're all in that bucket. I'm absolutely doing that. And I'm not even ashamed to say that I'm trying to do it to the best of my ability. I want the highest return that I can get on a risk adjusted basis. You can judge me all you like. That's what I'm here for. That's what I want to do, right? And if I'm successful at that, then my kids will benefit, right? Like either way, whether I do something now and I put it in this truck, I look, I get it. I get it. There are differences and there'll be some financial planner accountant out there falling off their chair right now.

1:05:54But it's just sort of like the best thing I can do for my kids is love them, look after them, and just like look after my own portfolio because you're going to get it. You're going to get it, right? And it's not even just wait till I drop off the purchase. It's just like that gives, if I've built up a good pile of assets and cash or whatever, and then it turns out that they did want to live somewhere near us or wherever, it's like, yeah, we can make that choice at the time. Up until that point, this is in the best performing assets that I can possibly find. And then, oh, you want to live near us?

1:06:26Boom, we can help you out. You don't? Okay, that's cool too, right? But I've just struggled with trying to make a decision for someone who's not me 20 years hence. It's a tricky one. And it's like, particularly if it means, it'd be one thing if there wasn't much of an opportunity cost, but I've got to make this decision for my children who are children. and not yet adults and what they will think in 20 years time. And assuming that I get that, if I don't get that right, I am purposely buying a lower quality asset. It doesn't make sense to me. No, that's fair. But very quickly, what Chris and others are saying is absolutely, I get, is absolutely rational.

1:07:10Hey, I'm a loving, caring parent and I want the best for my children. Like, yeah, like full praise on all of that. I think sometimes we get a little bit too cute with sort of structures and, you know, I don't know. I don't know. Just try and make as much money and then you'll have the optionality to do what you want when you need to, if you need to do it. Yeah, I like that. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

1:07:42Hey, question. Let's finish off with one from Kevin. Foolish greetings to the team behind the glass of my phone. Kevin, if you'd let us out occasionally, that'd be really nice because it's a little cozy in here with Andrew. Long-time listener, first-time mailbagger, says Kevin. I usually listen to you guys while dodging magpies and smart cars on my morning run. And it's the only thing keeping me sane in this market. You're not really sane, Kevin. You're just insane. Like, ah, special way of insanity. I nearly drove off the road recently when I heard Senator David Pocock's latest stat. The Australian government now collects more revenue from the beer excise,$2.7 billion, than it does from the petroleum resource rent tax,$1.5 billion.

1:08:21It seems we are officially powering the nation's coffers with schooners rather than LNG. Nah, I'd rather drink a schooner than LNG, but I hear what you're saying. This got me thinking about the bigger picture, which leads to my question. I was slogging through a Masters in Applied Finance. That is a slog, mate. And I finished a deep dive analysis the end of last year on the 2025-26 federal budget. One of the few people who've been through it, mate. Good one. While the politicians are celebrating a, quote, soft landing, end quote, on inflation. They worked. My numbers are showing some serious structural rot underneath the floorboards.

1:08:56The, quote, structural deficit, end quote, is here to stay. Payments are locked in at over 26 % of GDP, thanks to the NDIS, aged care and health. but receipts are stuck at roughly 23 % of GDP. That gap isn't closing. Two, productivity has collapsed. We're growing at a measly 0.4 % compared to the historical trend of 1.6%. And three, the tax lever we won't pull. My research suggests that lowering the corporate tax rate to 25 % specifically for companies that reinvest in productivity would kickstart capital deepening and could add 1 % to 2 % of GDP over the next decade. My question, do you guys agree with my assessment that we are sleepwalking into a productivity graveyard?

1:09:43And if you were handed the treasurer's keys for a day, scary thought, I know. Speak for yourself, Kevin. I would love it. Would you back a 25 % tax rate to get businesses investing again? Or is there another lever you'd pull to fix this structural imbalance? Full on, Kevin, aspiring finance nerd. His words, not mine. Are we sleeping on a productivity grabber? You already said yes, Ram. Tell me why. I mean, the whole top to bottom we are. I just, I can't. There's a number of trigger words that I hear in the media. Productivity is definitely a trigger word. Right. It is the, arguably, one of the most, if not the most important things.

1:10:23Yeah. If you want to talk about improving productivity, like so, improving prosperity. Growing the pie, for all of the ideological grow the pie, I think people are like, oh, lower taxes, lower, maybe, maybe not, whatever. Productivity is the only way you grow the pie. Maybe lower taxes is the way you get there, maybe. And I'll ask you the thoughts on that in a second. But population growth grows the pie, but then it grows also the number of people who want part of the pie. So it's a self-defeating mechanism unless you get the network effects like you talked about with cities before, Ram. And productivity is the only other one.

