The Australian housing market is experiencing its biggest decline in 40 years, driven by the 2026 federal budget changes that removed negative gearing for established properties and increased capital gains tax, which have reduced investor borrowing capacity by up to 30% and crushed auction clearance rates. This correction is compounded by three RBA interest rate hikes, rising unemployment, and high immigration levels that continue to drive up rental demand. While these changes will hurt property investors and first home buyers who entered the market with 5% deposits, they may benefit long-term affordability by reducing prices and increasing home ownership rates. The timing of these policy changes is considered procyclical, as they were implemented during an already weakening market rather than during a property boom.
Buyers abandon Australian propertyAdded:
Uh, good afternoon, Leith, and welcome to this week's edition of the macro and the mortgage with myself, Catherine Cashmore, from Land Cycle Investor, and Leith van Onselen from MacroBusiness.
And what a week it has been. I know you will have heaps to say this week on the fallout from the federal election. And already buyers are coming to me and telling me how much their budgets have been quashed. So, um, this was the story that I related to you last week about the first one that I heard, which was a a buyer that I was talking to prior to the election, and he told me he had 850,000 to spend, and he was thinking about investing and, you know, going out there. And he's not even even using negative gearing. He's investing in his, um, SMSF. So, you know, the changes in the federal budget weren't going to impact him. And, uh, he went to his broker after we'd had a chat and came back and told me he'd only got 500,000 to spend, and was it worth buying? And I have heard so many stories about this.
And what was quite interesting in in my course of investigating this was, you might have heard that the property firm Dashdot, um, has now, um, gone into liquidation. Dashdot. Dashdot.
Dash-Dashdot, I think it's I think it's called. Did you come across this in the in the news? Um, they've gone into liquidation anyway, and, uh, they wrote this whole list of reasons as to why they, you know, they've had to shut down and the investors that are going to be impacted. And, of course, it's excuse after excuse about, you know, the economy and consumer sentiment being very low. And then they have also said that, um, their clients that they're working with can no longer borrow what they, you know, they've gone down like 20% or something in borrowing capacity since they went to their brokers. And so, what we're really staring at at the moment is that the crash is already here because this is going to impact prices significantly. Clearance rates are already crashing. So, it it it's, uh, not a good atmosphere out there. So, you're going to drill down into it all today, but what have you been experiencing on the ground since we last spoke?
>> Yeah, it's a similar sort of thing. So, I speak to real estate agents uh and the same kind of thing, Catherine, also in the media. Uh so, some of the media that some brokers quote in the media said that basically for investors now um because of the negative gearing changes that their borrowing capacity's been shut cut by up to 30%.
>> Mhm.
>> And that kind of aligns with what you just said. And that the reason for that is that because investors owning existing homes now can't negatively gear that that means that the the banks or the lenders now um basically have shaved their after-tax cash flow.
Right? So, they're they're they're after-tax cash flow because they're no longer getting that back in their taxes.
Uh and so, they're so so now investors are running a bigger loss a bigger cash loss than previously.
And as a result, they've crimped their borrowing capacity by up to 30%. So, that that's a massive change when you think about it. And I've spoken to several real estaters, but there's one in there in Brisbane I'm pretty friendly with. We chat a lot on the phone and he uh basically said to me he goes, "Mate, the market's dead."
Uh he just said straight out, uh "Market's dead. Um huge change in the last month."
Um so, and and also just in the data and I'll show some of that in a second, but there's been obviously a big collapse in auction clearance rates, which is a sign that demand's weakening or very weak. But also there's also been quite a big surge in in new supply as well. So, um you know, vendors are now putting homes on the market and and so, we're getting an oversupply now with So, more homes less demand equals, you know, uh pending oversupply. Now, it's not oversupply in a structural sense for the rental market and that sort of thing like, you know, population versus housing construction. We're talking about oversupply for um for for listings, market listings versus buyer demand, which obviously takes into consideration a whole bunch of factors, borrowing capacity, interest rates, tax settings, people's income, sentiment, that kind of thing. And sentiment's obviously incredibly weak at the moment cuz the budget, three to four rate hikes, a lot of concern around the economy.
We've had a big uptick in unemployment in the most recent ABS data.
