Mailbag, incl: The pollies aren’t as bad as you say! July 5, 2026

25:08Thank you, guys. Every week you make economics digestible and fun to listen to. Keep up the good work. That's a fantastic story, Mike. I love that. Very, very cool. I do love that. We shall not cease. I had to look this up. We shall not cease from exploration. And at the end of our exploring, we'll be to arrive where we started and know the place for the first time. And that felt like that. It's TS Eliot, but he just goes so well with that little story there, Mike. I love it. Love it. Well done. He's actually a question too. By the way, Mike's from New Zealand. and Mike just accept and appreciate the fact I didn't try and do it in New Zealand actually because, man, I was desperately keen and I thought that's probably a bit too much.

25:44So I didn't. You're welcome. To the question, you guys bring up South American countries a lot. We're talking about what bad monetary management actually looks like in practice. The money printing, the corruption bleeding into the legal system and how all of it eventually does over-investors. You used the different word, does over-investors. You've made the point that even bonds sitting at 20 % returns aren't worth it when the whole system underneath is unreliable? And that's exactly where my question is coming from. We had a similar question before, Ram, but Mike puts it differently. At what point does America start looking similar?

26:17The government has pushed out the head of the Federal Reserve, Jerome Powell, and has someone else in the seat who will lower rates, which just means inflation running amok. Friends and family are being handed government roles and contracts while also being let loose on foreign affairs. Kushner and Witkoff are the obvious ones here, says Mike. There are serious allegations floating around about insider trading on oil pricing and deal speculations. People going short and long about 30 minutes before announcements that weren't public knowledge yet. Yeah, or polymarket bets, yeah. And then there's Trump Jr.

26:47running private businesses dealing with Saudi Arabia and surrounding states with the government's backing at what always seems to be suspiciously perfect timing. Not to mention tariff politics, says Mike. I'm not trying to have a go at America here, he says, brackets. They've done a decent enough job of that themselves. but a genuine question from an investor's point of view. Granted, a change in government could turn things around, partially, and honestly, it's still a more stable playing field than most. But the things you normally flag, like protectionism, meddling in markets, currency mismanagement, and the others, are starting to show up and are not slowing down.

27:24So when do you actually look at all of this and call it a tipping point? At what stage does America stop being the gold standard for investing and start looking like we need a more stable environment elsewhere. Cheers from Mike, brackets, young bastard, 28 from New Zealand. You are a young bastard, Mike, and I can't do that in a Kiwi accent. I'd love to. I can't quite get my head around the vowels. Just assume it's a Kiwi accent for you, Mike. Thanks for the story, mate. Thanks for the question. What do you reckon, mate? Where is the tipping point for the Yanks? Are we past it? Is it coming? Yeah, I feel as though we're past it, but I also think it's going to be an extremely slow car crash.

28:00Right. Like when I say why do I think we're past it, again, all you can really, the best you can do is just refer to history. And I think there's a wonderful book called This Time It's Different by Rogoff and I forget what it was, but they made the point that there's no country on planet Earth with the exception of Japan so far and they've got their own problems. That's had a debt to GDP above, is it 120 %? That has not ended badly is the short version of it or is not defaulted in some way, whether it's what they call a soft default, kind of like a soft slap in the face or a hard punch in the face.

28:39Because you get into what they call a debt spiral. It's just where the interest is so great that you're having to tax more and print more just to pay the interest. And the US is very fortunate having the world reserve currency, so not many places can do that and rely on external financing. I mean, a lot of countries, every country that's got its own currency can do it, but, you know, it's hard to sell that on the international kind of market. The US is in a bit of a privileged position. And there's impacts for exchange rates and national trades. And even if you can do it deliberately, directly, you can't escape the consequences for the most part.

29:13Yeah. I mean, I do think they're on the way and I think China is on the rise. It's not a hot take at all. It's just obvious, right? But also, I think there's a couple of things. So the first is that can be true, but it can still take decades. It's such a long time to pay out that it actually probably doesn't suggest you change too much your investing strategy. It's more a point of no return rather than a tipping point, mate. I mean, it's kind of the same. Tipping point feels like it's like over the cliff all of a sudden. What I'm hearing you kind of say is they've kind of passed the point where they can actually manage their way out of it.

