The Big 4 Banks are axing jobs. September 12, 2025

24:03You have made some bad decisions or not even bad decisions. You made decisions that when reality presented the facts as they were, it turned out that you didn't need that many people, right? And so it's horrible, but you have to correct that. Or if you don't correct it, reality will correct it for you because eventually you'll just run out of money. And now no one has a job, right? Now you don't have any savings. Now you're all at the welfare queue, right? So is that better than a bit of a course correction to ensure the viability of the business? Now, again, let me also very quickly add, this doesn't mean that there's no welfare or there's no protections or there's no retrain.

24:48All of that is super important, right? Like you've got to tease these things apart, but looking at it from the CEO of these businesses, any business has to make very, very difficult choices all the time, all the time. And sometimes those decisions are going to to be wrong, sometimes because of incompetence and stupidity, sometimes just, and oftentimes just because of bad luck. And you're just going to need to correct on that. Is that fair? Well, no, not, not if you look at the world in a simplistic 12 year old kind of way, but it is, it is, it is just, I guess what I'm saying is it's just a reflection of the situation.

25:24Sometimes I think, you know, it's, it's like, it's like the gazelle, you know, watching, one of their friends being eaten by lions and going, that's unfair. It's like, yeah, it is, but that's nature and that's life. We must recognise certain realities here. And it doesn't mean that we must say, yes, they're pleasant. We must not celebrate in them, but we must recognise the realities. And that's what is happening here. And again, I hear myself talking and I'm over talking at this point because I'm trying to not sound like a hardcore laissez-faire capitalist that, yeah, screw the workers. I'm not, I'm not.

26:01But if things are not viable, you know, eventually the reckoning will come either way. So you have to course correct. Now, there's also the other side of the coin. Well, not the other side, but there is the idea that you can absolutely get people in who exploit workers, who cut to the bone and expect, you know, not the shareholders but the employees to bear the brunt of that pain and all of these kind of really nasty sort of actions. Absolutely, and I'm not being an apologist for those kinds of things. But just as a broader, more simple concept, I just think this is just how business works. You know me, mate.

26:45Do you think anyone listening to this, does anyone think for a second that I'm a fan of the banks? Like someone's having a protest, I'm at the front line with the biggest placard. Screw them. I would, you know me, I would make some very radical changes to their business model and their privilege in society. But in this particular instance, I kind of go, well, we've got to let the operators of business make their choices in terms of resourcing and the rest of it. Because if we don't, we just end up with outright communism and bread lines. That's the logical end point of this. So what's the lesser of two evils here?

27:23I think that's mostly right. I had a couple of points. I think on your last point, you're right at the extension of the communism and bread lines. There's a decent amount of room between those binary outcomes. Oh, it is. I'm not saying it will, I'm just kind of, just for the sake of... I'm just saying if you push it forward, if you run that reasoning to the nth degree, that's where you go. And that's why it's worth highlighting because when you start with that, you work, no, that's not what I mean. What I mean is like, okay, now let's think about what jobs we're protecting. And that's why safety nets are important.

27:51And I think to your point, I'm going to come back a little bit, address something. You kind of went to the, I was going to the extreme, it sounds like I'm being critical. You talk about the cafe that loses money, right? People will have heard that and said, well, hang on, NAB's still making$4 billion. They're cutting some staff, so they might make, if they didn't cut their staff, they'd make$3 billion instead. And there's been gritty bars, there's no one needs an extra$100 million. Those people need jobs. And I think that's a very valid perspective and initial response. I think where I would take your analogy and push it forward is at a total economy level, right?

28:23So let's think about there's one business and it's ANZ and they employ 43 ,000 people. Someone's got a great idea. And that idea is I'm going to produce a new credit card. I don't know, to make stuff up, right? A new payments network of some description. No, Doug, yeah, that's why. Sorry. No, it sounds like, oh, God, I'm in trouble. No, because that payment system doesn't need people, so let's move away from that one. There's a new credit card. And the person I want a credit card is I'm going to employ some people with financial services experience, okay? So they've got two choices. Well, one choice, really.

28:56If ANZ keep those people, they're going to pay the ANZ staff even more to come and work for them, which is fine. But what we end up with is higher wages for ANZ and this other company, and we get two products, which is fine. Or ANZ says, actually, turns out we don't need those 3 ,500 people. And the other guy says, oh, beauty, because I needed 3 ,500 people for my credit card company. I'm going to pay them the same as ANZ paid them because ANZ don't need them. So now we've got two things and a lower cost base. Now, if you're one of those people who gets fired, you want the higher wage, and I get it.

29:23and there should be competition. We'll talk about that in a minute actually. But back to productivity at an economy-wide level, ANZ's make work makes either the sector product can't work because they don't leave ANZ or it's going to be done at a higher cost because they have to be paid more to leave ANZ even though ANZ don't need those people. And so even without the bread lines in communism, you end up with a less productive, less wealthy, less successful country with lower standards of living because the two products either don't happen or if they do, that happen at a higher cost than they otherwise would.

29:54And so just purely, and by the way, those people who leave ANZ and join the financial services company doing credit cards, they're benefiting from the bread company doing something exactly the same and the tourism company doing the same and the manufacturing company doing exactly the same. And so at an economic level, this is why this is really important. At an individual business, to Ram's point about the cafe, super valuable. At an economy level, we want everyone employed, as many as we can, doing the most productive stuff they can because that's how you get the highest standard of living. And so whenever you say, let's protect those jobs, you're effectively saying we are for lower productivity than we otherwise could have.

