The more things change… August 2, 2024

26:25And we want to know they understand it, right, of course. But any iconocrat worth their salt knows exactly what the impact is going to be. And they don't do it unwillingly. And the fact that Philo didn't smile enough and apologize enough and seem he had to go and meet bloody homeless people because he was told that he wasn't caring enough. And it's all just rubbish optics. I said BS optics, but it didn't. It's all rubbish optics. And I just, I think at some level, we can't only people just do the right things because they're the right things and not expect them to do this dog and pony show or to avoid making hard decisions just because it's possible someone might get hurt.

26:58And not because I don't care they get hurt, but because we know the alternative is actually worse. That's the thing. There is no door C where we have, oh, all the RBI needs to do is actually the thing that makes inflation go down and rates go down. It's like they don't have, that doesn't exist. No. So they've got to choose between two bad options. And I just think, while ever we pretend, frankly, allow the media honestly and journos and governments and politicians and whatever, and expect some sort of make me feel okay mummy thing out of it. I just, I think it's, honestly, I think it's a lack of maturity.

27:31And I think, to your point, it's horribly powerful, which is why it's used. And then we wonder why people aren't doing it. And then why can't Politician X fix all of my problems and promise to solve everything for me, rather than, you know what? this is going to suck. We're in a really, really crappy economic circumstance right now and we're going to need to make some hard decisions to get it fixed. And it's going to hurt some people, but so will the other choice. Our job is to hurt as few people as possible, as little as possible, to get to the other side. And so this is what I'm doing. And yes, it sucks and I wish it was different, but it's not.

28:01So my job is to do the right things, not the things that make you feel like I'm patting you on the head and calling you darling and making it all okay. And that's what really, I think, again, I don't want to sound like the you know, Clint Eastwood, Gran Torino, you know, get off my lawn. But it's kind of, it just is that. And it's not old person, it's not back in my day, it's not rose, it's just literally there's two bad choices. The RBA and the government should be responsible choosing the least worst one and getting on with it. And they're not. And that's, the government in particular, I'd said I wouldn't run out too much, but the absolute, like when Jim Chalmers says we're doing everything we can to fix inflation and they're spending more money and they still have a domestic deficit, I'm not being political at all, but that is absolute garbage.

28:41It just genuinely is. And people are, speaking of getting it worse, people are worse off because the government won't do something about it. You are paying more at the till because the government chooses not to act. That is, speaking of maths before you were, mate, that is just straight maths. It just is. And I'm sorry if you don't like that. I'm sorry if you're a Labor voter. I'm sorry if you like Jim Chalmers. I like Jim Chalmers. I think he's a good guy. I think he's been kowtowed by the politics rather than what he thinks he knows he should do. But that's where we find ourselves. We so often find there's, I don't want to, again, because it's too much of a minefield, but certain politicians leave office and they're like, oh, they're brilliant.

29:17They're really smart and articulate. But when they've got the reins of power, it's like, you're a bumbling idiot. And the reality is, is that the political pressures are just immense. So it's like you either play the game and you're there or you're not allowed on the field and you can't do anything. So politics is the art of compromise. But that's the reason. I'm sure if you went bush with Jim and it's just you and him and you had a few beers around a campfire, he would – I don't know. I don't know the guy, but I'm pretty sure he's a very intelligent man. And he would go, oh, yeah, you're 100 % right.

29:51I totally agree. But what can I do? I can feel like I can because of X, Y, Z. So if I do that – a couple other things I just want to really make the point here too is that this is a finance podcast. We're talking about finance. We're talking about economics and the rest of it. But I've often said, you know, economics and politics and society, they're all joined at the hip. The reason that we have a rise in populism is because of the economic situation. So this is far beyond some, you know, technical sort of weird sort of bespoke economic discussion amongst finance nerds. It's sort of like, no, this ultimately leads to like really, really bad people.

30:33because the bad people know that you just have to make big promises. People are so desperate and ill-informed that they'll go along with anything. And people in positions of comfort, as many of us are here in Australia, look overseas and go, why would anyone vote for that guy? Well, it's different, right? It's different when you're there and you're desperate and you're ill-informed. It's like, oh, well, this guy is saying he's going to make things really hard, but don't worry, it might get better down in the future. This guy is going to give me some money now. Like, okay, I'm going for that guy, right?

30:59It's sort of – so that's the one point I wanted to make. The other point I wanted to make here is that the trouble that we get to here is that this whole system is built on trust. There is a reason that people are happy to buy U.S. bonds at a much lower interest rate than Argentinian bonds. Apologies for picking on the Argentinians here, but it's a good example, right? You kind of deserve - It's also just fact, by the way. There's no assumption or presumption here. It's actually what's going on. It's just fact, right? And I put it to you. I put it to anyone who's listening. It's like you've got$10 ,000 to invest.

31:35You can buy an Argentinian bond giving you 12%. I think it's more than that, right? Or you can buy a US bond giving you 4%. Which one do you want? Now, on paper, one is significantly better. Why don't you go for the higher interest rate? Because there's no trust. There's no trust in the people who are controlling the money that's here. And my point is, is that when the further down this path we go with fiscal and monetary, a lack of duty of care there, what ultimately gets impacted is trust. And when the trust is gone, everything is gone. And it happens. It's gradually then suddenly it just goes.

32:13And it's all of a sudden like, oh, I'm not buying that. Look at what happened in the start of last year with the UK guilt market. The UK guilt. We're not even, we're talking, you know, pinnacle Western democracy here. And the whole thing just, again, I was going to swear, pooed itself. Thank you. Yeah. Why? Because Trust, Liz Trust said something dumb without any - It was so dumb too. Oh my gosh. What an, you know, not just, I'm not picking on her. Well, I will pick on her, but everyone around her in that party. And the market is a really good truth device, I think. And everyone just went, I am not touching that.