29:44So now it's just a question of how steep or gentle the decline is. I mean, they totally can manage their way out of it. Right, okay. It's not impossible, but it's hard. and every year that goes by, it's harder. It's like you never get addicted with the first cigarette. You've been smoking every day for five years, that's much harder. And if you stick at it for another 20 years, that's really hard. It's not a great analogy, but it's not a bad one either. And I think there is absolutely a case to be made that they could reverse out. But they're certainly not making the right decisions right now.

30:24Right? And the trouble is, here's the trouble, because the decisions that need to be made are so politically unpalatable as to almost you can rule them out. Someone has to go up there with a mandate of extreme austerity. Speaking of policy. You know? Yeah, yeah. Or just hope on a productivity miracle of likes which has never been seen. And maybe AI is that. I don't know. But I don't want to say it is a fait accompli, but we shouldn't underestimate the challenge that's involved. And that's not being cynical or negative for the sake of it. That's, again, it's just, if I was to told you like 99 % of the time X happens, Y follows.

31:02So that's all I'm doing here. I'm just, I'm just drawing allies. So it's impossible. No, not impossible. But history would urge us to be skeptical, right? So yes, so there's that. The other thing to remember is that separating the macro from the micro is hard. Like there can be, there are people who live in Argentina who've lived very comfortable lives, much better than most of us listening here, right? They're in the right place, the right time, they've got the right connection. You know, so there will be companies in America enlisted on the markets there that continue to thrive because they just do something incredible.

31:42Even if the broader society in which they operate is headed in a worrying direction, even at a very, very slow pace. So to answer your question, I agree. I think the US is in trouble, but I don't think it's immediate. And I think there's still incredible opportunity to be had there. I think there are some incredible companies and there will be, it's more likely than not that the next trillion dollar company is founded and grown in America. It's very likely. So it feels like you're speaking out both sides of your mouth and it's contradictory, but I don't think it is. And I've heard people make this case for a long time, and it's had a lot of resonance for me, but they've lost incredible amounts of money, at least on an opportunity cost basis.

32:27Yeah, yeah, yeah. So I'm not, I don't, I mean, I don't know what else I would do too much in that regard. So I'm always, I am endlessly fascinated about the macro. I can talk about it all day long. It's obviously super consequential. But when it comes to the practicality of investing my capital, I don't pay out a huge amount of attention. It sort of maybe informs general direction and general sentiments, but I'm very much a bottom-up investor. If there was a wonderful company in some Latin American company and I had the opportunity to invest in it, I would, even if I thought, well, the institutions and the political systems around that aren't great and the society as a whole is not on a great footing.

33:10Eh, you know. So does that answer the question? That's a pretty unsatisfying answer, but that's kind of how I square that circle. That's a good one, mate. I will say you gave the example of a South American country or company. I invest in a company called Mercado Libre, which is a South American Amazon slash PayPal combo. Yep. And very comfortably, it's super volatile, right, because when the currencies move, the share price is volatile because it's just currency move. The shares are listed in the US market and are trading in US dollars, and so you do get some significant movements as things move around.

33:41That's just kind of the way things go. So, you know, there's going to be consequences. I'm with you, mate. Look, I would suspect, Mike, and I don't know anything, like the problem with shocks is they're ever expected, otherwise there wouldn't be shocks. So, you know, what do you know, right? I think Ram's right. I think directionally they're in a world of hurt. I don't know how long it goes. I don't know how they get themselves out of it. I don't know what the implications are going to be for the US dollar or for international investors. And there's a range of possible outcomes, right? Maybe they nationalize the entire market.

34:08Maybe they ban foreign investors. There's maybe the currency halves and halves again because they have to effectively revalue or default on debt. So it's really hard to know. It's hard to know when, as Ram said, that the timeframe is really hard to do. I am aware of it. I'm cognizant of it. I'm thinking about it more than I was five years ago, put it that way. And so I'm keeping an eye on it. I suspect that I own decent amounts of US shares. I own quality businesses that I think have bright futures. if I was to get to a point where I felt like the macro implications were larger than the company's abilities to create value to my portfolio, that is maybe I get the currency crashes or something else happens and I can't take the money back at a reasonable price, then I'm going to sell and move.

