The real issue with housing affordability. May 22, 2026

23:47You're being sneaky and we're not better off for it. Like objectively, some people are, yes, and some people aren't. I don't even want to – your point is bang on. But at the aggregate level, I think it's reasonably objective statement of fact to sort of say that. And that is just where I wish the debate would go more in that kind of direction. A lot of people talk about it with the NDIS, the NDIS, a lot, but that phenomena is just a different degrees in other places. So that's what I don't like about it. Do you know what's funny, mate? I agree with you. I've had this question a lot on – so I write on Twitter a lot more about tax than about spending.

24:26And people ask me why regularly, and I never really fully answer the question because it just takes a lot of characters, and normally people who are asking are not really asking. They're just ranting, and, you know, they can do that, but, like, you know, there's not so much engagement I can do when it's that kind of person. But I'm glad you raised it because the hardest part of it, I think this is the breakdown of the Westminster system, honestly, at a government level, right, because the hardest part we're talking about spending is it's stupidly difficult to do because you can see the taxes are super – I mean, there's too many types of taxes, but there's no number of them.

25:01And you can calculate them up and you can work out who pays them and you can look at what changes would do. If I increase income tax or decrease income tax by one percentage point, here's the cost, here's the revenue. That stuff is – I mean, there's Laffer curve stuff, but let's put that aside for a second. You can reasonably estimate what happens. Take away payroll tax, double a GST. Those things are kind of calculable to within a reasonable range. You can argue about or discuss objectively better and worse options there, right? When it comes down to, well, actually, I think that the office of the administrative glove assessment project in the Department of Health has probably got three too many people in it.

25:38If we took those people out, we'd be okay. I think it's a very good process to go through. It's just stupidly hard to do from the outside. Some people say, oh, why are you talking about waste? I'm like, well, honestly, because I don't know where it is. We end up backing into our own corners of, well, of course there must be. Okay, maybe, but which waste do you want to get rid of? Well, all the waste in education. What's waste, you know, what's the cost of that? What should we stop doing? Well, all the things. And it's just, it's not a chrism of them, I mean, it is a bit because they're being a little bit silly.

26:12It's usually ideological, frankly, and that kind of thing. It's like, well, they must be, so we should just get rid of it. They're not spending well enough, I'm not giving them more. Okay, well, what's the size of the prize? Oh, it must be this much. Really? Why? Oh, I just think. And so it's, I'm not, again, I'm absolutely criticizing the people who are being knuckleheads, but they're not wrong conceptually. It's just a really hard conversation to have. And it's why you and I have talked before about, if I was in government, and I would have a group of well-meaning, completely non-ideological, non-partisan public servants, senior public servants, former senior public servants, grab a Ken Henry, grab an Alan Feld, grab a Martin Parkinson, head of Treasury, grab a...

26:46There's a group of other departments I don't know the names of. You sit in a high bar, dude. I don't know where you're finding all these people. If you can find more than 10, let me know. That's the thing, right? That's the problem. You don't need to. You task them with you. So, right, your job is government waste and efficiency. Go and do your thing, right? And that's what I do. But I think it's just too, I don't mean you, but it's, the reason I don't talk about it is because it's impossible to talk about. You know, other than these blanket statements of, well, of course it must be, or, well, it's probably 10 % because I just think it is.

27:16It's really, how do you talk about government waste? How do you objectively talk about the changes you would make to remove waste? Now, NDIS is a really easy example, so that's a great starting point, right? But once you get below that, how many people does the Department of Veterans Affairs need to process veterans' health claims? Are there too many? Are there not enough? Can I know from the outside? No. How many people do we need at the Department of Main Roads? Well, we need the ditch diggers. How many layers of management need? Well, I don't know. Do you know the evidence of fewer and more and that stuff?

27:43Go on, you go. Well, I agree. This is doge, right? Yes. Elon and Joe, there's so much government waste, let's get rid of it. Chainsaws, yeah. And that's doing it with a sledgehammer approach that those dudes go with. And, like, they couldn't make a dent, right? Right? So I certainly wouldn't, I think you make a good point. It's not something I, I don't know how you would do it. That's the thing, yeah. Yeah. But, I mean, at the same time, it's a thing, right? I mean, I just Googled it up then, you know, like the average pace of federal government spending has been growing at a rate of greater than 7 % over the last 20 years.

28:22Yeah. GDP's not growing that much. But that's reallocation. So that's why we've got to, so what we spend on we can talk about, but the waste bit of that you can't know. So if we have 7 % more services, 7 % more transfer payments, 7 % more stuff, that's just a policy choice. Yeah. And that's different from there's this much more waste or this much waste in total at all. And, again, people can say ideologically I don't think we should pay people at all, they should, you know, beg and live on the streets and we can make that case or save some money. I replied to a tweet during the week. Someone said, if we just reduce the NDIS to zero, we could cut tax rates.

28:53I was like, sure, but if we reduce healthcare to zero and education zero, you cut tax rates as well, but do we really want to do that? It was a silly starting point, right? And that's the hard part. Again, the growth of spending, if we as a society want more government in our lives because we want more transfer payments, we want more care of disabled people, we want more roads, we want more whatevers, and it costs more because it costs more, I'm okay with that. I'm not saying I'm okay with it as in I think it's the right thing to do. I think we're in a democracy and if we vote for more government provision in place of private provision, that's a democratic choice we can make.

29:27I wouldn't probably make that choice, but I don't think it's necessarily there for waste in that same way. That's why it's really hard still, even with your numbers, to try and get to the bottom of. Yeah, so good point. According to AI, so, you know, take it with a massive grain of salt. But Gemini is telling me that the improvement in service delivery has grown at a pace of 1 % per year. Now, I mean, you know, I don't actually necessarily put much more stock. I guess my point would be you're right. You are absolutely right to, it is so wrong and ideologically driven to just assume that increase in spending has not been reflected in a commensurate increase.

30:07At the same time, the same argument can be levied at the other side, not your argument, which is the other side of the argument, which is, no, every dollar, extra dollar spent is actually proportionally benefiting. So we can't assume that it's all being wasted. Right, right. It's just as dumb to assume that everything is being perfectly spent, right? And the reality in between is we know there's waste. It's really bloody hard from the outside to know where it is. Yeah, yeah. And that's the hardest part. Yeah, yeah. But there is an institutional inertia that just does build up over the Simpsons paradox or something.

30:43There's one of those names for it. So we just, particular in natural monopolistic public enterprises, you know, where there is no competitive restraint or feedback kind of mechanism. You just, and I've often made the point, it's not a public-private thing. You see it in very, you know, like Telstra's and that around the world. I work for companies like that. Absolutely. Yeah. Yeah. So it's a thing when you put more and more humans together in an engine that has very, very defensible earnings and very, very strong competitive advantages. It just makes you lazy. You don't need to be that more efficient because you don't need to be.

31:22I can work less and still get the same amount of money. It's just natural human incentives that over time. So it's not a libertarian small government argument per se, but it is, I think, behooves anyone on any part of the ideological spectrum to just recognise that it is a thing, that bureaucratic bloat is a thing, that institutional inertia is a thing and that, you know, particularly in these kinds of settings, it is almost a natural gravity of sorts that you have to push. It's like entropy, right? You have to push very hard to fight against it and you have to push very, very hard, to push against, you know, that every additional incremental dollar is commensurately providing a benefit.

32:12100%. I'm trying to use my words carefully because I, you know. It's a minefield. It's a minefield. Because I'll be honest. I mean, my ideological bent is that I, and I don't have any figures to back this up, but I suspect a very large part of that is wasted. And, again, I did in preparation for last week, actually, try and answer that more objectively by looking at the, I forget the report that the government produced last year or what it was, but they're just Googling and finding it and just like, yeah, no service delivery has fallen. So it's just like it feels, and I'm not saying it's shake fist at sky, government bad.

32:51I'm not. I'm really not. I'm really not. I just, I guess my lament is for the conversation to shift, to be away from purely focused on the amount of tax to also looking at the amount of spend and the effectiveness of that spend. It just feels as though that's largely not being discussed. And, you know, it's like, I mean, we started with a sound money kind of thing here. It's just like a lot of people sort of push back on that as well and will say that, you know, it means that we don't have welfare and we don't. It's like, no, it's entirely theoretically consistent to run an entirely communist state on a hard money system.

33:32Yeah, absolutely. But it just forces a honesty of the accounting system. So, again, I'm not trying to push us down that path. No, no, no, it's good. Just making the point that what appeals to me intellectually with these things and with a more transparent and honest and less sneaky sort of taxation system is that we can discuss and debate what we want and what we need and how we're going to fund it. Can we just stop being so sneaky about it and can we just be more, can we just, is it so wrong to demand that you spend our money better? Yeah, and I think that's the problem. I try and keep both ideas in my head at the same time.

