Will AI make us all redundant? April 7, 2023

0:07Welcome to Motley Fool Money, the podcast with the longest winning streak in podcast history. I'm Scott Phillips from The Motley Fool. He is Andrew Page, only from strawman.com. He is strawman.com, as well as being the founder, managing director, and the chief cook and bottle washer. Andrew, how are you? I'm very good. I'm very good. How are things? Very good this week. If you have a mortgage, things are very good. If you have a margin loan, things are very good. If you have a credit card, well, that doesn't matter, because credit card interest rates are always high. But a little glimmer of, I don't know what you call it.

0:44Maybe, is it hope? Is it good news? Is it just the absence of bad news? Relief is probably the right word, I think, actually. If you're a mortgage holder, mortgage payer, what is the right term for that? The bank holds the mortgage, right? It's one of those things, what do you describe someone who is a... What's the right term? Indebted servitude. There's a few terms you could use. Be nice, be nice. yeah no it's you know some someone uh someone who is uh is is happy to use extreme leverage i don't know you could put it in i'm sorry i'm sorry listen i didn't i shouldn't have i just i was it was a genuine question i didn't see it coming it was it was silly of me uh before before we get going though i do wonder what strawman.com is we're an online private investment club oh it's good to know good to know i'll write that down that way i won't forget uh mate uh big week on the macro front, lots going on.

1:45Let's kick off with rates because it is a relief for many, many people. By the way, this isn't on our agenda but have you seen just a rental report out from Domain? Was that on Thursday morning? No, I haven't seen it yet. What happened? You won't be surprised by the rents, of course. The rents are through the roof. Again, no surprise, right? Because that's just what's going on. But yeah, so house prices obviously coming a little bit. Oh, house prices also went up this week. So CoreLogic report on Monday, house prices up. We saw rents up as well, despite the fact... Oh, no, sorry. House prices up, despite the fact interest rates keep going up.

2:23Rents up because rents keep going up. Let me pull the numbers here. This is a year-on-year growth in Sydney, 10%. Melbourne, 11.1, Brisbane 12, Adelaide 13, Perth 14.6%. The combined capitals increase in rent is now 13 % year on year and 7.5 % in the regions. Again, no surprise, right? We all kind of know it, but it is the other thing that doesn't get talked about enough. Yes. Yep. Rents, if you take a broader view of it, rents have not been increasing at nearly the same pace as property prices yeah so there is potentially some catching up to do i mean that's that says in owners investors have just been happy to take um lower prospective yields sort of over time so it's sort of it's it's been driven by that i think i think my view on it tends to be is that there's a lot of debate in the media as to whether they should be able to put them up and how much and should rents be capped and the rest of it.

3:30I'm not actually that. I get the intent, but I don't know if that is the solution. Any centrally planned kind of economic things always tend to have unintended consequences and the rest of it. But I do think that there is a difference in terms of how much you can increase rents versus how much property prices can increase. Oh, you reckon? Yeah. The former depends on actual cash flows, earnings, disposable household income that that kind of thing right you know we can all hope to get pay rises and generally on average do over long periods of time um but houses are different houses are driven more by the availability of credit and i would argue very strongly i think the data supports this that when there's a lot of uh cheaper money and easier access to money that's the that's the that's the predominant driver of property prices so again you know our wages haven't gone up, they're not going up to the same extent as prices.

4:30What fills the gap? Extra debt fills the gap. And that's sort of fine. So I feel as though you, let's say you're looking at your property and going, listen, it's not viable at this stage. I have to increase the rent. And you do it and you do it and you do it. You will get to a point where it's just sort of like, no one's going to take it. Not that there's not demand there. Yes, there's always demand. But on aggregate, they're just actual and very real affordability limits that you will hit. I think I spoke to it on the podcast when we were looking recently for a house. There'd be a certain threshold below which there'd be 30 people out the door of every house we were looking at.