30:28Maybe it's negative in total. Maybe it's just not as good as it could have been. And that's fine. But if those people could have been employed elsewhere, why would you design that system that doesn't say, let's go and make more stuff more productively. Let's protect these jobs instead. Tell ANZ you're making enough money. Don't sack these people. You should just have them on make work programs because it's not nice. And again, we're saying very clear it's horrible for those people impacted. I've been made redundant twice. It's an awful, awful experience. It sucks. You don't wonder where the next job's coming from.

30:56You get a payout. You get a job before the money runs out. It's awful. Really, really terrible. Yeah, I took a redundancy back in the day, yeah. I would have given the choice, mate. Mine were non-voluntary redundancies both times. Thank you. But, you know, that's where you end up. And so we get it. What we're saying is economically you can't or you can. You shouldn't design a system. You shouldn't want a system where make work is encouraged rather than those people being gainfully employed elsewhere. And by the way, at four point, what, are we 3 % unemployment? There's no good time to be made redundant, but I'd rather be made redundant with this level of employment than 6 % or 7 % or 10 % or 12%.

31:26You know, that's ugly, right? Again, some people will be considering us callous right now. That's fine. All I can ask is you listen to what we're saying and what we've said before and the people that we are and you make your own judgments. If you want to be critical, feel free. But the result of that is really, really important in my mind. Well, yeah, I think you really touched on something so super important here too. I mean, again, you've always got to, like, So people will, and it's really hard to be critical because people who are upset by it from the outside are upset because they're sympathetic, empathetic, caring people.

31:58We're like, how can you be critical? And I don't mean to be, but I just urge a bit of deeper thought on it. And let's play the counterfactual. You say this should, someone says, I think this should not happen or should happen or whatever. It's like, well, that's your opinion. So you're saying that we need to have a system where someone or some group of people get to decide what's right? Now, the answer is usually, depending on who you're talking to, is like, yes, in small print down the bottom, as long as that person agrees with me. Now, humans, if you've ever met any before, mate, well, you'll know, very rarely agree on things.

32:35So you also, when you have a system like that, you also have to account for the fact that sometimes the people who are making those decisions will not agree with you. And then you'll also be unhappy with that. Not just in the longer-term consequences, but this is like, well, oh, we've got to do it this time. So in this particular example, I think that this should be illegal. You know, government of the day, they've got their ear to the ground. They hear what the people are saying. They go, okay, ANZ, you cannot fire them. Like, okay, yay, woo, that's great. They made the right decision. Now, by the way, half the population is going, no, that was a terrible decision.

33:08Fast forward a little bit. Now there's a different government in power. there's a different ideology in focus. And they go, no, we've got to cut them. And so now they're all doing it. Well, that's unfair. And you get to this really perverse situation where the system's only as good as the people who are running it and hopefully that they align with what you happen to think. Or you could have a system where no one makes a decision. You could almost say it was a decentralized kind of system. No, no, no, I'm not going there. But I do mean decentralized in the sense that that is what prices are telling us.

33:41Your example was an excellent one. Yeah, nice. And you go, so if let's say that the people employed at ANZ are all fully employed, fully productive, and ANZ actually need them all, and they're all doing great, great things for them, and you come along with a great idea for your credit card company and you need more people, well, you have to increase the wages. Is that good or bad? No, that is a signal. That is the communication lines between all the individual actors out there going, I demand more people and therefore that is reflected in the price. That price sends a signal to the market that we need more people here.

34:18And then other people looking at the job market or at school or at university going, gosh, where should I work? Oh, there's really good money to be made over there. Again, that signal is what allocates our capital without any one person or one group of person making a decision. It's decentralized in the sense that each and every single one of us are out there making decisions every time we purchase something. It might be that your credit card company is just the best thing since sliced bread and everyone loves it. And yet everyone continues to love the service that ANZ is offering, in which case, yeah, we need more people in these two businesses.

34:49And yeah, that means that prices for the salaries have to go up. But yeah, we're still all better off because now we've got all the services that we want. And also those higher prices will induce more people to go into that industry. And guess what? Supply and demand and extra supply will actually help sort of normalise and the whole thing is so elegant and beautiful and just pristine, really, if I can really over-egg the pudding here, in that that's what's so magic about it is that we, through our collective actions, are saying what we want, what we value. And while the other side has a very noble viewpoint here, you must reconcile with the fact it's like, well, how are you going to allocate 4 billion different resources across millions and tens and tens of millions of people for all time through to eternity in an effective, sensible, fair way.

35:44And it's just like, yes, maybe AGI or something gets us there that we can do that, but right now we can't. And so this is, this is just the market doing what it's doing. Now I'm going to go on a little bit here. Let's imagine that ANZ's made the wrong call here. We're going to, some idiot CEO comes in. I need to make an extra$100 million. I'm going to fire all these people. I'm going to put all the jobs over into Southeast Asia. Now, we've got to be careful because we don't exactly have a free and open market in banking, I would say. I'm not going to use the cartel word. Yes, I am. It's a cartel.

36:15So anyway, so it's a little bit different here, but in a free and open market, what would happen is you would go, you know, honey, we've been with ANZ for a long time. They've been a really good bank, but I just can't get through to anyone on the call center. The service qualities are terrible. I'm going to Scott's company because Scott has got a much better operation here. And they pay the piper. Yes, in year one, they make a little bit of extra money because they cut all their stuff. The longer term value of the business has now been gutted because of your short termism. And who wins? Well, it's the person who has provided a better service level.