1:10:51They're the only two levers that can actually improve standard of living at all over any length of time. Keep going, sorry, man. Yeah. So it's super important. Where I bristle though, is that it's not something that you can say to a business, be more productive. I mean, they're already trying to be as productive as they can. Not for the economy and not for the country. They're doing it because they want to increase market share and make more profits. That's how you do that. You'd be more efficient than the next person. And if you're more efficient than the next person, you can afford a lower price and you can either improve quality or offer a lower price.

1:11:27And then guess what? You make a lot more money. So the fact that anyone even thinks that this is a political problem, it drives me crazy. There is some policy implication though. Wait a second. So you're right. So like I said, the one exception is that if you want to improve productivity, take stuff away, don't add stuff. Don't make me fill out 400 different forms that are going to take six months each to process and you're going to charge me$500 for each one. And just like, it's an absolute nonsense. And I think anyone who's run a business knows when you start going through a lot of these box ticking things, it's like, I would rather be thinking about my product lineup.

1:12:06I would rather be thinking about my manufacturing capacity. I would rather be thinking about my roster and my workers. I would rather be thinking about a million other things, but I'm having to talk to the bloody accountant and the lawyers again, because I'm trying to navigate this labyrinth of regulation and red tape. And, you know, it's just like that that's that's what just drives me bananas it it's like with the kids thing people want to have kids businesses want to be more productive yeah right like it just it just is right you don't need to ask it or will it will it into action so sorry little little aside there kevin the other thing that you're absolutely right i mean you don't need to be studying you know doing a what was a master's in finance or or supply finance to anyone anyone who looks at the budget over any length it is that's right freddy can see it yeah yeah yeah except if you're a journalist or a politician you can't see it right like it's but it's it's not like wow i had to spend like i had to go into the catacombs and research in the archives and i uncovered this secret that no one else i'm not having a go you at all kevin it's just like that's what's so frustrating about it is it's right there and it's like and and and it doesn't lead anywhere good it just doesn't lead any we're good so i don't know yes productivity is important just help help businesses help themselves is probably the best uh thing to do and if you really want to help stop borrowing money from our kids and and stop printing it out of thin air that would be a wonderful start that would be a wonderful start yeah um kevin um yeah structural references i've been banging on this for a long long long long time you know that mate if you're a long time listener um it's madness.

1:13:50It is madness that we keep making things worse rather than better. And I've said before, was it Friday, you put me up on the Keynesian idea of surplus and deficits. What's a surplus? It's a mythical thing we've never seen, but apparently it exists. That's the thing that gets trotted out. It's all right. When things are good, then we'll get a surplus. Wake me up when that happens. That's important for two reasons. One is if you don't have national debt, net debt over time, again, some deficits add to the debt, surplus is taken away. If you run a structural deficit properly, you also don't have national debt growing.

1:14:21At best, you pay it down, but at worst, you just leave it not getting bigger and eventually get smaller as a share of GDP. So I would pay it down, but even if we didn't, if we went to a structurally balanced budget tomorrow, you said the gap isn't closing, Kevin. I mean, that's up to us, right? So we close it by decisions. That's how it's going to happen. We're not going to grow our way out of that gap. We have to choose to close the gap. And a structural deficit would, sorry, structural balanced budget would actually help those things happen. So I think we'll be careful what we assume won't change or we're prepared to allow the politicians to get off the hook on.

1:14:56We should demand it gets changed. Can I just put it? You're right. I'm not going to disagree. I'm just going to frame it differently. What we need to do is either increase people's taxes or take away their services. Yeah, totally. When we say balance the budget, that's kind of what we're talking about. Yep. And by the way, we sound like it's a bad thing. if you are spending 3 % more than you're earning every year, you're growing the credit card balance, and you can say, well, it's not fair. People are complaining. Yeah, I would complain if my spending had to go down or my income had to go up to stop adding money to the credit card, but it doesn't mean you shouldn't do it.

1:15:29It's called being a - I want as much stuff as I can get for free as well. I don't - Yeah, I get it, but there are consequences to that. In other words, Jackie Lambie, it's just called being a goddamn bloody adult. Seriously? We're spending more than we're earning, guys. You can keep doing that until the bank manager knocks on the door. You can actually just go, actually, I'm being an idiot. I'm going to just change some stuff because this is dumb. There's nothing controversial about it other than pure selfishness, self-interest, and the inability and unwillingness to look at the reality as it exists.