5:07And then above that, nothing, crickets. Now, we know that there was heaps of people looking for a house in our area. We saw the same faces every weekend. We sort of eyed each other off and gave each other dirty looks. you know um but but above that threshold zero now why why is that i just it's not as though it just you just can't do it right and and so i feel as though that that's not saying we've got to be careful here i'm not saying they can't go up further i think they probably will but i i do think you you you have more very real limitations that you don't have in an easier that you don't have in terms of outright buying when there is a uh an easier credit environment does that make sense it does i'm not sure i come from the same place maybe we end up in the same place um i'm not sure i i agree with you on the on the margins where if credit literally isn't available but i don't know we have that circumstance i think anyone who has the income can buy a house today i don't think there's a rationing of credit by the banks at least as far as i'm aware um if if there was to be a meaningful increase or decrease i suppose that makes sense to the cost of money i completely agree with you i've said for a million years affordability is a measure of repayments versus incomes not prices versus incomes i know we disagree slightly there as well um but i agree with that i think i guess i'm just thinking though that absent the extremes of either of those two scenarios it simply comes down to in both cases how much can people afford you about the renters you know can they afford to pay the prices that are being charged no the same will be true at some level of house prices as a function of income or you know affordability as a function of income.

6:46I'm not so sure. I mean, they'll move differently at different times. As you say, there's a catch-up on rents now. But over time, I would expect that both will increase at the same rate with a more variable increase on prices because interest rates go up and down. And so you can't afford to buy the million-dollar house when rates double. You can afford to buy a million-and-a-half-dollar house when the rates fall. But over the long term, unless the average rate changes, I would expect they would increase roughly at the same pace, which is that of wages, once you have an equilibrium point. Is that not your thought?

7:22Yeah, I guess it's a question of timeframes. So maybe if you look over a 10, 15-year arc, that's true, but man, that's going to be a rough 10 to 15-year period potentially. So here's some maths for you, which I spoke to recently. So let's say that you went to the bank and they said you wanted to borrow some money and they're going to assess you with the, they're looking at a 2 % mortgage rate. You can afford 2K a month, that'll let you buy 500K a year. I just plugged this into a CBA loan calculator. Now you can't get those kinds of rates anymore. Now it's much closer to 5.5%. So if you want to, that same mortgage is now$3 ,000 a week.

8:05It's 50 % more. Or to come at it from the other direction, if 2 ,000 was what you could afford per month, whereas before you could borrow 500 ,000 now you can borrow 350 ,000 so the maths is that there's 30 % less that you can afford now we've spoken a lot before that I think the calculus for the average person is I want to buy a house very natural uh inclination of course um you go to the bank how much can I borrow you can borrow this much right that's what I and you you rock up to the auction 100 % with that in your back pocket now yep when you're selling a house this is, you know, take notes here, it's going to get complicated.

8:42You need someone to buy it. Yes, okay. You with me? So for every seller, there needs to be a buyer. So again, we're going to hold everything consistent here, same level of demand, all of that kind of stuff. It's just that the people on the other half of that transaction are now rocking up with 30 % capacity. Yeah, correct. So the other lever to pull there is maybe your income goes up 30%, makes up the difference. But it's just, it's a deceptive, the math is deceptive because you think, yeah, 5%, 5.5 % is more than 2%. I get it. I can't afford as much. Yeah, that's right. That's right. But when you actually crunch the numbers, it's like, whoa, that is a lot.

9:21So where does that, so assuming that people were bidding up to what they could afford to do, which I think was reasonably what people were doing. And now all of a sudden, just forget any future rate rises, just say everything just stays steady from here. You know, on average, again, on aggregate, 30 % less I can afford to spend. That is – now, to your point, at some point, I suspect interest rates will go down again, right? And that will work in reverse and then we'll see the other side of it. In fact, that's been the story of the last 15, 20 years, right? But that's got to be predicated on your view of what interest rates do.

9:59Are you going to be able to get a mortgage at 2 % anytime soon? And I'd probably say very unlikely in a world of 7 % inflation. Yeah, we're back in COVID-2 or something else. Exactly. Yeah, that's right. So I guess that's my angle. And now all of the people, so the people who already had a house and already haven't serviced that, and now their expenses have gone up considerably in some cases. Yeah. We go, right, very natural inclination. I'm going to pass that on. But again, you just hit that affordability. The renters don't have that dynamic at play. They just have what they're earning, minus what their other expenses are.

10:33There's no extra pool of cash that you can draw on that's going to be influenced directly by interest rates. I think that's 100 % right. I think we are both right on different timeframes. I think, you know, if you were to draw the long-term line, I think you'll see rents are a reasonably straight line up and to the right. I think the house prices will be a reasonably straight line up and to the right with lots of that kind of sine wave kind of structure to it. So you end up with this cyclical, it's going the same direction. I would argue over time, they end up at similar proportions of income because at the end of the day, how much of your income do you want to put in a mortgage?