Uh and I think that's going to get worse as well uh with all the AI and rollout and plus, you know, we've still got the potential for a um I guess fuel rationing potentially down the track. It's Yeah, we've sort of avoided it at the moment, but um but yeah, that that that's also a risk down down the road as well. So, yeah, I think um I actually went on Karl Stefanovic's show. I got invited back on after going on 2 weeks ago, which was great. We had a good 20-minute interview and uh yeah, I was pretty uh I got a nice soundbite uh which I said at the start where I said, "Karl, we are facing the biggest decline in property prices in at least 40 years." And I did that for the for the clickbait. But obviously um that doesn't necessarily mean it's going to be a full-blown crash because the biggest decline in 40 years according to CoreLogic is 8.2%, right? So, we don't have to get almost close to double digits nationally and you have the biggest decline in 40 years, but I honestly think we're we're we're we're looking at that. And of course, as you say often, uh you know, a national decline of up to 10% doesn't mean 10% everywhere.
Obviously, there's some markets that'll be a lot worse than that. There's submarkets within capital cities. Uh there'll be some properties that'll go up probably. Uh you know, some might go up, but um you know, an average across the nation of 10% decline roughly is, you know, pretty decent and in some areas it'll be a lot worse than that.
And as I mentioned last week, you know, there are areas around Melbourne for well, I don't know if you call them Melbourne, but yeah, the Mornington Peninsula, that that's still part of Melbourne. Um you know, places like that have already seen massive declines in values because of the changes in the uh land taxes affecting investors' holiday homes, that sort of thing. Uh so, some of those properties has been reported that they're they're taking 50% haircuts. So, they basically doubled during the pandemic and now they've halved.
Um so, yeah, there are areas that are already bleeding.
And yeah, I I I think that after talking about it for years, this could actually be, you know, the closest thing we get to a an Australian house price crash.
Now, probably more a correction, but even so, you know, the the biggest decline in 40 years. I think I think all the ingredients are there now.
>> Well, what's interesting about that headline, of course, is that we ran with that headline, gosh, you know, a couple of weeks ago prior to the federal budget. We and the newspapers sort of grabbed hold of it, but you know, the the biggest decline in 40 years, you you have to think back and and anyone that's watching this that remembers the early 1990s recession and how that impacted Australia and how that impacted property prices across the east east coast. It wasn't a pleasant time at all and unemployment shot up, you know, to around 10 11%.
And that's actually what I think that we're we're heading into because and the and the reason being because when you get property prices that fall, it's not isolated to people that own property and okay, property prices fall. It brings down the entire economy because there are so many businesses that are choreographed around the property sector. So, you know, we're not just talking about the finance industry and the real estate companies and the insurance companies, but we're talking about, you know, the removal companies and the furniture companies and the building materials and construction and the traders and everybody that relies on high housing turnover to, you know, increase activity in their own businesses. But also as rates go up, you know, for the people that have got a mortgage then that makes them rethink about what they're spending, discretionary spending drops and that's what the consumers sentiment index, that's why they're all plummeting to record lows. I think the one came out in America from the University of Michigan showing also a record low. So, you know, these these things are going to really impact the economy and really bring it everything down with it. And you know, you could argue that the the budget and the changes to negative gearing and capital gains tax were very poorly timed in that >> Yeah, I I would argue it. I I don't think it was.
>> I I I I agree 100%. So, obviously, look, you know, um I I personally, as you know, my view is I don't mind the changes. I think they're necessary uh from a although, you know, with the caveat that they should have cut it cut personally come taxes as well, obviously. Like, you don't just, you know, raise effectively raise taxes, but then don't cut it elsewhere and get proper tax reform.
They didn't do that, but, you know, in isolation, the the changes will take investor demand out of the market, obviously, you know, through this borrowing capacity thing.
Um you know, investors just aren't going to want to lose more money to um to to invest in a market where looks like capital growth is going to be gone now for years, and there's a good chance of decline. So, you know, it's going to kill investor growth.
But, that's obviously good for first home buyers, right? Lower prices is good for them. It also means when they rock up to an auction, they won't be competing against an investor who's got more got a bigger wallet and bidding against them. So, first home buyer demand should go up.