36:53Who can provide the best service or the best good quality good at the lowest price? That's who needs to be rewarded and who gets to decide the reward. Every individual one of us do just by the interaction of how we interact with those businesses. That's what matters. Am I making sense? That's perfect. And I think the other thing I just want to say is, well, I won't speak for you. I'm not for absolutely free market unfettered, you know, movements of supply and demand, right? For a whole, externalities are real, pollution and other things, exploitation are real. So you pair that with reasonable labour laws, safety nets, redundancy payments, that kind of stuff.

37:32You say, right, here's the framework in which you should act. If a bank – and by the way, the other thing is if you hire someone knowing there might be a redundancy at the other end of this one, if you get it wrong, there's an incentive there to maybe try and get it right. And if people are let go, then yes, they are looked after by reasonable safety. And I think it's probably too low, by the way. That's a whole other conversation. But that idea, you know, it's very, very, yeah. Extremes are dangerous. I hope I didn't paint it as pure extreme because I am 100 % with that. I just don't want to put words in your mouth by saying we think this.

38:04I was always, I think this. Yes. Jump in. But that's the trouble with debate today is because it is so binary and it's so black and white. You're either pure communist or you're pure laissez-faire libertarian. It's like both ends are dumb, right? Correct. But my point is is that the more you nut in either extreme, The worst it gets, there is a, the Zen Buddhists would say there is a middle path here, right? And you've just got to be careful with what you wish for here. And it's all good and well to say, these are the champagne socialists, right? It's all good and well to say this should happen and that should happen.

38:36But opinions change very quickly when it's like, yes, but you have to directly pay for that yourself. It might not be someone's coming into your house and asking, you know, for you to put, open up your wallet and put it into the tray here. But you'll pay for it in one form or another, right? very indirectly and very temporarily dislocated, if I can put it that way. But it is true. And this is why we must, this is why it's such a good system just to let people make individual choices, let them run their course and let the cards fall where they play. And we put some protections around that to make sure that there's no exploitation.

39:10The analogy I like is like the game of soccer. The end of your day, the idea is to get the ball in the net, right? Now, on one end, you could say anything goes, in which case you have people with tanks and artillery and bazookas fighting each other to get the ball at the end of the nest. Like, well, that's probably not great. And on the other hand, you have these teams of people who argue what's right and what's proper. Does who get the ball in the other end? It's like, well, that's not going to work either. What matters? What matters? And this is what business says all the time is that we have a clear, open and fair framework.

39:46What are the rules? Okay. I'm not allowed to kick someone in the head. Right. Okay. I'm not allowed to do that. You know, I'm not allowed to touch the ball with my hands. If something is a bit more tame as an example. Cool. That's cool too. But once I know the rules, once they're clear, once they're non-prejudiced, then we can all operate. And then some really beautiful, elegant things can emerge from that. And I guess that's the point. And that's what I would say, not to defend ANZ or NAB or anything here, but when I say free and open mug. I just sort of mean, and I've made the point before, you try opening a bank in Australia, like it ain't easy, right?

40:23And if you can do it, it's because you've already got many, many hundreds of millions of dollars to sort of do that kind of stuff. But I am for business owners being able to make their capital allocation decisions more or less freely within certain constraints, but more or less with the idea of maximizing viability. And yes, to make a profit, we've got to stop villainizing the idea of making a profit, right? Like why would anyone do anything without the potential? Not because you're greedy, but because you're being asked to sacrifice your time and your savings to do something, right? And if you do that well, why shouldn't you be rewarded?

41:10You shouldn't be rewarded if you've been exploitative. You shouldn't be rewarded if you've had an unfair political edge that's been granted to you. You know, there is absolutely exceptions to that. But if all your crime is making everyone happier, then I really think, yeah, well done to you. And on the other side of the other foot is the shoe of you thought you had a great idea, it didn't turn out to be great, and so the business has gone out. Again, again, that's tragic. It's sad. My heart, every time I walk down the main street, right, and there's a shop that's closing down, I just, oh, my gut wrenches and I just feel for that.

41:50That's someone's dream that's just died there, right there, you know, and it is soul crushing. But at the same time, it's kind of like, well, it wasn't viable. Now someone's going to come into that space and they're going to have a go at it and if they do well, they're going to prosper. It doesn't also mean that the person who started the business, we should make it so brutally punitive that you will never, ever, ever start a business ever again. That's why I've said before with the US, which gets so many things wrong, but they get that one thing wrong and they are very forgiving of failure in business.

42:22Not because that the capital owning class need extra protections, but because that is the engine for growth and prosperity, right? That's what it is. And it's, I don't know. I don't know. It's very easy to get ideological. but I just, I hope I'm trying to, I'm struggling here to present it in a way. My lens really, although it might not sound like it is, it's the fairest way. My North Star is fairness and maximum prosperity, the maximum people. That's where I'm not coming from, the banks need to make more money. And I'll push back very hard, anyone who makes that assertion. No, I want as many people to be as prosperous as possible, and I want the opportunity for that prosperity to be as fair and open as possible.

