March 26, 2025 • 30 mins
The 2025 Budget managed to squeeze in a few pre-election surprises. A teeny tax cut, a decision to 'do nothing' on pension access (with unchanged deeming rates) and a genuine move to upgrade the government's signature Shared Home Ownership program.
The so-called Help To Buy scheme will be very popular, but what are the risks?
In this episode, Will Hamilton of Hamilton Wealth Partners joins Associate Editor - Wealth, James Kirby.
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In today's show, we cover
* The biggest thing for First Home Buyers in years- Help To Buy
* Why bracket creep undermines all tax cuts
* Is the $3m super tax dead or alive?
* Should long-term investors be influenced by today's dividend yields?
See omnystudio.com/listener for privacy information.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:10):
Hello, and welcome to The Australian's Money Puzzle podcast. I'm
James Kirkby. Welcome aboard everybody. I notice we haven't had
many questions about this week's federal budget. That's probably because
there wasn't an awful lot in it that is compared
to a conventional budget. Don't be mistaken, though, because there
(00:30):
was issues in it, right, I mean, keep an eye
on that. There was a tax cut, Yes it was tiny,
Yes it was at the lower band, but it was
a tax cut. Nonetheless, there's a very interesting expansion of
the plan to have shared home ownership that could be
really interesting. That's the biggest sort of thing in the
first home buyers market we've seen for a long time,
(00:52):
and with anyone can up to one hundred thousand a
year you can apply for that. So I think that's
going to be a major feature of the residential property
market going forward. There was also some very interesting sort
of side steps inside the budget, in other words, things
that were not mentioned but were important because they weren't.
Give you an example, the deming rate. The deming rates unchanged.
(01:15):
The deming rates is unchanged since twenty twenty. This is remarkable.
Basically the rate that controls pension access is unchanged since
twenty twenty. That's a giveaway, folks, it's a giveaway to
older Australians. On the other hand, the coup, we call
it notorious. Notorious plan to introduce a new super tax
of fifteen percent on earnings above three million was nowhere
(01:38):
mentioned in the budget papers. And I mean anywhere, because
we were really digging and looking for it, myself and
my colleagues inside the lock up, and we didn't see
any mentioned at all. That well, I'm going to infer
that it means that plan as we know, is never
going to see the light of day. That doesn't mean
they won't try something, but I'd like to think they're
never going to try that. We talk about that in
(01:58):
a moment with my guest today. One thing just before
we start. As we speak, news has just come out
that Trump has introduced a twenty five let me read
this again. I got to be sure about this. A
twenty five percent tariff on foreign made automobiles in the US.
(02:20):
Can you believe this? This is how believable. Imagine if
it was in Australia. It would be like bring us
back to a hold and everybody driving a hold in
or a Ford as we were back in the nineteen eighties.
This is huge. This Trump tariff play. The big day supposedly,
if he can stop leaking it before the big day
is supposed to be Tuesday, April second. That's like the
(02:41):
tariff day that he's supposed to deliver all the entire package.
And that is just for our next show, which would
be ideally timed. My guest will be Cameron Stuart. He's
the chief international correspondent at the Australia and he's a
Trump expert. He's covered the Trump elections, He's been at
those Trump rallies. He really understands this controversial figure who's
(03:03):
dictating the tempo of world investment markets. So look out
for that one in a few days time. Now there
is only one person I talked to about the budget
each year, and we're going to talk about the budget.
We're also going to talk about where we are this
time of the year now that we know what was
in the budget. It is of course Will Hamilton of
Hamilton Investment Partners.
Speaker 2 (03:21):
How are you will very well, James, thank you for
having me.
Speaker 1 (03:25):
You're very welcome. Great to have you. I mentioned the
issues there on the budget, there was another tax cut.
We've had a batch of tax cuts from the ALP.
Now does that to some extent undermine the original ambitious
multi year tax cut program that Josh Rodenberg and Morrison had.
Speaker 2 (03:46):
No, I don't think it does, because I think what
you're saying is it's they're calling it the cup of
coffee tax cut. It doesn't start for sixteen months, and
then it does come in at five dollars a week,
and then it goes to ten dollars twelve months after that.
It's at the lower tax band, and I think this
goes from sixteen to fifteen and then to fourteen percent.
So the thing is it doesn't erode bracket creep. That
(04:07):
the brecker creep at the top end. There's no erosion. Yeah,
so it we've still got very substantial bracket creep and
it's a big issue.
Speaker 1 (04:15):
Bracket creep, folks. I hope everyone is across a before
we go any further. Bracker creep is that if the
tax rates remain fixed at percentages, then what happens is,
as you get a pay rise, you graduate into those
tax bands and that means that you continually pay more tax.
And actually if you look marvelous couple of slides from
(04:38):
saul eslike the Independent Economist I saw this morning where
he showed how the tax revenue year upon year upon
year and into the future increasingly depends on income tax.
So bracket creep is this controversy and the only way
to plug it would be if they indexed the bands.
Do you think either party whatever index to bands because
(05:03):
it means either party could never announce the tax cut again.
Speaker 2 (05:06):
Really, I see there's an article in The Australian today
that Dunton's being urged to do this. I think that
I know he's been everyone's everyone, everyone's urging him to
do and I think tax personal taxpayer contribution. When Morrison
went out of power, I think it was about forty
eight point three percent. In this budget, it's forecast now
(05:28):
for twenty eight twenty nine to peak at fifty four percent.
So that's the effect of bracket crep. Now we need
major we need tax reform and I think one of
the things that the Tier member and Wentworth elector Spend
has been really calling for.
Speaker 1 (05:42):
Is indexation of the bands.
Speaker 2 (05:44):
Eah correct is that? But bigger tax reform and the
thing is the people listening to this as individuals are
being urged to contribute more and more to the total
tax take, and that's wrong. It really is wrong. And
I think that one of the biggest reasons is because
there's two sides naturally to a budget. There's the revenue
side and there's expenditure side, and both sides aren't tackling
(06:09):
the spending side, and they're spending like drunken sailors.
Speaker 1 (06:12):
They're spending like drunken sailors. Okay, folks, you heard it
here first from Will Hamilton, and actually I don't disagree
with that. And the coalition's tactical electoral election policy of
matching LP giveaways, particularly on the medical side, is well,
basically it rulls into every time you spend, we spend too.
(06:34):
So on that three million tax I think we have
a question later on that, but it was nowhere to
be seen. Do you think it's dead?
Speaker 2 (06:42):
It's surprising, was probably the number one question we got
yesterday from people, because you know, look, our client base,
this is a very relevant proposal that was put forward
and there was no mention of it, and as we
all know, it's sort of stuck in the center, killed
by the Senate at the moment, everyone's expecting they'll have
a go at it or but there's just no mention
(07:05):
whatsoever about resurrecting that legislation in the Upper House or
trying to alter it amend it. So where does it stand?