Other things equal, it means that the home ownership rate should go up. So, you know, and all those reasons, it's it's good.
But, it's also the the timing is incredibly procyclical, right? So, they So, they brought this in at a time when at the start of the year, Australian housing had never been as expensive. So, relative to prices to incomes, the years to save a deposit, all that stuff was the highest in history. Even the mortgage payments to disposable income before the RBA hiked three times was pretty close to almost the highest in history. Now, it would be the highest in history. Now, they've had three rate hikes. So, you know, that was obviously and then we had the obviously we've had the Middle East uh crisis and all this other stuff.
So, um yeah, it's not great timing because it's going to exacerbate the exacerbate the downside, obviously.
Uh so, you know, not not good on on um on that measure, but yeah, it it it just goes to show you like sometimes timing's when you do policy changes, timing matters. And just if they'd done it as the market was in a bull run, you know, it would have made more sense to take heat out of the the But, now the market's already had already turned before they did it. Now, they're just going to exasperate the problem.
>> rates were already going up. I mean, we we already had that. Actually, that was the point that Karl Stefanovic, I'm sure you'll share it on on your channel, but Karl Stefanovic was trying to say in your last interview, which was, you know, hang on, wasn't what was happening anyway slowing the property market down?
>> Yeah.
>> And you know, the the argument about getting first home buyers in, I just preface this with I mean, I've dealt with hundreds and hundreds of home buyers over the years, and I've never met one that hasn't been concerned with once they're buying to the market, their property price up. It is a a psychological thing. When people buy property, they want the price to go up.
And and you know, having dealt, you know, because I've worked very hard in the housing affordability arena by, you know, working with Prosper Australia for many, many years. And even there, I would say that, you know, when people own a house, they're happy to get out when all the policies are working in their favor and they give them the biggest windfall gains. So, you know, this you know, people can can scream and and you know, you've been writing MacroBusiness for years and you know, I used to contribute to the articles in MacroBusiness. So, you know, I I know the audience there and and you know, that they've been the specuvester, the idea of the investor being being the enemy is is great to sort of preach about, but you know, that's the way policy has taught people to invest in this country is to build their wealth through speculating on property, and nobody wants to get caught red-handed on the other side. But let's get into that.
>> Yeah. Can I can I just one last thing before I get into that? So, again, the the people I feel most sorry for are those who are sucked into the 5% deposit scheme, right? So, you know, they came in October 1 last year. At that stage, at the start of when around about October-ish, even into November, people still thought the RBA would at least keep rates on hold or maybe even cut.
And you know, they were they were enticed in the market. They were still the market the sentiment was still pretty bullish on on home prices.
And tens of thousands of them basically dived in on that 5% deposit scheme. And then now, you know, come 2026, they've seen three rate hikes now and now prices are tumbling in Sydney and Melbourne at least and then they're really slowing quickly in the other you know major capitals as well. So, you know, that those people are facing you know, having bought at the top then seen their mortgage payments go up when they borrowed 95% so they take it out a mega mortgage paying you know, extra money every single month like a lot of extra money and then now potentially being negative equity and that sucks for them and on your point about turnover Tom Panos did some great shorts on YouTube or Instagram It was on YouTube I think and he actually talked about how when when turnover collapses it tanks the economy. He mostly made all the same points you made. You get less removals, you get less activity across across the spectrum. Right? So and we're sort of going into a low turnover environment now and part of that's because of the the the tax changes obviously quarantine negative so grandfather negative gearing for existing investors. So you know, some existing investors is going to say well, prices are you know, the outlook sucks so I might as well hold on to it. I'm not going to sell so they'll hold on to the property so you get less turnover cuz they're incentivized to keep it because they've got those negative gearing benefits even though I think losing money on something where you're not getting capital growth stupid but that's the psychology.
So, you know, we we we are likely to get a lot less turnover now and it's also going to affect state budgets obviously because stamp duty is a major driver of you know, it's a main major driver of most state governments budgets as well.
So, you know, it just filters through and >> they will backflip. They will backflip on this policy. That >> Yeah, would you would you be ashamed? Be ashamed cuz that's not a bad policy but again ill-timed right? Because you do it it's a sort of policy I know obviously that election last year and whatever but it would have been a lot better to have done it a year ago when we're in an upswing or even 2 years ago would have been better as we were going into a you know, we had basically a couple years of very strong price growth.