11:10How much of your income do you want to put in the rent? That's probably not going to change meaningfully. The average renter or the average buyer probably are not dissimilar in terms of their rate of increase of wages, probably different cohorts, but you know what I mean. So yeah, I 100 % agree with you, mate. I think we're both right in different timeframes. You've just described the short term. of I think I've described the long term and we're kind of rough at the same point but it's in the long run we're all dead is the famous quote right well it's good that we did it right because that that does demonstrate exactly which which way this is all heading and again it depends on what question we're trying to answer as to what the future looks like and how it might kind of net out it just comes I guess to a full circle my point just being is that I I think if you're looking at your situation thinking whatever impact I feel through higher servicing costs I will just pass on.

11:57And I don't begrudge you for doing that. I mean, that's, that's, I would say any owners of capital, you know, your capitalistic duty to get is the best return you can while playing within the laws and having some sense of moral decency. But, but I just don't think you, I will, I don't know where that point is. It's just, it's more just a conceptual point. There will be a point at which it's just, I mean, you, you can logically map it out. Let's, let's say we will disagree it to where it is, but is a thousand dollars a week for an average three bedroom home in Sydney or is it 2 ,000? Is it 10 ,000?

12:27Is it 8 million? At some point, logically, it's just like, well, you won't want to charge that much rent, but you're not going to find anyone to do it. You won't get it, correct. Well, maybe you do, but the other 10 people with a similar house in a similar area can't. So it's just, it breaks down at that point. So I wouldn't be hanging my hat on, I'll just do that. You know what I find fascinating about this, mate, is it's, I say fascinating, probably, you know, renters are saying, well, thanks for being fascinated by it. I'm not paying the bills. But I do find it interesting to think about the dynamics of the rental market as a whole in this context, because you would have assumed that in the past, while landlords might have been buying these things to flip them and make an easy profit, all that kind of stuff, you also wouldn't assume they would choose to leave money on the table for the hell of it.

13:13So they might have crippled about the last$10, but in theory, they would have as a group charged what the market would have borne. And now they're charging what the market will bear, except those are very different numbers. I just find that fascinating because, to your very point, attempts at increase nationally, roughly, in rents year on year, the market, in theory, would have been able to bear some proportion of that 12 months ago and wasn't, or prices are too high now. But it's almost, we talk about the efficient markets hypothesis regularly about the prices are all, in theory, efficient. Rental prices, you would assume, because it's such a big, transparent market, should be reasonably efficient.

13:50But if you can jam up rents 13 % year on year without people learning more, either they're more desperate, and frankly that might be part of the story because we'll talk about supply in a minute. Governor Lowe himself talked about that. We'll get onto that. But the other part is the demand thing. I just find it interesting that a market's so big and transparent with so many different players and reasonably well regulated, not so much in tenants' rights, but there's no hidden data here. this is this is you know it's about as kind of big and transparent as a multiplayer market gets without looking at things like supermarkets and stuff um i'm just i'm just fascinated there is that much elasticity in rents yes it either implies that people are prepared to pay more or they weren't charging enough previously or this is the end of the end of the result but almost to your very point about the wages thing yeah we would have had this conversation and you would have said i guess 12 months ago rents can only increase as fast as wages no is it yes you're right?

14:46And then 12 months later, we've been like, whoa, hang on. I didn't get a 30 % wage rise. Who's getting the money? I just find it fascinating there's that much slack in the system in theory at least 12 months ago. Yeah, I'd probably liken it to the share market where my view is that it's extremely extraordinarily efficient, just not in short timeframes. And so it's probably, I think if you sort of draw that line of reasoning out over broader timeframes. I think you probably do get more of a match. We've seen a 13 % jump year on year, but I'm sure it averages out to something that's more in line with that.

15:22Yes, that's a picture actually. Yeah. And there's also a social aspect to it as well. And for the longest time, it just wasn't a core part of the proposition with an investment property. It was all about the capital gain and now affordability on servicing the debt has brought that cashflow dynamic into much more stark relief and you've also got the and this is i heard this on the news the other day so there's plenty of people who are jacking up rent because they kind of have to but there's plenty of people who own their houses outright who go oh i'm gonna put the road because i can't right because the market is doing it oh higher interest i can do that so there's there's a signaling mechanism or a social or hurting mechanism i don't know what you call it where it's sort of like why did people not do it a year ago probably because they didn't a it wasn't a huge part of the focus and b they didn't feel as though they could and then you see evidence that oh it turns out i can get away with it and then i will you know but again i just roll it forward okay well let's do it again let's do a 13 percent the year next year and the year after that i mean the jaws widen out between affordability and rental costs it just again what point does the rubber band snap i don't know but it gets tighter and tighter the further they go apart 100 and i i I'm going to draw it back to Lowe actually because I think part of what you are implying or what I've inferred from what you said, I won't put words in your mouth, is the inefficiency of pricing but also what Lowe has talked about for a long time is inflation expectations.