34:11I suspect you're right. I suspect there is waste that should be rooted out. It's just really hard to, without being ideological, I'm not paying you another dollar in tax because you're wasting the money you're getting. um how would if they've halved or doubled waste how would we know you wouldn't you couldn't know there's no and so people are why you talk about waste i'm like because i i can't there's no waste is bad okay done what what what what more do you want me to add how can i how can i from the outside genuinely i mean again there's very specific cases i think the nds is a basket case so i'm not i've done that a lot right so i'm not avoiding that at all not you say not that you're saying i'm just it's just like you know what you're talking about we always talk about taxes It's not about waste.

34:49I'm like, well, dude, I can rant at the sky and say, oh, you're all bastards and bludgers and, of course, it's all wasted and we should just shut down government because governments suck and I can do that ranty stuff. But if I'm trying to add an objective and kind of some sort of evidence back to or theory back to or some conversation of like, what do you want me to say? And I'm not asking our listeners to be my Twitter therapy session, but that's why it's a problem just because you raised it. Like I agree with you 100 % that we absolutely should focus on both. That's what I mean about the Westminster system.

35:18It's got to be done from inside because you can't from the outside. It's just not possible to do that. You can't kind of, you can't know. Until they let me inside the Department of Aging and say, go around and see who's in the computers and how much administration is being done and who's still using Lotus 1, 2, 3 and, you know, improve that process and take out those requirements. I mean, I could if you asked me to do it and paid me to do it, I'd go and do it for a year and happily do it. But why did I talk about it? Because I don't, how do you expect me to know? Waste is bad. Okay, done. What more do you want me to say?

35:49It's just a bloody hard thing to do. I will say this is... It's also an incredible shield though, right? Oh, totally. Because if you are inside the tent and, you know... 100%. And to any criticism, you just say, well, it's impossible to ever figure it out, so I guess you just have to deal with this. It's like that just feels a bit defeatist and a bit like, okay. But from the inside, that's the point. That's why you've got to do it from inside the tent. You have to. It's the only way it can be done. You can't do it from outside the tank because you don't get that visibility. I mean, you can benchmark.

36:21You know what I would do? This is ideological. It tends to be party political, right? And usually, as you know, I don't care and I listen to it, I don't care. I actually would return the – I don't think – I think Labor's done it for a while. The Libs used to do it, so it's kind of a Liberal Party policy generally. I don't care. I like the efficiency dividend idea from public service, which is just an ongoing, I'm going to give you 3 % less money next year, so find a better way to do it. You know, it's the Charlie Munger and incentives, right? The trouble is, though, that you'll never think, well, I'm going to get rid of my friends and colleagues.

36:53I'm going to get rid of services. That's the only problem. With KPIs too, right? So you do both. You say, right, you need to deliver these services and you've got 3 % less money to do it with, go. You know, and it's that efficiency dividend. But you're right, that's the problem. This is the challenge of it. It's like other than how do we objectively talk about it? I just don't think you can. I don't mean to be defeatist, but if you can't know, how do you know? How much should you cut from the Department of Aging? I don't know. And how would you do it? I don't know. But talk about it, Scott. I don't know.

37:27I think talking about it is the first step, but there needs to be action. It's impossible for us to guarantee that no one will drown at an Australian beach or that no one will get food poisoning in an Australian cafe. But we still have lifeguards and we still have food safety inspectors, right? And I think that it's not a perfect solution that captures everything, but I think when the stakes are so high and when we are taking people's hard-earned money in the name of service delivery for the greater good, it's not – absolutely, you don't immediately assume that it's all waste and you just – all of a sudden, you're in an ideological camp.

38:02but it is perfectly reasonable to say, actually, we are going to demand a huge degree of transparency and we are going to try and measure these things as best as we can because that doesn't guarantee anything in the same way that having a lifeguard on patrol guarantees that no one will ever get themselves in trouble at the beach. But it certainly helps sort of limit it and you're not saying this but others will. It's just like, well, they're probably going to do a good job and we can't really tell anyway so let's just trust them. To me, it's a little bit like, and again, it's not a public-private thing.

38:37I've got shares in companies that I absolutely convinced that those companies are not being run as efficiently as they otherwise could. But, you know, I would hope that the directors that represent me and other shareholders are on top of that kind of stuff and at least not having a perfect solution because, one, a perfect solution doesn't exist, but I would like to think that there is a North Star there where they at least advocate for the right thing and try to do the right thing, whereas, you know, the trust me bro, I'm just, I'm never comfortable with that. It's sort of like, no, because you're a human being and human beings are human beings and there are self-interest is a thing, incentives are a thing.

39:20And, look, if we're talking about something that just doesn't really matter, then fine, but if we're talking about literally the national interests, and how much money you are going to forcibly take out of my bank account, well, you know, call me crazy, I wouldn't mind a little bit of scrutiny, not to assume that you're doing the wrong thing, but just to ensure that, you know, just eternal vigilance. It's what, it's a, there is a dangerous path when there is a, not that anyone's saying this, but like a, you know, a blind faith in that Big Brother will always be there, look after me, or, you know, don't worry, nothing to see here, trust us, it's cool.

40:03You couldn't possibly understand, don't ask, yeah, yeah. That always makes me uncomfortable. Yeah. And too often the case, that seems to be the reply. You see in some of the interviews after the budget, it's like, oh, no, we absolutely wouldn't do that. I mean, obviously, not to be cynical, but what else are you going to say? I would say the same in that position. And I'm sure that you hook them up to a lie detector and they genuinely sort of mean it. But it's just like I just, not to assume that worst, but I need more than just a pat on the head and don't you worry your precious little, you know, self about it.

40:39Yeah. I agree with that. I agree with that. I still, I think for all that, those are the generic concerns. I don't know how you address them from the outside. And I still come back to what? Part of the tax and not spending, or waste in particular, because it's like spending is different. You can say, I don't think we should pay the dollar, and it costs us this much money we can save that much. A spending program is fine. The waste bit is like we shouldn't have waste. We should have less waste. No, stop wasting money. Don't have any more waste. Stop wasting. What else do you want me to say? I don't know.

41:12What waste? I don't know. Where is it? I don't know, but it's probably there somewhere. All right, what should I do about it? Stop wasting money. Okay, good, done. It feels like a perfectly fine point to make. I completely agree with you before. As I said, we've talked before about some sort of non-ideological doge is a great starting point. But acknowledging it, sure, it's a thing. Should we fix it? Yeah. How? I don't know. It's just from the outside, I don't think you can do it. I think you can talk about it in an objective, useful way with a policy prescription. The other way you said it was just we shouldn't do it.

41:47It's like, okay, well. Well, the report I quoted last week was talking about very objective things. So like hospital wait times, number of beds, cost per admission. Like that's just in the healthcare arena. Like there are – so very, very high level. There are a couple of things that we – more than a couple of things that we can measure very objective. We can absolutely measure the dollars going in. Like we can measure that to the fraction of a cent. And we can also measure those KPIs to your point. You know, whether it is hospital wait times or, I don't know, I'm drawing a blank here, but the thousands of different things, you know, the rate of marks that kids are getting on HSC through the public system or, you know, you name it, right?

42:33So measure it, right? And I think it's not unreasonable to say, well, if we can objectively see that dollars going in is going up and metrics that we are tracking are not improving or even going backwards, well, that's definitionally waste. Now, that doesn't solve the problem. Yeah, I disagree. That's just causality and correlation. So you think, wait a second, let me get this right. No, no, no, I don't think anything. That's my point. I'm asking you to say, again, not you personally, but for the sake of the conversation, more money is going in, outcomes are worse. Yeah. Okay? What happened? Well, it must be waste.

43:17Really? Were there more, are the individual, take the kids things, are kids' behaviours improving or getting worse? I don't know. Are parents doing the right thing? I don't know. Is there social media? I don't know. Is there bullying in the classroom? I don't know. Are kids getting fed properly? I don't know. Let's blame the teachers and say there must be waste because the marks are going down. Now, I know you're not saying that. I know you're more nuanced than that, but I think it's too, it definitely suggests that, wait a sec, I might, I mean, And if you were Lord Emperor of Australia, you'd go, wait, something is wrong, right?

43:47Yes, but that's miles away from waste. That's miles away from waste. I think it's too easy, I just get to kind of go, well, it must be waste because I think there must be waste. And if I can look at a number that says I might be right, therefore, see, obviously there's waste. I think there's so much more. It's like the lying broken promise there. You obviously lied. Did I? What happened between the money going in and the stuff coming out that made a difference? Now, I'm not saying it's not waste, do they? Like, literally, this is what I'm, this is why I suck on social media because I'm just, I'm not prepared to go, you're wrong or you're right.

44:17I'm going to go, we can't know. This is so multifactorial. You can't go more money in, worse outcomes equals waste. Maybe it equals. Equals problem. Yes, 100 million percent. And I'm happy with that, but that's. Okay. Maybe we just paid the staff more because they got an enterprise agreement increase. Okay, well, we paid teachers more. Therefore, the results are worse because the net plan is down and costs are up. Well, unless we thought we were going to have 35 kids in a class, we had to pay teachers more. That's not the impact. I'm not defending it. I'm not disagreeing with you. I'm not saying the reverse is true.