Would have been better to two it 2 years ago as we're going in an upswing rather than now when we're already into a downswing after RBA's hiked rates and we've got this stubborn inflation from the Middle East oil shock, which means the RBA is going to remain on you know, remain with higher rates for longer sort of thing.
Um so, yeah, that the timing could end up killing it killing the policy.
>> Well, I mean that the the point is is that we're going to fall into a recession. I mean that that is a firm forecast of mine has been for for many years around this time of the cycle. And if we fall into a recession, there's only one thing that a government can do.
They can either if they want to remain in power and that is to get you out of recession as quickly as possible. And the quickest way for governments to get you out of recession without fundamental taxation reform, which was what you called for, which was, you know, doing more of a shift by taking income off off off off labor and productivity and putting it onto land natural resources. That was the kind of structural reform that would have balanced this out. But because they haven't done that, because they're they're is a tax rack from every orifice, then when we go into recession, the only way and the quickest way for them to get out of that without doing a massive policy change tax policy, which doesn't seem like they're going to do, is to pump the property market. And the way to do that would be to reverse these policies straight away. And that that's why I think that that it's it's highly likely that they'll do it. I've I've had I have a friend that works in treasury and he's saying to me, "Oh look, the government's not phased at the moment.
The only thing that they're looking at is the startups and maybe tweaking it you know, doing a few policy tweaks. But it's easy not to be phased at at this point, you know, when we get closer to the election and the economy is really suffering, which it will be because if we have the biggest fall in 40 years, then just as Tom has accurately assessed as well, it's going to bring down the economy. It it always does. It whether it's rate hikes that that pinch people on one side in terms of, you know, them defaulting a high number of defaults and unable to pay the debt or whether it's something else, you know, it's that credit squeeze that is really going to produce that that downturn and that downturn is going to impact all sectors of the economy eventually. Not to mention the stock market which carries an awful lot of property wealth.
You know, so I mean we've discussed that we've discussed little bits of this before but before people sort of fall asleep on us I guess we need to get to the charts go through the data for this week and then we can spin on to have a bit of a chat about that and spin on to some questions that have come through in the comments from last week.
>> Yeah, so so just a just a quick you know I always give the weekly house price update thing nowadays. So um this is the CoreLogic's daily index. So I always do the 28-day change just the easiest way to track it. And yeah, prices are now well they're they'll fall in a week again. They've just fallen a little bit more now at the five-city level. So this So the CoreLogic index if you're just joining for the first time it's basically daily index that they that they release and it's only for the five major capitals. So that's obviously you know Sydney, Melbourne, Brisbane, Perth, Adelaide and then there's the five-city aggregate which is basically it's almost a proxy for the national house housing market but it's not quite because it doesn't include the smaller states or the regions but other way you know the the national market tends to follow those five major capitals. And the the five major capitals are obviously shown in the orange line there. So that's fallen a bit steeper in the negative. Sydney and Melbourne are still losing losing money.
Uh sorry falling value. They've been falling in value for months. Um Brisbane Adelaide and Perth are all slowing very quickly.
So that's pretty obvious. Um they're still recording positive growth but that is slowing down very very quickly. Now this is more a Sydney and Melbourne story because the auction mark auction markets only really strong in Sydney and Melbourne. Like that they dominate. They are they auction they're the auction capitals. The small markets don't do that many auctions.
Um but you can see the auction clearance rates and historically they've tracked prices very closely. So uh I've used CoreLogic for the auction clearance rate. So, these are the final clearance rates. Got the monthly average. So, I've taken basically the first, what is it?
Three or four weeks of May, cuz we've got this weekend coming up, which will count to this month next week. And I've averaged it out, and I've done the average for every single month.
So, at the national level, which is heavily weighted towards Sydney and Melbourne, you can see the auction clearance rate on the left uh, left chart, that's tracking down levels we haven't seen since the pandemic.
Um, and I've put it against PropTrack's quarterly price growth. I use PropTrack because that's the longest series I've got where you can do this. You can see the correlation very strong. Like, auction clearance rates are a great leading indicator. They're pretty much the the best real-time indicator we have for the strength of the market. Well, for Sydney and Melbourne anyway.