And I think that's the big thing as far as
our clients are concerned. So unless they can change the
minds of Jackie Lambia at all, this thing's dead.
Speaker 1 (07:24):
Okay, I have to say, will I don't think it's dead.
And I think they can change the minds of those
people simply by offering them something that I didn't offer before.
So for instance, you could package it. This is how
they do these deals in Senate. You say, Okay, you
might be crazy about this tax, but we want it through.
And what we'll do is we'll do a double bill,
you know. And they took in other goodies with it,
(07:44):
which the others will find it resistible. That's political. More
to the point that three m tax three million tax
aren't super That is still on the agenda, and Jim
Chalmers has reiterated that he wants to push it through
put that on the agenda. It's not indexed either, right,
so bracket creep would kick in there big time, wouldn't it.
Speaker 2 (08:03):
And the transfer balance cap is indexed and like it
was interesting. Okay, So the transfer balance cap which you
have will Flagg James is going from one point nine
to two million a concessional and non concessional contribution, So
the way to get money into Super has not been altered.
Speaker 1 (08:18):
Yeah, and I think that's really unfair. That was the
point I'd brought up on budget coverage, even though it
wasn't in the budget papers, but I wasn't going to
ignore it, which is folks, I think this is really relevant.
If you are older and if you have one point
nine million this is individually per head in Super, and
you've taxed free earnings on that, that cap is going
to rise to two million on July one two million, okay. Now,
(08:42):
but if you are in accumulation stage. Any of our
listeners who aren't retired, which is a vast majority, let
me tell you the most they can put into Super
pre tax each year is thirty thousand dollars. Now, a
couple of things you could put in thirty thousand dollars
ten years ago, twenty years ago, and how many years
(09:04):
would it take to get two million? How many years
must do the calculation of that. But basically it's loaded
towards older people, isn't it. Really?
Speaker 2 (09:11):
It isn't the thing that we've argued since from the
point that Kelly I do ar Alter, this was the
issue actually is getting money into super and that still
and what they're doing and not altering these levels is
making it even harder.
Speaker 1 (09:27):
Yes, that's right. It's really contradictory that you're letting the
amount you can have tax free swell and you're not
changing year after year the amount you can put in.
But we'll put that to one side. But I want
people to be aware of it. I'm sure listeners are
aware of it, and it's I think it's crucial in
terms of again one of these things that the budget
(09:48):
did not cover. Okay, let's take a short break and
we want to come back and just pick up one
or two I think very important pre election issues for investors,
because we have an election coming up in May, and
we don't normally have a budget during an election campaign,
and there is an election campaign on for all intents
(10:08):
and purposes. I know it hasn't been called yet, but
it will be called in a matter of days. Okay.
Back in the moment. Hello, Welcome back to the Australians
Money Puzzle podcast. James Kirby here talking to Will Hamilton
(10:31):
of Hamilton Wealth Partners. We cover the budget every year together.
Often we've so much in the budget we could talk
for an hour. We're not going to talk for an
hour on the budget this year we will because really
there isn't an hour's worth in it. There is barely
ten minutes worth. I think we've touched off the big issues.
I just want to zone in one one issue that
I think our listeners will find very interesting. For first
(10:53):
home buyers. If you are one, if you want to
be one, or if anyone related to you wants to
be one, or a friend of yours wants to one.
There's a couple of grants you can choose from. The
most popular is the Home Loan Guarantee Grant Federal. These
are federal grants where the government will cover will guarantee
the deposit you don't have, basically so you can have
(11:13):
a small deposit. This is the most popular off the schemes.
Roughly fifty thousand people have used it, maybe more. This
is the last time I saw the figures. The other
one is the first Home super Saber scheme. Some of
our listeners have used that. They are heroes to use
that because it is the most ghastly complicated scheme I've
ever come across. However, thirty five thousand people or more
(11:36):
have used it. They've used it because people will jump
on anything that gets them into the market. The majority
of people who don't have rich mom and dads who
will give them quietly one hundred grand or two hundred
grand to get them going. Most people don't have that.
They depend on these grants, or they depend on whatever
initiatives they can have. So will The point I'm making
(11:57):
is the government's expanded shared home ownership scheme I think
will go like hotcakes. I think it will be instantly popular.
The deal is you can earn up to ninety thousand,
up to one hundred thousand, and you can buy a
house up to one point three million, which is quite something.
That's it's regionally sectoralized. Basically Sydney's the highest makes sense,
(12:18):
and it drops from there. The government will pay will
put in thirty percent of an existing house and forty
percent of a new house, right so you don't have
to you share ownership. What do you think of the idea.
Speaker 2 (12:35):
Well, look, it's going to get people in. And the
fact that they've also lifted the single salary cap from
ninety two hundred thousand, you going to see this allow
a lot more people in as well. So you're right,
it's going to assist this market, and it's going to
assist that you're up to that one point three million,
it's going to assist it substantially.
Speaker 1 (12:54):
The only forty thousand spots will and that's over the
budget papers.
Speaker 2 (12:57):
Twenty thousand places initially. Yeah, that's right.
Speaker 1 (12:59):
Yeah, th I notice demand will be strong. The demand
will be strong, and I noticed real estates a councilors,
et cetera yesterday asking from more spots already. So I
think it will be. But let's just look at it
for a moment. If you did this, so the upside
would be that you could buy a house that you
could not have bought previously, and that's substantial. The downside
(13:22):
is you share, you're in a joint venture, and you're
a joint venture with a government agency. What could go wrong?
What could go wrong? A lot of things. What could
go wrong?
Speaker 2 (13:34):
First one is if if it's reversed, but I don't
see that happening. They may see if they stop, they
may stop it. The other thing is is they're going
to put some effectively interest rate or carry on it.
I doubt that as well. So I think, what if
you've got to change your government and they didn't like
the scheme. I think it would just be worth ceasing it.
Speaker 1 (13:54):
Yeah, it would wither on the vine. But you wouldn't
care about that if you were in and I noticed that.
I don't want to preach George, but governments don't necessarily
do that. Like the ALP got in. They are absolutely
against using your super for buying a home. The Coalition
is totally for it. But the first Home super Saver
scheme which was introduced by the Morrison government was not unwound.
(14:16):
It wasn't advertised, but it certainly wasn't unwound and continues
under the EARP. So that's a precedent. I think. One
of the things that perhaps is an issue with the
shared ownership scheme, like any joint venture, is how does
the partnership end. Would you ever actually get to completely
own the house to be able to buy out that
part that you that the government owns, and if the
(14:38):
price went down, you'd be in a terrible pickle, wouldn't you.
You'd be stuck in a half government own't house for
who knows how long. How would you say that?