44:55I think we did leave so much more room for I don't know, we should look into this rather than the direct. I think this is obviously waste. This is obviously corruption. This is obviously a lie. It's so easy to go to that tabloid answer role. That's true. I agree with that. charmageddon kind of stuff. And I'm not disagreeing with you because you're not wrong. And honestly, mate, you're probably right. Like I'm actually saying I think. It's got to be in the top three likely candidates. Right, 100%. 100%. 100%. I think that's right. But also the other thing I would say for what it's worth is you've got family in the education sector, so do I.

45:28Things like NAPLAN, you know, my wife is in the education consulting space, right, and so we measure a thing and say NAPLAN went up or down, therefore it's good, therefore it's bad. Oh, the whole thing's a joke. And my wife at home, it's like, right. And so part of that kind of idea was, you know, the Gillard government said, well, we'll measure it, therefore we'll know what's going on. We'll know how good a job teachers are doing. And it's like, yeah, again, your wife's been there, my wife's been there, it's like, that's, it feels like, and from the outside, I guess this is what I'm coming back to, is from the outside it would look like we're spending this much on education, now the results are down, therefore the teachers suck, or therefore the principles are bad, or therefore we should bring back the cane, or therefore we should, and people kind of defer to their own, you know, you know what's wrong with schools?

46:09This is what's wrong with schools. We don't do the three hours anymore. We don't do enough homework. We don't hit the kids. Two hours come October. So I couldn't get a Simpsons reference out, picking up, tripping over myself to get it out. Anyway, I think we've done it. Well, no, I agree. I'm annoyed because the grey is important. We're on the same, I think we're circling the same kind of point. It's just that you're saying. Or the same drain. The same drain. you're saying one, you can't automatically infer that it is grifts and waste, and that's an excellent point, and I agree. I'm just saying we can't automatically assume that it's not that either, right?

46:48That, I think, is another problem, and it's like when we talk about economic metrics or just company metrics. Yeah, that's a good point, actually. You know, I will wax lyrical about the absolute uselessness of one quarter's GDP or one quarter's free cash flow from a government. Is that pointless? It means next to nothing. Having a view of that trend over many, many periods, well, that's a bit more, that's a very different thing, right? It's like me trying to get a read on the climate by just seeing whether it's hot or cold on next Thursday. It's like I can't extrapolate from that data point. But over decades I'm seeing, sorry, it's a bad example It instantly puts half, well, whatever percentage of people offside.

47:33But the point remains though. And I guess that's where in my response to the budget, it was the first step was, well, let's just go over 20 years. Because then you've got different stripes of politicians in power, different decisions, all of this kind of stuff. And when you see a 20-year deterioration in cost of living, you know, housing affordability, healthcare standards, and at the same time you see the rate of government spending growing at more than double the rate of GDP. I'm not, you're right. You're right to talk me off the ledge and say, don't just automatically assume that the lizard people are doing the wrong thing.

48:14But they are. But they are. But at the same time, I guess I'm just advocating for, that's a thing. And when the very people who are, that we put our trust in and we give immense degrees of money and power to try and do that, for them just to turn around and go, oh, don't worry about it. Oh, you're just being ideological. Oh, no, no, no, no, you're not looking at the wrong thing. It's like, no, no, no. Which you don't understand is, yeah. Even if someone's barking up the wrong tree here, the stakes are so high that it deserves a conversation and it deserves at the, I mean, what's the phrase? Like extraordinary claims require extraordinary evidence or something like that.

49:00And I feel as though when we're talking about this, you know, that kind of, I can't think of much else that benefits into that thing and it's sort of like, you know, don't worry, it's going to fix intergenerational inequalities. Like, is it? No, I don't think, ah, you're just being ideological. What? Exactly. You know, no, it does. No, it doesn't. No, it does and it doesn't. And we just go, and then you know what? You get to my stage of life where it's like, I don't even watch news anymore because I can't, because that's the level of discourse. And again, I've got no easy answers. It's much easier to shout at the sky and shake your fist.

49:37But it's also, I think, not unreasonable to at least acknowledge that things could be better. 100%. 100%. You know? I think we're on a new ticket there. Yeah, yeah, yeah. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

49:58Hey, listen, speaking of governments doing things and maybe not having enough practitioners in the room, I just thought it was worth circling back quickly because Angus Taylor said he'd repeal both the negative gear and capital gains tax changes if they are legislated by the government. So that's kind of notable. Now, how the hell it would work in terms of what you buy and you did buy, you didn't buy, and under what rules you bought and do they backdate the, do you get need of gear again if you bought when it wasn't in place? I don't know how that works and the opposition doesn't need to say that yet because there's no election coming, but that's a thing in itself.

50:29What I thought was interesting, mate, though, is we talked about this a little bit, so I don't want to overdo it. We've spent long enough on the other stuff already, but the capital gains tax changes where they went back to indexation and the PM said, well, it's like 1999, all over again, so we've been here, done that. He's right in terms of indexation, but having a floor of 30 % on capital gains tax, regardless of the individual taxpayers' tax-free threshold, and not go back to the averaging provision where you could actually average the gain over five years to work out what your marginal tax rate should be, has also been ignored.

51:04And the third one that's actually not getting talked about, and probably doesn't need to be because it's a million years ago now, but maybe it'll impact some people, the pre-1985 capital gains that were excluded for the first time and the second time and now being brought back into the tent. And I just, it just feels like, I mean, there's people who will agree with all those three things should happen anyway and that's fine because that's, you know, people have different views. I find it extraordinary and I'm really, it feels like, I think each of them have, there's a reason for each of them, right?

51:31And there's a, someone in the room has gone, well, I can make an argument for those three things. I can make an argument for going back to 9.85 because they're still getting it tax-free and they're making a fortune and they should contribute something. Yeah, okay. I can make an argument for a minimum 30 % capital gains tax rate because the investment banker's wife who isn't working has all the shares in her name and she sells 50 grand a year and we spend the money, we don't pay any tax on it because she's got a zero tax threshold. Zero tax, no other income. Okay, I kind of get that. I still don't know why they wouldn't do averaging.

52:00That makes zero sense to me altogether. So I can kind of get why someone in the room said we should do this. I just, and again, if we've done this enough last week, I'm happy not to overdo it, but they're getting so much grief from just stupid, avoidable decisions where they could have just gone, well, should we just make it like last time? Because then we can say it's like last time politically, let alone policy-wise, but also... It wouldn't raise as much tax if I was being a cynic. That's the reason why. But even then, it's not that much. That's the thing. Yeah, yeah. Like the CGT on 40... Because the thing is 30 % cuts in at 45 grand.

52:32So it's zero to about 18 ,000 for me. I can't remember the exact numbers now. And then it's 16 % above that. I mean, the increment... How many people... Even if there was 10 ,000 people at court and they had to pay five grand more tax each. I mean, even then, is it more money? Yeah, but it feels just like such a bad ROI from a policy and a political perspective. I just have to believe there were people in the room who just weren't thinking. It was like, yeah, that'd be good. Let's just do that. And no one's actually gone, just can we sense check this for someone who knows this stuff? It really feels weird.

53:02Again, maybe they did. Maybe they just went, screw it, I don't care. We're doing it anyway. You're referring to Henlon's razor here. Never attributes a malice what can adequately be described by incompetence. But I think that's it. Honestly, mate, like I don't, the money raised by any of these things is so minuscule and the political pressure and pain is so unnecessary because even the budget papers, they had an example of the guy on zero tax who got a capital gain and had to pay an extra five grand more tax than he would have had to pay otherwise. It's literally in the papers and they've gone, yeah, there's going to be single-digit thousand, maybe double-digit thousand people who are caught by this and the extra tax is going to be five or six grand.

53:38Like it is just such a nonsense thing to go for. And the averaging thing, again, is like I just, I don't, again, maybe it was deliberate, maybe they did think about it. Incompetence versus deliberate, you can, I mean, it turns out to be a political view, maybe an ideological view. I mean, neither is a great option. This is where I fall down and sort of like, well, pick whatever description you want. I don't like, what, you're evil or you're dumb. I was like, is there another option I can choose from? And how did they get to that point? I just thought it was bizarre, mate. And that's all the political heat they're copying now.

54:10If they hadn't done that, they'd have a third, a quarter of the political heat because it would just be straight out self-interest at that point of like, I don't want to pay more tax. Okay, I see the colour of your mask. That's fine. Yeah, sure. You know, colour of your mask is not a thing. You've now had your colours to the mask. Yeah, it's all for you. You don't want to pay more tax. Okay, I can agree or disagree that tax should be higher or lower, but at least I know what I'm talking about. When you get to say, what about the pension of selling 50 grand with the BHB shares, who otherwise wouldn't pay any tax.

