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Chapter 1: What budget backflips did the Australian government recently announce?
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Hello, I'm James Thompson, Senior Chanticleer Columnist at the AFR. Welcome to our weekly news breakdown of all things business, finance and markets. With me today, as always, it's my Chanticleer colleague, the so-called soccer expert who couldn't have been more wrong about the mighty Socceroos. It's Anthony McDonald. How are you, Anthony? Never been happy to be wrong, James. Go Australia.
Fantastic. Well, this week we examine the government's budget back down, we explain why Australia and America's central banks are talking more about rate rises, and we take a question on whether AI could change the way your super fund has to invest.
James, as we record this morning, Friday morning, KPMG is getting brutally grilled at a parliamentary inquiry over its audit scandal. We're going to do things a bit differently today because this is playing out in real time. We're going to have a chat late on Friday just before we publish this podcast and bring you all of the drama from these hearings. Stick around for that later in the podcast.
Oh, I can't wait, Anthony. All right.
Elon Musk's rocket stock IPO, SpaceX, is still the biggest talking point in markets a week on from its float. The stock soared on listing and it's been up three of its first five trading sessions. It last traded about 40% above the IPO price. Investors are valuing this company, Anthony, like it's Amazon or Microsoft.
Please tell me, is this real or are we looking at one of the biggest meme stocks ever?
Ha ha ha.
Good question, James. I mean, first off, hats off to SpaceX. I mean, no one's regretting buying the IPO, right? That's the first test. Can it keep it up? There's a lot of hot money and a lot of short-term factors that went into buying the stock at the IPO, I think, and SpaceX couldn't have asked for much of a better backdrop.
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Chapter 2: Why is KPMG facing scrutiny in a parliamentary inquiry?
It was dubbed a 14-point US-Iran deal. Which of those 14 points caught your eye? And are there any longer-lasting consequences from this three-and-a-half-month conflict?
Oh, I take you to paragraph five, Anthony. I know you will study this closely. Oh, yeah, paragraph five. Upon the signing of this memorandum of understanding, the Islamic Republic of Iran will make arrangements of using its best efforts for the safe passage of commercial vessels with no charge for 60 days only. Uh-huh. That's it. This is no deal. This is a 60-day ceasefire.
This kicks the can down the road for two months. Now, I mean, it is good that we've got a deal, you know, beautiful signing ceremony in the Palace of Versailles. I mean, how good is that? But, I mean, I think this is the clause that matters most. Does the Strait of Hormuz open quickly? Does it stay open unimpeded beyond that 60-day deadline?
Or are we back at the negotiating table or worse, the US and Iran are firing projectiles at each other two and a half months down the track? I hope... And I think the economy needs – the global economy needs this to be a long-lasting deal. But it's more of a – as it says, it's a memorandum of understanding. It's a page and a half, you know.
You would have written longer meeting agendas for the local soccer club, Anthony. I mean – This is the bare bones of something that leads to a bigger negotiation. I guess my concern, Anthony, is that Trump is not a details guy. He's got a short attention span. He moves on from things quickly. So is the White House going to be able to nail this agreement down? But look...
It's a good thing we've got this because things are starting to really break in the energy world. There's a place in Oklahoma called Cushing, which is a sort of pipeline crossroads of the world. So oil comes in to Cushing from around the world and it's sent across the US. The tanks are starting to run dry in Cushing. And when the tanks run dry, all sorts of bad stuff happens.
Pipelines don't work because the pressure isn't there. So this has come right in the nick of time. Donald Trump's approval rating when it comes to the economy is totally in the toilet. So everything points to this deal being real and sticking.
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Chapter 3: What are the implications of the RBA's recent interest rate decisions?
I just worry that it gets to the midterm elections. The Iranians know they've got this leverage. Do you think in, you know, a couple of weeks out from the midterm elections, they might chuck a couple of mines and straight off a moose and say, no, no, Donald. You didn't sort this out completely. I don't know.
Are you confident that this is the real thing? I mean, even if it is a real thing, we've still got these consequences that are playing out in the economy, right? So even if the peace deal still holds, and that's great. I mean, you've still got this inflation shock. You've still got the energy problems, huge ramifications. I mean, just look at Australia, all right?