34:53If I think the regulatory or legal environment make it harder and less likely these companies to succeed, I would sell and put my money somewhere else. Until I believe that, I think the companies that I own have very bright futures, particularly over the long term, And so I don't want to try and make, to around this point, macro bets that are uncertain over, frankly, business futures that I think are more, if not certain, more likely. And so it's kind of a – it ends up being just a bit of a gut feeling as to which way you want to take it. Yeah, Mike, you're right to be aware of it. I'm not going to tell you what you should do.

35:24I will say half of my personal portfolio, more than that, is invested in the US, including super. It's more here than there, but a large chunk. not because I'm unaware of it or not mindful of it. I wouldn't say I'm concerned, but I'm mindful. I'll keep an eye on it. At some point, it may be the case of they still bring it home or send it somewhere else. But at what stage is your question, Mike? I don't know. I don't know the stage. A lot of good things can happen despite bad. Mercado Libero is a great example. That's the – and I'm glad you mentioned it, Ram, because I wouldn't have thought of it.

35:52That's a great example of a company where you go, you know what, for all of the stuff that's going on, these guys have got a bright future and that, to my mind, is good enough. what did Hemingway say about there are two ways to go broke gradually and then suddenly you know and it's sort of which is great I love it I love it I love it and it's it's usually the way when you see the waning of empires they sort of struggle they sort of hit a tipping point they struggle they struggle they struggle and then it just gets it gets very real very quickly at the end and you know look at look at the French Revolution and the Napoleonic era There's a whole bunch of precedences that sort of when you look at the great global powers of history, they tend to follow a certain arc and it's hard to not position the US on a particular part of that arc.

36:43It really is hard not to. But you've just got to be mindful of, as I said, the length of that arc and the specificity of the various players. And what happens to the individual? You're right, the individual players within that aren't going to have the same future as the entity itself. that's the challenge yeah Motley Fool Money for more subscribe to the free newsletter at fool.com.au forward slash listener

37:09I've got a big question from a listener I'm going to call John who and John you said in the third paragraph you didn't want me to mention your name you're very very lucky I read at least a little bit of that while I was talking around you guys know well enough you don't want your name mentioned mention it at the very very top so I'll call you John instead wait a second I know a John I think I know who you're talking about go ahead Well, he says he's got a very specific name, which he does, so I do know his name. I'm going to give him this one. Anyway, I will say a few budget pushbacks and questions, mate.

37:37We've got a limited amount of time today, so we'll try and do each – we've done it a bit before, so we'll try and summarize our thoughts and move on, see how we go. Hi, team, says John. First up, I'm a big fan of the podcast, and I want to lead with that. It's part of my weekly routine, and I genuinely value what you do. So please take this in the spirit it's intended because I don't want to come across as having a whinge. We understand. Thanks, Sean. Honestly, if you started the question, John, it's like, I just want to have a whinge. I'm like, yeah, go for it. Fine. I'll allow it. Me too. Quick favour before I dive in, says John.

38:10If any of this ever gets read out or quoted, please don't use my name. It's an uncommon one. And I'm, let's say, vocal about my opinions in other corners of the internet. It wouldn't take a genius to put two and two together. He says. Anyway, I wanted to share some thoughts on the recent budget episode. I agree with you in principle that these changes are probably necessary. You made a fair point. There's never going to be a comfortable moment to stop negative gearing, and something has to give. Where I fundamentally struggle is the framing of this as an intergenerational equity issue or one of fairness.

38:44Now, I will say at this point, John, I'm going to try to separate out the government's selling pitch from the actual policies here, because I think that's really important. People are kind of like, oh, the elbow shouldn't call it that. I don't even disagree with you, but it's not really, that doesn't determine whether or not the policy is justified in and of itself for its own purposes. So I thought we'd mention that as we kick off, but we'll keep going from here. Yes, that is true, but it does, when the rationalisation is weak, it undermines. Oh, it does. But the policy is going to be justified with a bad message.

39:17100%, 100%. But it's sort of like the fact that if it's got a good, If there's a good rationale, I'm not a political strategist, but my advice would be lead with that rather than - I suspect the political advice was from the spinners who said, if you can make it about this, this is better for votes, as I would suspect that. You don't get any extra marks for that, for me. No, no, no. I'm sorry, I'm not justifying the spin at all. I'm not justifying the spin at all, John. This is not about - I'm not saying it's right or wrong. I'm just - whether it is or not about that, is different from whether the policy itself is justified.