54:36It's like, well, that feels like a pretty stupid policy. And what if I sell a$200 ,000 profit on a business or some shares in a year and rather than$40 ,000 a year being taxed or the equivalent of, I go straight from the 16 % tax bracket to the 47 % tax bracket in one year because I crystallised the gain in a single year? And it wasn't like this – it's never like they've gone back and gone, here's a new idea, guys. Averaging. I've never done it before, but let's talk about it. It's like they literally had the key thing playbook. Pick it up. Move it here, put it back down, and then you get to go, we did it before, it didn't break anything, what's your problem?

55:09And I find it flabbergasted. Again, maybe I shouldn't be surprised, mate, to your point, and, again, neither is good. I am just staggered. They've just left that flank so far open. I guess what, honestly, what maybe. I try not to be a cynic, man. I really do. Help me be a better man. What worries me, mate, is it's going to bring the whole thing down because, like, Alessanderson can disagree, and that's fine. I'm a massive fan of indexation. I think it's the right thing to do. But we should average it and we shouldn't have a minimum floor. And if the combination of all the pushback here forces the government politically to drop this because it just gets too hard, a la Bill Shorten 2019, then we've missed another chance for another seven years of actually doing the right thing by the tax system.

55:50I find it so incredibly frustrating that, you know, talk about stealing defeat from the jaws of victory, right? Like that may well be the outcome of just poorly designed policy such that the overwhelming, you know, opprobrium is just so dramatically politically impalable, they have to walk away from the whole thing. Oh, it's just... I mean, that's what's the mind blow about it because even if you want to say you're just a craven, self-interested politician who only cares about being re-elected, okay, this is not going to help you towards that end. Yes, yes, that's right. Like, if that's what you care of, like, that's all, you know, even under that framework, it doesn't make sense.

56:31Correct. Like, and the other thing that really, really sucks about it all is the gaslighting, honestly. It's doing all of that and then telling young people that we're helping you. It's like, no, they're young people. It has an affordability spin, yeah. And I'm not trying to create a generational divide, exaggerate the generational divide, but it's sort of like, so everything that the boomers and frankly, a good chunk of our generation, Gen Xs were able to enjoy. You don't get to enjoy. But don't worry, we're helping you. It's like, what? We're fixing housing affordability. You're welcome. That doesn't, how does that help me get, it doesn't, you're actually making it, you're kicking, I'm trying to get on the ladder and you're pulling it up after yourself here, right?

57:20Like this is, that's what's so egregious about it. And it's just been across the board. I've had people, because friends and family in my circle, they know, you know, what I do. and it's sort of like they just think something to do with money. So he has a view on that. But it's just sort of like I'm screwed. Every single person I know or relative I know that's under the age of 30 is doing what all of us did and not anyone, most, not everyone, not a lot of people want to do, which is call it old-fashioned, have some security, a place to live, raise a family, live your best life, right? It's not complicated.

57:57and it's like if you're on the average salary and you can save the average savings rate, you know, and you start when you're 20, so you've only, you know, that's assuming that you don't do any education after high school. It's going to take you 40 years to save a deposit, right? And so what do you do? Well, I can tell you because there's a very significant cohort in straw man that are the younger end of the special. It's like, well, I'm buying shares in the meantime because I'm not an idiot because I'm not putting it in the bank and just having inflation needed away. So what do I do? I have to save in assets.

58:31And so that's why it's a big part of why ETFs have exploded and what is it, Spaceship and all of these sort of, you know, fintech apps. Yeah, yeah, yeah. Yeah, the micro-investing, it's just because they're like, well, because young people, I mean, people are people and every young person has always been the same. I'm sure in ancient Rome young people were the same then as they are now, you know. Yeah. I want to get ahead. It's easy to sort of point to some sort of particular segment and sort of say a bunch of hopeless no-hopers, but the vast, vast majority of people are trying to work in a way to better their lives.

59:04I want to afford a house because renting sucks. Take it from me. And so I'm going to do it in an ETF. Oh, okay, now I'm going to, now my tax has literally doubled, you know, effectively to what I would have otherwise, more or less, I'm exaggerating, but not far off, not far off. and the maths depends on the exact circumstance. So you're going to tax me to a significantly higher degree and then tell me to say thank you for it? Like, and again, you're either a complete idiot that you didn't see that because you can almost just get onto a chat GBT and, hey, I work, you know, work for Treasury and the government here and I'm just going to put some numbers together and, like, hey, what does this work out?

59:44It's like, oh, this is far worse. Far worse for this. Like, just use the average person, put the average numbers in, it's far worse. Like, right. So either I didn't do that, it's like what are you doing, or maybe even do it more in a more sophisticated way, right? Like I don't know, I'll put that out there. So either you didn't do that or you did do it and then I'm going to do it anyway. And not only am I going to do it anyway, I'm going to say you need to thank me. Like it's so insulting. Like they deserve, and I'm not trying to be party political, but I hope they get a signal at the next election as to...

1:00:27how good that is. I mean, the best thing they've got going for them is that the opposition is just as useless. So it's kind of... But if there was any confidence in opposition, like, they would absolutely be pilloried and, I don't know. Talk me off that ledge. Am I wrong? Do you think a younger person is on a better path towards that dream now or a worse path? No, but I do think that we are still... My issue actually... Sorry. How long have we got the podcast? I suspect this might go for a while. So young people are worse off than we were, objectively. The problem I have made is this doesn't, to your starting point, this doesn't address housing affordability.

1:01:11But also what it doesn't do is impact intra-generational equality. I've talked about inherited inequality, the bank of mum and dad. If you've got a bank of mum and dad, you're fine as long as mum and dad are happy to open the bank. If you don't have a bank of mum and dad, you're screwed. And all of the things we're talking about here are where we say, well, we should let higher income young people save so they can possibly be on the property ladder and rent to somebody else who are, you know, who themselves are trying to find property they want to buy, but they can't, you know, there'll be a group of young people who get old and become landlords and a group of young people who get old and become tenants.

1:01:51And so while we can compare across generations and we should from a, I think, frankly, taking some lessons and see what's changing, almost to your point about spending, see what's changing and see what we can change back and see where things got worse and try and get to the root cause of those things. So I think you're 100 % right there. I do think the idea of, well, my kids rentvesting so they can get ahead. So who are they renting to? And those people aren't rentvesting because they can't afford to because housing is too expensive. And I think when we kind of say, now, there's no harm in those people doing it.

1:02:22I'm not criticizing those people for doing it or those parents for saying it's a good idea. but I do think it hides the problem, right? Pretending that we can say, well, we'll let the top X percent of income earners of the next generation invest, save up, do all that so they can possibly finally get a roof over their heads. We're kind of unintentionally focusing on a subset of the cohort rather than the whole cohort. And so I 100 % agree with your point, which is our young people are worse off than we were. I don't think we solve it by letting some of those young people get ahead and hold the rest of those young people back, which is kind of what the changes are being, or the objection of the changes being predicated against, which is we need to let some of those young people on high incomes invest in ETFs without penalising them tax-wise so they can buy a house.

1:03:06So, hey, what about the rest of them? Oh, well, what do you expect from us? We can't really fix housing affordability. We only make some tax changes around the edges. So I kind of, I think I agree with your problem. Our listeners know I agree fully with your problem that you identify. I don't think the solution is let some young people have some of the advantages that some of us had rather than actually fixing the fundamental problem, which is housing has gone from four times income to ten times income. That is not a TGT problem, right? That is not a negative gearing problem. That is a fundamental societal structural problem.

1:03:35And I think, by the way, the lie slash mistruth slash broken promise of this is all their housing affordability. It's clearly not. You don't put a couple of grand sacks on shares to fix housing affordability. No one's that silly. And so the government's, again, being too clever by half, trying to dress up these changes as we care about young people and house prices. Like, no, you don't. Firstly, it's not going to go down that far in your own numbers. Secondly, shares, property, art, start-ups, that's not housing affordability. Like, you know, let's be at least honest. Again, I support the changes because I think a fairer balance of the tax burden is reasonable, but this is not housing affordability.

1:04:07So I think to your point, mate, I would still not let young people use these tools or let older people use these tools either because all it does is it helps them climb over each other to get ahead rather than being more prosperous, better off, spending less of their incomes in total on housing, which I know was your number one kind of concern. That's where I think if we let them deframe this as, you know, it's young people versus old people, I think it's missing the point entirely because it's going to be the young people who can afford to and the young people who can't afford to versus each other because they're going to get old.

1:04:41We're the boomers' kids, right? We blame the boomers. Now they're blaming us. Gen X is blaming us. Gen Z is blaming us. millennials will blame gen z and whatever the hell comes after millennials will blame the millennials and it's always going to be the case until we actually fix the structural issues which is 63 % housing ownership is not enough and 30-year mortgages that take up half your income is crap and let's have 80 % of ownership with 30 of your income going to housing and that's I'm picking numbers up it's not miles away from what I aim for and then we can talk about individual people or individual groups within that cohort rather than pretending that we can solve the whole cohort problem by putting capital gain stacks on shares or start-ups or something else.