43:09And when you pull on that thread long enough and you think about it, you kind of get to a point where it's sort of like, yeah, we just need to let people make individual decisions and then be rewarded or punished by virtue of the sensibleness of those decisions. And to flog that horse, what links the individual decisions with the prosperity is productivity. Yes. Which is kind of where we started. That's literally the tool. Productivity, you don't do productivity, but productivity is the measurement of a higher level of prosperity per person. Again, on average, there's issues with averages and distributions and all that kind of stuff.

43:46Who gets the biggies matters and all that sort of thing. That's a different policy topic. But broadly, that is how you link those two together. You say we've got X million people working in Australia. The more value they can create per person, the better off we all are. How do you create more value? Well, probably not through make-work jobs, probably through doing another thing where that person labour can be deployed more effectively for them and for the rest of us and then done at scale 14 million times over any adults we've got in the country, that's how you get to a more productive, more prosperous country.

44:15That's literally the formula. And it's not perfect and there are safety nets and there are employment laws and there are competition laws and there are all sorts of stuff. The government should be doing to make sure that things do work out the way we want them to work out. Minimum wage laws, same thing. But broadly, that's why I'm not a free market capitalist. I'm a well-regulated capitalism guy, right? That's my, I say well, not over-regulated, not over-regulated. Free markets with insensible bounds is my approach. Yeah. Can I give you a story? And I'm going to butcher it, so probably Google this to get the real deal here.

44:47But Milton Friedman, I think it was, visited China at one point and he was taking on a tour, I think it was Friedman, and they went to a work site where all these workers were digging a rope with shovels. and the local representative was like, look how many people we're employing. Look how prosperous we are. So Freeman always makes the choice like, well, employment's a means to an end. And his response was, you know, you could improve this and make even more jobs. And it's like, really, how do we do that? Give them teaspoons. Take away the shovel and give them teaspoons. You'll need many more people to do the job.

45:25Now, to your point, what does that do for productivity? It's terrible, but it's terrible. But this is why a myopic focus on jobs is a bad thing. This is going to really test the thinking, right? It's like, well, Andrew's saying that jobs are bad now. Okay. Okay, mate. I'm not saying jobs are bad, but I am saying that inefficient, ineffective jobs are bad. Not bad for the person because they're employed in a way where their labour, their time, their energy is being pulled away from other areas, which could be far more conducive to their wellbeing and to our collective wellbeing. And if you think otherwise, you really do get people out there building an eight lane highway from Sydney to Perth using teaspoons.

46:15And it's like, and a politician would go, oh, but look at all the jobs we've created. It's like, yes. Okay, I'll give you that. But do you honestly think this? Or I could use an incredible bit of machinery that has a culmination of years of physics and engineering and technology and science and, you know, that will just like vroom down the road and just, you know, make it. What took 1 ,000 people, 1 ,000 days, now takes three dudes in a couple of weeks. And I'm like, yeah, there's less people employed. Yep, I'm very cool with that. I am very, and so are the dudes that otherwise would be doing it with a teaspoon, I dare say.

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47:04I mean, that's a great story, but it's not even really that. I mean, it is, but it's actually just, think about protectionism through, labour protectionism through history. I mean, 85 % of us should work on farms. If we're going to protect farm jobs, because the greedy farmers didn't want to have as many people working on farms. We'd also be on farms. Making horseshoes. Right. And there's some value in not being outside and being in the fresh air, and I'm sure people would love to do that work and good luck. But we would not have made cars. We would not have, you know, you have to think. Productivity, improvement, advancement, progress, prosperity depend on.

47:40That's what productivity is. It's using technology. We'd be on farms picking beetroot by hand. By the way, speaking of China or Cuba, And, you know, we protect those jobs because you can't lose, those fund workers can't be allowed to lose their jobs. We'll take production lines. We could be all putting cars together by hand, right? Okay, well, we wouldn't be doing the other jobs that we're currently doing. And plus a car would cost$480 ,000 for a recent Tita, right? Or it'd cost$25 ,000, but we'd all make a dollar a day. I mean, either way, either of those outcomes are bad, right? So that's why it's really, really important.

48:12And, again, we've got to individual, here's why it matters. Same with tariffs, by the way. I don't want to get back into that. But tariffs have really concentrated costs because I lose my job. Sorry, I lose my job because of globalisation. Someone says we should put tariffs in place so Scott can have his job back. Makes some sense at that level, an individual level. Then you say everyone in the country is going to be poorer so Scott can have a job. Well, that's now starting to sound bad. If you worked in a steelworks or a regional airline, maybe. Right? But then you say, well, actually, now that we're poorer, Scott can have his job back.

48:46Okay, maybe I'm even okay with that. But then you say, actually, but what would have happened if we hadn't done that is Scott would have actually found work doing something else. So now Scott's still got the job he would have had otherwise and we're still all poorer. Yeah. Now that's even... So we go back to the technology stuff, the productivity stuff. That's why this matters because the road worker, as you said, won't be doing something else. He said, more prosperous for them, more prosperous for the country. We're protecting agricultural workers or road workers or steel workers rather than saying, we'll look after you individually because we want it.

49:14we're, you know, thoughtful, kind, prosperous people. We want to help out those with less fortune than us. We'll give you a safety net. We'll make sure it works. It's, you know, reasonable. But let's not stand in the way of progress for that purpose. Otherwise, we're all still on the farms. And there's no one would say that's a good idea, except that's exactly what we do every time we say this job or that job should be protected. Every single time. Can I just make one small point on this before we move on, Which is interesting in that we've all, particularly since COVID, realised that not all, because some people have real jobs that require them to be physically present, but for the rest of us who just do Zoom meetings and spreadsheets and PowerPoint presentations and really don't do anything productive, of which there's an increasing large number of us, and I include myself in this group.