Speaker 2 (14:47):
So is there effectively imagine call we don't know that. Yeah,
I look, I need to see the fine print.
Speaker 1 (14:53):
Yes, we don't know the details. One other thing, folks,
by the way, is in the nature of these things,
which are so times sort of perverse incentives, or you
might say disincentives. Sometimes if you earn, if you go
in let's say you're around ninety eight thousand, and you
qualify for the scheme, and in the natural course of
event you are promoted or you make more money as
(15:14):
the years go buy then there is a close already
in the proposal that the government will want you to
buy them out faster than this planned. Under the conventional plan,
you only have to buy out the government, or at
least they have to get the money back for their
stake is when you sell the house. But if you
get promoted, you have to give them back some of
(15:35):
their steak faster. That's one of those classic sort of
disincentive things that you've got to watch that often get
built into these things by accident.
Speaker 2 (15:45):
And you would expect that the people that weare the
demand is for this game, they're the ones that will
get Probably the cealariisers are going to be more rapid
as well, so.
Speaker 1 (15:54):
They're the very ones, aren't they. Yeah, because they're first
home buyers, so by definition they are going to ascew younger. Okay,
very good. We don't know just yet. I don't want
to talk about the election just yet in terms of
the choices investors have, because we don't have all the
details just yet. I noticed a couple of things we're
coming to you before Dutton gives the budget reply. Budget
replies are normally completely boring and no one pays attention
(16:17):
to them. This time, people will pay attention because we
aren't the middle love it, as I say, a de
facto election campaign. Also, I notice that there is that
what's that famous little item in the budget which is
expenses on There's a phrase for it, but basically it's
money they've put aside, which they have in details what
they're going to do with. And there's two billion in
(16:41):
there still unused, which may well be used yet by
the government for some last minute election enticements in the
next month or so. But we'll see where we go
on that. I've got some terribly good questions I really
want to get to with Will. In fact, as often
(17:02):
the case, I've been saving these for a wik because
they're particularly difficult. Thank you, You're welcome. And also there's
a question that's about another guest. But that's the nature
of it. There'll be questions about you Will that another
guest will have to answer. That's just the nature of
a rolling show. All right, we'll be back in a
moment with some questions. Hello, welcome back to the Australians
(17:31):
Money Puzzle. James Kirby and Will Hamilton here with you. Okay, folks.
Now the first question is from declan I'm baffled by
Roger Montgomery suggestion. Now Roger Montgomery was on the show
two bad if you want to listen to it, very
good as always. Roger Montgomery suggestion that people should calculate
(17:53):
dividend heal based on the price they paid to acquire
their shares, and he used Comewell Bank as an exam
rather than based on the current value. The question and
the investors should be asking themselves is would it be
better off continuing to hold the shares I have or
should I sell them and invest elsewhere. Okay, I don't
(18:14):
really argue with that theoretical point brought up by Detton,
but I don't have a problem either with Rogers. I mean,
if I buy come Bank shares for thirty dollars, which
is I think what I paid for them thirty six,
and they're now nearly one hundred, and the dividend yield
(18:35):
on paper, when I look at the tables, tellt me
it's three and a half percent. But my dividend yield
on those shares is much much higher than that. If
I bought a property and you said to me, you know,
the rental yield is only three percent, but I know
that I bought that property, you know, for half half
the cost it is today, so the rent is terrific
(18:56):
on it, It seems to me. I think both points
are pretty relevant.
Speaker 2 (19:00):
What do you think, will, I think you've got to
look look what Roger's saying in some respects is right.
I think that and CBA, the dividend you're late late
last year went down and then it's gone up because
the share price is adjusted, I mean, and the share
prices recently it's recently fallen twenty percent. So yeah, it's
by that nature gone up. But I think you've got
(19:22):
to look at I have an issue with people just
purely looking at dividend yield when they look at a stock.
At equities, you invest in equities for growth, so one
component of the return is income, the other is growth.
Now people were scratching their heads when CBA was going up,
and why is it going up? It's ten year EPs
(19:46):
growth average has been half a percent. So you look
at se earnings per share and you look at the yield,
and I think that's what You've got to look at
the total return that you're expecting from that and make
a judgment from it. Right, if you paid thirty six
dollars for the stock, the dividend you're getting is based
off that thirty six dollars, So it's relevant.
Speaker 1 (20:08):
I know whatvant of course that there are. People will
always say that, look at your share portfolio, would you
buy that stock today? Very powerfuct point, of course, it is.
I think with dividend machine stock which come bank is
and all the banks are, that particular point is diluted
to some extent. That's where I would come from at least.
But it's a very good question. Thank you. Debt all right, James.
Speaker 2 (20:32):
James asks about six months ago you had an accountant
on the show, Duncan Perkins tax Time Accountants. I believe
I found it very informative and with one eye on
the end of the financial year, I'd love to hear
more about putting the appropriate structures in place now to
minimize your tax liabilities down the line. In addition, I'd
love to hear more about debt recycling and the associated
(20:53):
tax benefits in additions to the risks involved. I think
appropriate structures aren't just for one James. You should be
looking if you're going to put a tax structure in place,
it's for a long term, not just for one year. Yeah.
So if you're presently investing in your own name and
you going forward and looking at a family trust, that's
(21:16):
you're with that trust for a number of years and
likewise transferring assets from your name into a trust realizes
capital gains.
Speaker 1 (21:24):
Yeah, okay, but maybe perhaps you might explain to the
general listener of what debt recycling is.
Speaker 2 (21:34):
So on debt recycling, it's are you moving debt for
also from one entity to another?
Speaker 1 (21:41):
Why would you do that.
Speaker 2 (21:44):
Due to tax? So, for instance, your mortgage that you
have in your own name is being paid in after
tax dollars. And whereas if you've got debts, this is
in you know that you put that in a family trust,
(22:06):
or it's on against an investment portfolio or property in
your own name that is being paid in pre tax dollars. Debt.
Speaker 1 (22:14):
Yeah, correct, okay, yeah.
Speaker 2 (22:16):
And that's the big thing to ensure that you efficiently run.
You have your debt structured in an efficient way. We
have a number we have a number of people, so
we have a number of people coming in and you
know that they've got that ability to pay off their
home loan and look at debt in other vehicles and
they never thought of it, that hold on that debt
(22:36):
of my home loan is in after tax dollars and
therefore there's no efficiency in it.
Speaker 1 (22:42):
So what's the worst sort of debt?
Speaker 2 (22:44):
It is the worst sort of debt if you can
afford it.
Speaker 1 (22:46):
So is it by definition the first sort of debt
you should get rid of?
Speaker 2 (22:51):
Correct?
Speaker 1 (22:52):
Yes, So that's absolutely.