1:05:20Hmm. Yes. We don't have long enough. Go on, go on. Let's give you your reply. We don't have to argue about it. If you've got a different view or same view. No, you're not wrong. I just think everyone misses the elephant in the room, you know, and it's been addressed. It's been circled a million times before, and you probably are the first person I ever heard it from, which was people don't approach a house, whether it's an investment or unoccupied, because they've done a detailed discounted cash flow model. Yeah. They go to the bank, how much can I borrow? I'll buy it. Yep. Now, why have we gone from four times income to 15 times income in Sydney?

1:06:01It's because the banks were lending us far more money than they ever have before. Second incomes in households, banks lending us more money, lower deposits required. Yep. All of that kind of stuff, you know. And again, I don't know how to say it without, you know, I'm just going to say it. It's like the banks create the money that do that and then self-referentially use the very asset that was purchased as the collateral for the next round of money creation. And then it's all well and good until something goes wrong and then the central bank comes in and bails them all out. I know it's my whole thing, but it's kind of like, I don't think it takes an unreasonable, it's not an unreasonable thing to sort of say so much of our ills stem from housing.

1:06:39And we talk about cost of living. or really, I mean, you just can't talk about that without talking about housing and shelter. And you can't talk about the unaffordable. I mean, to your point, to the government's point, to almost everyone's point, it's just like, yeah, these tax changes are absolutely distortions and they need to be addressed, but they're not a silver bullet. Correct. How about when I rock up to the bank with my 14 different negatively geared properties with, you know, with hardly a buffer in there and then they go, okay, yeah, we'll lend you some more money for it. And it's just like, okay.

1:07:11And it's not like someone has had to save that money elsewhere and put that at risk in any kind of sane system. It's just sort of like, you know, there's such a massive moral hazard there from a banking standpoint is because it's particularly one which is effectively an oligopoly with an implicit bailout behind it. It's just like, we'll do it. We'll do it because there's virtually no downside, right? So why wouldn't we do that? And I know that's my thing and it's my whole shtick, but at the very least it's a top three factor, right? It's a top three factor. It's something to enable. You want to agree on the input because I think it's that we can choose to either do it or not and other countries have different affordability metrics than ours with the same sorts of banking systems.

1:07:57So I don't think we can say this is causal directly. It's an enabler. Yes, exactly. I think that's exactly. You can disagree, by the way. My view is it's exactly an enabler. It's like because we want to do these things, the banks go, yeah, we can do that. I think, honestly, I think, and of course it's in their interest, but I think if it was causal, it would be similarly causal elsewhere. And I think it's a lot of other things as well as, but you're absolutely right, mate. You can't do it without the enabling of that lending. You change those rules and whatever, no matter how badly we desperately want to have the property, you know, pawn at the barbecue, you can't do it without the money.

1:08:31So you're a million percent right, I agree. I think it's also too, it's a, Australia is exceptional at how we have done that. And it's also, it's actually that we have been enabled in part from that same system that you have in other parts of the world, but also supported by an incredible resources boom and the rise of China. I mean, China is our success, is the root of all of our success, right? Like that's where all our export income comes from. You know, that's what's given us cheaper goods. So it's actually deadened the otherwise impacts of monetary inflation. It's given us great income. So we have been able to play it a lot further than other countries.

1:09:13But even though they haven't, you're right, they haven't gone to the same degree, they're directionally gone in the same, you know, they're going in house to incomes as a general metric have gone up, right? So, and then don't forget in places like Ireland and Spain, the UK, gosh, America, in the GFC, they actually all were very, we remember the charts from the time, they're all going in that direction and they all had a massive correction. And as I'm very fond of pointing out, and then more recently, it's like so has Toronto and so has Auckland and so has other very Western, very stable democracy, you know, places.

1:09:57sort of have. So we are top of the pops in what we've done, but I don't think we're unique in the part, in what's helping to drive it. Anyone who offers anything is monocausal is wrong and I certainly don't want to make that mistake. You know, it's like it's all about that. But I do bang the drum on it a bit because it's, while I don't think for a second it's all about that, it feels like it's a significant part of it that just doesn't get addressed at all, ever. You won't find a single story on it all about negative gearing. Yep, that's an impact. It's all on immigration. Absolutely, that's an impact, you know.

1:10:38100%. But that's an impact too, right? Can we talk about like top three, I would put it up there and if you want to argue the toss, well, maybe it's top five or top ten, but certainly it deserves a place in the discussion and it's just not, and it's like you get to a stage now with the country's largest bank, 70 % of its lending activity is on residential housing. Yeah. This is never, banks never really historically were in this kind of game and banks around the other way, they do a lot of business. There's a far broader suite of services. And Australia is just sort of like, no, we're just, that's the only game in town.

1:11:16And I just don't know that you can solve the problem with any of these silver bullets, and this isn't a silver bullet itself. Totally, totally. But I'm sorry, I'm repeating myself with this. That's a good point. Can we acknowledge it and talk about it without, you know, people rolling their eyes? And if I'm wrong on that, let me know. But, like, surely you agree it's like it's a thing, right? Of course it is. It must be a thing. Any multiplier to existing or new demand directionally makes it worse than all the magnitude makes it worse. It must. It can't not. You know, to your frustration, maths is maths, right?

1:11:51You can have your own, you don't get your own maths. It's kind of like. You don't get your own maths. Do the work. So I think you're right. So to my mind, mate, I think that's probably just my broadest point around the housing thing is we've got to fix the idea. Again, everyone wants to get ahead, right? And I read about this on Twitter, actually. I did a long thread on it. And the funny thing about property investing to get ahead is you can only get ahead by pushing someone else down because you're in a closed system. Now, immigration actually adds to that, by the way, but that's, again, I don't want to get into a single issue, whatever.

1:12:23Like, if you're a landlord, someone else is a tenant. Unless the place is empty, that's how it works. And we can't have more investors without having more tenants. I mean, again, you can talk about the spread of houses between individual people, but conceptually, it kind of works that way. The only way you can unpack this is to get – now, when people say they want to get ahead, what they really mean is they want to improve their living standards. They want to have more wealth, more comfort, more whatever. That is not only desirable, it's how the engine works. It's what's behind ingenuity and drive and innovation and all that stuff, right?

1:12:55That was true 10 ,000 years ago. Right, exactly. And so it's a really good thing. What ends up being, though, is getting ahead of the other guy and being able to climb higher because you're standing on other people to get there. And this is where things like percentage of homes owned by owner-occupiers or the broad affordability on not just an average or a median or a mean but on a distribution basis, you know, can 80 % of the people buy a home in a reasonable location of a reasonable size with reasonable amenity? Yes or no? If not, fix the problem. And the pretense of the 5 % deposit guarantee or whether it's Angus Taylor's or Jim Chalmers' budget and budget reply speeches, no one is saying actually is the thing.

1:13:36Unless incomes grow faster than house prices, at very least, even if they don't go down, that's the only way to fix affordability. You can't have houses go up at 7 % if incomes go up at 3 % and improve affordability. It's just, again, you can't have your own math. Literally, if you think that's true, I don't know, I've got a bridge to sell you, right? I'm happy to sell you the bridge at vastly inflated prices because if you think that's possible, where does the sunset come from? It is possible through debt and that's how we've done it, right? But that's good. You've made a band thing before. Like that's...

1:14:06The math breaks at a point. Yeah, but the thing is it does make it affordable, right? It makes it accessible but not more affordable and that's the difference. So can I buy a house? Have I taken on too many dollars worth of debt? If the bank can lend it to you, sure. Is that more affordable? No. It's costing me more of my take-home income. And by the way, everyone else in my peer group in similar demo can do the same thing. So it's actually, yeah, it just wretcheds up. And yet not everyone can. So the housing ownership stats drop slowly because every time the price goes up, you're carving off those people who were marginal and now are less than marginal.

1:14:33So they can't. So they're now renters. So all you're doing is, I mean, at some point, this is why I worry about intragenerational inequality and inherited inequality, because you are creating the haves and have-nots that if you never buy a house, how can you be the banker mum or dad if it's needed, I mean, it shouldn't be needed, but let's say it is. You can't be. So how do your kids get a house? Well, they can't. How do their kids get a house? They can't. What if you have got a bank of mum and dad? If I need to help my kids out, I can afford to. I'm very fortunate. And so if they need it, I will because why would you not help your kids?

1:15:00Okay, so they get a house, but the guy next door, their kids don't get a house. All right, so then what happens next? And this is the until you fix the structural reality and so we genuinely ask ourselves the question of what should – it's literally as simple as what should the home ownership rate be? And then how do you get there? And if you genuinely want to get there, what do you have to do to make it work? And you don't do it. Didn't the government say there was 7 ,000 more first-time buyers as a result of the scheme or something? 7 ,000. And it's like, right, 7 ,000? It's like, I mean, it's good for those people.