39:53They're linked, but they're not the same thing. I don't think you can say it's a bad policy because they're saying it's this and they're wrong about it. It's a good policy and they're still wrong about the spin is also possible and true. Yeah, it's a good policy and they can't sell it and I don't think they really fully understand it themselves if that's their rationale. Unless they're the wrong people, exactly. Or they just think we're a bunch of idiots. It's like none of those are really attractive as rationalisations. All right, John says, if it's truly about fairness, why grandfather it? that alone seems to acknowledge the rules will keep shifting around my generation specifically the generation before me built wealth using exactly these strategies the generation just behind me has the five percent deposit schemes i'm the proverbial stuff in the sandwich everyone before and after me get at least gets to be bred i was trying to use the same playbook everyone else used before me to close the gap toward owning a place to live in not to become a property mogul just to eventually have someone somewhere I can have a barbecue with my family.

40:50So let's stop there. There's a couple of different points, mate. Is it fair to grandfather? Is grandfathering undo or make lie of the idea of fairness? Oh, that's a good one. I mean, probably not, but then there is, I do have some sympathy to the argument of perfect being the enemy of the good. So if it's sort of like if we need to make a change and the only politically feasible way to make that change is to grandfather it and that just implicitly is unfair. Yeah, yeah. But it gets us to a better place. I'm not happy about it, John, but I can sympathise with it because if it's like, oh, no, we're going to do it for everyone, it's like, yeah, but it won't get voted and nothing changes.

41:36It's sort of like it's crappy but it's less crappy than doing something dumb. So that is a very unsatisfying answer, but it might not be such a straightforward binary choice. But if it was a binary choice, like, look, we either do this and we compromise on the grandfathering or we don't do it at all. It's like, okay, that sucks, but okay, let's just grandfather it. Yeah, I think that's right. I will say, John, I really hate the generational equity stuff. I hate the international wars by the same token. The whole thing is, here's the thing, When the old people die, the money doesn't disappear. It goes somewhere, right?

42:13So it's a temporal question. Right now, you might be doing it tougher than you will if your parents have got something they can give you. And if they don't have anything to give you, it's not going to help you either way. And if you've got something you can negative gear and someone else doesn't, then it's not really about the generations. It's within the generations. Those who do it and those who don't. Not everyone can negative gear a property. Otherwise, there's no one to own property. I mean, I guess everyone can be a tenant. We can all negative gear off each other, but no one's getting ahead.

42:34We're all doing it, right? So when we say getting ahead, we think we mean building some wealth in relation to our current circumstances, and it's right. What we're really saying is I want the advantage so I can do it on a home. The other guy can't because he's not doing it, so he can't get it, and that's how I get my advantage. It's not bad. It's not an ethical or moral judgment. It just is what it is. So it's not intergenerational because other members of your generation will be doing it, and some will and some won't. Some Generation Z are doing it. Some boomers are doing it. There's plenty of boomers, by the way, who are on pensions and renting.

43:03So when we say, we frame this in our own way. So I don't love it. Grandfathering to me, my view generally is, A, ram's right about the politics. B, I've used the example a million times. The copper and the nurse who happened to be together, they borrowed two years ago, used negative currency account and said it was a good idea. And then we say, actually, that tax is getting, guess what? It goes away tomorrow. Bad luck, it's gone. So, well, hang on, I've got a debt and I can't pay it and I can't afford to pay the mortgage now because the rent, I'm going to have to sell the place. Maybe I sell it at a loss and, and, and, and, and.

43:32And so I just think on a fairness level, honestly - It's a rug pull. It's a rug pull. And you have rightly said before, mate, you know, shareholders don't get protected for share prices going down or any of that kind of stuff. And so they made a call, right? They made a call to invest and they are subject to the consequences. But I think honestly - It's actually called investing. It's not called guaranteed. Right, exactly. We've kind of got to the point in this country where it's seen as a rite of passage. Yes, yes. It's a zero risk, can't fail. Yes. And I get why we think that because we've had a long run of that.