16:54Landlords charge it because they think they can get away with it. Tenants pay it because they figure that's what we have to pay now. When you have that acceptance of inflation, that makes it in a large degree endemic because the demand side of the, you know, the price side of the supply-demand curve should be saying, well, hang on, what do you mean meat's up by 15 %? I'll buy less meat then. Or you say, I guess that's what it bloody costs. I guess I'll buy it if I've got the money. And so the idea of inflation expectations, it feels really esoteric and really kind of, you know, out there. But that very idea on rents, as you say, 12 months ago, landlords thought, we can't charge more than that, I'm sure.

17:30now through combination necessity and the other blokes doing it and tenants are prepared to pay it and again this there's a supply issue there we'll talk about that in a sec but um it is just fascinating to me that that change has happened uh in because the market is prepared to a have a go b realize you can get away with it and so it just shifts everything it's almost like in remuneration we're kind of going from metaphor to metaphor here but the idea that you know once you know that the guy across the road is getting a million dollars ceo of you know page corp then i'm like well hang on andrew's getting a million dollars running page corp i want 1.1 I'm better than him.

18:00And you find out I'm getting 1.1. So you say, I want 1.2. That's remuneration. Well, we all target the mean, which means everyone below the mean gets to the mean, which brings the mean up and so on. And so Buffett called it ratchet, ratchet and bingo. Exactly. And back to rents, I mean, or just prices generally in the economy. That's why inflation expectations are so important. Well, can I just add on to that? I mean, this is what's so diabolically tough about economics is that it's all interconnected. right very douglas adams dirk gently kind of stuff where um yeah rents slash housing costs i think is the second biggest component of the cpi basket right so so what does that say 6.8 national inflation come back a little bit from the peak yeah and now we've just had one of the major components going up we've also had which we probably talk about as well opec and fuel prices going up we've said fuel is the base input for pretty much everything in our modern society so so here you have this situation where interest rates are going up because the cba is trying to fight fight inflation those increasing interest rates have increased the highest of increased the price of housing which in turn is increasing inflation which in turn will make it more likely for the cba to to increase interest rates so it's very circular and and and very very complex it is it is um so phil low talked to the national press club on wednesday we recorded this thursday morning so it was yesterday our time but it'll be a couple of days ago when this goes to to air um i thought mate he was very very clear and very frank now i'm not expecting that a lot of our listeners are going to sit through an hour of central bank speak um i actually missed the first half of it i was i was doing something else doing some recording or something else a video for our members so i missed it uh but jumped on towards the end he was just very very good um i was just really really impressed with the way he outlined the circumstances also the answers he gave to the journos who were some cases michael pasco i'll give him a wrap but he was on the good oil by the way so check that podcast out he's awesome michael pasco he's really so massive i'm a big fan i have been a big fan for you i used to watch my business sunday that's how old i am there was a show called business sunday once upon a time young listeners um and uh he he asked a question of governor low he he asked a very thoughtful question he had three or four different data points in there and he wasn't trying to trip him up was the other thing he was saying well so here's this and here's that here's this so that should mean that what do you think about this and it was you know other people got up and said oh what about inflation or you know what about house prices or don't you care about people and that's all they're not sound bites and you know i don't want to bag the journalists to ask those questions although well actually no bag them it's just lazy journalism it's just ridiculous yeah ask a thoughtful careful considered question yeah it's the old you know don't you know how much the loaf of bread and the thing of milk is it was the kind of the rba version of that don't you care about you know house prices and stuff like that uh or just go you know renters and all the stuff anyway pasco's question was excellent uh but he just and he just spoke really well what was his point what was his question uh well this is a good one actually so pasco basically drew a very nice easy line between the fact that population was going to grow faster than economic growth and so governor is that not uh per capita a recession is that not what we're going to go into and and this was interesting too and i people bag low for this i i don't i think there's a a westminster convention and maybe that's old fashion maybe it's not but i kind of like it um his job is not to make pronouncements that embarrass people or you know he's there to say yeah so you just look i don't choose to use that term uh and so pasco at the end tweeted actually follow him by the way on twitter if you do uh basically tweeted and said so yes it was basically so you know the net result was uh low saying well and the way he got out was like well they're just forecasts it's like well you know michael followed up i'm sure he would have said so you're forecasting a technical recession um but yes look and that's but that was the reality so it was it was important yeah the can we can we dig into that what please what why why is it necessary well is it a bad thing a good thing what what what kind of thing is it if gdp is growing the gdp per capita is shrinking so we are going to talk about population hopefully a little bit later uh but we'll do this bit now um you know the answer to this of course you are you are asking the uh the dorothy dixler question like give me a chance to answer it so thank you and then i will let you jump in as well this is one of the great um sleights of hand of governments in australia and as i want to do this is not a party political thing they're both as useless as each other on this one they when you hear economic data reported we hear the economy grew at x percent or the economy is this big or whatever else it is and here's the here's here's how i'll draw this example andrew if uh if you said oh the uh the entire payroll of strawman.com has gone up by five percent like oh good oh good wages are