1:15:30Like, I love it. It's fantastic for them. But really? Like, you can say that with a straight face. It'd be 7 ,000 more homeowners. There's 28 million of us. Really? Really? That's right. Come on. Like that's fixing housing affordability and accessibility. I mean, come on, guys. Here's the other thing. I agree. And the other thing is let's say that you're not in that bucket, you're in the other bucket. You're actually part of the landed gentry, right? So I was like, well, that sucks and I can see that that's unfair, but I've got some houses and mum and dad have got some houses and I'm okay. You're actually even like we're all in it together.

1:16:01Like you'll still wear it at some point too because presumably, I can't see how else you would frame it, anyone who's been buying an investment property is because they feel as though they'll get a return on it. If that's not true, I think we need to have a serious discussion about what investing is. If not to generate a positive return, then I don't know, maybe it's just a broader philanthropic exercise, but you know, to intentionally lose money. But that's the other side of all of this kind of stuff is that, I know the word Ponzi gets used a lot, but it's like it almost, it fits too well not to be used in this particular situation because if I'm buying...

1:16:41By the way, you haven't even got to it. It feels even more Ponzi-y, right? It doesn't. Just because you're adding more people, it's like, let's just put more stuff at the top and squeeze it through the sausage machine. So just unpack it a little bit. Ponzi just defined that people making a return are doing so by the new money that's coming in and whether that's through literally newer people or people with newer access to capital that didn't exist. It's kind of what's happening. So let's say that the affordability crisis gets so much worse that it's just like at a point where it's just like just the rate of even the aspiration of ever owning a home falls away because I just I will never save the deposit I'll never get to it what do you think that does to the potential for your capital gain you know if I'm already spending 48 percent of my after-tax income just on shelter alone and everything else has been consumed by health and food and fuel and all the other kind of essentials in life and it's just like you just you can't put everyone oh we'll put the rent up as if it's just like this unlimited well to draw from it, you very much reach a point where it's like, well, you can put the rent up, but I'm already paying everything that I can.

1:17:44Now, we can debate where that line actually sits. I'm just making the very objective mathematical observation that at a point, it does cease to become. And if it doesn't make sense to you, it's just like, okay, let's assume that average rents in capital cities are now$20 ,000 a week. Like, if you look at that and go, that's ridiculous, no one will ever be able to afford that, then yes, that's exactly my point. And now all we're arguing about is where that line sits. It's obviously somewhere between$1 and$20 ,000 a week. There is something that just fundamentally breaks. So, oh, it's okay. I've got a house.

1:18:15I'm going to be fine because I'll be able to sell it at some point. It's like, yeah, maybe, but maybe it's not going to be the real game that you think it is unless there's someone else who's freshly coming into the system and doing it. So again, we're all in it together. It behooves all of us to want a more structurally sustainable system. Now, it works in the short term, right? These are the hard part of a lot of these things because whenever I make this argument, someone goes, well, I did this and look how rich I am, which is like me going into the casino, putting it all on black, winning and saying, see, that was the smartest thing I ever did in the world.

1:18:45And it's like, you know, it's not that silly an example. And these things, we're talking about dynamics that play out over decades, right? So you can, it's just like, you know, a whole bunch of people made stupid amounts of money on lithium stocks at one point in time, you know, and then it all fell away. Or whatever, you know, pick your favourite meme stock or your favourite, you know, crypto token or something like it. At a point in time, there was always someone who's done something very well out of something that was obviously unsustainable and obviously stupid. And just to be able to point to, well, it worked for a while, therefore it's not that dumb, it's just very spurious reasoning and not clear thinking.

1:19:26And so my only point that I'm making is your point is exactly right, but it's just like even if you're on the other side of it, oh, that's okay, I've got some money, I'm going to buy a house, cool, just don't think that the yield is going to be anything meaningful in real terms or there's going to be any meaningful capital gains in real terms unless you get more people on the other side of that transaction who can either buy it off you, like you can play the greater fool, right, or just has this unlimited well of income that they can push towards rental servicing costs. And obviously that's not true.

1:20:02So this is why, again, I'll just very, I'll shut up in a minute. It's why I don't like property in Australia, not because I don't like property. I don't like it for the same reason I didn't like CSL a few years ago or, you know, I don't know, pick whatever stock is like, oh, but it's a great company. Oh, but property is a great asset. Yep, yep, that's both true. But Charlie Munger will tell you no asset, no matter how wonderful, is worth an infinite amount. And that's where we get, that's kind of the point of where we're getting to here. And when the proposition is for me, and I've looked at it because I can't help myself, look at it like just in my own backyard here in Greater Sydney, it's like I'm going to go at least five to one leverage on an asset that in real terms before cost is going to yield me one and a half, 2%.

1:20:50and after costs with interest and that, assuming that interest rates never rise, assuming that rates never go up, assuming that the paint never peels and that the gutter falls off, you know, how does that make sense? And clearly it makes sense to enough people where that's a thing. It's like, well, okay, push it forward. Now you're making half a percent real term. Now you're making 0.1. Oh, now you're actually, you're losing money in real terms, you know? And now the government's taken away the, there's not even the tax benefit there. And it's like, okay, but it will keep going up, right? It's the Star Wars meme.

1:21:26It'll keep going up, right? Right? I guess so because vibes, right? Well, and then, honestly, man, they don't want to, so that's the purely financial self-interest reason, which is enough, right? But again, throw back in the social implication. Okay, so I'm not getting a yield, but I'm going to do it because the price is going to go up more than wages. I'm going to make some money. Okay, well, that means that housing has become less affordable for people who buy it from you by definition. So we are locking in not only a financial transaction that is questionable but a social outcome, which is not only awful but impossible to avoid if your assumption on capital growth is right.

1:22:10So whether you're buying a bad asset or you are making housing, not making, sorry, that's wrong, you're benefiting from housing becoming less affordable. I'm going to buy a really overpriced house but that's cool because someone will buy an even more overpriced house in the future. Oh and when they do the government will take 30 % of the gain as well at least Right, yeah and it makes it makes very little sense and we've said that over and over again we've talked a lot about the fact that they say housing affordability then throw a 5 % guarantee as if it's actually addressing affordability rather than just dressing up a pretense and this is, and by the way the opposition is the same and this is not a party, never a party political, but it's not even a single side issue here or a single policy issue.

1:22:53No one has a policy. I mean, Angus Taylor got up and said, I will repeal the negative-giving capital gains tax change. Like, okay, Angus, cool. What are you going to do? Now, I will say on one level at least the government, the opposition said we are going to align housing completions with immigration levels so that we're not actually having more households being formed than houses being completed, which again was a remarkable statement that even needs to be said out loud. It's like, in what world would you not do that? Help me out here. Again, with your biggest strata, small strata is irrelevant.

1:23:25We're going to have 101 households formed and we're going to build 100 houses. So where's the extra household going to live? It's the island analogy that we were talking about. Yeah, yeah, yeah. We're on a desert island. There's 100 huts and there's 100 families. Yes. Right? Yeah. Now, people from the neighbouring island just all right, another 50 people rock up. They're like, okay, how is that going to work? It just will, don't worry. It will just work. And it's like it's not the most, you know, gigabrained person in the village who goes, maybe we should build some more huts before we, you know, invite the neighbouring tribe across to live on our island.

1:24:03It's just so self-evidently true. You said before, just to circle back very quickly on, like, how do we stop a lot of this waste? It's a very hard problem, as we said. but I think one part of it is just don't start something that is almost destined to be a waste. Mathematically, inevitably a waste, like the 5 % deposit scheme or these kinds of things because things are very hard to repeal. They're very easy to bring into play. So I'll circle back just quickly on that one point. Like that would be a great place to start. Even if we never managed to roll any of our expenditure back, can we stop throwing good money after that on new programs?

1:24:42which are just like, you know, your average year nine economic student would go, that's probably not going to work. Exactly. You know. Just do the maths. Do some maths. Do some maths. Feeling better? No, now I feel worse, actually. Voicing it all just makes me depressed. I think the bigger picture here is as well is that, and I know we've talked about this as well, it's just like, yes, we've got to decide what services we want. Yes, we've got to decide how we want to pay for them, but we've got to stop trying to punish any kind of success that people have had particularly. I'm going to talk my own book because I'm a finance guy, I'm an investor, so okay, that's just, I am.

1:25:29I'm going to make the point here though. I feel as though the demonising of capital is just a very unproductive area to go in. Not that there can't be reforms and not that it needs to, And in fact, I would very stringently argue against giving owners of capital preferential treatment. I'm dead against that kind of stuff. But it's just the budget, the framing, the discussion, it's just sort of like it's do you feel as though, am I probably a little bit too sensitive to it, but it feels as though it's all being framed as in like we want to, and some people run too far with the argument, I know. I do know that.