50:02Well, productive is a little bit jaundiced, but keep going. I know, I might be a little bit tongue-in-cheek, But, oh, God, I've gone blank. Sorry. It was exactly the wrong point. I should have shut up. I was more thinking, but those things are worthwhile if someone's going to pay you to do a thing that adds value for them. That's almost your point about jobs being allocated, right? That's the point. And so we've all worked out that we can do it from home and we go, well, we can do it anywhere. Why do you need me to come in? And I'm actually very supportive of that. The point I want to make is that just be careful of that because that is a double-edged sword because business who's going to go, actually, you're right, you can work from home.

50:41Actually, now that I think about it, you can work from anywhere. Actually, now that I think about it, I don't even, why do I need to pay you Australian minimum award wage when I can pay someone in Vietnam who's just as smart and hardworking, et cetera, et cetera, and pay them pennies on the dollar? And so it's just, I don't know, there's no value judgment in it other than we've got to be very, I don't know, not even careful, just cognizant of the double-edged sword nature of this, that remote working is a wonderful thing and I'm a big, big supporter of it. But all of a sudden, whereas in the olden days, the employment pool for a business was only in its local geographic area, now it's global.

51:23And that means that you are, whereas before you and me, you and me are going for a job in Sydney and we're competing against the people who also live in and around Sydney. Now we're competing against 100 million other people who live anywhere in the world. And it's just a thing. I don't know what my point is. No, you're right. Other than like, ooh, okay. No, you're totally right. Exactly. And by the way, of course, I've been doing it for years. At some point, we just say which jobs can and can't be done or need to be done. Your work from home is... The only thing I do push back on that from others on social media is that's true, but if the job can be done from home and your boss wants you in the office just because he wants you in the office, Your job survives on the fact your boss is a micromanager, and that might work for a couple of years until your boss gets moved out.

52:07It's like, okay, save execution, which is worth something if you're getting paid, but to kind of go, we should go back to the office because otherwise the boss will realise someone else could do my job. It's like, not realising the boss being an idiot, not realising you could actually employ someone from another office overseas or from home overseas as much as you from home. And that's kind of, you're not wrong. It's absolutely the globalisation of wages continues. and white colour workers thought we were immune for a while because it was call centres and, you know, factories. It turns out, you know, not so much.

52:37Yep. Yep. Mate, can we change a tack pretty many for you actually, a little bit back to businesses, back to ANZ? The BCA, the Business Council of Australia, has come out and said, hey, PM Treasurer, would you mind please just quashing this idea of a cash flow tax because it's going to scare away potential investment? And I've got some thoughts. So I'll explain the tax first. The Treasurer asked the Productivity Commission for some tax ideas. And God love the Treasurer and the usual political maxim of, firstly, never hold an inquiry unless you know the outcome. The other is, never think about something else when you think about the terms of reference.

53:18I know we would say incentives. In political speak, it's the terms of reference. So the Treasurer said, hey, Productivity, come up with some tax ideas. Cool. But they have to be revenue neutral. It's like, right. So that then causes every potential concern. So what's the point then? Well, so they did some interesting things. But my point is just that you narrow it down so much that while the Productivity Commission has an idea, we always, always, always need to remember the idea is framed in this is the idea if I have to obey those conditions rather than what's the best idea. So you point out what's the point, you're right.

53:51There's no point in not making a wider frame of reference of a better conversation. The point of having some feedback is, though, if you're given those tools, is there a way, or are those conditions, is there a way we can improve things? And the BCA said, oh, sorry, the product community question said, yeah, there is actually. What we think we should do is cut corporate tax rates for small businesses because that means more incentive, more motivation, more money, more hiring, hopefully all those things, although I think it's a little bit spurious. I'll come back to that. What we'll do, though, to pay for that, because it's got to be revenue neutral, is we'll bring in a cash flow tax for all businesses.

54:21And what that basically does is says, well, Well, you can't just use the, on one hand, the tax rules to pretend you're not making any money. So that's kind of multinational is a little bit, you know, that's profit shifting. The other reason why small business would like this is we're going to cut your corporate rate. We're going to add back a 5 % cash flow tax, but you can depreciate your investments in year one. And that's the key idea here was rather than saying you have to buy a new machine, buy a new tractor, let's go back to the farm analogy, and it's going to last 10 years. So you can only claim a tenth of that on tax every year.

54:53So the cash has gone out, but the tax benefit only comes in over 10 years. Now, there's a whole lot of accounting matching principle stuff that we won't get into, but the basic idea of the Productivity Commission is if we do that, you're more likely to buy the tractor and you'll get the benefit in year one because you get the money back straight away. So in theory, it's good for productivity because there are a replacement, a faster replacement of the capital stock, to use the phrase, in this case, physical goods or physical, not goods, physical capital, that in theory should mean things are done better, faster, quicker, more efficiently, more productively.

55:26And it's got a lot of sense to it. The net result, we'll get back to your thoughts, the net result is it would mean effectively a tax deduction or tax reduction, sorry, for small business. But big business wouldn't get a tax cut for corporate tax and the 5 % layout on top of that. The argument of the Productivity Commission is, well, you can pay less tax if you go and spend more stuff on more investments. In other words, if you use your profits, to go and buy new machinery, then you'll avoid paying the tax because there's no cash flow. The cash flow goes out, so you save some money on that cash flow.