growing that's great you look at your own pay and go but i didn't get any of that yeah but the whole payroll's up yeah but i didn't get any more money yeah but the payroll's up the governments do the same with economic growth where they say because we hired more people in other words right right or maybe someone else got the money you didn't yeah so it's you know it matters um but yes in that case where that's the best analogy for the for the economy which is uh economic growth might be two percent now if you've got three percent more people in the country now we don't always get our share of this by the way it's a bit like it's a bit like owning shares in a company you don't get all of the profits sometimes the profits are retained but the company is more valuable over time when share price going we're talking about speaking of analogies this is the case when companies uh issue new shares you know the net profit might be growing but if they've doubled you know we're talking the pizza but if you double the share count and and price and profits up five percent but there's twice as many shares well guess what your share of that has gone down dramatically now it's never that never that bigger deal with the economy but if the economy grows at two percent the population grows at three percent guess what your slice of the pie decreased and generally speaking we say a recession is when the economy decreases now the economy per person which is really all that matters right because if we've got 10 people in australia or 100 people or a thousand people or a million people what matters is that the the the share that we all get or the value that's being created on our behalf is probably a better way to put it because we don't get the share but the value that's being created on our collective behalf should be at least as good as the growth in the population that way we all are slightly better off if you've got population growing faster than economic growth we're all slightly worse off individually because we've added more people but haven't actually created additional wealth to cover the growth number of people i mean it's some you know go think about it easily there's this two country a country b both have a hundred billion dollars in gdp one country has 10 million people the other one has 200 million people and which one do you want to live in right right which is a richer country yes yes exactly and again you know we we absolutely should be talking about him and i got i got smashed on twitter yesterday um we should absolutely talk about the distribution of that wealth right that's really really important and we should make sure you know it's if gdp per person is growing but it's all going to the the plutocrats and the autocrats and the technocrats and other crats um then you know it's it's useless right if if the economy is growing or shrinking it doesn't matter if i'm not getting anything extra out of it if it's all going somewhere else so distribution absolutely matters but the better starting point is fixed distribution in a growing economy when we're all at least theoretically getting a bigger share because if you've got if you've got a smaller pie and the same number of people or slightly bigger pie but even more people on top of that we know we're all getting a little bit less and that's that's the story right that that's why this matters and why a per capita number matters a whole lot more um there are some things that do make sense on a on a total population basis there are some scale benefits of having a larger population uh those who are worried about defense would suggest we should have a bigger population uh there are benefits from migration as well so we need to be a little bit careful about i had this conversation on twitter as well recently mate and um so we're gonna get we'll go into it now but population is a really really fraught topic right because you end up with xenophobic knuckleheads and racists who will use uh population size as an excuse to keep out people they don't like and cultures and colors they don't like and so it gets really really really dangerous and so i've i've tried to be really careful on twitter i'm trying to be really careful here not to talk about who those people are uh or where they come from because i don't personally care as long as they are appropriate migrants for our country what i what i care about is the size of the population relative to as you just talked about the economy for example there's other issues as well and it doesn't seem to me that by shoehorning more and more people in for the sake of it so the governments can say governments plural can say look we've grown the economy it's like well yeah but you kind of did it by you know having more and more people crash the party um you know they're invited it's not quite crashing we've invited more people to the party now we haven't increased size the punch bowl right so there's all there's less punch for the rest of us that that is the fundamental challenge when it comes to economic growth when it comes to the per capita measurements it is it is not economic illiteracy because they know full well what they're doing it is it is literally sleight of hand to not focus on gdp per capita now if you're being a little more cynical you might suggest and you and i are investors and we're business people and we like companies that make profit if you're being a little more cynical you might suggest that let's pick on woolies for the fun of it woolies doesn't really care about gdp per capita they just want more people in the shops so they like population growth um you know i'm sure uh news corp would like more people available to read their papers in any given city i'm sure that anz bank would be more than happy with more people who can have more bank accounts and more loans so there are very very significant vested interests in big australia which comes down to how big is my market right we all like large markets for our companies how do you get the big market large and growing but right yeah so how do you do that well you continue to funnel people into the country look at that i've created a large and growing market and so we should actually talk about i mean we don't do this you shouldn't necessarily do this per company but if all these are growing sales at two percent from popular to go two and a half percent their sales per capita are fallen too which doesn't really matter that much and if you're a tiny company it doesn't matter at all but they're obviously losing market share right it's worth it's worth keeping in mind when you look at those numbers particularly for those really big you know the transurbans or the the Woolies, the Coles, the businesses that have almost the entire market, particularly together, combined, look at the growth kind of matters there as well.