1:26:06But, you know, that, oh, you've made money, you lucky bugger, we need to take, you need to do that. And it's like not accounting for the sleepless nights, the massive risks that were taken, you know. It's sort of, it feels as though, not to say no tax, I'm not saying that, not all less tax, but it's just sort of like in the eyes of a politician, if you're not wearing a hard hat in a factory pouring steel, then you're a bludger who just got lucky, or, you know, and it's so silly. Even in the, it's a different country obviously, but AOC over there talking about the only way to make a billion dollars is to be a crook.

1:26:40I'm sure you saw the clip going around on social media. I didn't actually know. I missed that one. Yeah, right. You know, it's just like, obviously, you know, people are like, well, you can be a, I mean, it just, I don't know. I just, the framing just irks me. So, yeah, I probably got two thoughts. I think, and not you at all. I've got PTSD from Twitter. I think we need to separate out the political from the policy, right? So, of course, AOC, that's a stupid thing to say. And, of course, it's a stupid thing to pretend about housing affordability. I don't think, though, that in and of itself invalidates or validates a policy position.

1:27:23You can be right for the wrong reasons and you can be right and spin it back. You know, we talk about the government selling this for housing affordability and all that kind of stuff. And it's not. It's obviously not, right? I still personally think it's the right policy. And I can say at the same time, they broke a promise, it's a good policy, and they're spitting it. It's like those things can all be true at the same time, right? Does it make it a bad policy? No, it doesn't. So we can criticise or even just constructively review the behaviour of a politician like AOC and say, well, that's just stupid, and it is.

1:27:56doesn't necessarily mean any policy that she may or may not put forward would be necessarily stupid because the spin was stupid. So I'm kind of in two minds.

1:28:11I'm really torn, mate, because, and honestly it probably goes back to the tax brackets at some level, you know, as in the lack of indexation. My starting point for, so two things. My starting point for tax is simply, and you've said this as much earlier, how much do we need to raise? Oh, sorry, what do we want to do? How much does that cost? And who should pay what proportion of the tax burden? So I start with that, right? And if you sell a startup business for$5 million and you're going to pay 47 % tax, that would suck. Writing that$2.5 million check, right, that has got to suck. Especially if it took you 20 years to generate that, right?

1:28:52And especially if you, like, I can tell you, you pay a crap load of tax along the way as well. And it's like, hey, wait a second, someone was successful. I just punished them almost. I know that's a very bad framing, but it's like, and it's even like no tax, but like 47%, like, call it what, it's half of it. But on the flip side, you've sold for$5 million, you've now got after-tax$2.5 million in the skyrocket. You pay tax only because you paid yourself. And the nurse who's earning$85 ,000 a year and paying$25 ,000 of that in tax and having 60 grand left over, I was looking at you going, you just got$2.5 million after tax.

1:29:28Like in terms of the fairness of the tax burden, and not that it should be equal, equal, but I think we let the percentages and the dollars paid, often we say we don't mean you at all, I don't mean me, I mean just people, obscure kind of the proportional ability to pay that tax bill. So I'm not against a preferential or differential treatment for startups because it does indexation doesn't work because it can't work because the the cost base is too often zero so i'm not saying i'm not saying it i'm not saying it should be the same rate but i i do bristle a little bit mate about the whole you know do you just hear how much tax i've it's warren buffett's line about you know maybe you'll find someone with a great idea who won't do it because the tax they'll pay when they it's like you know if i said to you here's the thing if you're a startup founder i said you can sell it in 20 years time for two and a half million dollars and keep it all you're like oh beauty and i say you can sell five million dollars in 20 in time and keep$2.5 million, you'd be like, oh, bastards.

1:30:20And so it's kind of, and it's all framing, right? And it's all emotional and it's all fine. I don't, I just, I struggle. Well, no, I'll round that out. I'll round that out. Because as an investor, it's not just the return, it's the risk versus return. Exactly, yeah. So the proper, you're not wrong, but just to flesh it out, the proper framing is you can make, as you said, but or if you go wrong, you could lose everything. Sure, sure. But I don't think that's government's job to make that decision separate to tax. You and I talk a lot about what government should be involved in and not involved in.

1:30:54My personal view is take the risk, don't take the risk. That's on you. You want to make money afterwards, risk it all, sure. Go to Cassino, put your money on number 31 or black and maybe make a fortune, maybe you lose it all. That's your call. Or don't do it. I don't mind if you don't do it. If you want to work, work. If you want to start the business, start the business. You know the rules now. The rules are these are the rules from effectively 1st of July 2027 Do you want to start the business? If you do, that's cool. Go for it. You know the rules. We won't backdate it, so I'm not going to screw you over.

1:31:19But that's the argument. Now I'm really just playing the debating team sort of game. But, and you often yourself talk about sort of the decisions on the margin are really what sort of affect things. 100%. And so there is, look, I'll put it in the context of shares. If I'm looking at two shares, two small cap pre-revenue companies, He's very, very, very high risk. But if I deem one that has a 100X potential and one that has a 3X potential, I mean, I'm going to, like, I'm just not going to go the 3X one. And there is a point, again, I don't know where the line is, but to your point, it's sort of like, well, do I want to risk, do I want to, like, put my home up, draw against it, quit my job, take my savings, risk it all for$2 million?

1:32:11I don't know. What about$10 million? Maybe. $20 million. Yeah, okay, I'll do it. There is a, again, we can argue where the line is drawn, but there is a point at which it's sort of like actually the upside is enough for me to take the risk, right? I'm upset. And so in the way, I know you didn't do it deliberately, but it's always framed as in at the starting line, I know I'm going to be successful and therefore, and therefore why are you complaining about it because you're going to make all this money? My argument is always like if it's sitting right there, man, go for it. Like why aren't you doing this?

1:32:41It's so easy and obvious and not anyone can do it. Like, please, please enlighten us as to how straightforward and easy and risk-free this kind of is. But of course it's not. And it's sort of like, again, not for most. If I've still got a good idea and I'm very high conviction in it and I think the upside is worthwhile, I will do it. But there's someone on the margin that's going, well, I don't know if I would. I just, I need the upside potential. This is beyond just start-up land. This is investing in houses or art or shares. That's just basic risk-reward calculation for any investment. And the government has now basically said, well, your reward is a lot less than what it used to be.

1:33:22So just on a purely rational, logical basis, like at the margin, it is going to dissuade people who otherwise would start a business to start a business. And I view that as negative. I just view it as negative. And I'm not saying that they shouldn't pay tax on your success. And I'm not saying that at all. But my concern is two things. It's always framed as it's just a layup for anyone who wants to take it and there's millions on offer for anyone who's like, well, that's not true and that you should still be happy because you made money. Why are you complaining that you've had to pay$2.5 million, to use the example?

1:34:00They're like, well, because I had to pay$2.5 million. I'm not allowed to not enjoy that experience. You can, but that's not how policy should be set, right? So to be clear, I am agreeing with you. I do think it should be a differential tax treatment. So I'm not arguing for the full freight. And so you are. We're kind of, at some point, we're just debating teams for the fun of it. That's fine. That's hopefully useful for our listeners because it means that we're, you know, fleshing out the idea. Well, that's what I mean. Talking it through is part of the exercise. Yeah, yeah. So I think there's also a little bit from what I'm hearing from you, mate, of just kind of like the people who say this and say that.

1:34:30I think that's reasonable, but also, and you can complain about it. It doesn't mean we shouldn't necessarily set tax that way. And I think from my perspective, you know what changed my mind? You're actually responsible for changing my mind on this one. When we talked, and I don't want to talk about sound money one and a half hours in, but we will just very, very quickly. We talked about, in fact, it was the time I made the argument, and you can miss me otherwise, of the startup risk. You know, our point was if there's sound money, debt is more expensive and the marginal products won't get up. You know, only the most likely will be funded.

1:34:59And while it does, and you agreed at the time to my argument that it will mean some of the moonshots don't happen because the ROI is just not obviously large enough to make the moonshots justifiable. Yeah. But your argument was at the time, I don't mean to throw it back, not my intent, other than you convinced me. So I'm not saying you said before, I'm saying I think because you said that, you know, yes, you would lose some of those, but overall it would be a better system. And I think that's kind of my view, you know. Do you lose the, I don't know, Canva? Maybe, maybe, maybe, maybe, maybe, maybe.

1:35:32is the system though better off overall probably do i am i am i prepared to take a risk directionally on that yes it is my answer for that reason that i think those were the great you can't stop steve jobs double double the u.s tax rate triple the u.s tax rate he's going to start apple because he just wants to start apple right and if and if and if scott phillips doesn't start scottsburgers.com uh you know at a lemonade stand out on the end of my driveway that's probably no because i don't want to pay the tax i probably didn't have a really good idea i probably wasn't so convinced that it will work.

1:36:00And again, not that it will work just because I'm convinced of it, but I think the marginal, you're right about it, and you're a million percent right theoretically, and I don't even mean in a bad way. I just mean higher taxes will be less activity. We know that, right? It's tax 101. You tax them, you want less off because you're going to get less of it when you tax it. So you're 100 % right. I don't think we should let that be sufficient in and of itself to not change the tax system. But again, let me tell you very clearly, I don't know what the right number would be. I saw this morning someone say a flat 30 % tax on start-ups.