Um, you can see Sydney in the mid- middle, auction clearance rates have absolutely collapsed, but they are tanking in Sydney.
Um, and it's only a matter of It's it's obviously going to feed into prices. You can see the correlations there again pretty strong. Um, and Melbourne on the right-hand side also tanking, but not as bad as Sydney.
But overall, you know, what it basically tells you is that the buyer demand has has fallen heavily, especially in the last sort of, you know, couple of weeks.
Well, it's really it's been this year that's it's fallen in Sydney and Melbourne, but the last couple of weeks it's gotten pretty dire.
Um, at the same time, we've got listings piling up. So, every single week CoreLogic releases a market indicators report, and what it And this is one of the charts that's in that report. It's a pretty handy. So, what it shows is basically the the change in listings as of the start of this week versus the start the same time last year.
And, you know, a few months ago basically, Sydney and Melbourne had more listings in the uh, previous 12 months a few months back, but now pretty much well, most markets now are following them. So, Perth still uh, total listings are still down on last year in Perth, Hobart, and Darwin, but the you can see the new listings now are rocketing or have gone up quite a lot everywhere.
Um and Brisbane's a really real interesting one cuz a couple months back Brisbane had a massive shortage of listings.
And it was well down on last year. Now listings have spiked in Brisbane now. So they've got new listings which is like less than 30 days, I think it is.
That's the um that's gone up nearly 20% on last year, total listings up nearly 4%, but across every single market new listings are up.
So people are versus the same time last year. So people are starting to put more homes in the market. Now that's probably you know, it could be uh because of the three rate hikes people saying, "Look, you know, I need to get out." Uh if you're an investor like I'm losing money, whatever the new tax changes. It could also be the fact that in places like Brisbane, Adelaide, Perth, it could be interstaters who've just basically made a motza in the last 5 years, so I'm time to take profits and getting out. Um and because they don't see much capital growth ahead. It could be any any number of reasons, but regardless, demand is down, supply's up.
So that's obviously not good for prices.
Um Now this week we got some data which actually suggests that you know, interest rates will remain on hold at the June uh RBA meeting. You know, almost definitely will remain on hold, but could remain on hold for a bit longer as well. Obviously depends on the data, but uh the the the Reserve Bank's basically two key performance indicators, right? So one of them is obviously to keep inflation between its band of 2 to 3%. Now we're above that.
Uh the other one is full employment.
That's sort of its two yin and the yang of what the Reserve Bank does.
Now the latest uh last week we got the latest unemployment data for April.
And it shot up. So the unemployment rate shot up to 4 4.5%. Now that doesn't sound too bad, but that's sort of the highest since late 2021.
And you can see the chart on the left that it was well above what the the latest statement of monetary policy that was released earlier this month from the RBA was expecting.
And the most alarming thing is the middle chart.
You can see that youth unemployment has shot up. And youth unemployment is typically a sort of a barometer of the strength yeah of the direction of where the labor market's going. So it's it's always the most volatile component and it tends to be sort of a canary in the coal mine.
Well, youth unemployment has absolutely shot up and it's gone up it's over 11% now. That's 15 to 24-year-olds.
Um so based on the unemployment rate alone, if you just uh look at that one part of the RBA's key performance indicator, there's no way they'd hike rates again because because unemployment is way worse than what they forecast at the start of the month.
>> [snorts] >> At the same time we also received inflation data this uh for for April. So the Reserve Bank of Australia does inflation now monthly. Used to do quarterly now for the last several months now it does a monthly series.
And you can see that inflation the trimmed inflation was 3.4% which is still above its target.
But it was actually marginally better than what it had forecast in its late latest statement of monetary policy earlier this month. It was basically in line with its forecast. So if you put those two things together, unemployment rate way worse than what the RBA forecast, inflation within its forecast, that would tell you that the RBA is going to keep rates on hold.
And that's not that unexpected because the latest minutes from the RBA which were released uh I think earlier this week um if not late last week, I'm losing track of time. They suggested that the RBA board members said that they were um they were inclined to leave rates on hold to see because they considered the monetary conditions to be tight after three rate hikes and that they want to see how the data evolves and how the economy responds to their rate hike. So they're already leaning towards keeping rates on hold.