33:03I'm getting rid of this piece of paper because you're going to pay me back in funny money. I don't want it. You can say anything you like, all the rhetoric. I don't want it. And then what happened, then the government had to step into bail. And it just kind of fixes it a little bit. But when that trust starts to go, it's very, very, very, very hard to win back. And so what is at stake? This isn't about, oh, gosh, I hope my mortgage doesn't go up too much more. The fundamental thing at stake here is geopolitical stability, you know, the very fabric of our society. It sounds hyperbolic, right? But it's like things could get very, very dark very, very quickly when people en masse start to lose faith in the system, and the people sort of controlling it, and the very fluid which we sort of swim in is lacking, loses credibility, you have a reset.

33:56And by the way, this isn't like, oh, really? Is that what the academics say? No, this is what history says. And this is what history says, not just in, oh, it happened once in 1639 and then again in 1911. No, like repeatedly, dozens of times, even in the last couple of decades around the world, it happens again and again and again and again. And we in the West, in our incredible position of privilege and luxury, go, yeah, but that's there. That wouldn't happen here. It's like, well, guess what? It's happening slower, but it's happening. We're on the exact same path and the stakes couldn't be higher.

34:30I'll end on that bleak message. I'm going to bleaker for a second, mate, and we'll move on. The other thing that's worth remembering is that the RBA is trying to – the government is trying to avoid a recession. and that's important. And I'm going to say ish. And the reason I say ish is because if you look at the ABS numbers, we've been a per capita recession, a per person recession. Oh, forever. For more than a year. And it's not... A recession is worse because if businesses get less customers, they tend to lay people off and unemployment gets worse. A recession is worse than a per capita recession, but it's effectively only worse because the per capita recession gets worse.

35:08That's how this will end up. Now, there's changes to population growth, immigration policy and stuff. So the numbers may or may not look different in the future. But while we all think we're trying to avoid a recession because they're, well, if the economy's not a recession, everything's okay or good or positive or something, whatever it is we think, the average Australian's share of GDP now, averages are still equally messy. There's a distribution question about who's getting a lot and who's not getting much. But the economy might be growing, but per capita, per person, the economy is shrinking.

35:40Australia is producing less per person than we were a year ago, and that's been the case for the last at least four quarters, based on some quick ABS numbers I pulled the other day. So, now, so what? I don't know. That's a big so what. That's a big deal. That is a huge deal. Well, yeah. So, we're going to be at the solar. We've all got less purchasing power, and we're all producing less. Yes, yes. This is not a good scenario. Correct. And whatever growth we think we're getting is being propped up largely by imported demand, which is not necessarily even a bad thing. I think, you know, I talked about population growth before, Ram, but in a situation where you've got housing vacancies in less than 1%, inflation at 4%, house prices going through the roof still, rents going through the roof still, other products going through the roof.

36:27We're talking about the 19.4 % increase in total prices over the last four and a half years. And we're making a list off. By the way, that also means productivity is awful. I don't buy the view that productivity is a government problem necessarily. No. I don't know how. I think it has a role to play to do what it can to help businesses be as productive as possible. And often that's getting out of the way rather than getting in the way. Can I not have 12 forms to fill out? That would be really nice. And some infrastructure spending does matter, right? A bridge or a faster road. I mean, there are things government, and they all feel little and inconsequential, but add them together on an economics, a total economy level, and you start to get some big numbers.

37:06So governments have a role. Productivity is not easy to solve. The challenge is, and this goes back to inflation, mate, about you saying we're paying more. You can pay more for stuff. And some people say, well, that doesn't matter if price goes up as long as wages go up as well, because it stays the same. That's also true in the short term. But if wages go up without productivity going up, businesses make less money. You can even say that's fine because they're making too much money. Okay, that's good for a year. And then what? And then what? It starts to break down when the economy is not growing in real terms, that is, per person and after inflation is accounted for.

37:38You can't just make both numbers go up and say the same, price has got 100%, my wage got up 100%, everything's okay. It just doesn't work that way. And so this is the real risk with this stuff if it's allowed to keep going. So the RBA should try and avoid a recession if it can. As I said, when businesses start to go backwards, they're going forwards now because there's more people to buy their stuff. That's been a nice salve for a struggling economy. It has been, as Ram said, we're not addressing the core issues. We're pretending it's OK by papering it over. But at least people are staying in jobs because businesses are getting more revenue.

38:09And yes, a recession would make that worse. So there is something to fear from a recession that's worse than a per capita recession. But don't believe for a second that we're OK as long as the economy is growing, because it's simply not the case. We are getting less for our money. We are making less per person. And productivity is falling. It is not. It's not a healthy state of effect. Our kids will be worse off than we are. It's the first time, I think, in a long time where that can be said to be true. Well, I'm going to disagree with you. I'm still an optimist, right? I think, but I'm an active optimist.

38:40In other words, we've got to make some changes. You made the point before, Amber, that governments and central banks and, frankly, the rest of us have to have real conversations about fixing the problems. If we don't fix the problems, we will absolutely continue on this path. That is the challenge confronting us. I'm an optimist. I think enough smart people, enough people who care enough, enough people who are informed enough, part of the reason we do this podcast and part of the reason I'm on Twitter a lot is to try and somehow add a little tiny speck of extra context information to an economic conversation.

39:08I think we can, it's completely within our grasp to solve all of these problems. Yeah. And not solve perfectly that we can't create utopia. We can solve the fundamental problems that risk things getting worse, but we have to do it. So I'm an optimist because I think we can. I'm not prepared to say it's all over. We can't do it, can't fix it. Too bad, so sad. But you're right that if we don't do it, the trajectory is pretty awful. Yeah. Oh, gosh. It's very hard to move on if you keep saying things like that. But it's another bugbear of mine is this idea that we can centrally control productivity.