Speaker 2 (22:54):
You get rid of that after the debt that's been
paid off in after tax dollars. And if you wanted
to take on debt, make sure and you've got the
ability to make sure that it is therefore in tax
deductible or pre tax on the repayments.
Speaker 1 (23:12):
What about the reciting part. Is there something more that
he's alluding to there? Maybe when rates change or whatever.
Speaker 2 (23:20):
That's another thing. Yeah, as well, when you're looking at
your locking when rates change, and we are going through
a rate changing at the moment, so you're not wanting
to know you've had fixed rate loans as interest rates
go up, as rates go down. You want it to
have variable but our rates. But the gamble there is
how farabile rates go.
Speaker 1 (23:40):
You're skeptical about them dropping.
Speaker 2 (23:42):
I think there'll be one more, but I don't one.
Speaker 1 (23:44):
More zero point two five percent cut? That means the
entire site think cutting is a half a percent.
Speaker 2 (23:49):
Yeah, we didn't go We didn't go up as far
as others did. James. Yeah, we were one hundred basis
points less on our aid increases. Yeah.
Speaker 1 (23:58):
Yeah, very interesting. But the economists are still hanging on
to two or three more cuts. You skeptical about that?
Speaker 2 (24:06):
I am skeptical where if we're going to get more cats,
it means that the economy is struggling.
Speaker 1 (24:11):
To say, Yeah, I was going to say, why are
you skeptical because the economy.
Speaker 2 (24:16):
I think it's it's effectively going sideways. I'm just not
saying that. Yeah, that extreme weakness was I'm not, don't
get me wrong. I actually think on a relative basis,
Australia is a under performing the rest of the world,
and that's a that's for a different podcast. But I
think that it's effectively flat lining.
Speaker 1 (24:35):
And it's tipping along. And I suppose on the upside,
unemployment or employment, whichever way you look at it is
also flat lining in and around four percent, and the
forecast and the budget leave it there. Okay. I hope
that's useful to you, James. Now Sam says, I am
struggling to find had to then there's an answer to
(24:56):
the following question, Sam and all the Sam's out there.
We never give advice on the show. This is information only.
Is interest on a loan taken out to pay a
sole trader's tax debts tax deductible? Is interested on a
loan taken out to pay a soul traders tax debts,
including quarterly payments with bas tax deductible.
Speaker 2 (25:19):
You need to get accountants advice on this one. We can't.
We're not let your text advice James. Sorry, Sam, that's
really it's legally we're going down a dangerous pass.
Speaker 1 (25:30):
I made the assumption i'd get an answer there. That's
all right. Put that on the put that to one side.
I will come back to you, Sam, don't worry. I
will be so organized that I will put this back
into the questions folder that we get all the time.
Every day we get questions, and I'm delighted to see
them all right now. Bouncing along to Andrew. If you
(25:51):
have a loan or loans from a bank, fully offset
with deposits at the same bank and not paying any interest,
and the bank goes busted, are you still liable for
the loan? Oh my, Look two parts to that. Let's
just answer it straight first of all, and then we'll
answer it in a more realistic way.
Speaker 2 (26:10):
For the net ad standing balance. You're liable.
Speaker 1 (26:13):
You're liable, yeah, correct. But if the bank went under,
it would have included your loan, wouldn't it. And it
still would have gone under.
Speaker 2 (26:21):
And there's a thing that code a receiver or liquid
ida that will be appointed, and the first thing they'll
be doing is chasing your date.
Speaker 1 (26:27):
The first thing they do is is chase your date
if the bank was in receivership. However, in the real world, Andrew,
and we don't mean to be complacent. Don't be complacent
at all. However, Number one, there's a bank guarantee, which
I'm sure you know about, and that's on the positive course,
two hundred and fifty thousand per person per bank. But
(26:49):
also there isn't an explicit guarantee about loans, et cetera.
But there is a de facto, extremely strong historical priests
in this country that banks are not allowed to go under.
And anytime banks have been in trouble right back, you
can go as far back as you like. Stay in
(27:10):
Bank of Victoria I think late nineteen eighties. Was it
Bank West in the GFC that comeback basically had to
takeover I think bank I say, sure, all the state
banks really, once upon a time, bank I say, spectacular one,
once upon a time. But the point I'm making is
that it doesn't happen. The government ensures that the big
(27:31):
four banks will take over a bank that's in trouble.
If one of the big four banks is in trouble,
another bank will take it over. If they don't, the
government will step in. If the banking system collapses, the
economy collapses. They don't let it happen. In the historical
precedent is that separately, there's a government guarantee on deposits. However,
strictly to answer your question, Andrew, you bet they will
(27:53):
be chasing you further loan if there was a receiver
appointed to the biggest receivership imaginable, which would be Big
four bank. But there have been times, haven't there will?
I mean Westpacland very close to the line, very close?
When was that ninety one two?
Speaker 2 (28:08):
Yeah, Peka came in and bailed them out.
Speaker 1 (28:10):
There you go, you see, But somebody will invariably come in.
Because the other thing is, of course, that there is
an oligopoly in the Australian banking system. There's four banks.
They don't even try to expand outside Australia. They're completely
domestically focused. It's a mortgage machine, it's government guaranteed. Really,
it's a pretty good.
Speaker 2 (28:31):
Business on the dead side. Now they're a lot more
conservative than there were, especially even compared to the GFS.
Speaker 1 (28:37):
Yes, because the capital adequacy rules have continually been ramped
up by APPRA, the regulator, the Australian prudential with Australian
Prudential Regulation Authority. Worth knowing all that, Andrew, what a
good question, which is in a way a theoretical question.
All right, terrific. Hey, thank you, Will.
Speaker 2 (28:56):
You're welcome, James. You started the podcast in talking on terror. Yes,
And I found a great quote by Ivan Calhoun. Well,
Ivan Cahoune.
Speaker 1 (29:08):
Posted remind our listens who he is.
Speaker 2 (29:10):
He was a NAB but before that he was the
chief economist at Deutsche Bank, and he posted a quote
from David Kelly, the JP Morgan Asset Management Global Chief strategist,
and he said, the trouble with tariffs, to be descind
is that they raise prices, slow economic growth, cut profits,
(29:31):
increase unemployment, worseen inequality, diminished productivity, and increase global tensions.
Other than that, they're fine.
Speaker 1 (29:40):
That's right. I used that quote about three weeks ago
on the weekend. I saw it somewhere and I said,
oh boy, that's a corker. But more than that, it's
not just that it's a corker, it's who it's from,
the heart of Wall Street, the heart of Wall Street
JP Morgan, and one of the biggest jobs in that
investment bank take it on board folks. A lot more
(30:00):
more coming on that one, and we will be talking
about that with Cameron Stewart in a few days. Okay,
thank you. Keep the emails rolling. You're very shy on
the voice memos. It's very easy, you know, it's very easy,
and we'd love to hear you. But we're always happy
to read you out of course, what we'd love to
hear you too, So think about that. Here's the email
(30:20):
the money puzzle at the Australian dot com dot Au.