1:15:56So, yes, more tax, less spending, or both. Yes, yes, yes. It's not a difficult one. Productivity, Ram's right. Get stuff out of the way. Just get stuff out of the way. Governments can't do much to fix underlying productivity. they can remove impediments and that's the least they could and should do. All they can do. What else can they do? You know what else they can do? They can invent AI, right? Or you can invent the internet. Or you can, you know, that's what, but let's be real, right? This is not going to happen. So I mostly agree with you. I think there are policies you could put in place should you choose and these may not be worth doing at all or may not have the returns you want or may actually not even be a positive ROI.

1:16:36We could and probably should invest more in education, for example, right? As a wealthy, high-wage country, we are likely to be more productive if we have the skills that are rewarded by productivity. Actually, that's true. And you can say with roads too, right? So that's the purview. Roads do improve productivity. So I will walk back a little bit. But I mean, right generically, what you're right about, and this is the key thing, is governments can't make businesses more productive internally, right? They can absolutely create the conditions to allow businesses to thrive. That's the way to put it.

1:17:10And that's education and it's infrastructure and probably a few other things, probably trade policy, probably some degree. If government said we will put productivity at the forefront of not everything because it shouldn't go above defence and security, it shouldn't go above social services necessarily in terms of making sure people actually have enough to eat and a bed to sleep in and hospitals to attend. But past that, every decision should be what can we do in this portfolio area to help Australian businesses be more productive and competitive. Not make them do it, not internally do it. How do we get out of their way?

1:17:42How do we remove barriers? How do we make things more, you know, prepare workers, all that kind of stuff? So a little bit. And 99 % of what you said is right. I just want to add that little extra bit. There are a couple of things on the edges they can do. Let me add a little bit just on that as well. Because when you say stuff like that, again, I thoroughly agree. But I am aware that the interpretation often is when you say that, what that sounds like is giving big business more advantage. Yeah, right, right. And I know you're not saying that. That's why I want to emphasize it. Again, majority of businesses are what are called SMEs, small, medium enterprises.

1:18:11They hire the most people. So it's not about giving, you know, some mega international multi-corp blah, blah, you know, an extra sweetener or something like that. That is absolutely not what we should do. But it is getting out of the way of, yeah, absolutely. But, you know, if Gary wants to run a cafe and, you know, Sarah wants to set up her own plumbing business. Make that as easy as possible. Make that as easy as possible. So productivity, yes, it's a problem. Go and say I'm going to fix it. To some degree, we're a victim of being a mature economy. A lot of productivity growth goes from primary to secondary, in other words, manufacturing, then secondary to services.

1:18:52It's harder to make services more productive. AI will do a lot of that, by the way. It's hard to make services more productive. Nurse, can I deal with so many patients? Yes, you can make that slightly better with better monitoring, a better technology, but replacing 40 workers in a field with a tractor is much easier. So just increasing productivity is harder the more you move to a services economy. And that probably means the historical trend is higher than the future will be, almost by definition, I would suspect. I'm no futurist, but it's when we can't do it. Tax lever, Kevin, I have never been sold on this one.

1:19:22And maybe I'm wrong. Warren Buffett has a great quote, which is, I'll mangle it, but I'll get it roughly right. Maybe you'll come across a guy who's got a great idea, but he won't proceed with it because of the tax that he'll pay when it succeeds. If so, send him my way. Let me unburden him. And the thesis to your question, and I'm not saying you're saying this, Kevin, but the inference would be someone won't do a thing because they get to keep 70 cents in the dollar. But if they've got to keep 75 cents in the dollar, they do the thing. Now, there's going to be some idiots out there who are just anti-government, anti-tax idiots who are like, I can make a lot of money doing this thing, but I'm not going to out of principle.

1:19:59It's like, well, believe you, dude, someone else will probably do it if it's a great idea. If you're going to do it because you get to keep 70 cents in the dollar, what more are you going to do to keep 75 cents in the dollar? And incrementally on the margins, there's someone who do one more thing. Yeah, because people are people, right? Are we likely to make back in gains the five cents we lose from everyone else who's already doing their thing just to make the extra bit? And I think the answer honestly, mate, is no. I just don't. If there was an obvious capital starvation, maybe make the argument we'd attract more capital from overseas.

1:20:29I'm not familiar with any great ideas that Australians have that aren't going ahead, right? I just don't buy that tax specifically, a reduction in tax would make enough difference, frankly, at all. But more importantly, actually, on a net basis, if you reduce the rate, you're going to do a whole lot more stuff just to earn the same revenue dollars, let alone get more. You're likely to leak tax revenue. So do I think it would make a difference? Honestly, mate, no. Every business will say, of course it will, because they want to, because I want to pay less tax, and everyone does, right? The government says, Scott, will you be more productive if I have half your tax bill?