39:43I mean, what government initiative invented the steam engine? Yeah. what what what public policy shapes the internal combustion engine what uh you know the haber bosch process which is what how we produce nitrogen which revolutionized farming and shot productivity insanely through the roof like it's it's one of probably the most significant discoveries that no one talks about right like it's i've never heard of it there you go oh i knew i knew of the impact of it but i had never heard of the it's got the yeah the name of it like it was a revolutionary breakthrough right you know lithium battery technology or the internet just go more into modern times these things happen because people tinker away and they figure stuff out it's not something that can be dictated to your point you're right we can foster it we can encourage it we can get the hell out of the way to do all of this kind of stuff but i if i mean i'm i'm just always needing to punch the wall when i'm watching i just don't do it anymore and some politician gets up there and we need to do more about productivity it's like you can't do anything you can't just You know what would really enhance productivity?

40:48Cold fusion. That'd be great. Let's do that. Well, okay. Very easy to say. Yeah, that's right. Someone do it, right? Like these things happen naturally. Why do they happen? Because people are creative. People are intelligent. People are working and, you know, they're just, there are all kinds of, yeah, curious. It just happens. You can't plan for it. It doesn't happen in a linear state. It just, things get discovered and then they get rolled out. Do they get rolled out because there was a policy to roll? No, it gets rolled out because it's better. Did someone knock on your door and say, Scott, you should really get rid of the horse and drive a car?

41:23I was like, thanks. I don't need to be told that. We're bad at horses and we must have a car from now on. Yeah, exactly. No, I'm just going to do it because it's a heap better. That's how productivity – that is the core root of productivity, is human ingenuity. So just get the heck out of the way, right, and stop talking about it and shaking your fist. and it's just, it's madness. And it's a word that I think 90 % of politicians and talking heads in the media throw around without having the foggiest clue as to what it actually means. That's also very true. I'd like to see a hairdresser improve their productivity.

41:57Well, so that's what I was going to say. Or a plumber. We need to get to the rest of our podcast at some point. But you're right. And actually, that's why it's harder at the moment. I'm very wary of the person who said, we only need six computers, or we're at the end of history. The future will always be far more impressive than you expect or you worry might be otherwise to be the case. The famous one was the IBM president, wasn't he? Yes. A worldwide need for six computers. But a lot of the improvements we've made over the last couple of centuries are mechanizing things that were otherwise done by hand.

42:31And that will continue. We'll make houses with robots one day. Fast-break technologies on the ASX is actually making some progress recently. Anyway, but yeah, good point. Good point. And hairdressers, maybe you can go into a room and the robot cuts you. I don't know. But the challenge for us productivity-wise for the country, I've always been telling this, is just that when you have a certain level of wealth, you become a services economy, which is wonderful. It's what you should want, right? Because services jobs are paid more. It means we're enjoying a more luxurious, higher quality of life.

43:03We're not in a field somewhere with a hoe. Right. Digging a hole. That's what we're not doing. Exactly. Yeah. And so you and I are doing a services job right now. We're helping people invest. Why? Because they've got enough money left over. Why? Because we're rich enough that, you know, these are - I haven't picked up a shovel in a long time. Right. So I'll come and dig a hole around my place. So the - But once you have that, think about how does a hairdresser, a plumber, a nurse at an aged care facility, how do you become more productive? We don't want nurses looking after seven or 10 or 15 patients each.

43:35We want them having one to four or five of the ratios are, right? So it's much, much harder for a services economy to become more traditionally productive. And by services, I mean specifically here, personal services, which is increasing. Now, accountants can become more productive. Investors can become more productive. I'm saying there's no end to it. But when 99 % of us were laborers using our hands and then invented a hoe and then invented a shovel, then invented a horse-drawn plow, then invented a tractor, then invented a combine harvester, then invented a road train that can take X number of cattle to market 100 kilometers away.

44:07So the sequential removal or replacement of labor with machines works to a point. And then you start to replace not machines with people, but you tend to those jobs shrink. The new jobs are people jobs that are less prone to being able to be improved with productivity. It plateaus. The S-curve plateaus because you get to a point now where you can have a modern agricultural operation, which can produce so much food with like a dozen people, right? And it's like, does that mean that there's no more productivity enhancements in terms of farming? No, there's a lot of cool stuff that can be done. But the low-hanging fruit has been taken at this point.

44:47Maybe, I think this particular pudding gets very much over-egged, but maybe we're at the stage now where a lot of the thinking tasks can be enhanced through AI and that kind of stuff. So maybe that's a productivity boon. But yeah, you're absolutely right. Just to say the word and to look backwards and like that's what's happened in the past and that's what will happen again in the future and we need more machines. No one's carving a pencil from a tree by themselves, right? It's made in a massive factory and it's like these things have been so insanely optimized. And again, not to say that they can never be done, but maybe we 3D print a pencil in the future, you know.

45:26We just apply atom by atom and we do it in the most efficient way that's possible. But there is a logical conclusion to that at some point. And again, it's hard to do verbally, but S-curves are S-curves for a reason. Very slow, very steep, then very slow because a lot of the benefit comes early on, you know, and then it's maximized. And then actually I mentioned the internal combustion engine. That's a great example. That's been around for 100 years, right? And the model going, I'm going to forget my history here, so whenever it was invented, but 10 years later, they were so much more efficient.

46:08And then 10 years, like so much more efficient. Now, the engines that are being made today, are they more efficient than 10 years ago? Yeah. Yeah, they are. But the quantum leap isn't, it's plateauing. Same with my favorite examples with Xboxes and smartphones. Yeah. Yeah, yeah, yeah. Yeah, you know, like, whoa, the iPhone 2 is so much better than, you know, whoa, the Xbox 360 is so much better graphics. And like these days it's like, yeah, it's a little bit better. And it's just kind of, you just knock against sort of like physical constraints after a point, you know. And it's like you can only sort of carry Moore's Law to a degree before you start getting against, you start hitting up against the laws of the universe, right?