Today's show was produced by Leah Samuel Gluuke. Talk to
you soon,
Hello, and welcome to The Australian's Money Puzzle podcast. I'm
James Kirkby. Welcome aboard everybody. I notice we haven't had
many questions about this week's federal budget. That's probably because
there wasn't an awful lot in it that is compared
to a conventional budget. Don't be mistaken, though, because there
(00:30):
was issues in it, right, I mean, keep an eye
on that. There was a tax cut, Yes it was tiny,
Yes it was at the lower band, but it was
a tax cut. Nonetheless, there's a very interesting expansion of
the plan to have shared home ownership that could be
really interesting. That's the biggest sort of thing in the
first home buyers market we've seen for a long time,
(00:52):
and with anyone can up to one hundred thousand a
year you can apply for that. So I think that's
going to be a major feature of the residential property
market going forward. There was also some very interesting sort
of side steps inside the budget, in other words, things
that were not mentioned but were important because they weren't.
Give you an example, the deming rate. The deming rates unchanged.
(01:15):
The deming rates is unchanged since twenty twenty. This is remarkable.
Basically the rate that controls pension access is unchanged since
twenty twenty. That's a giveaway, folks, it's a giveaway to
older Australians. On the other hand, the coup, we call
it notorious. Notorious plan to introduce a new super tax
of fifteen percent on earnings above three million was nowhere
(01:38):
mentioned in the budget papers. And I mean anywhere, because
we were really digging and looking for it, myself and
my colleagues inside the lock up, and we didn't see
any mentioned at all. That well, I'm going to infer
that it means that plan as we know, is never
going to see the light of day. That doesn't mean
they won't try something, but I'd like to think they're
never going to try that. We talk about that in
(01:58):
a moment with my guest today. One thing just before
we start. As we speak, news has just come out
that Trump has introduced a twenty five let me read
this again. I got to be sure about this. A
twenty five percent tariff on foreign made automobiles in the US.
(02:20):
Can you believe this? This is how believable. Imagine if
it was in Australia. It would be like bring us
back to a hold and everybody driving a hold in
or a Ford as we were back in the nineteen eighties.
This is huge. This Trump tariff play. The big day supposedly,
if he can stop leaking it before the big day
is supposed to be Tuesday, April second. That's like the
(02:41):
tariff day that he's supposed to deliver all the entire package.
And that is just for our next show, which would
be ideally timed. My guest will be Cameron Stuart. He's
the chief international correspondent at the Australia and he's a
Trump expert. He's covered the Trump elections, He's been at
those Trump rallies. He really understands this controversial figure who's
(03:03):
dictating the tempo of world investment markets. So look out
for that one in a few days time. Now there
is only one person I talked to about the budget
each year, and we're going to talk about the budget.
We're also going to talk about where we are this
time of the year now that we know what was
in the budget. It is of course Will Hamilton of
Hamilton Investment Partners.
Speaker 2 (03:21):
How are you will very well, James, thank you for
having me.
Speaker 1 (03:25):
You're very welcome. Great to have you. I mentioned the
issues there on the budget, there was another tax cut.
We've had a batch of tax cuts from the ALP.
Now does that to some extent undermine the original ambitious
multi year tax cut program that Josh Rodenberg and Morrison had.
Speaker 2 (03:46):
No, I don't think it does, because I think what
you're saying is it's they're calling it the cup of
coffee tax cut. It doesn't start for sixteen months, and
then it does come in at five dollars a week,
and then it goes to ten dollars twelve months after that.
It's at the lower tax band, and I think this
goes from sixteen to fifteen and then to fourteen percent.
So the thing is it doesn't erode bracket creep. That
(04:07):
the brecker creep at the top end. There's no erosion. Yeah,
so it we've still got very substantial bracket creep and
it's a big issue.
Speaker 1 (04:15):
Bracket creep, folks. I hope everyone is across a before
we go any further. Bracker creep is that if the
tax rates remain fixed at percentages, then what happens is,
as you get a pay rise, you graduate into those
tax bands and that means that you continually pay more tax.
And actually if you look marvelous couple of slides from
(04:38):
saul eslike the Independent Economist I saw this morning where
he showed how the tax revenue year upon year upon
year and into the future increasingly depends on income tax.
So bracket creep is this controversy and the only way
to plug it would be if they indexed the bands.
Do you think either party whatever index to bands because
(05:03):
it means either party could never announce the tax cut again.
Speaker 2 (05:06):
Really, I see there's an article in The Australian today
that Dunton's being urged to do this. I think that
I know he's been everyone's everyone, everyone's urging him to
do and I think tax personal taxpayer contribution. When Morrison
went out of power, I think it was about forty
eight point three percent. In this budget, it's forecast now
(05:28):
for twenty eight twenty nine to peak at fifty four percent.
So that's the effect of bracket crep. Now we need
major we need tax reform and I think one of
the things that the Tier member and Wentworth elector Spend
has been really calling for.
Speaker 1 (05:42):
Is indexation of the bands.
Speaker 2 (05:44):
Eah correct is that? But bigger tax reform and the
thing is the people listening to this as individuals are
being urged to contribute more and more to the total
tax take, and that's wrong. It really is wrong. And
I think that one of the biggest reasons is because
there's two sides naturally to a budget. There's the revenue
side and there's expenditure side, and both sides aren't tackling
(06:09):
the spending side, and they're spending like drunken sailors.
Speaker 1 (06:12):
They're spending like drunken sailors. Okay, folks, you heard it
here first from Will Hamilton, and actually I don't disagree
with that. And the coalition's tactical electoral election policy of
matching LP giveaways, particularly on the medical side, is well,
basically it rulls into every time you spend, we spend too.
(06:34):
So on that three million tax I think we have
a question later on that, but it was nowhere to
be seen. Do you think it's dead?
Speaker 2 (06:42):
It's surprising, was probably the number one question we got
yesterday from people, because you know, look, our client base,
this is a very relevant proposal that was put forward
and there was no mention of it, and as we
all know, it's sort of stuck in the center, killed
by the Senate at the moment, everyone's expecting they'll have
a go at it or but there's just no mention
(07:05):
whatsoever about resurrecting that legislation in the Upper House or
trying to alter it amend it. So where does it stand?
And I think that's the big thing as far as
our clients are concerned. So unless they can change the
minds of Jackie Lambia at all, this thing's dead.
Speaker 1 (07:24):
Okay, I have to say, will I don't think it's dead.