That was before those minutes were done at the last meeting which was at the start of the month. Since then the unemployment rate spiked.
Trimmed inflation's no worse than what they had forecast so that just tells you going on hold. Um it could be that if the unemployment rate keeps rising that they RBA does just stay on hold anyway, and then we could be at the peak now. The financial markets have actually trimmed their forecast for rate hikes, so they were tipping uh couple weeks ago they were tipping two two more rate hikes this year and end of year cash rate at 4.85%.
They've now trimmed that to a slightly less than 100% chance of one rate hike.
So, they still think we're going to get one rate hike, but they're not certain about it. So, it's sort of like an 85% chance we'll get one rate hike this year.
Um so, the financial markets are now moving toward starting to move away from being uber hawkish on rates.
And that's that's sort of in response to the the unemployment data and the inflation data, so that was interesting. Uh that's pretty much it for the data uh this week.
Hm. Um obviously yeah, I've got the cycle stuff later, but uh yeah, that that that's that's the main um you know, housing and inflation data that we've got this week.
>> Yeah, yeah. I mean, it it's not looking too good, is it? And I think that the main consensus as well is I don't know and I I thought this was interesting from Carl as well because I sort of feel a bit the same about it and maybe I'm just mixing in the wrong circles, but I don't know anyone who's really happy with this budget.
>> No, no, it's not. It it well, again, it's sort of um you know, Australians are doing it pretty tough right now. We've had uh years of falling real wages. So, yeah, I know I know that rebound a little bit last year for a couple quarters, but by and large, you know, the everyone's purchasing power has basically gone backwards, right? The last 5 years. So, we're getting less for our money than we were 5 years ago. That's There's obviously some people who've had big pay rises and who are doing better, but you know, typically speaking, everything costs more than it did.
Uh money doesn't buy as much as it did 5 years ago.
But then we're still paying more tax every year, right? So, cuz this is the whole bracket creep story I've I've been banging on about. So, we're So, we've gone backwards in our purchasing power, but we're paying more tax to the federal government because of bracket creep, right? Because we still have wage growth, but and that's pushed us into higher tax brackets, pushed up our average tax rate.
But that wage growth hasn't kept up with inflation, so we've gone backwards or our cost of living, right? And I'd argue that the inflation rate anyway is not that accurate for cost of living cuz there's a whole bunch of stuff that's not included in it. Um you know, etc. Yeah, it's not really a cost of living indicator. It's just a measure of changes in process that the you know, they use. So Um yeah, and so you know, people are annoyed that they're going backwards and then and the government's obviously implemented three ways to increase tax through tax on trusts, which I don't care about to be honest with you. I don't use one, so I I I thought those are a tax dodge by and large. I'm sure there's some legitimate uses for them, but yeah, it it it is a way to shelter some tax.
Um then obviously negative gearing capital gains tax changes. So the federal federal there's extra ways to raise money, but they're not giving it back to us. Like like they'll argue, "Oh, we're doing this one-off, you know, $250 rebate for taxpayers and all this other stuff." But it's it's you're not going to get it for a year or so and it's chicken feed, right?
>> Yeah, it's nothing. It doesn't make >> Yeah, it's not structural. It's not a structural change, right? So if they're going to structurally change the tax system to raise more revenue, they should structurally change uh you know, index the tax brackets or whatever so that we don't just have to pay more tax every year even though we're going backwards in real terms. And the problem with it is, Catherine, like so we've gone backwards the last 5 years and we're going to go backwards next year or two. It's literally baked in the RBA's forecast because we've got this Middle East this global energy shock that's driving up inflation to a a level that's above the only the um wage growth. So we're going to go backwards in next year or two, but we're still going to pay higher taxes through cuz our average tax cuz the cuz of bracket creep and our average tax rate's going to go up.
So I think people are sort of fed up.
They're fed up with the waste, the excessive government spending that we've got, the um I mean dare I say people are getting a bit sick of the wetness in everything now.
Like I'm sick of that but but they're also you know sick of the extra control of our lives that the government's trying to do with all this sensitive garbage and all you know all the there's a whole bunch of reasons why people are sort of getting fed up right?