28:37I'm for a big Australia, I've got to say. Yeah, but I'm also for doing it intelligently. So I think just opening up the doors and allowing more people in than we have the infrastructural capacity to adequately look after, I think that's a mistake. And I think we're going way too fast. And I think to talk about housing, right, I think that's a big part of the problem there as well. Well, I do, side note, I do sometimes struggle at the rationale. People say, oh, housing will be fine because we're going to have heaps of immigrants. But when you look at the sort of the intake, you know, there's a lot of sort of nurses, labourers, chefs, fruit pickers.

29:18You know, I mean, I don't know if they're necessarily the kind of people who are picking up$3 million in Western Sydney houses. You know, I just, anyway, it's a secondary point. I actually think it's a huge, speaking of analogies to companies, I think Australia Incorporated has a massive competitive advantage because of the stability of our political system, our climate, our safety, our infrastructure, our social services. It's a great place to live. It's probably one of the best places to live. I should say it is the best place to live before people run me out of the country. But objectively speaking on the data, like this is like, you know, it's easily in the top five of places around the world I think you want to live.

30:02So, wow, that's pretty cool. So maybe we should be like bringing in people that have been educated on other people's money. You know what I mean? Like the really highly skilled, but maybe we should be attracting whole kinds of industries here. America is such a great example of this as well. and you look at all of the value that's been created in corporate America over there. I've read a stat once. It was sort of like I think 30 % were born overseas or parents who were born overseas. So it's like it can be an incredible advantage to attract very capable people to our country. And we're all richer as a result of it, right?

30:37It's like we're a fan. Look at the pick, Matt. We've literally got the pick. Where else are you going to go, right? Like it's just, I mean, if I was, I don't know, name a pick on a company. If it was somewhere else and look in a company, like compared to America, right?