1:20:59Oh, yes, Mr. Chalmers. Yes, I will, sir. I promise. Okay, good. Well, as long as you promise, I'll owe you a tax bill. Oh, thank you, Mr. Chalmers. That'd be great. I'm in that line, right? I'm signed that piece of paper. Will I double my productivity and output and will the tax bill be the same? No. So, I'm not sold. What I don't get there, though, is like, so if I own my business and whatever, 50 % tax, company tax, right? Yeah. that gets passed through. I mean, there are, I'm going to make the point again. There are only people. There are businesses. PGY, LTD is a human invention. Particularly in Australia.

1:21:37Especially in Australia. Yes, yes, yes. Because of the franking system. Yes, 100%. So it's a question like, whatever tax is paid on my behalf by the company, I get to claim has already been paid. So the company can pay zero tax. Or 100 % tax. Or 100 % tax. I mean, either way, it comes out in the wash when it comes back to me the only thing that exists in meatspace and outside of the realm of the abstract. And it's not trying to be too cute here with sort of terminologies and the rest of it, but it's sort of – It's important to say the flow of the money. We're working out what the impact is going to be.

1:22:10Yeah, yeah, yeah, yeah. No, I think it's a good point. I just – I don't buy lower taxes mean – again, on the margins, will someone do one thing more because there's lower tax? Yes, because people are idiots. But if you find the person – if you find the serious business person who won't do a thing at 70 % or 30 % tax rate, get to keep 70%, but they'll do it at a 75 % retention. I like to, you hated the 70 cents that much, but you love the 75 cents. I mean, it defies, now there's return hurdle rates and there's returns on capital. And again, on the margins, will there be someone for whom that makes actually an actual difference, not just an emotional, you know, whatever?

1:22:44Yes, probably. Is that really the difference? I doubt it, mate. So again, you've done the work. You say that if you lower the corporate and make a difference, you may well be right. The question I guess I've got is, is it a permanent change or a one-off change? And does it do enough to offset what otherwise would be lost? And if the answer is no, and by the way, Ransport is actually more important than mine, which is, I don't know what the tax rate is it gets passed through the individuals anyway. So who cares what the rate is, which sounds weird, but it is the reality. At one level, it's different where it's for reinvestment, right?

1:23:13So if I'm paying 100 % out, I've got no money to keep internally as the operation. So I should, again, there's nuance in all of this kind of stuff. So there is absolutely a difference between 80 % corporate tax rate and 10%, particularly from an outside shareholder's perspective, particularly in a company that doesn't have a policy of paying out most of their earnings in dividends, just to get a little bit wonkish. But we talked about it on Friday. It's sort of like we can argue the toss and there are valid points on both sides, but it comes back to this fiddling at the edges. It's 30 % okay, 25 % much better.

1:23:48I'm always back to the view of just wholesale structural changes is what's needed. But at the same time, it's never going to happen. So maybe that actually is a bit better. But I guess I'm just saying, Chris, it's worthy of consideration. It's just not a silver bullet in and of itself. And I know you're absolutely not sort of saying that. Kevin, by the way. Sorry, Kevin. can I make one very quick point I'm just going to make it go on we can just move past it I don't need any comment in the rest of it I would like a world where any productivity gains that are realised are not diluted by excessive money printing I'm just going to say that I'm shocked I'm just going to say that because for those that are new to the pod very quickly very quickly if you missed Friday's episode what does productivity mean productivity means I can do more with less same input i get i get more out of it that's great which actually another fancy if depending on which way you want to solve things it's just like what that's really saying is uh i can i can do a lot i i can the money that i get can buy a lot more in other words solve it a different way prices should go down in a in a perfect world my world uh every the everything would get cheaper by the aggregate rate of productivity growth.

1:25:15We live in a system where we actually target against that. So every time we get productivity gains, we actually adjust either the quantity or the price of money or both, usually the price in the short term and then the quantity in big emergency kind of situations. But we do that to make sure that we don't. And what that really spells out, in the most simplest terms I can put it, it means that anything that should accrue to us in terms of our prosperity and purchasing power is diluted away. and that is the biggest elephant in the room that no one ever wants to address. It's a whole other discussion.

1:25:48I feel contractually obliged to mention it and we can move on. No comment needed, mate. All right. In that case, we are done here. I'm going to let the mic drop. Let it hit the ground. Yeah, that's a good policy. Pregnant pause. And then we're finished. Thank you for listening. Until next Friday, have a great week 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.

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