44:05But it's that – But always because of that though. Yeah, but because of that, because the Copeland Nurse didn't do their research started by shares in BHP. They went to the account and the accounts, you can eagerly gear. Everyone's doing it. They expected not to lose money. Were they wrong? Yeah, probably. Should we rug pull them? I just don't honestly. I can't. I don't know any investment property. I'm not going to worry about it personally. I just can't bring myself to say it's a good – I've got young kids, right? I want them to have affordable homes too. But I can't justify pulling the rug out from a 38 - and 40-year-old cop or a nurse who just want to do what the accountant told them to do.

44:36You know, yes, they were naive. Yes, they should realise. It wasn't just the accountant. It was the whole of society told them to do it. Right. All right. So let's move on from that one in the interest of time. I'd also gently push back on the CGT changes for shares. If the problem is housing, why touch the one other vehicle people like me were using to accelerate a deposit? Good point. It feels like the goalpost is moving twice in the same breath. This is the one where I'll go first, mate, and this one you've got to jump in already. Just for fun, just to change it up. No, no, please. I wasn't actually meaning, I hadn't read this far down.

45:05Surprised, John. This is kind of what I meant, though, in the messaging, right? So absolutely, if your argument is these changes are needed for housing affordability, touching CGTFCS makes absolutely zero sense. Just bottom line, they're full stop. There is no argument. So you're right, John. This is where the sales message is just crappy. I had argued before the budget, before it was obviously Labor policy, for a return to index action of CGT because it was fair relative to labour income, not because it was made any difference to house prices. So for me, you're right, there was zero justification changing CGT if the only argument is housing affordability, by definition.

45:42I would do it anyway because I think it's the right way to tax capital gains from investing because I think it's just, we've talked about this, the same rate of tax regardless of income source feels to me, and everyone can disagree, feels to me the right thing. So I wouldn't push back on the changes, but I would absolutely say that the argument they're making for the changes holds absolutely zero water. Reb? Yep. I agree with all of that. I mean, I feel people are very entitled to be upset, though, because it does feel like an element of being gaslit with a lot of this stuff. Yeah, that's exactly what it is, 100%.

46:16You know? So it's sort of like, to me, it doesn't excuse it. Yeah, it doesn't excuse, you know, it's like, oh, but it's actually, I'm sure that's the concept. conversation behind the scenes like we just had to get this through and here's our vision for it why it makes sense and maybe even with that I'll disagree with it but then just sort of go out there and sell it under false pretenses doesn't correct yeah that doesn't help me swallow that particular pill yeah like that's like that sucks as I said before you either think I'm an idiot um or you don't understand it yourself or you don't you you don't have a good enough argument to actually put the actual reason forward.

46:51You know, none of it's great. People are very angry after this budget and I think they've got a right to be a lot of the time. Is there a lot of anger that's perhaps not entirely fair? Yep. Welcome to politics, you know. And it comes back to being not able to sell a vision. And back to Henry at the very start here is a long-term thinking and a vision and something to get people excited about and believe in again and understand. or, you know, it's, I'm asking too much here. I don't know what I'm asking. I'm asking for a larger than life character that's far-seeing, intelligent, articulate and can make very complex things easy.

47:26So a person like that probably doesn't exist, but, yeah. You know what? I think they do actually. The cynicism just crushes me, you know. I just, I really had an age in life where I just like I'm, if a poly comes on the radio, I just turn it off. And I'm not politically disengaged. It's just that you're not, nothing that you say is genuine, right? You ask that. Okay. Yeah. No, that's it. And then you get this political nihilism, which is what we have at the moment. And, yeah, I don't know. I don't know what I'm trying to say. It's like people are angry, people are hurting, people are upset, and I totally get it.

48:09You mentioned about someone who can, you know, say it. Here's the thing. Allegra Spender in March wrote an article in the AFR, right? So think about CGT. This is John for CGT changes particularly. And this is the quote. Really simple. I mean, it's almost a little bit too simplistic, but think about a message, right? The message for how do we talk about CGT changes? Well, we'll call it housing affordability. That helps. Here's what she wrote. Quote, consider someone earning$100 ,000 a year just over the median wage. Earned as a salary, you pay$23 ,000 in tax. Split through a family trust, you pay$13 ,000.