30:56So I'm all for it. I think we've got, we could really make a lot out of that. It's just that you just can't do it healthful ever without any sort of planning in place. It requires a lot of planning around housing, around infrastructure and schooling and everything like that. And we don't tend to do that very well. I am going to ask you a question, uh not to not to pick on you but i am curious what's the and i by the way this is a bit without notice so uh i am not a fan of big australia for any for its own sake um i don't again and back to the back to the per capita thing if we had a big australia and everyone's the same per capita there's twice as many of us is there is there any particular advantage i'm i'm genuinely not sure that i see a reason why we need to be big per se i'm not saying we need no migration i'm a big fan of migration i'm a big fan of well targeted migration you just talked exactly about that and at a moderate level for a whole lot of different reasons i've had people on on twitter say to me you know the extreme version of why why why immigration at all i'm like well we probably have some some moral obligation to refugees and asylum seekers uh there are people with skills out there who make us a better country there are some moderate very very modest i think scale benefits but on a on a per on a per person basis or per literally per capita um you know am i a fan of a big house do i want more people in my house no because i'm comfortable in size and shape and whatever i've got i'm not sure there's a there's a burning platform for i'm not saying we should be smaller either by the way but what's what's your view of why big australia is better for us or let's pick i don't know what numbers you think big is but let's say there's let's say big australia is 50 million versus today's 20 is it 27 million 28 something like that well i'm not sure i i have been convinced that bigger is better we're kind of conditioned to think immigration is good and i agree and we absolutely i'm one let me say just really clearly one million percent this is not about any sort of figure for xenophobia or racism or anything else it's just literally how was you know i guess my so let me before i ask you the question i'll give you my view that way you you can rail against something my general my general take is this i think the it is it seems clear to me that we don't have the to your point um capacity for housing particularly and frankly in an inflationary environment adding more demand to any of these things strikes me a little bit bananas i'm not convinced that we have the planning done correctly and i'm not convinced that we have an environment on the eastern seaboard in particular but right around the country um it wasn't that long ago we had dams in sydney that were you know running low and frankly running out in parts of regional australia people i was sending to the bush like well their dams were kind of empty too like you know we've got we've got big issues we can do different things differently i just kind of figure right now you bring people in when you're kind of really comfortable that you can do it well and i just have no confidence at all that we need the people in them in their own sake but on top of that just that there's any really other other than because i'm a capitalist i want more people to buy the stuff of my companies you know um i see no reason why big is necessarily any better than current for example i think i'm not saying it should just be current i'm saying we should lock the doors i'm just saying more for its own sake feels like something that we say but i mean think about it more i was probably that camp i don't know maybe only six months ago 12 months ago um but the more i think about it i'm like no those those benefits of bigness don't seem obvious to me and the downsides i am worried about our environment worry about the ability to supply water the infrastructure everything's like sewage if you speak to people who know this stuff um the the literally the things like the sewage parts we have in the ground aren't built to cater for high density living in some areas right like it's literally if we're not that capacity it's not that far away and i don't know i just it feels like we're running headlong into the unknown uh for reasons that don't seem clear to me i mean Yeah, it's all about execution.

34:59I agree with that 100%. Yeah. I guess there's probably a, I think it's the right term, a geopolitical angle to it. Like the places that have more, it's not black and white, but more transparent, open liberal democracies, open free markets. These are kind of the places, like if you look at the globe as a whole, I mean, where are the places that you want to see prosper and grow and get bigger and more influential? I think in those places, right? It doesn't have to be Australia. I'm not trying to be too parochial, but as opposed to an aggressively growing authoritarian regime, there's going to be a power imbalance at some point.

35:47I'd rather the strength and resources go to the good guys. That's probably a really simplistic way to look at it. But I also think I'm a technologist as well, right? I just have huge optimism when it comes to that. And I look at Australia. We have such a massive land mass. And I know it sort of sounds really highfalutin and the rest of it, but I don't think it's that difficult to imagine a world. And I'm speaking over the span of decades, if not centuries here, where we just green the deserts. We become an energy superpower house with all the renewable blessings that we have. We make strides on desalination.

36:25again we literally make the deserts bloom we made canberra out of nothing right what a great city one of the best cities to live in right and and some people might agree but it's a pretty good place right i was in camera on the weekend i really like canberra camera's great right but i mean we can do this kind of stuff there's a lot of space out there and there are definite advantages i mean this is one of the real strengths of america and why it's risen to dominance was just an incredible natural abundance of resources that was able to support so many people and under a system that not while not perfect was certainly better than a lot that were going around at the time that's what gave them global dominance you know and um so yeah i i i think that in a targeted sensible smart way we could make australia incorporated a much more influential i think just be a positive drive for humanity you've done well i mean again it's all an execution right so So it's easy to make those big, grand statements.

37:21But yeah. I think we can both agree that making sure, you want to open the gates when things are ready. It's like, let's build the things and say, great, we've got room for some more people, come in. As opposed to, come in and we'll see if we can work it out. We'll figure it out. Then we're screwed, right? It's like, I know, there is some element of trusting ourselves, but equally, I don't know. I'm an optimist generally, as you well know, our listeners well know, I don't know, I don't know. taking 600 ,000 people over the next two years. But even half that, even a quarter of that, you know, numbers-wise, until we know that we have the...