46:49And so, I guess my point is that we're generals fighting the last war a lot of the time. We look at these things, oh, that's what we need to do, thinking that it's actually we've squeezed a lot of the juice from that lemon. That's not to say we stop squeezing, but we probably should look for other lemons to squeeze is what I'm saying. Yeah, I think that's right. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

47:17Shane Elliott, who is the ANZ CEO, spoke this week, and he said that 50-year mortgages are not off the table. I'm so glad you brought this. We were talking before about what to think about, and I was thinking in the back of my head, there is something. Thank you. Thank you so much. And I think we've actually ranted about this before, and if I have, I'm not even sorry for doing it again. No, we're doing it again. You know what I think is fascinating about housing, mate, is I don't know many things. But one of the things I do know reasonably well is economics and economic behavior, and yes, behavioral finance, for those who want me to say the phrase, it's the new drinking game, I think.

47:58why second order impacts are really important always ask yourself and then what um so let's let's take a step back the average loan mortgage i won't say average i'm sure it is it's almost every mortgage this has 30 years right uh when i when i got my first uh unit first mortgage was 25 year was standard so it's already gone up by 20 right from 25 to 30 most people don't forget that and kind of think 30 has been around forever it hasn't um although i am old so maybe it's almost forever.

48:27The possibility and holding out the view that, hey, hang on, if I could do it over 50 years, I could borrow the same amount of money and pay less per month. That's why a 50-year mortgage sounds attractive. And that is million percent true. At the same amount of borrowing over a longer term, even at the same interest rate, you'll pay less per month. Now, two things. Firstly, you'll pay more interest overall of the life of the loan. And some people will say, that's okay. That's the price of, at least I can get into the market. The market is so screwed. Affordability is so poor right now that people are prepared to trade off almost everything so they can at least say those words, at least I can get into the market.

49:09And I don't blame them for that view. Again, we're talking about first order impacts here, right? We're still that first order. What would it mean? If you think, well, hang on, I can't buy a house. If I could at least buy a house. Yes, I've got to pay it off over longer. Yes, I've got to pay more interest, but at least I can get the house. That'd be a trade-off I'd be prepared to make. And I think that's a horrible thing for our society to offer kids, particularly kids, as their only choice, right? I think that just sucks in the first instance. If the only way we can get you into a house is to make you pay it off for 20 years longer, it blows my mind.

49:39By the way, never ask Barbara if you need a haircut. Like, the bank CEO thinks it's a good idea. Oh, really? Oh, you think that's a good idea? It wouldn't have anything to do with the fact that you make a squillion dollars more in profit. You know. More interest payments, exactly. No, you're right. But I get people saying, I wish we could, if I could lower my mortgage payments, I could afford that house I want to buy. Yep, get it. Get it. 100 % get it. Don't blame me for thinking that. We decided you should fix that so that's not the only option available to you, by the way. And if you're someone who has your own home, yes, this will make your home, you know, anyone.

50:14But it also makes it more affordable for everyone else. Well, so here's the problem, right? You don't go to the bank and say, I've got to buy a million dollar house. How little can I pay in interest to buy that house? I mean, yes, you do if you want the best rate. But you go to the bank and say, I earn this much money. How much can I borrow? And the bank manager says, well, it doesn't really matter how much you can borrow. What it matters is how much you can repay on a monthly basis. So you can afford to pay this mortgage off at$3 ,000 a month. And I'll do my maths on a 30-year mortgage. Okay, you can borrow.

50:45I haven't done the maths, by the way. I'm going to make it up. You can borrow a million dollars. And you go, cool, okay, so I can afford to spend a million dollars on a house. Someone says to you, hey, you're paying$3 ,000 a month on that mortgage. I could get you a loan. If you paid the loan off over 50 years, you could pay$2 ,800 a month rather than$3 ,000. And you go, first order impact, great, save$200 a month. That's awesome. I can afford that. And people who couldn't afford$3 ,000 a month but can only afford$2 ,800 a month can now buy the million dollar house. So that's great too. So again, first order impact, everyone's winning.

51:15The bank makes more money. Yeah. but they win and the borrower gets to pay less and therefore afford the house they couldn't otherwise afford. Great, fantastic, wonderful. Except you know what actually happens? The person who could afford to pay$3 ,000 a month can still afford to pay$3 ,000 a month and they go to the bank manager and say, Mr. Bank Manager, I can afford to pay three grand a month and the bank manager says, well, see in the old days that would have got you a million dollar mortgage but over 50 years I can lend you$1.2 million. So now when you go to the auction and someone else bids a million or a million and one thousand, you say, oh, I get a one million two, one million five, 1.1, 1.15, $1.2 million, okay, sold.

52:00So what have you done? You've turned a 30-year, $3 ,000 a month repayment for a million dollar house into a 50-year, $3 ,000 a month repayment for a$1.2 million house. Congratulations. Congratulations. You've just made it a home seller subsidy all over again, just like every other so-called affordability measure out there. Every other policy. Mate, we're on the same page. Sorry. We are. Keep going. I didn't - No, that's it. That's all I got. Other than just double underline, the second order impact. Yes, it makes - I've had people, again, on Twitter, I probably just keep mentioning it, but it's a great platform because you get to chat to people about this stuff, right?

52:37Yeah. And they're like, well, I know 50 years sucks, but at least it's cheaper. At least I get it in the market. I'm like, oh, I really wish that was true. you know your poor thing like i get how how way and this is why they do it right because it feels first order super the housing at least i can buy a house first home bonus grant at least i can buy a house 50 just me no house it's just just an edge for me there right i don't blame anyone for not thinking this through as i said i'm not very smart i don't know many things one thing i do understand is the way money will slosh through the economy when you change the settings and the circumstances and this one i get i will bet my entire own house on the fact that if you gave people 50 year mortgages, it would simply mean they end up paying the same monthly repayment for a more expensive house over a longer period of time.