We had a budget commitment to spend $10 billion on fuel security, you know, storage, looking at refining capacity, all that sort of stuff. That wasn't on the political agenda before 2020. the bomb started going off in Iran, but we were happy to just limp along with what we had. And now we've signed up for the next three to five years to spend 10 billion bucks on this stuff.
And if we're doing it, we got through this relatively unscathed compared to a lot of economies, thanks to the fact that we're a wealthier nation and our businesses and consumers can afford to pay a bit more for petrol, diesel and aviation fuel in the short term. If we're doing this fuel security thing, you can imagine it rolling out across the entire world.
Some
I mean, there will be consequences. And of course, it begs the question globally, will we be better or worse off after these deals hashed out?
Yeah, that's a great point, Anthony. I mean, so we will see oil prices go down. We're already seeing that. But then we don't know whether they'll have to go back up again as if Iran does charge a toll. And we'll see these underlying inflationary pressures build as countries try and improve their fuel security plans.
Because that costs money to do too, you know, you've got to invest in new tanks and new supply agreements and all that sort of thing. So there is a hell of a lot of moving pieces around the Middle East still. And I think, you know, it's going to be months before we totally figure out how all this plays out.
All right, James, let's jump into our first topic, and it's a story we've seen played out in politics plenty of times before. After the budget, backlash comes the inevitable backflip. On Thursday, the government announced a series of carve-outs from the changes to capital gains taxes and a backdown on part of its changes to trusts.
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Chapter 4: How is AI expected to impact superannuation funds by 2030?
The days of easy growth and rising incomes and productivity and just living standards being better just aren't there anymore for them. So, you know, that's what's fueling this One Nation rise. I mean, Donald Trump's been elected twice on it in the US and now we're seeing One Nation tap into it here.
Chapter 5: What challenges do super funds face with changing contributions?
I mean, if you wind back a few years... You know, we've had One Nation on the scene for 20, 30 years, James. I don't think many people were tipping Pauline Hanson to be at the National Press Club with a speech that really was a must-see. You know, like she's got a groundswell of support now. Good on her, polling fantastically.
And all of a sudden we're now more interested in what the party really stands for, what are its economic policies. I know you looked them up a couple of weeks ago, but I think most people would be unaware of them. I mean, is she really for workers and everyday people or is this just about making – the rich right supporters of hers richer.
So, yeah, I mean, she stood up there, argued against multiculturalism, said we can have many races but need one culture. You know, there was no welcome to country. She rallied against immigration, against overseas students, questioned how all of this has changed Australian values and sort of really tried tapping into the social divide here between rich and poor.
I mean, like she pointed to a Salvo survey that said 19% of people had eaten food from a rubbish bin in the past 12 months. You know, like she said, One Nation would end the renewable energy bribery and fix energy policy. She tapped into this capital gains tax issue. She's milking that for everything it's worth. And why wouldn't you? I mean, this is politics.
But One Nation's popular, but it doesn't count for Jack unless they turn this into votes at an election, James. They've got six elected representatives in Canberra, right? Four in the Senate, two in the House of Reps. One of those was Barnaby Joyce, who got elected as a national and he crossed over.
And then the other one was a by-election down in southwest New South Wales, the seat of Farah recently. But the budget all adds to this growing discontent. It definitely helps open the door to One Nation. Yeah.
Paul Bassett, who's a You know, founded Seek, entrepreneur, investor. He had a great post on social media sort of saying that there's a political earthquake going on. For 80 years, we've had this two-party system, and all of a sudden, it's being busted. Now, we don't know what that looks like come the next election, but I was struck this week, Anthony, talking to one of our top CEOs.
They made the point that they're starting to try and understand what's changing in the political mood. And the line was when 30% of your customers are moving in one direction, you better try and get your head around it. I think business is really concerned, rightfully so, about this anti-immigration line. Business loves population growth because it means more customers.
But business also loves the vibrancy and dynamism that immigration brings to an economy and how important that is. So I think there'd be concern. But this change in the political atmosphere is something business is really going to have to get its head around.
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