48:41Earn it as a capital gain, you pay$7 ,000. Earn it from your super balance in retirement and you pay no tax at all. End quote. That's it. That's the line. It's literally all they've got to get up and say is an investor pays$7 ,000 in tax, an individual pays$23 ,000 in tax, that feels bad. That feels unequal. That's not her. I had a view before. I think I should have published this article, by the way. But that's literally my, when you talk about fairness, I don't reckon the copper or the fiery or the office worker or whoever on 100 grand a year should pay$23 ,000 in tax if I can make$100 ,000 capital going and pay$7 ,000 in tax on it.

49:19Again, you can have a different view. That's the line, though. That is the justification in literally, what is it, 50 words? Not even that. Very, very simple. And the government seems to be able to find it. I find that bizarre.

49:32I think I agree. I get, I'm hesitating here because I'm, and this is thinking out loud, which is going to be dangerous. It's definitely dangerous. I don't necessarily think this, but I'll put it to you to help me. I do. Understand it. Could you mount an argument to sort of say that there is, the person who has invested the money has already earned it? Yes. So there's that. So they get treated the same in terms of their income. So I have deferred consumption, I have saved. Yes. And now I have invested. So there's sort of like, well, you've taxed it, right? The second point would be there is when you turn up to your job, you get paid.

50:11Yes. When I turn up to the share market or any market, I might get paid. Yes. Like there's a risk dimension to it there as well. As I said, it was really ill-formed thoughts, but are they qualitatively different? Those are very good push. I think the answer is yes or no. Oh, sorry. One more point. One more point. Yeah. With income tax, I'll get taxed every year based on what I earned that year. If I hold an asset for 10 years and then sell it, I pay all the tax then. So it's not amortized. I actually earned that over a decade-long period. So it feels a bit harsh that I'm paying all of it at the top marginal rate just because I happen to sell it at this particular point in time.

50:52So I agree on all three. On the last one, which is easy, I would return to the averaging rule that Paul Keating put in place in$9.95, which averaged your tax rate over five years. And basically, so whatever you paid in tax over that five-year period as a marginal rate, that marginal rate will apply to your capital gain. And that stops that lump sum top marginal rate taxation. So you're 100 % right, and I would change what they're suggesting. So I would agree completely with you on that one. The first two are absolutely justifiably good reasons out on the cons column of the changes. And so the question for me is always, and should be for all of us, again, in a world of least worst outcomes, what you know given that's those are absolutely spot on points should we then either pay full freight with indexation or have something to discount for those two reasons and i still think no but not because they're not valid just because i don't think they're overwhelmingly sufficient to change my thoughts are quickly on those you're you've paid tax on the income you're reinvesting that income but you're only paying tax on the gain from the income you invested so you're being taxed twice on the same income, right?

51:57You earn 100 grand. You pay, well, let's use the numbers from a legal spender. You pay 23 grand in tax. You invest 77 grand. Let's say you invest whatever's left over. If you double that money, you're not paying tax on the 77. You're only paying tax on the money you made with that money. So you're not really paying tax twice on the capital at all. You're paying tax on what you earn as a labor income, and you're paying tax only on the gains from that labor income, again, the second time around. If you're being taxed twice on the base, I would agree with you. If it's 100 grand, you say, well, on the 77 grand, you're being taxed on that.

52:22You're not. If your 77 grand doubles, you earn another 77. Bad example because the numbers are the same then. Let's say it goes up by 30 grand to make my life easier. You pay tax on the 30, not the original 77. So the money is being put to work. In the same way, by the way, if you buy some capital equipment, you make something every year and sell it, you make taxed each year on the output from the machine. As GST or the profit you make from using the machine, even though you bought the machine already. So I think there's justification for being taxed on the profit of the savings. You're not being taxed on the savings themselves.

52:53I think that double taxation, to my mind, directionally I understand it, but I think it falls down on the logic. I suppose the other argument is you get to offset your losses too. Totally. Yeah, exactly. I was going to make the point of the second one, is being taxed on the gain, there's no guarantee of it. I think that's true. It's too trite, but I love Buffett's loan. I've used this one before. Maybe you've come across someone who doesn't want to go ahead with a good idea because I'll pay tax when it succeeds. I'll send him my way, let me unburden him. it's kind of like you might lose i don't think it's the government should be the co-equity investor right what if i lose well don't do it if you don't want to but i want to okay do it but know that this is the rules as long as the rules don't change and this is the key right as long as you invest knowing what's going to happen if i win if i lose i kind of maybe i'll lose money okay yeah maybe you don't invest that but i want to invest okay well here's the rate well i don't invest that right okay don't invest but i do want to invest well is it worth it or not i kind of again, as long as no one's being forced to invest and as long as the approaches are clear and transparent and prospective rather than retrospective again, I'm not saying they're not valid concerns they absolutely are.