And I think they can change the minds of those
people simply by offering them something that I didn't offer before.
So for instance, you could package it. This is how
they do these deals in Senate. You say, Okay, you
might be crazy about this tax, but we want it through.
And what we'll do is we'll do a double bill,
you know. And they took in other goodies with it,
(07:44):
which the others will find it resistible. That's political. More
to the point that three m tax three million tax
aren't super That is still on the agenda, and Jim
Chalmers has reiterated that he wants to push it through
put that on the agenda. It's not indexed either, right,
so bracket creep would kick in there big time, wouldn't it.
Speaker 2 (08:03):
And the transfer balance cap is indexed and like it
was interesting. Okay, So the transfer balance cap which you
have will Flagg James is going from one point nine
to two million a concessional and non concessional contribution, So
the way to get money into Super has not been altered.
Speaker 1 (08:18):
Yeah, and I think that's really unfair. That was the
point I'd brought up on budget coverage, even though it
wasn't in the budget papers, but I wasn't going to
ignore it, which is folks, I think this is really relevant.
If you are older and if you have one point
nine million this is individually per head in Super, and
you've taxed free earnings on that, that cap is going
to rise to two million on July one two million, okay. Now,
(08:42):
but if you are in accumulation stage. Any of our
listeners who aren't retired, which is a vast majority, let
me tell you the most they can put into Super
pre tax each year is thirty thousand dollars. Now, a
couple of things you could put in thirty thousand dollars
ten years ago, twenty years ago, and how many years
(09:04):
would it take to get two million? How many years
must do the calculation of that. But basically it's loaded
towards older people, isn't it. Really?
Speaker 2 (09:11):
It isn't the thing that we've argued since from the
point that Kelly I do ar Alter, this was the
issue actually is getting money into super and that still
and what they're doing and not altering these levels is
making it even harder.
Speaker 1 (09:27):
Yes, that's right. It's really contradictory that you're letting the
amount you can have tax free swell and you're not
changing year after year the amount you can put in.
But we'll put that to one side. But I want
people to be aware of it. I'm sure listeners are
aware of it, and it's I think it's crucial in
terms of again one of these things that the budget
(09:48):
did not cover. Okay, let's take a short break and
we want to come back and just pick up one
or two I think very important pre election issues for investors,
because we have an election coming up in May, and
we don't normally have a budget during an election campaign,
and there is an election campaign on for all intents
(10:08):
and purposes. I know it hasn't been called yet, but
it will be called in a matter of days. Okay.
Back in the moment. Hello, Welcome back to the Australians
Money Puzzle podcast. James Kirby here talking to Will Hamilton
(10:31):
of Hamilton Wealth Partners. We cover the budget every year together.
Often we've so much in the budget we could talk
for an hour. We're not going to talk for an
hour on the budget this year we will because really
there isn't an hour's worth in it. There is barely
ten minutes worth. I think we've touched off the big issues.
I just want to zone in one one issue that
I think our listeners will find very interesting. For first
(10:53):
home buyers. If you are one, if you want to
be one, or if anyone related to you wants to
be one, or a friend of yours wants to one.
There's a couple of grants you can choose from. The
most popular is the Home Loan Guarantee Grant Federal. These
are federal grants where the government will cover will guarantee
the deposit you don't have, basically so you can have
(11:13):
a small deposit. This is the most popular off the schemes.
Roughly fifty thousand people have used it, maybe more. This
is the last time I saw the figures. The other
one is the first Home super Saber scheme. Some of
our listeners have used that. They are heroes to use
that because it is the most ghastly complicated scheme I've
ever come across. However, thirty five thousand people or more
(11:36):
have used it. They've used it because people will jump
on anything that gets them into the market. The majority
of people who don't have rich mom and dads who
will give them quietly one hundred grand or two hundred
grand to get them going. Most people don't have that.
They depend on these grants, or they depend on whatever
initiatives they can have. So will The point I'm making
(11:57):
is the government's expanded shared home ownership scheme I think
will go like hotcakes. I think it will be instantly popular.
The deal is you can earn up to ninety thousand,
up to one hundred thousand, and you can buy a
house up to one point three million, which is quite something.
That's it's regionally sectoralized. Basically Sydney's the highest makes sense,
(12:18):
and it drops from there. The government will pay will
put in thirty percent of an existing house and forty
percent of a new house, right so you don't have
to you share ownership. What do you think of the idea.
Speaker 2 (12:35):
Well, look, it's going to get people in. And the
fact that they've also lifted the single salary cap from
ninety two hundred thousand, you going to see this allow
a lot more people in as well. So you're right,
it's going to assist this market, and it's going to
assist that you're up to that one point three million,
it's going to assist it substantially.
Speaker 1 (12:54):
The only forty thousand spots will and that's over the
budget papers.
Speaker 2 (12:57):
Twenty thousand places initially. Yeah, that's right.
Speaker 1 (12:59):
Yeah, th I notice demand will be strong. The demand
will be strong, and I noticed real estates a councilors,
et cetera yesterday asking from more spots already. So I
think it will be. But let's just look at it
for a moment. If you did this, so the upside
would be that you could buy a house that you
could not have bought previously, and that's substantial. The downside
(13:22):
is you share, you're in a joint venture, and you're
a joint venture with a government agency. What could go wrong?
What could go wrong? A lot of things. What could
go wrong?
Speaker 2 (13:34):
First one is if if it's reversed, but I don't
see that happening. They may see if they stop, they
may stop it. The other thing is is they're going
to put some effectively interest rate or carry on it.
I doubt that as well. So I think, what if
you've got to change your government and they didn't like
the scheme. I think it would just be worth ceasing it.
Speaker 1 (13:54):
Yeah, it would wither on the vine. But you wouldn't
care about that if you were in and I noticed that.
I don't want to preach George, but governments don't necessarily
do that. Like the ALP got in. They are absolutely
against using your super for buying a home. The Coalition
is totally for it. But the first Home super Saver
scheme which was introduced by the Morrison government was not unwound.
(14:16):
It wasn't advertised, but it certainly wasn't unwound and continues
under the EARP. So that's a precedent. I think. One
of the things that perhaps is an issue with the
shared ownership scheme, like any joint venture, is how does
the partnership end. Would you ever actually get to completely
own the house to be able to buy out that
part that you that the government owns, and if the
(14:38):
price went down, you'd be in a terrible pickle, wouldn't you.
You'd be stuck in a half government own't house for
who knows how long. How would you say that?
Speaker 2 (14:47):
So is there effectively imagine call we don't know that. Yeah,
I look, I need to see the fine print.