53:18And that is not a win for anybody except banks and those looking to sell their homes, not those looking to buy one. What it does is it pretty much guarantees that when you pass away, rather than leaving your kids any assets, you'll be leaving them in debt. Correct. Think about it. Even if you somehow, I don't know how this is even mathematically possible unless you're born with a silver spoon. Somehow at age 20, two years out of high school, no tertiary education, you've somehow saved up. The average median home is like a million dollars. So somehow, somehow you've gotten$200 ,000. I don't know how you did it.

53:54Maybe you're just like a drug deal or trading crypto or God knows what, you know, and you've somehow got 200 grand together. You're 70. You're 70 when you pay that off. Now, generally 20-year-olds don't get million-dollar mortgages, right? Like, so, so more, the average, I think the average now is 35 or something like that. So you're now 85 when you can hope to pay this off. And that's without anything radically changing in terms of interest rates. And I, I don't know, look, how much has the world changed in 50 years? Yeah. 1976, is it through to now? No, 74. Four through to now. Yeah. Australia had just gotten color TV, right?

54:37That's right. I know because that's my era, right? I was born around then. And this is like, you know, now we've got rockets that land themselves. And so for me to take out a mortgage and a commitment that's going to last 50 years, like it's so bonkers. Alex Joyner, speaking of Twitter, I thought he put it really well. He said, affordability is a price issue. It's not a leverage issue. Lovely, isn't it? Isn't that a beautiful saying? I mean, if you think that the best way to fix this is to just give people more... We are the most indebted country. I think we're in the top two, three. Like, it's so insane how leveraged we are.

55:21When you're on the podium, it doesn't really matter which number you are. Things are bad. Yeah, exactly. It's like we're only the third most corrupt nation in the... Oh, that's fine then. That's okay. You're not number one. And it's a crowded field, right? We are up to our eyeballs. And the genius at the bank, who possibly has no skin in this game whatsoever, has said that we should all take on more debt. That'll fix the problem. It is barking mad. But I said it. I've called it before. We've had this conversation. It'll happen. It'll happen. It'll happen because - Well, unless a government with some backbone or a potential regulator with some backbone - I stand by my comment.

56:03Yeah, fair. So my tweet was exactly that. If I was treasurer tomorrow, I would mandate a maximum of 25-year mortgages. That's it. Job done. I don't care. God, yeah. It makes no sense. Here's the other thing, by the way, Matt, quickly. It's going to destroy the super system. Yep. Oh, that's going to be raided. Because your point about, well, it has to be, right? So I don't even necessarily mean super as super. What I mean is the payout at retirement. If you've got a 30-year mortgage, you're starting at 34. You're probably going to pay it off just before you retire, right? So you're probably okay most of the time.

56:29People like to trade up and bloody, it's just stupid anyway. But if you've got a 50-year mortgage and you take it out at 35, to your point, at 65, you retire, you've got 20 years left of the mortgage. Yeah. What do you do? You can't pay it off. Well, either you use your super withdrawals to pay it off. In other words, you're not working. You're still paying a bloody mortgage. Or you take a lump sum and pay it off. Either way, what was supposed to be spent on living expenses in retirement become mortgage or de facto mortgage repayments in retirement. So what have you done? You've basically co-opted the super system to pay for more expensive housing.

57:00The emperor has no clothes. You find a – go to your local primary school, grab a kid in year five or six, and say, how do you fix affordability? And they'll say, well, prices have to come down. These kids will get it, right? Because it's like, what's the problem? Unaffordable. Oh, well, so how do you fix it? We prices have to come down. Yeah, yeah, that's it. That's the point. It's the one truth that no one wants to acknowledge. I'm not, and again, I'm a homeowner, right? Like I don't, I'm not, I'm not, it would cause an incredible amount of misery and the rest of it. But that's, it's kind of the only solution here, everyone.

57:39Like it just, we are not going to fix the problem by taking this balloon where the rubber is so stretched, it's going to pop at any second and then blow more air into it. Like it is the height of madness. I mean, the thing is I can rant and rave and you and I can rant and rave as much as we want. Reality has a way of sorting itself out. So we can sort this out in a, as best we can controlled kind of manner, or we can just let the economy sort it out for us and reality sort it out for us. And generally that's what happens because no one wants to make a hard decision and you just blow until it pops.

58:13And then I guess what? The balloon's not overinflated anymore. It just, that's how, that's how it gets fixed. happened in 2008 2009 uh you know i yeah it's it's so mad and and the thing is i get to the point where it's sort of like i feel as though short of putting on some sock puppets i don't know how else to explain it like you know it's sort of like there's some it's like trying to have an argument with someone about the sky being blue and then going no it's not and then you go okay, well, let me try and frame it differently and come at it at a different angle. But at a point, it's just sort of like, I don't know how to convince you at this point if you can't see it.

58:58I love him, actually. What's his name? Jim Randy? Randy, he busts all these pseudoscience myths. Right, okay. Randy James? Oh, God, I can't believe I've forgotten his name. He's excellent. He's absolutely brilliant. he takes tasks to psychics and all of these other uh snake oil salesmen he he said those who believe without reason cannot be convinced by reason and it's so true right so yeah when you're arguing against someone who's just the whole foundation of their belief system is just because i think and then you think that you're going to apply facts figures and reason to change their mind yeah it's not gonna work right so yeah i'm sadly i think it's just gonna it'll sort itself out and again we just to put a pin in this unless you want to say something else on it but it's it's it's just to not not to make it all it sounds selfish but and we should definitely try and advocate for change and all the right kind of stuff but but what you can do is you can control your own circumstances.

1:00:00And I would just, again, really encourage everyone to just try and structure your own life and your own, and it's not easy, right? Because at the end of the day, you need somewhere to live and these are very difficult things. It might make sense on paper to go, where'd you go? Coober Pedy and rent a caravan somewhere in a trailer park and, oh, look how much more affordable things are. The reality is it is going to be very difficult, but don't overextend yourself too much in the pursuit of easy money. And this country has become just, we worship at the foot of this idol called property. And it's gone so far beyond utility value now that all it is a wealth creation strategy.