And they're sick of big government, they're sick of their intrusions in our lives.
And I think that's one of the reasons why they're kind of a bit jacked off with the budget because they're like well you know you just it's just a tax grab.
>> Yeah. We we've had so many comments that have come in and I don't think any of them have anything positive to say.
Apart from a few which have nice and positive things to say about you Keith but we we've had one which I thought was was quite perceptive and and bearing in mind this is this was made six days ago now it'll be seven days when this podcast comes out I'm sure but from macro VO5QW who says house prices in Australia almost entirely credit driven. Negative gearing has always let investors borrow more than owner occupiers because banks add the expected tax refund back to serviceability. Most investors rely on that boost. Remove it for established properties as the 2026 budget does and borrowing capacity drops 10 to 20% immediately and the CGT changes market fear and tighter sentiment prices fall.
That's the ownership market. The rental market is completely separate. High immigration keeps pouring new tenants in who can't yet borrow to buy. They compete for existing stock. Vacancies stays crushed, rents keep climbing. Even if lower prices eventually pull some first home buyers out of renting and into ownership that shift is slow.
Immigration driven rental demand is fast. Result, rents get squeezed even higher while prices soften. Two different markets with two different drivers.
That I I I would largely agree with that but I think so what I was going to mention is that Louis Christopher has been doing the rounds. Actually anyone that is on Instagram he's a really good one to follow as well SQM Research.
Louis does some really good little little sound bites Um um, about you know, what he's seeing in his indicators. He's got some brilliant leading indicators over SQM Research.
And he was uh, saying that you know, he was laughing at the idea that rents would only go up uh, $2. He he thinks that they're going to go up much more than that than negative gearing changes are going to impact that quite significantly. And I think that's because of the trends that we're seeing in this comment. Um, so are you factoring into your own analysis uh, steep rising rents?
>> Yeah, yeah, but but not because of the tax changes, right? But cuz we've the government's ramming ramming massive massive migration still. Like still historically high and the budget's actually revised it up by 55,000.
Um, so so they're obviously running a very high migration policy into a market that that is getting more supply constrained because >> That's the point, yeah.
>> Yes. So so it's not it's for me it's not about negative gearing or the capital gains tax changes. Like we'd be getting this rental growth regardless. And we have been getting that rental growth growth regardless. So I I I I don't see cuz of that. But to your point, I didn't know Louis Christopher's got an Instagram. So I'm going to start following it cuz I want to get his sound bite.
>> Yeah, yeah, he's he's good. He's good.
>> Yeah, but yeah, I I I I I it's funny cuz I'm on Instagram I've never once seen him one of them come up. So I'm going to have to actually search him out. But the um, yeah, so yeah yeah, no definitely we only and and and that comment was very good. Like I'm sure this um, yeah, you're not going to get any any uh, any debate from me about any of that stuff. It's I think the person nailed it on the head. Um, he hit the nail on the head.
>> So there's one under 2% of migrants purchase a house within their first year, 40% within 5 years, 75% after 10 years. Don't know where those figures are from, but you know.
>> Sounds about right. No, no, cuz they >> They have a big impact on house prices directly as well as indirectly through forcing up rental prices. I think the argument that's being made is that if investors are going to clear out of the rental market quite quickly, which is sort of what we're seeing, right? We're seeing a lot I mean, I'm hearing it and I'm I'm a little tiny little bit in the property sphere, you know, and and I'm you know, in in my own business, you know, people are talking to me more about selling than they are about buying. You know, investors have sort of disappeared. They're now looking >> It's already in Melbourne. It's happening in Melbourne.
>> Yeah, I mean, it's been happening in Melbourne for quite a long period of time, but it's been kind of like a slower trend in Melbourne because you still have those incentives there, but the you know, the point is is when migrants are coming in and you've got investors exiting and those migrants predominantly they're going to be renting for a few years before they've saved up enough to be able to buy. Then that's where you're going to see the pressure on rents. It's the fact that there are two things now combining that we had that anyway.
>> Yeah, well, but the thing about it is so obviously if an investor sells, right?
They're either sell to another investor or they sell to an owner-occupier. So if you sell to sorry, you sell to a >> Yeah.