1:36:32I don't know what the right number is. That seems reasonable to me, something like that. If you started from zero, there's some sort of flat tax, which is not milder after the 50 % discount currently, but it's kind of there or thereabouts. So there's probably something there. Maybe there's some implied percentage of the gain that you can kind of write off on tax. Maybe it's the 50%. Maybe you pay your margin on half foot because half is reasonable. I don't really have a strong view, mate. And I don't blame you for complaining about paying a$2.5 million check. The question is just really at a policy level.

1:37:00And it's like everyone. No one wants to pay more tax, right? The guy says, I work 80 hours a week. I shouldn't have to pay more tax. I worked overtime. I shouldn't pay more tax. It's like, okay, you all pay less tax. Good, done. Who's paying the tax now? Oh, they are, those people, them over there. And so that's kind of the national conversation is just we've got to say, your example, again, I apologize if I'm so back at you, if you came down from the clouds and someone said, you don't get to choose what position you're in. How do you design the tax system?

1:37:28I care more about the nurse who's paying tax and trying to get by than I do about the startup founder who sells for millions and has to pay a lot of tax. I just do and that's a philosophical position. I think it's ideological. I think it's philosophical of like, you know, I'm not saying we should be equal either. I'm just saying if I've got to work out where the tax burden falls and I add more tax to the nurse or I've added more tax to the startup founder with a seven-figure payout, I don't think that for me that's not a difficult conversation at all, but others will disagree and that's fine. Yeah, and it's really not the concept of paying tax on your multi-million dollar exit.

1:37:59It's not. It's, yeah, I probably didn't say it clearly, but it's more just the, and maybe I'm just too delicate to this, but it's the demonisation of it is one. Yeah. And the other part of it is the degree of it. So it's like, could there be more tax paid? Sure, that's not an unreasonable thing to talk about, but it was a very significant jump and, you know, and framed as in like, well, you greedy bastard, you need to pay more, look at how much money you've made. And like you hear all this stuff, which again, it does make me cringe a little bit, but nevertheless, it's true. It's like, wait a second, you literally created jobs.

1:38:39You literally paid a whole bunch of tax. By definition, to be successful, you had to create a lot of value for people who've bought your product or service because otherwise they wouldn't have done it, right? It's not worth anything, yeah. And for all of that, again, not that maybe a bit more tax isn't justified, but we're going to frame you as the villain and we're really going to ratchet up the tax. That's the egregious part of it, you know. So, again, we're not, like I think everything that we discuss slash debate, I think, you know, we're so directionally, it's that 5 % little ground and it's just, and I'm probably a little bit more sensitive to it than I should.

1:39:18And one more thing I will say on all of that, it is always the, I said this last week as well, when these discussions happen, we talk about Gina and Jobs and Bezos and Musk. They are like percentage, in terms of entrepreneurs, to use that term, they're 0.0001%, you know. If that, yeah. It's the local mechanic. It's the hairdresser. It's the baker, the butcher, the candlestick maker. Like these are the people. And so it feels good to those who are sort of more of a socialist sort of mindset to feel as though you're sticking it to those greedy, rent-seeking, you know, capitalist bastards. And it's like actually they're fine, right?

1:40:10Like, who you're really hurting is more of a, for want of a better term, a more middle-class aspirational kind of person, you know, who has, again, literally risked. They didn't go to the market and raise a trillion dollars because they wanted to float SpaceX. You know, they saved for 30 years, begged, borrowed from all of their friends and families, and then put it all on the line, didn't sleep for 20 years. Yeah. grew a stomach ulcer and then was successful. And we don't see the silent evidence of all the people who did that and failed. You know, my heart breaks every time you see it. We know the stats.

1:40:49I don't know exactly what it is, but what, nine out of ten businesses fail in the first year? You know, it's like we have to accept that brutal calculus when we go into this thing. And it's sort of like, again, we're only talking about degrees here. We're not talking about anything other than that. But I just, all of our, we are never, And this is, I think, a statement I will die on this hill, is that we are never going to increase our national prosperity by a better bureaucratic management. Like it's just not going to happen, not in and of itself. We can move the dial there. Yep, sure. We can make things more fair and more efficient.

1:41:28Absolutely we can. Should we do that stuff? 100 % we should. But let's, for the love of God, not cripple the very engine of our prosperity. And it is. It's people going out there and doing stuff. And it's not even a capital versus labour kind of thing. So you've got a job for company X, Y, and Z. Well, you're part of that team that is driving it forward. Now, the bargain is that we'll pay you a fixed amount of money and we'll take all the risk and we get the upside. But who's the victim here? It's like, so you want to pay me to do this thing? Yes, I do. Now, as an employer, like I'll use you as an example.

1:42:02I mean, is it in your interest for the Motley Fool to be a viable ongoing entity? Absolutely it is, right? Is it in your interest for them to be able to grow the business, right? They give out shares or like, I mean, this is, there's a false dichotomy between labour and capital. In the same way I was trying to make the point earlier with between people who invest in houses and those who, I mean, we are all joined at the hip, you know, as Doug Gentlywood said, we must acknowledge the fundamental interconnectedness of all things. And it's very true in the economy. I mean, it's very true in business and entrepreneurism and all of this kind of stuff.

1:42:38So I'm not disagreeing with you at all, mate. I'm just upset at the framing and the overreach. And I think that's right. I do think we should separate the framing out in the sense that that becomes the emotive bit of whether or not it's good policy, right? So, again, frame, as I say, AOC, frame perfectly fine with the same policy. And so I think you're right to, you're very right to call it out. I still think 47 % is still, I think the degree of tax and the flat rate is just way too much. Yeah, I was going to say, I think they're, and I don't mean that the framing should be ignored, by the way, because I think the framing is right.

1:43:11I think the framing actually talks to the way we have a national conversation about entrepreneurship. So I think it matters. I'm just, I think they're separate conversations rather than the same. And, yes, they're interrelated because if people believe the framing, then they'll believe it. So I get it, right? And so I think you're right. We need to recognise that, you know, we've talked a million times. I don't know if I keep doing it because it's late in the podcast, but we've talked a lot about productivity, right? Governments can't, I mean, they can help with productivity. They can do some things that help make productive growth more likely or less unlikely.

1:43:41But at the end of the day, it is people. So for businesses, it's people, right? Businesses are the artificial construct for the people who are doing some things and trying to create some value, which is the phrase you use all the time. And so whether it's a business or an individual, a sole trader, even an employee, I mean, the reality is finding better ways of doing the things we're doing is what gives us productivity. That's what gives us economic growth. if that's what gives us prosperity, that's got to be the starting point. And you then absolutely harness that to look after people who need the help or you harness that to fund the communal projects like roads and parks and health.

1:44:12But you're right, it's making sure we don't end up with the idea of, you know, you can slice up the pie until the pie goes away and once the pie's gone you can't slice it up anymore. So there's always both at the same time. And that's the problem with our politics, mate, and I think it gets to that idea of one party frames themselves as the workers, one frames themselves as businesses if one can exist without the other and that's kind of the point you just made. It's nonsense. It doesn't mean each party can't rebalance in their direction because they think the balance is wrong. It's just the stupidity of the one-liner and, again, back to your point about the framing of, you know, all billionaires are crooks or all business people are the fat, you know, monopoly banker, you know, top hat people.

1:44:51I mean, back to speaking of bloody politics, you know, calling Malcolm Turnbull Mr Harborside Mansion is a criticism as opposed to the fact that he actually worked hard and invested and was smart and earned that wealth, you know, it was used as a slur rather than as a, wow, that's amazing, you know, congratulations, well done. Maybe you've got some things to help us with politically. And we swallowed it, right? And so that's, yeah, all of which to say, as you say, we're 99 % aligned all the time and hopefully the differences or at least often just devil's advocate for the sake of it actually help illustrate and kind of flesh out the conversation.

1:45:20Yeah, I hope so. I hope so. I mean, these are knotty kind of issues. There is no easy answer. I mean, it's very easy to be the armchair critic and honestly if you gave me the scepter and said, that's it, you're in control, I would go in with a great deal of confidence and bluster and I'm like three years in and I'm just like, help, save me, I'm out. What did I do? What did I do? I'm sorry. I really tried. I mean, I'm very hyper aware of all of that. There are some things, there are some mistakes I often find that are just like you're dealing with very chaotic, difficult to foresee things and you're just going to make mistakes.

1:45:54There are other things that are just really obvious. That's where I want to rail the most. Not to sort of aim for some perfection that will never be achieved, but can we just stop doing the dumb stuff? If we can get to that point, I'll be a very happy man. All right. On that happy note, we will finish up this podcast because we've gone for a while. Will you come back on Sunday? Of course you will. We'll see you then. Until then, full 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.

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