Chapter 1: What is the main topic discussed in this episode?
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Hello, I'm Alan Kohler, editor-at-large of Intelligent Investor and finance presenter and columnist for the ABC.
And I'm Stephen Mayne, contributor at Intelligent Investor, founder of Crikey and shareholder activist. And we are the Money Cafe, Alan.
Chapter 2: What are the implications of the RBA's latest rate hike?
It's all happening. Goodness me, where do we start today? So I guess interest rates maybe three months in a row.
That's right. Well, three meetings in a row at least. That's right. And the market's predicting another one in August.
Yes.
and probably another one by the end of the year, so possibly two more. Certainly Lucy Ellis, the Chief Economist at Westpac, thinks there'll be two more from here. And the RBA is predicting a slowdown, not a recession, but a slowdown from 1.8% growth to 1.3% growth this but surprisingly not an increase in unemployment for this year at least.
Next year and the year after it's predicting unemployment will sort of rise gradually, but nothing too drastic.
So they're basically saying we can jack up interest rates without smashing the jobs market.
That's what they believe.
That's the calculation, isn't it? Yeah.
So, yeah, I mean, look, I think obviously the jobs market and the world economy and the Australian economy in general is in the hands of what's going on in Iran, which we'll get onto in a minute.
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Chapter 3: How is the upcoming federal budget expected to impact the economy?
I mean, I just think it's unsustainable. The public sector in Australia, states and federal combined, are running, you know, overall debt-funded deficits of, you know, it's pushing, it's well north of $60, $70 billion overall. at the top of a boom. I mean, it's just irresponsible.
I have to say, Alan, I dusted off my, as an old spin doctor for the Victorian government, I dusted off my last spin doctoring effort for the Autumn Economic Statement of 1994. And what staggered me was I've had a look at the numbers the Liberal government said back then versus the projected now. So total property taxes in Victoria, 93, 94, 2.1 billion. You know what the forecast is for 26, 27?
19.5 billion in property taxes. So that's stamp duties, 10 billion, land tax, 6.5. So it's up 9.3 times. in 32 years, and inflation over the same period, a $100 toaster would be $240. So inflation over that period is 140%, yet they've gone 930% in property tax revenue. And even if you do a population stat, the population is up by 56% over that period to 7 million.
Yet property taxes have gone up nine. And payroll tax is the same. It's gone up sixfold. So it's just massive tax increases. And even after these massive tax increases, you're still burning $13 billion a year in cash. And the simple reason is that when the Labor government of Victoria got into power, the capital works budget was running at $4.5 billion a year. Now it's $25 billion.
And might get back to 15 on the forecast. So they've just done this enormous debt-funded infrastructure spending spree. CFMEU boondoggles and all the rest. And it's all debt-funded. And even with massive tax increases, they're still bleeding cash at the top of a boom. And for mine, it's just unsustainable.
I mean, obviously a lot of that increase in property taxes is due to the increase in house prices that have risen at a much faster rate than CPI and incomes and so on. But not entirely. Obviously they've whacked up the percentages as well.
Oh, the rates have gone up. And don't forget the levy, the COVID debt levy on payroll tax, the mental health and wellbeing levy. They're both payroll tax increases. But on land tax, you've got the COVID debt levy. You've got the emergency services and volunteers fund, the congestion levy, the metropolitan improvement levy, the windfall gap levy.
So they're hitting property holders every which way. And before you look at the $5 billion plus in council rates in Victoria, it's going to be $9.5 billion in cash. So it's a bubble and they're milking it. And so I guess that plays into the capital gains tax negative gearing debate because property is the story of Australia, isn't it? It is.
That's right. So that's without rates, council rates, right?
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