55:57Now, if that sounds complex, it absolutely is. It would be a first globally. No one else does this. So it's kind of some cool thinking from the PC, whether it's worth it or not. The BCA has come out and said, well, we think more tax is bad and people won't invest if you keep it going. So we want you to get rid of it, Treasurer. We'll file this one and the lobby group is going to lobby. Right, because they don't really care about the mechanics of the tax flow or the cash flow. So all they're saying is, I'll say Woolies again for the fun of it, Woolies is going to have to pay more tax. Woolies is a member of the BCA.

56:25Woolies has asked the head of the BCA to go and talk to the government and say, can you please not do this? And that's kind of what, you know, let's be honest, it's not about investment in the country. It's about whether or not they're going to get charged more tax. That's fundamental what this is about. If you're a lobby group, you dress it up as nicely as you can. Yeah. I don't know what I think, actually. I mean, my initial, what I don't like right off the bat is the added complexity which you refer to. I just, this is unfortunately the trouble whenever there's tax of any description. We have a discussion within this tiny little microcosm of this particular thing.

57:00Yeah. Now, the government needs to, well, it has obligations. Yep. And it needs to fund those obligations, right? But, so, yeah, we need to have a chat about what's the best way to raise the money in the most fair, efficient kind of way possible. Yeah. But these conversations always happen in isolation. So it's almost, from my point of view, impossible to talk about the merits of this without talking about how it fits into the wider scheme of things. A hundred percent, yeah. You know? And so there's that. Which is the issue with making a very narrow term of reference, but it must be this rather than...

57:37Same with the bloody EV road user tax, right? I have no problem with an EV tax replacing fuel excise conceptually. A car is a car is a car. Different engine. We've still got a fuel, a tax bill to meet. You could say, well, let's replace one with the other. Makes on one level perfect sense. The point is on a bigger sense. It's like, hang on, we just lost some revenue. Rather than saying it used to be cars, now it's going to be cars again, the Treasurer could have said, this is a good opportunity. Never waste a crisis. It's going away across the entire economy. What is the fairest, least impactful, most efficient, you know, way to raise the missing revenue?

58:11Maybe it's a tax on bananas, right? Maybe it's higher income tax or GST. Maybe it's less tax deductions over here. There's many different ways you could do it, except he's kind of going, cars go away, more on cars. It's like, oh, dude. Like, I know it's easy. It's politically simple. So in a day and age, why wouldn't you? But every opportunity like that is such a missed opportunity to say, it's gone away. We could start from scratch. Ask the boffins. We're going to raise$15 billion. Guys, how? Thanks for asking, Treasurer. We've got a list between on the shelf gathering desk. You won't look at it.

58:40Here's our top 15 ideas. Number 16 is an EV road user charge. How about we think of the other ones? It's why we get left with these Rube Goldberg machines, right? Yes. They're just so ridiculously sort of complicated. By the way, it's always funny too that the calculus is always on the revenue side. It's never on the cost side. Yes. And again, I mean, that sort of feels like a politically loaded kind of statement. It's not to sort of advocate just for the sake of it, for less government services. But it is part of the, like, again, do we want a holistic, sensible look at this thing, then yes, we need to look at the tax system in aggregate, but we've also got to look at what we're spending it on.

59:20You know, are we being, are we getting the best bang for our buck? Us, the Australian citizens, you know, by virtue, we pay all this money. I mean, you can, you can talk to the Nordic countries, which have a very, very high tax burden, but very, very high levels of service as well. And so you could probably, in fact, many do make the case that that's actually not too bad a thing. I'm actually really happy to pay loads of tax because I get free healthcare, free education, great roads, all of this kind of wonderful things. And, yeah, I could probably do that in the private sector, but I'd end up paying for that either way, and this is just the way that we prefer to do it.

59:52It's a whole other sort of conversation. But my point is here is just like, no, just look at this tiny, tiny narrow sliver and only look at it in terms of this context. So I don't like that. The other one too is that it's an increasingly prevalent viewpoint that without government direction, business would have no capability of allocating capital, which just, I had a little dig at the trade minister the other day on Twitter. I saw that. He's gone, India is such an incredible opportunity. People need to invest there. And it's like, you idiot. And it's not that he's wrong. It's got nothing to do with India.

1:00:37It's got nothing to do with there. It's just like, but it's sort of like, oh, oh, thanks, Minister. Now I will make money over there. I hated making money. I really hate making money. And I'm really, really got no capability to spot opportunity myself. But now that you pointed out, I'm going to do it. Are you personally making any investments? Oh, you're not, you're not putting your own money, but I should. Yeah, you need to take more risk. You need to take more risk. It's an incredible opportunity. And again, it just, it fundamentally misunderstands the fact that there are millions, literally, of people out there constantly looking for opportunity to exploit it for their own selfish ends, right?

1:01:13Like that's humans. Again, that's what we do. So if India was this incredible low-hanging fruit of opportunity, people would do it. People would, particularly the diasporas, it's like, I've got a foot in both camps here. I speak the language. I know the culture. I've got connections back home. Wow. I can do this. I'm going to do that. And I'm going to do it not because it's good for the economy or the treasurer reckons I should, I'm going to do it because I'm going to be able to make a buck out of it. And I'm going to be able to make a buck out of it because somewhere else, somehow I'm making someone else's life, but a better back to that, back to that original point.