Speaker 1 (14:53):
Yes, we don't know the details. One other thing, folks,
by the way, is in the nature of these things,
which are so times sort of perverse incentives, or you
might say disincentives. Sometimes if you earn, if you go
in let's say you're around ninety eight thousand, and you
qualify for the scheme, and in the natural course of
event you are promoted or you make more money as
(15:14):
the years go buy then there is a close already
in the proposal that the government will want you to
buy them out faster than this planned. Under the conventional plan,
you only have to buy out the government, or at
least they have to get the money back for their
stake is when you sell the house. But if you
get promoted, you have to give them back some of
(15:35):
their steak faster. That's one of those classic sort of
disincentive things that you've got to watch that often get
built into these things by accident.
Speaker 2 (15:45):
And you would expect that the people that weare the
demand is for this game, they're the ones that will
get Probably the cealariisers are going to be more rapid
as well, so.
Speaker 1 (15:54):
They're the very ones, aren't they. Yeah, because they're first
home buyers, so by definition they are going to ascew younger. Okay,
very good. We don't know just yet. I don't want
to talk about the election just yet in terms of
the choices investors have, because we don't have all the
details just yet. I noticed a couple of things we're
coming to you before Dutton gives the budget reply. Budget
replies are normally completely boring and no one pays attention
(16:17):
to them. This time, people will pay attention because we
aren't the middle love it, as I say, a de
facto election campaign. Also, I notice that there is that
what's that famous little item in the budget which is
expenses on There's a phrase for it, but basically it's
money they've put aside, which they have in details what
they're going to do with. And there's two billion in
(16:41):
there still unused, which may well be used yet by
the government for some last minute election enticements in the
next month or so. But we'll see where we go
on that. I've got some terribly good questions I really
want to get to with Will. In fact, as often
(17:02):
the case, I've been saving these for a wik because
they're particularly difficult. Thank you, You're welcome. And also there's
a question that's about another guest. But that's the nature
of it. There'll be questions about you Will that another
guest will have to answer. That's just the nature of
a rolling show. All right, we'll be back in a
moment with some questions. Hello, welcome back to the Australians
(17:31):
Money Puzzle. James Kirby and Will Hamilton here with you. Okay, folks.
Now the first question is from declan I'm baffled by
Roger Montgomery suggestion. Now Roger Montgomery was on the show
two bad if you want to listen to it, very
good as always. Roger Montgomery suggestion that people should calculate
(17:53):
dividend heal based on the price they paid to acquire
their shares, and he used Comewell Bank as an exam
rather than based on the current value. The question and
the investors should be asking themselves is would it be
better off continuing to hold the shares I have or
should I sell them and invest elsewhere. Okay, I don't
(18:14):
really argue with that theoretical point brought up by Detton,
but I don't have a problem either with Rogers. I mean,
if I buy come Bank shares for thirty dollars, which
is I think what I paid for them thirty six,
and they're now nearly one hundred, and the dividend yield
(18:35):
on paper, when I look at the tables, tellt me
it's three and a half percent. But my dividend yield
on those shares is much much higher than that. If
I bought a property and you said to me, you know,
the rental yield is only three percent, but I know
that I bought that property, you know, for half half
the cost it is today, so the rent is terrific
(18:56):
on it, It seems to me. I think both points
are pretty relevant.
Speaker 2 (19:00):
What do you think, will, I think you've got to
look look what Roger's saying in some respects is right.
I think that and CBA, the dividend you're late late
last year went down and then it's gone up because
the share price is adjusted, I mean, and the share
prices recently it's recently fallen twenty percent. So yeah, it's
by that nature gone up. But I think you've got
(19:22):
to look at I have an issue with people just
purely looking at dividend yield when they look at a stock.
At equities, you invest in equities for growth, so one
component of the return is income, the other is growth.
Now people were scratching their heads when CBA was going up,
and why is it going up? It's ten year EPs
(19:46):
growth average has been half a percent. So you look
at se earnings per share and you look at the yield,
and I think that's what You've got to look at
the total return that you're expecting from that and make
a judgment from it. Right, if you paid thirty six
dollars for the stock, the dividend you're getting is based
off that thirty six dollars, So it's relevant.
Speaker 1 (20:08):
I know whatvant of course that there are. People will
always say that, look at your share portfolio, would you
buy that stock today? Very powerfuct point, of course, it is.
I think with dividend machine stock which come bank is
and all the banks are, that particular point is diluted
to some extent. That's where I would come from at least.
But it's a very good question. Thank you. Debt all right, James.
Speaker 2 (20:32):
James asks about six months ago you had an accountant
on the show, Duncan Perkins tax Time Accountants. I believe
I found it very informative and with one eye on
the end of the financial year, I'd love to hear
more about putting the appropriate structures in place now to
minimize your tax liabilities down the line. In addition, I'd
love to hear more about debt recycling and the associated
(20:53):
tax benefits in additions to the risks involved. I think
appropriate structures aren't just for one James. You should be
looking if you're going to put a tax structure in place,
it's for a long term, not just for one year. Yeah.
So if you're presently investing in your own name and
you going forward and looking at a family trust, that's
(21:16):
you're with that trust for a number of years and
likewise transferring assets from your name into a trust realizes
capital gains.
Speaker 1 (21:24):
Yeah, okay, but maybe perhaps you might explain to the
general listener of what debt recycling is.
Speaker 2 (21:34):
So on debt recycling, it's are you moving debt for
also from one entity to another?
Speaker 1 (21:41):
Why would you do that.
Speaker 2 (21:44):
Due to tax? So, for instance, your mortgage that you
have in your own name is being paid in after
tax dollars. And whereas if you've got debts, this is
in you know that you put that in a family trust,
(22:06):
or it's on against an investment portfolio or property in
your own name that is being paid in pre tax dollars. Debt.
Speaker 1 (22:14):
Yeah, correct, okay, yeah.
Speaker 2 (22:16):
And that's the big thing to ensure that you efficiently run.
You have your debt structured in an efficient way. We
have a number we have a number of people, so
we have a number of people coming in and you
know that they've got that ability to pay off their
home loan and look at debt in other vehicles and
they never thought of it, that hold on that debt
(22:36):
of my home loan is in after tax dollars and
therefore there's no efficiency in it.
Speaker 1 (22:42):
So what's the worst sort of debt?
Speaker 2 (22:44):
It is the worst sort of debt if you can
afford it.
Speaker 1 (22:46):
So is it by definition the first sort of debt
you should get rid of?
Speaker 2 (22:51):
Correct?
Speaker 1 (22:52):
Yes, So that's absolutely.
Speaker 2 (22:54):
You get rid of that after the debt that's been
paid off in after tax dollars. And if you wanted
to take on debt, make sure and you've got the
ability to make sure that it is therefore in tax
deductible or pre tax on the repayments.
Speaker 1 (23:12):
What about the reciting part. Is there something more that
he's alluding to there? Maybe when rates change or whatever.