1:00:49It's so financialized. And now we're so deep down the bottom of the barrel in terms of ideas. And we're just like, well, we got into this mess by all this irresponsible financial engineering. So what do we do? Let's do some more financial engineering. And just don't participate in the folly as best as you can avoid it. Don't do it. And I'm very hyper aware that I've been saying that for a while. and it actually turns out that the person today, who knows what will happen tomorrow, but the person today borrowed up to the eyeballs has actually done much, much better. But it's like seeing the guy who came out of the casino and just left his chips on black for 20 spins in a row and then saying, look what I did.

1:01:34It's really smart. You should do it too. And then someone like me goes, oh, it sounds really reckless and stupid. And he goes, yeah, but I did it and it worked. And that person did it and it worked. I was like, yes. I can't argue against that fact. However, and it's just, I don't know. I just shrug my shoulders. Last one for me, mate. We should touch on Rex, the regional airline. Officially, it's regional express going broke. Speaking of rants, settle in, everyone. We're halfway through this pod. I was going to say we're not really, but it's possible. So Rex goes broke this week. it reminds me of after bonza reminds me of the old thing about you know losing one parent is unfortunate losing both is just careless i kind of feel like that with airlines it's like you know losing one airline is unfortunate losing both is just careless um they're falling like flies mate and uh this is this is fascinating because the the the failure here seems to have been and i've talked to a few people about this it's it's a challenge because i looked at the failure It was hubris, right?

1:02:39They thought they could take on the big guys, new planes, new routes, take on the so-called Golden Triangle, Sydney, Melbourne, Canberra, try and make somebody beat Qantas and Virgin at their own game. And we've seen everybody try and do that. Compass Mark 1, 2, 3, 84, 85 and 86. Ausjet was there. There's always ones I forget. Ansett, of course, went broke when Virgin turned up and actually managed to survive long enough to put the other airline broke. To imagine that Rex could come and just sort of take that That was, now, in some parallel university, it happened and it worked and they're fine, right?

1:03:12But the hubris involved is massive. The only reason I pause on the word hubris is the hubris of running an airline trying to make money in general is always, you know, and this is why it's a problem. People say, why did they do it? Well, if you're gutsy enough, hubristic enough, optimistic enough to think you can run an airline successfully, I guess you figure you can run any, you can go to Sydney, Melbourne, Canberra successfully too because the base business is very hard to be profitable in the first place. So if you have the kind of self-delusion of, it's a good business, it's a great business, we should do more of this.

1:03:43I guess you get kind of what you deserve and we shouldn't be surprised. But again, tongue half in cheek. But I will say, it seems that they simply just bit off more than they could chew. They got too greedy. They got too carried away. They decided or thought they could somehow compete in this area. As I said, in some parallel universe, they probably have and that's fine. I'm not saying it was exactly always a zero sum or 0 % chance of succeeding. But it was just unnecessary. Warren Buffett talks about people who use debt and say they risked what they had and needed to try and get what they didn't have and didn't need.

1:04:18And it kind of feels like that with Rex, right? There's a perfectly fine little business doing regional flights around New South Wales, Vic, Taz, Queensland, largely. And if they get a flight out of SA, they might. It wasn't a great business, but it was an okay business. It was fine and it was paying its way. And they kind of jeopardized all that, literally threw all that away to try and do something they didn't have to do and it just it really strikes me interesting we talk so much about businesses are growing and about growing by acquisition and that kind of stuff sometimes you can grow and try and grow i guess this is semi-organically because new roots but you know it's current business they didn't buy any any companies they didn't go on that's literally said hey let's make obligations for these planes and these staff in these routes and it ended up that was the millstone they end up drowning the whole operation.

1:05:03Yeah. Oh, my God. I don't know where to start. First thing is we can't give advice on this platform. The next thing to say is never buy an L. Educationally speaking. Educationally speaking. Correct, correct. Just don't. Just don't. And please, someone don't at me with some retrospectively cherry-picked data point where if I bought the Qantas here and I sold it, yeah, don't, right? They are so diabolically difficult. Yeah. I mean - If you get lucky enough to make money owning airline shares, lucky is the optimal word. It's absolutely lucky. Most airlines in most time periods, you're not going to make money.

1:05:43You're really not. It's a commodity, frankly. And, you know, it - Gosh, there's so many different places to go with this. What is it about planes that's so special? I don't get it. I could understand it in the early days of aviation where it had a real romanticism about it. You know, it really was the future. We're ushering in the future with air travel and it opened up the world and it was a sign of national prosperity. I get it. I get it, right? But guess what? It's not 1955 anymore, right? Like it's 2024. Let them fail. Let them fail. If your business fails, my business fails, if most businesses fail, well, they had a good run and it didn't work out.

1:06:34Airline fails and it's national news. Oh, we've got to do something. Do we? Why? I don't get it. Because the people. It was like, well, the people didn't use it or they weren't prepared to pay enough. That's why it's going out of business, right? Or part of the reason why it's going out of business. if there was some dire need that was just the the the people were screaming out for they'd pay it they would pay for it right but they don't so they don't want it certainly not at that price point so so the market the market is telling you something here right and and then again we we on one hand we go oh communism is really dumb and then we turn around and we do communism right i I don't get it.

1:07:15Yeah. Let it fail. I know. And there'll be someone, my heart goes out to the employees and the rest because they didn't make these decisions. Certainly not most of them. The ones at the top are certainly responsible. But it is. Okay. That's the point. The second point is, well, if we're going to, we, you, me, and everyone listening and anyone who pays tax in this country are going to bail them out. And we're going to do it, like how many times have we talked about Qantas? Just giving, we, the taxpayer, gave them a gift. It was over$2 billion from memory. No strings attached. Yeah. There you go.