1:01:50Right. And so here you have, again, it's like businesses need to invest more and buy more capital equipment. And I'm like, do they? So you're telling me that they're cutting off their nose to spite their face. They are deliberately not making capital investments in the tractor, to use your example, because you're not giving them enough incentive to do so. No, if they need a tractor, they'll buy a bloody tractor and they'll work within the framework that is given to them. And I feel as though what happens when you start, I mean, again, there's a spectrum here, but sometimes it's more informative when you go to the extremes of the spectrum.

1:02:27We often talk about, you and me, mate, how people do dumb things with their investing in the name of tax. I'm not going to sell this because I'll have to pay tax. That's true, yeah. You know, it's just like dumb things where they put the cart before the horse. Now, if you're going to keep pushing in this direction, businesses and people are going to make purchasing decisions, not necessarily because it's in the best interest of their stakeholders in the wider community, but because they might be able to get a short-term tax advantage out of it. Now, again, what do you want here? Do you want maximum prosperity or do you want a tax dodge?

1:03:04So I think that's right. The only thing I'm going to say is that assumes the status quo is right and the change is necessary. Yeah, I'm not saying the status quo is definitely not right. The reason I'm saying is because at the moment businesses are obliged to depreciate over 10 years for tax purposes. Yeah. And if it was the other way around, And we could potentially say the same thing. So there is something, you're right that they shouldn't, we don't change the tax to make businesses do what they otherwise won't do or aren't currently doing, except that if the current arrangement is retarding them from doing things they otherwise would like to do and we can let them do it better by doing it this way, then actually changing this tax would get out of people's way, out of businesses' way in doing that.

1:03:41So I think you're a millionth percent right. It's not the role of government to tell businesses what to do. or but if the... They're there to set the ground rules, as we said before. Right. That's what they're there for. But if the ground rules are wrong and fixing them makes it better, you're not telling them this is what to do, you're getting out of their way. And I can't see, but I don't have a strong view either way, frankly. I don't think you're wrong. Here's the other thing, by the way, both for the business and the government, these changes would simply be timing issues rather than actual cash differences, right?

1:04:07Right. Now, time is money. Depreciation in year one was depreciation over 10 years. You and I work in the world of net present values and discounted cash flow. So it's, you know, if you want to give me an investment return from buying my woolly shares, I'd like it this year rather than in 10 years' time, please. That's an easy decision. So there is some time value both for the government and the business in this. I kind of think I'm with you, though, mate. I don't think for all of the tax cut stuff and all the cash flow stuff, you could simply just change the rules for depreciating the asset. Yeah.

1:04:36Right? So you keep the tax rates as they are and simply say, and I've got to say, for all of the – I give plenty of government heaps. I've given the former Morrison government who was particularly its last term where I think it was just runneless and useless they introduced an instant asset tax write-off now that was deliberately to buy the votes of tradies so they could buy their utes right because it was always going to come and then go and so you had to get in early and get it done and buy some votes and I'll give it to you and they won't all that kind of rubbish god-awful policy well except that if it was permanent like effectively this cash flow tax supply implies then again it doesn't change any it doesn't change the timing of any behaviour It just simply means it's more reasonable.

1:05:14So I didn't have an issue with the concept. Again, it was done for purely political reasons, and if you don't think it was, then you're probably rusted on. But conceptually, it applies to use, but if it also applies to the coffee machine and the production line and the whatever else, and it's genuine business use and it's for – I have no issue with instant asset tax rules for tax purposes. The appreciation of 10 years is just a fiction created by accounting rules because they thought that was the best. Now, accounting-wise, it should be done for the P &L, but that's why we have a profit loss statement and a cash flow statement.

1:05:46That idea of it can be both is really important. So, yeah, it was vote buying at the time, but I wasn't actually opposed to the principle of it because there is no inherent reason why you can't get the tax deduction on the ute until the end of its useful life over 10 years rather than up front. If I buy the ute, the cash goes out the door. It's a real cost. It's a real cash cost. I'm not so sure you shouldn't use cash accounting for tax purposes, quite honestly. But I wouldn't have a whole bracket of tax to make it worthwhile. Just one last one, mate. Speaking of incentives, the BCA is clearly talking rubbish about disincentivising investment, right?

1:06:22Oh, yeah. This is just pure lobbying for the sake of lobbying. You know what really? There are always edge cases, right? Here's the thing. You only pay tax when you actually make money. So the idea of like, Buffer's got a great line. I'll try and do it word for word. but it's something like maybe you'll come across someone who won't proceed with a project just because the tax he's going to pay when it succeeds. Send him my way. Let me relieve him. Let me unburden him. Unburden him. Thank you, unburden him. And it's the idea that somehow, you know, if I can make$100 million and I've got to pay 30 % tax or 35 % tax on that money, am I really going to forego the$65 million after tax because there's$5 million riding on it?

1:07:02Now, at some point, yes. If your return on investment calculations are so finely done that your after-tax return is so low. Yes, there'll be some edge cases that disappear. Of course there will. But to think the edge cases that go are worth more to the economy than the tax you'd forego by not increasing tax or by decreasing taxes, that's the bit where you kind of go, no, you're just arguing your own corner here, right? Same as people say with pay, right? If we lowered the tax rates, I'd work harder. It's like, really? If you're a$200 ,000 job and you say, well, I'll take it if the tax rate is 45%, but not if it's 47%.