53:59I don't find them sufficiently convincing to not make the change and I think that's, we've got to kind of keep those ideas I know you do this but I think everyone's got to keep those ideas, just because there's a possible downside okay, there's a possible downside. Is there a possible upside? Yes. Is the upside being a downside? Yes. Okay, let's do it I don't know that we need to have a policy that has no losers, no risks and no downsides. But that, I mean I mean, I'm just being difficult at this point. I'm devil's advocate. Please, that's fun. That's the idea. But so to your point there, it does change the upside, right?

54:33Relative to the previous tax regime, yes. But you're not obliged to invest. If you don't want to, don't do it. That's okay. So any allocation of capital decision is properly framed. Yes. a contemplation of risk versus reward, upside versus downside. Yep. So if my upside is less up and my downside is still all the way down, yep, yep, yep. Yes. That changes the calculus. And if it changes the calculus, not on all cases, I mean, you're right, most people are still going to go ahead with it. But on the margin, does that stop business formation because the risk-reward calculus isn't as attractive as it was.

55:18The degree to which we can say is not a big deal or not, but just on that, laying it out in that way, is there validity in that view? Yeah. Again, on the same basis that it's absolutely true, yes. It's a bit like we talked about a month or so ago, the Laffer curve, and this is pre-recorded. Maybe we've done it since. I'm not sure because we're not pre-recording that stuff. Yes, absolutely. he will. And so the question for the government is on two separate graphs, which of those maximises the tax collection or doesn't have reduced tax collection? On the other hand, what maximises the national interest and national wellbeing?

55:56And you've got to set at the same time on both axes, the right policy settings for those. I don't know anybody. It's hard when you talk about that. There's an article in Australia saying, this couple is going to leave Australia because of the tax changes, as if they were somehow representative of everybody, right? So you You can always find someone who says, oh, no, I would do this differently under those rules. And I get it, right? It makes sense. The question for us is, you're at two point of age business formation. Will there be a sufficient reduction in business formation to offset the benefits of the policy?

56:25I don't suspect there is any slash many people who would say, I've got a million-dollar idea, but I'm only going to do it if you tax me 23 % rather than 47%. Do you know what the half million dollars is? Yeah. I don't know anyone who – I don't want to interrupt at this point. It's always framed as in this like mega payday super startup. You're Atlassian and woo, you know, yachts and gold scepters. Yep. I always push back on that because actually the reality of it day to day is like Gary starting his plumbing trade. Sure, sure. It's probably not something for cash, mate. Let's make it Gary. Does Gary not decide to start his own plumbing business and stop working for someone else because the tax rate is 47 % rather than 23%, including other indexation, which we always kind of ignore.

57:09But that's – Actually, I can probably – yeah, well, it's a bit on the margin though. That's the argument here. That's my point. So I think it's a small margin. Go on, go on. My brother's a tradie, right? Cool. And he gave his business away. When I say gave it, he sold his business. Nice. But – and it was just like – he just reached a point where he's like, it's just easier to work for a big corporation, take the money, go home and not worry about it. Yep. And I was like, yeah, but the good thing about a business is you've got more upside and he was like yeah but that upside isn't as good as it used to be and it's not that it was a black and white kind of thing but it was enough to sort of push it and there's i actually i mean again i really am just being difficult for the sake of it but i just and we can't quantify it but there will be someone that's the question is is to what how many people at that end of it that i'm right on the edge there are some people there is nothing you can do to talk me away i This is my passion, my dream.

58:06I am starting the pizza parlor because I've always wanted to do it since I was six. And I don't care what the tax rate is. It's not even a consideration for me. But there's a bunch of people on the fence. It's kind of like, oh, I was going to, but now it feels – and if that is material enough, we have disincentivised business creation, which I think is a bad thing, if it is material enough. I generally agree with you. I think – sorry, I think we're going to keep going. Did you have – do you want to answer that? Yeah. Yeah, well, no, it's a secondary point. And this is a real, let's say we're going to be out of time because I know we've got a hard finish.