1:07:54Why? I don't know. I have no good answer as to why, but we did. And now that's being talked about again. We're going to do communism again. We're going to, oh, the government should buy it out and run it. What, the government should run an airline? Okay. I guess maybe they should run all the other industries. How is that? Name one example ever. I get the theory, by the way. As I said, I was the stinky uni kid handing out the green left. I really was. I knew it was you. I knew it was you. I was such a commie. I think you all go through that phase because it is so appealing and it's got such a fairness feel to it.

1:08:33You don't realize how badly it's gone in the past either. You see this brand new idea. Oh, this is an idea. It's like, well, that sounds good. We should try that. Corporate's screwing over everyone. So let's spread it. And it works beautifully on paper, just a disaster in every other way, right? And yet here we are, again, in the modern age, talking about this as a viable solution. At the very least, there needs to be a lot of strings attached. But I would say, and I'll say it again, let it fail. Because if there is a market demand there that can be done in a viable manner, the market will solve that problem.

1:09:10Because someone will go, oh, I'll do it, right? Alliance, oh gosh, I've just gone blank on the name. There is a goodish, maybe that's the best way to describe it. In fact, I'm speaking to the CEO at the end of, is it this month? Alliance Aviation, AQZ. It's listed on there. So this is, again, I haven't done my prep yet for it, but my understanding is that they actually go okay. and the reason they go okay is because this is what we do we operate they basically do the fly in fly out kind of work for all the mines over in wa there's a need for it we can do it at this kind of cost that's what we do should maybe we should start doing flights to bali and then no no no no why why where's our competitive edge why would we do that that's right i'm not empire building so so there is there are it is possible to do this in a way and someone will do it if there is enough people in the country that need these kind of, someone will step up and they'll do it and it'll be at a certain cost and it probably won't be that cheap, but it will be there.

1:10:15That's the way that we have to allow things to sort of solve themselves. Because again, it just takes us in a direction where no one, no one, actually when I say no one wins, 99.999 % of us don't win and a couple of us close to the spigot win massively. Yeah, I think that's right. I probably a little bit, I think there's a role for understanding in a country like Australia, given our distances and stuff whether or not we want to have a regionally operating airline and if we do you know to what degree it's a quasi-public service and i don't really have a strong view on that i probably would have a strong view of living in dubbo or mudgie or mount eiser or birdsville or something so at some point the the country is the country is the country we've probably got to have a think about how we how we make that happen um so there i think there's i'm not as strongly sure about that.

1:11:03The other thing I would say, by the way, and this is speaking of being Pollyanna and theory versus reality, there is a... There need to be no difference between a company run by government or owned by government and a company owned by shareholders. There need to be no difference. Now, maybe the reality is always going to be, and it's probably always a problem, but if every share of Woolworths was owned by the government and the government did nothing other than appoint the same people to the board and the same people to management, it's probable you get the same result. Now, there's a lot of ifs in that statement, so I will happily say, if they can't keep their hands on, if we know the politicians that we have, if, if, if, if, if, then it probably shouldn't happen.

1:11:47And I guess I'm just, I'm leaving room for, and I've said this kind of before in different contexts, there's no reason why a government-owned corporation run by a commercial team of transplant the entire board and management of virgin for example into into rex have it owned by the government and say guys do whatever you would have done at virgin anyway uh now again airlines are airlines they probably all suck it in terms of returns eventually but that's the only the only couple of points i make i completely agree with everything else you said other than just do we want to run as a as a department like centrelink No, of course not.

1:12:18But there's no reason why you couldn't run a commercial arm of government. Frankly, I think about like Saudi Aramco, for example. These are obviously very different businesses, different industries, different reasons, different resources. But there are government businesses. I mean, why do people pay a fortune for Commonwealth Bank when it was floated? Because it was actually a successful, profitable business. Yeah, I'm leaving room for that possibility. That's all. Maybe only for pedantic, semantic reasons. But, you know, I don't want Albo and Dutton sitting on the board of Rex, right? No. That's a bad thing.

1:12:53But just allowing for room for, if we decide as a country, that along with providing trains and buses, we should also provide regional airlines because that just makes, you know, sense for a country that wants that infrastructure. It could be done should we choose to do it. It's also a question of degree here. So I just, people probably heard because I have, my teenage son has a keyboard that makes a ridiculously loud clicking noise and it drives me crazy. Yeah, mechanical keyboard. I'm told it's important. Gamey keyboard, dad gamey keyboard. You know, gosh, you think of, think about inflation, right?

1:13:31Like you would, how is a keyboard that much? Anyway, anyway, I digress. So I did a bit of Googling. um according to the australian institute of health and welfare this is in relation to sort of like the flying doctor service that kind of stuff 1.2 percent of australians live in remote areas right another 0.8 live in very remote areas and you could classify about 8 percent live in outer regional areas okay um so you've at best yeah you've got 10 of the population who might be in need of this kind of service. And when we're talking about some of these real remote places, less than 2%. Does that have been like Dubbo's and Mudgee's, though?

1:14:10I wonder what outer regions versus regional. Probably doesn't matter. I can't do it live. So I grew up in Tamworth, right? That's a five-hour drive to Sydney. I mean, by the time you... And I had flown it before. By the time you flew... Sorry, drove out to the airport, went through that nightmare, waited for your plane, caught your plane, got delayed. It was like, I could have just driven, right? I could have easily just, it's very marginal. And I tell you, it's not the most remote place in the world. But my point being is that, and there's not a large amount of people here that we are talking about.

1:14:51No, that's not, we should therefore forget about it. You're not in the majority, so therefore we don't care. I am not saying that whatsoever. But I think the urgency and significance of the problem is absolutely overblown. And then of those people that are there, how many of them are the kind of people that are flying to the cities on a regular basis? I would say very, very few of them, right? So it's sort of like – and you speak to people. My dad did a lot of work in the country. We did a lot of traveling out there. And it's like they will always tell you that it's better out that way, right?