1:07:36It's like, no, no, no, no, no, no, no, you won't. You think you will, you say you will, you want to believe it. No, there's a fig leaf for I want to pay less tax and I'm going to pretend that somehow. Now, again, is there an edge case? I guess. But have you ever heard of anyone who knocked back a pay rise because they might pay a higher rate of tax on the pay rise? I mean, it's nonsense, absolute nonsense. Yeah. I mean, oh, gosh, yes. On that Ute thing too, the other part of it is I actually say it does, that particular Morrison policy, there was so many bad ones, but this one in particular. And then ironically from the party that's meant to be more representative of business interests, it led to a huge misallocation of capital and it all comes back to a fundamental misunderstanding of what's important for the economy.

1:08:17So what's important for it? And like I've got a bunch of mates in the building industry and trade, right? And I tell you what, they all bought new utes. Now, did they not have a ute before? No, they had a ute. Did they want a newer, nicer one? Hell yeah. Of course, because they're humans, right? Now, did the youth they have before make them, was unable to do their job? No, absolutely do it. Did the new youth make them more productive? No. It just, it still carried the same amount of stuff and so went from A to B, right? So what did it actually do? Now, there will be the edge case. Yes. The margin's important.

1:08:56There will be the person who was like, I actually do need a new ute because this thing's falling apart. And without this, I couldn't afford one, which means I'm not able to do my business. And so that is at the edge. I thank God it's come exactly at the right time. And it's come exactly at the right time. So that's kind of saved me. But we've done this ham-fisted approach where everyone's gotten a new ute. And even now, right, everyone's like, wow, that is a really nice ute. Like I'm not even a ute guy. I was like, I'm impressed by that, right? You don't need that. You don't need that whatsoever.

1:09:27So even if you did need it, it would be fundamentally inside your own, you know, through your lens of what's appropriate for you to do your job. But again, why does it come through a misunderstanding of economics? The government would have gone, but look at all these new vehicle sales. That's good for GDP. GDP went up. Propped up the economy, yep. Yeah, but it's rampant consumption, unnecessary consumption with no productivity kick at the end of it. So to your eyes, to your myopic, short-sighted eyes, that, yes, that was a good thing because we had a big bump up in new cars, new ute sales for that particular period.

1:10:03But guess what? It's not there anymore and everyone's still got a pretty good ute. So now there's less sales than there otherwise would have been. It's like all this money for gone and spent and wasted and for what? Absolute what? Because government felt that without their incredible, you know, holistic vision and direction that the whole industry would have collapsed in and of itself because people are too dumb to make their own decisions as to what's worthwhile for their business, right? Like that's the fundamental issue at stake here. You're the referee. Make the rules. Get on the pitch. Make sure that people are following, but then just let people play.

1:10:43Let them do their thing. People will make mistakes. Other people do really genius things. and over time really special things will emerge. Yes. Yeah. And that's, again, to your point and my point, I don't mind the instant asset tax write-off idea, which effectively is the cash flow tax. The idea you're putting it in place for a clearly political reason, disguised as an economic reason, which has no justification for the reasons you just said is exactly what's going on. And, by the way, I'm still in the favour. I think you are actually half Keynesian. You'll bristle at it. The idea of running the surplus and deficit budgets over a structured budget cycle, if the economy needed the support, that's what the automatic stabilisers are designed for.

1:11:22You don't need additional government action if you – and this is the other thing, design the system. Back to your point about being the referee, I'll take it a step further. You're the referee and you are the bloke or the woman who writes the rulebook, right? So you write the rulebook and then you enforce the rules. So if the rulebook's wrong, then that's fine. Change the rules. Don't just go in and blow some – let me horribly torture the editor for – Don't you go blow some penalties in favour of one team or the other because you're trying to even things up, right? That's a bastardisation of the rules and of the game.

1:11:51If the game's not working, change the rules, fix the rules. That's perfectly appropriate, but that's working on the system, not trying to meddle individually in this activity, that activity, do it now, do it later. That's where it gets messy, right, where you try and mess up with the game being played rather than changing the system itself if it needs it and then refereeing it appropriately, as you've rightly said. Yeah, that team scored a gold. Oh, the other team's really sad. That's unfair. Let's change it. Let's give them a free goal. What? Yeah, correct. I thought we were playing a game here.

1:12:18No, no, no. It's all everyone's got to feel good. Everyone's got to be like. Everyone gets a goal. That's torture horribly. Everyone gets a goal so the players don't have to try as hard so they get old and soft and flabby and a bit unfit. No one comes to the game anymore. Exactly right. No one comes to the game. It's like there's just two people there just like pleading their case, you know, but I deserve a goal. Oh, okay. You get a goal. But what about me? Okay, you get a goal too. They were like, I'm going to go start watching cricket instead because this game sucks. It was not 90 points all, but a single ball's been kicked.

1:12:45Exactly, yeah, that's right. Anyway, we also watch more cricket. That's a very good point. On that note, mate, I've thoroughly enjoyed our chat. Will you come back and extend the ranty slash chatty conversation on Sunday? Got some really good feedback from the rant though, right? Like last week, I'm emboldened. Yeah, thanks very much. That's all he needs. I'm not sure if they like you or just hate me, but either way, we'll see you on Sunday. Until then. Fool on. See you then. Cheers.