Speaker 2 (23:20):
That's another thing. Yeah, as well, when you're looking at
your locking when rates change, and we are going through
a rate changing at the moment, so you're not wanting
to know you've had fixed rate loans as interest rates
go up, as rates go down. You want it to
have variable but our rates. But the gamble there is
how farabile rates go.
Speaker 1 (23:40):
You're skeptical about them dropping.
Speaker 2 (23:42):
I think there'll be one more, but I don't one.
Speaker 1 (23:44):
More zero point two five percent cut? That means the
entire site think cutting is a half a percent.
Speaker 2 (23:49):
Yeah, we didn't go We didn't go up as far
as others did. James. Yeah, we were one hundred basis
points less on our aid increases. Yeah.
Speaker 1 (23:58):
Yeah, very interesting. But the economists are still hanging on
to two or three more cuts. You skeptical about that?
Speaker 2 (24:06):
I am skeptical where if we're going to get more cats,
it means that the economy is struggling.
Speaker 1 (24:11):
To say, Yeah, I was going to say, why are
you skeptical because the economy.
Speaker 2 (24:16):
I think it's it's effectively going sideways. I'm just not
saying that. Yeah, that extreme weakness was I'm not, don't
get me wrong. I actually think on a relative basis,
Australia is a under performing the rest of the world,
and that's a that's for a different podcast. But I
think that it's effectively flat lining.
Speaker 1 (24:35):
And it's tipping along. And I suppose on the upside,
unemployment or employment, whichever way you look at it is
also flat lining in and around four percent, and the
forecast and the budget leave it there. Okay. I hope
that's useful to you, James. Now Sam says, I am
struggling to find had to then there's an answer to
(24:56):
the following question, Sam and all the Sam's out there.
We never give advice on the show. This is information only.
Is interest on a loan taken out to pay a
sole trader's tax debts tax deductible? Is interested on a
loan taken out to pay a soul traders tax debts,
including quarterly payments with bas tax deductible.
Speaker 2 (25:19):
You need to get accountants advice on this one. We can't.
We're not let your text advice James. Sorry, Sam, that's
really it's legally we're going down a dangerous pass.
Speaker 1 (25:30):
I made the assumption i'd get an answer there. That's
all right. Put that on the put that to one side.
I will come back to you, Sam, don't worry. I
will be so organized that I will put this back
into the questions folder that we get all the time.
Every day we get questions, and I'm delighted to see
them all right now. Bouncing along to Andrew. If you
(25:51):
have a loan or loans from a bank, fully offset
with deposits at the same bank and not paying any interest,
and the bank goes busted, are you still liable for
the loan? Oh my, Look two parts to that. Let's
just answer it straight first of all, and then we'll
answer it in a more realistic way.
Speaker 2 (26:10):
For the net ad standing balance. You're liable.
Speaker 1 (26:13):
You're liable, yeah, correct. But if the bank went under,
it would have included your loan, wouldn't it. And it
still would have gone under.
Speaker 2 (26:21):
And there's a thing that code a receiver or liquid
ida that will be appointed, and the first thing they'll
be doing is chasing your date.
Speaker 1 (26:27):
The first thing they do is is chase your date
if the bank was in receivership. However, in the real world, Andrew,
and we don't mean to be complacent. Don't be complacent
at all. However, Number one, there's a bank guarantee, which
I'm sure you know about, and that's on the positive course,
two hundred and fifty thousand per person per bank. But
(26:49):
also there isn't an explicit guarantee about loans, et cetera.
But there is a de facto, extremely strong historical priests
in this country that banks are not allowed to go under.
And anytime banks have been in trouble right back, you
can go as far back as you like. Stay in
(27:10):
Bank of Victoria I think late nineteen eighties. Was it
Bank West in the GFC that comeback basically had to
takeover I think bank I say, sure, all the state
banks really, once upon a time, bank I say, spectacular one,
once upon a time. But the point I'm making is
that it doesn't happen. The government ensures that the big
(27:31):
four banks will take over a bank that's in trouble.
If one of the big four banks is in trouble,
another bank will take it over. If they don't, the
government will step in. If the banking system collapses, the
economy collapses. They don't let it happen. In the historical
precedent is that separately, there's a government guarantee on deposits. However,
strictly to answer your question, Andrew, you bet they will
(27:53):
be chasing you further loan if there was a receiver
appointed to the biggest receivership imaginable, which would be Big
four bank. But there have been times, haven't there will?
I mean Westpacland very close to the line, very close?
When was that ninety one two?
Speaker 2 (28:08):
Yeah, Peka came in and bailed them out.
Speaker 1 (28:10):
There you go, you see, But somebody will invariably come in.
Because the other thing is, of course, that there is
an oligopoly in the Australian banking system. There's four banks.
They don't even try to expand outside Australia. They're completely
domestically focused. It's a mortgage machine, it's government guaranteed. Really,
it's a pretty good.
Speaker 2 (28:31):
Business on the dead side. Now they're a lot more
conservative than there were, especially even compared to the GFS.
Speaker 1 (28:37):
Yes, because the capital adequacy rules have continually been ramped
up by APPRA, the regulator, the Australian prudential with Australian
Prudential Regulation Authority. Worth knowing all that, Andrew, what a
good question, which is in a way a theoretical question.
All right, terrific. Hey, thank you, Will.
Speaker 2 (28:56):
You're welcome, James. You started the podcast in talking on terror. Yes,
And I found a great quote by Ivan Calhoun. Well,
Ivan Cahoune.
Speaker 1 (29:08):
Posted remind our listens who he is.
Speaker 2 (29:10):
He was a NAB but before that he was the
chief economist at Deutsche Bank, and he posted a quote
from David Kelly, the JP Morgan Asset Management Global Chief strategist,
and he said, the trouble with tariffs, to be descind
is that they raise prices, slow economic growth, cut profits,
(29:31):
increase unemployment, worseen inequality, diminished productivity, and increase global tensions.
Other than that, they're fine.
Speaker 1 (29:40):
That's right. I used that quote about three weeks ago
on the weekend. I saw it somewhere and I said,
oh boy, that's a corker. But more than that, it's
not just that it's a corker, it's who it's from,
the heart of Wall Street, the heart of Wall Street
JP Morgan, and one of the biggest jobs in that
investment bank take it on board folks. A lot more
(30:00):
more coming on that one, and we will be talking
about that with Cameron Stewart in a few days. Okay,
thank you. Keep the emails rolling. You're very shy on
the voice memos. It's very easy, you know, it's very easy,
and we'd love to hear you. But we're always happy
to read you out of course, what we'd love to
hear you too, So think about that. Here's the email
(30:20):
the money puzzle at the Australian dot com dot Au.
Today's show was produced by Leah Samuel Gluuke. Talk to
you soon,
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