1:15:20As everyone does. Everyone lives in God's country. Ask anyone, oh, God's country. This is the best place to be. But there's compromise. If you live in the city, you get all the pollution. You get the crime. You get the hoons. You get all of that kind of stuff, but services are much cheaper. That's pretty cool. You live in the country, beautiful environment, clear skies, all of that great stuff, but guess what? You don't have super fast broadband and hourly flights to the center of the city. Well, actually, now you do have super fast broadband, thanks to the Starling. That's right. But my point is that I think we need to sort of recognize that, like in everything, there's compromise.

1:16:01If you want to live in a remote cattle station, have at it and good on you. But, and I'm not, I actually, there's a lot of appeal for me to do that, actually. I really get it. But should you expect the kinds of things that someone who lives in the middle of Sydney expects? I don't think so. Just as someone in Sydney saying, I should have five acres in Redfern and I should have, you know, no pollution. And I was like, well, no, get real, mate. This is where you live. this is a compromise that you take so it's just there is the fact that this has dom i'm getting push notifications from the abc app it's like breaking you this is only how i don't again it just when it comes to airlines there is something about them where journalists and by extension i guess us all think that it's just like super super mega mega important and we need to do everything we possibly can and it's just like even again for the people who are losing their jobs here again My heart goes out for anyone who unfairly loses their job.

1:17:02But the number of people that pack shelves for coals are probably 10x that number, right? But it's not as a motive. I don't know, mate. I don't know. I'm just rambling at this point. I guess I'm just saying I don't think those are binary decisions. There's a point in between. We work as a country. What do we provide to whom and where? And it's not the same. I'm not strongly saying it's true. If it was that necessary, the planes would be falling. and they'd be making squitty dollars, they'd put the fares up. And the commercial reality of those flights tells you exactly what's going on, which is not enough people use them often enough to make that route profitable.

1:17:37There's some simple reality of that as well. Oh, can I make one more point too? So let's play this forward, right? So what happens after this gets wound up? Well, the planes, they exist, right? They don't live on a balance sheet. They're real planes. The infrastructure, the mechanics, the parts, the airports, They exist. And guess what? A savvy entrepreneur looking at it going, I can pick up some pretty cheap assets and I can make a go of that. And maybe I'm a better operator. Maybe the people who ran this thing into the ground aren't the people that we need to sort of help. I get it. It sounds so unfair, but that's kind of the best way to run an economy.

1:18:23I would agree with you about airlines, to be fair, because there was no – anyone who actually thinks that is the next person who's going to lose money running an airline. And let them lose it, right? Let them lose it. And it's like with so many of these, like the door dashes and the milk runs of this world. You know who wins? The consumer wins. Because there are people – because it's uneconomic, the people using Rex were getting it out of – Yeah, that's right. They're getting funded by the hubris of some CEO and corporate executive. And then they stuffed up and someone else wants to step into the fray?

1:19:00Okay, cool. We'll benefit from that. So, again, who are we helping here? Do we want to help people who live in regional Australia or do we want to help the people who ran it into the ground? I would say, again, if there's a demand for it, it will be met. and it'll be met by the market. And let's just not do all these kinds of silly things to reward dumb decisions and to prop up something that's just not viable because someone pays the piper at the end of the day. And it's so easy to say the government. That's the other thing, right? But people don't say the taxpayer. They say the government. Correct, correct.

1:19:41God, my mother-in-law. The government should do this. The government, it's our money. It's you. It's me. So I'm not saying the government shouldn't do it, But we need to have a discussion if we're happy to do that on our behalf with our money, right? It's not this magic pudding of free cash that comes out. Because if that was the case, you could solve every single one of society's problems just by printing up a bunch of cash and letting the government run the whole thing. And if that's the way the world works, we would have figured that out a long time ago and we'd all be living in mansions with five Ferraris parked out the front and a yacht in the harbor.

1:20:15But it doesn't work that way because there are real constraints in the world. There are real limitations and there are opportunity costs abound. And so we have this cut and thrust system called capitalism and it's messy and it's horrible. And sometimes things really work out and sometimes things really fail, but it's pretty much what's driven us forward. And I just make the distinction between that and crony capitalism, which I always have to do. My mates who just point to like really bad examples of it. Well-regulated capitalism is my phrase that I choose to use. It's the right system as long as you're running at its successes.

1:20:49Yeah, exactly. It's not laissez-faire capitalism or anything like that kind of stuff, but it's not... Yeah, I made the point. I'm going to shut up. We can both agree, though, to finish off that if there is going to be money, taxpayers' money given to Rex to keep the thing in the air, that at the very, very least we should get an equity stake and not be a freebie. Goodness sakes. Yes. Good. Otherwise, can my business have a handout, please? Anyone who's out there listening who owns a business, would you like some free government money? My business went broke. I'm really sorry. Can I have some government money to fix that up again?

1:21:19I did all these things that just didn't work out. So can I just start again? I mean, this isn't - I'm not disagreeing with you, even if maybe we shouldn't do it at all. But if we're going to, I think if we're going to, at least the taxpayer should get an ROI on the equity value of what we put in. Yes, 100%. On that note, this has been a good return. I'm feeling better already. You feeling better already? I think I built up a bunch of rage while you were gone. It's good to have a bit of a release valve. You're welcome. and again, your wife is welcome that I'm now taking the brunt. Alyssa's taking the brunt.

1:21:51Don't leave for so long again next time. My mental health can't take it. Exactly, exactly. Will you come back on Sunday then given we're back in the swing? Mate, all I'm going to do is go grab a coffee, stretch the legs and we're back at it. We are back, baby. All right, we will see you on Sunday. Enjoy the first half of your weekend and until then, Fool on. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only. Please speak to your financial professional to understand how it may pertain to your situation. Subscribe to the free newsletter at fool.com.au forward slash listener.

1:22:28The Motley Fool operates under Financial Services Licence 400691.