37:55Again, if this was Australia Rink, to your point, if you and I ran Australia Rink, Australia was the family farm, right? And we said, well, how many... I don't want to necessarily make the analogy with people and animals, but, you know, you'd say, right, well, how many sheep can we put in this paddock and keep the... You know, with enough fodder to do well, not degrade the soil or like you know if you were probably going to you know sustainable regenerative farming you'd say here's what we need to do to make this work you wouldn't say well let's shove more and shove more and if it's too many i'm sure we'll find a solution for it and i just i just it's really honestly the population policy feels like it's it isn't one it's just hey let's just keep the economic growth story going because it'd be embarrassing if we had a recession as i said all in execution just not thought out there's no long-term thinking it's an absolute dog's breakfast you're right you're right just the potential i think is is there.

38:44Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener. Let's go to something you mentioned before as well. We talked about rent being or housing being a big contributor to CPI. The other one is energy, both in terms of transport and heating, cooling, household power. OPEC, the Organization of Petroleum Exporting Countries, the world's largest cartel something would be illegal anywhere else if it was inside a country's borders but because we need the oil we're happy to kind of just turn a blind eye or not even that just kind of go yeah it is what it is let's buy their oil um they cut back production announced it on sunday i think it was um over to monday morning our time and uh yeah they're going to cut back production to try to get the oil price back up and i have to say for all of the things that we've seen inflation-wise the last 12 months oil has actually been one of the bright spots It doesn't feel like that at the pump.

39:41But if you look at the price of oil over 12 months, it's been on this, again, it's always bumpy, but a pretty clear downward trajectory, right? And then year on year - Yeah, that 12 months, that's from the peak of Ukraine, though, as well. So it's got to be careful with the base effect. But yes, I hear what you're saying. But my point is, when you measure inflation, it's what we do. We always measure last year's price and say, is the price higher or lower than last year? So as we record inflation, we've been able to say, to your point, there's a reason why it was too high. But the fact that it's coming back down was taking meaningful pressure, or we started to take meaningful pressure off inflation.

40:12That's part of, I think, the December, January, February monthly inflation rates we've seen. Part of that is absolutely the fact that energy prices and oil prices have come down year on year. Still too high. And you're right about the base effect. But when we measure inflation, we don't say, well, let's ignore that. Well, we do some of it. We don't do it on a case-by-case basis of, that was always too low. Let's let it out. That's always too high. The measured, recorded, reported inflation rate was benefiting meaningfully from oil coming down. this has the potential to turn that around it does and there's gotta be careful it feels like there's a geo everyone's now listening like you're slightly closer to the speaker right now i just don't know there's a lot of it's i mean it's particularly these days there's just so much misinformation around but there's a i've been reading a bit of stuff that's sort of like the geopolitical angle on this.

41:04So the US has effectively weaponized the dollar and Russia is pretty keen to get out of that. There's more and more countries negotiating in buying oil directly with their own currency. So with Yuan, rubles, for example, are moving away from the petrodollar US sort of system there. The US in response to the Ukraine, Biden released huge amounts of what's called the SPR, the Strategic Petroleum Reserve. So it's this thing that's been in place since i think the end of world war ii so if ever there's a war or anything major happen we've got we've just got some spare tanks of oil lying around in case we need it really by the way really good idea to have that kind of exactly i wish we did like an island on the other side of the world where you could you know make sure you had supply we've got like 14 days of supply or something onshore it's like guys what our strategic we put our strategic reserves in america i know what it's not very smart is it what the hell i.e it's not a strategic reserve anymore If things get real, the US is going to use that, right?

42:03I'm sorry. It's the most insane, stupid thing. Anyway, it's the lowest level I think it's been in decades and decades and decades. And Biden said, when it gets, I forget the exact price range, but whenever it gets to, I think, 67, 70, something like that, we're going to start stockpiling again and build back up the reserve. Probably a good idea. Yes, correct. Interesting that he signaled the price of that. And interesting that every time the oil prices got near that, we've had some kind of collusive action. Now, let's, again, it's not, they're frenemies when it comes to the Middle East and the US, right?

42:41And again, we could get into the fascinating history of the petrodollar system and why and how that all evolved and all of this kind of stuff. But there was sort of like a very sort of mutually convenient arrangement in settling everything with US dollars. And I think there's more of a desire from other parties, particularly that don't align very strongly with the US, that just are a bit nervous about that dependence and the fact that all of the money that they have could be taken away from them in an instant. And they're wanting to do transactions in other kinds of currencies. So the amount, in fact, global settlement that's happening in US dollars has actually been on a pretty slow decline.