58:41But there's a really interesting thing I heard the other day, which is that governments in the past have increased their tax rate by reducing the tax rate. And that I will just let hang there and we can come back and explore that. There's a few instances around the world where that's sort of been the case. It feels very counterintuitive. And the argument very quickly goes is that when you've got an extraordinarily friendly business environment, lots and lots and lots of jobs are created. As a percentage of revenue or income or whatever it is, we're taxing less. But there's just so much more economic activity.

59:19As a government, we take in more money. And it's kind of like, do you want a high rate of tax or do you want a lot of money to spend on public services? That's entirely right. That's exactly right. By the way, a US state tried that and almost sent themselves was broke because they decided they would do it and cut all the taxes and it turned out economic activity didn't improve enough to justify it. So that's the other end of the Laffer curve, right? They fell off the left-hand side. Others, as you said, could fall off the right-hand side of the curve. And that's exactly my point of those two graphs.

59:44You want to maximise your tax take and you want to maximise national wellbeing. They won't always be the same thing, by the way, because you might, I want to say maximise tax take, I don't mean collect as much as you possibly can. There's a whole lot of people out there going, they already collect enough tax. I just mean on that curve, wherever you put that curve. And by the way, it's also the curve moves, right? So if you collect less tax or more tax dollars, but the country's working better, as you say, there's all different permutations. I 100 % agree with you, mate, and that's exactly what we need to work through is what's the best level of that.

1:00:14I have a pretty strong suspicion the overall tax rates are too high. I wouldn't, though, argue for preferential taxation of capital to solve that particular problem. You know, I've talked about inequality and other things. So if we were going to say, you know what, I want to incentivise work and new businesses and other things, because it's really, it's all just productivity right the new the business formation doesn't solve anything if i'm a plumber and you're a plumber and i start a business i do exactly what you do charge exactly what you do and instead of work if you do it myself the national the national outcomes are different it's literally identical right what matters is if i start a business that is successful because i do better than you do and i attract more customers and i'm more efficient that changes so that's it's more about the output per input again productivity right rather than how many businesses per se there are i think that can be a little bit ideological again we'll come back to that one as well probably but i just think you know we're looking for the outcome not the idea and i think new business formation is great because when it's successful it says i'm doing something that people like more and that's good for the economy if it's not successful it's just formed then falls apart or forms for yeah if you and i both plumbers in the same street and we just have half the half the work each but we you know i used to work you used to work for me now we both work separately we're the same number of jobs at the same price with the same quality output we haven't created anything we've just we've just divvied the pie up differently so i think I think productivity improvement in all of its broad forms through business creation is exactly what we're looking for, to your point.

1:01:34I think that's the key when we don't want to dissuade because that is where things genuinely improve. And we got no in advance. That's the other problem, right? Yeah. Interesting. Let's finish off here. John says, I'm on roughly an average salary. I'm not asking for a five-bedroom house, but if I have to move far enough out to afford somewhere, the family I want to barbecue with won't be close enough to come. There really isn't a question here. It's more that no matter which direction reform goes, my cohort seems to wear the cost. And the fairness label is the bit that rubs the wrong way. Makes sense, mate.

1:02:04And honestly, if none of this ever sees the light of day, it was cathartic to write. My wife, friends, and family will all be quietly thankful I found an outlet and I'm no longer bashing their ears about it. That's why we do this podcast. Keep up the great work. We'll still be listening next week. Cheers, John. Thanks, John. That was a great question, mate, and very, very well done. He asks us at the end by apologies. As always, I should have listened to the end before reacting full on. So we may have addressed some of those questions already, but thanks, Joe. I appreciate the feedback. Yeah. We are done.

1:02:33I have got a hard out. There's no hard outs in podcast world, but unfortunately in the real world I've got a radio interview to do and they're going to call on me and I'll be in trouble if I don't answer. So thank you for listening. Thanks for being part of the podcast. Thank you to you, mate. I always enjoy our chats. They make me think. They hopefully help our listeners understand the world a little bit better or at least consider some different options. And we'll do it again next Friday. You'll be here, won't you? You know I will. Of course you will because it's pre-recorded. Until then, have a great week and full on.

1:02:58Cheers.