>> a renter that becomes an owner-occupier, right? So so if you if if if that happens, the rent you get you reduce the rental demand by one, but you also reduce the rental stock by one.
>> But you you you do you do with all else being equal except when you're pumping immigration.
>> Oh, yeah, yeah, but but that but again >> increasing the rental demand quicker >> Yeah, 100% but but my point about that is even if the negative gearing capital gains tax tax changes happen, that would be happening anyway.
Because yeah, like so if investors sell out sell out Yeah, well, not but it it's but it's wouldn't have any more impact on the rental market. The reason being, right?
So if you've got 10 investors and then half of them sell because of the Yeah, imagine an economy of 100 homes. I don't know, I'm making this up or 50 homes. You and you've got 10 investors and half 50 50% of those investors sell because of the rule changes.
And and you've got 10 rental families because you got 10 investors. Well, half of those like those homes either will sell to another investor or they're going to sell to an owner-occupier, right? A a renter. So at the end of it you have five rental families and five owner-occupied fam uh sorry, five rental properties because yes, you've reduced your your rental supply by five, but you've also reduced your rental demand by five. This is other things equal, right?
But obviously, if you pump it in all these new people coming in every year, which we do anyway, um that's going to yes, that increases rental demand, but it doesn't increase rental demand any more. Like the equilibrium doesn't change because um yeah, we'll have fewer rental properties overall, we'll have fewer renters not including the migrants.
Because renters will become owner-occupiers. So, that cancels it out. That means all the extra demand is from the migration. But you get that anyway, even without the um the tax changes. Like the the the the whole point of this is the tax changes don't really change the supply-demand equilibrium on their own.
What changes is this excessive immigration, and that's been going on for the last 4 years anyway, regardless of these changes. So, the the fundamental problem is unless Australia does a Canada and it dramatically cuts immigration to a level that's below the ability to add homes and build homes, like add new housing stock to the market, we're going to continue to have this rental crisis.
Like negative gearing capital gains taxes don't make any difference to that.
It would be different if most negative geared investors bought new homes, but about only 20% of them build new homes. Like so, about 80% of it's existing, right? And and we're keeping negative gearing for new builds anyway, so that shouldn't really affect that. So, I I I I don't buy that argument that the tax changes make a difference to the rental market, really. And and the reason why you just have to look at Melbourne. Like I wish I I I didn't include the charts this week, so I I I've used them previously and I pulled them out of the chart pack, but um you know, Victoria's had a big decline in the number of rental properties across the state since the government massively raised land taxes. So, the number of rental bonds in Victoria has shrunk for 2 years. So, we have less investment properties, but Melbourne Melbourne's rental growth has been slower than most other places and that just tells you that Melbourne's getting more first home buyers now because >> Well, that's true.
>> Yeah, so >> As you said population is exodus as as gone from Melbourne.
>> Oh, yeah, yeah, no, no, that that that that helped as well, but but but the thing is I guess my point is it's an immigration it's an excessive immigration story not a tax policy story when it comes to >> Primarily it is. I just think that the excessive immigration coupled with this going on at the same time is you know, it's going to see more of a the the point is is rents were going we knew we know rents were going stratospheric anyway. I think this is going to accentuate it because of the immigration coming in combined with the investor sell-off as in you know, we're going to have people that can't you know jump into the the buying market straight away because you know, when immigrants come in they're not allowed to buy they need to get their permanent status. They need to save for a deposit.
Um, but >> It could it could have an impact in certain areas. So if I I don't think in the aggregate it'd make any difference.
Uh, because again investors will sell to a former renter.
And it it just nails out one less rental property.
>> renters than we're selling to renters.
>> Oh, yeah, yeah, but that but that's a separate issue, right? That So that that we were doing that anyway. We're doing that irrespective >> But now but now we're doing it more because we're losing Yeah, I mean I I I understand what you're saying.
>> Yeah, but but but so I'll just so in certain areas though, so like for example because we're doing this we're keeping the negative gearing on this new new homes not established.
We could have the rental supply being pushed into high-rise or brand new high-rise cuz that's new property or or out in the fringe, but established areas that have established properties there might be a shortage of rental properties there and oversupply somewhere else. So I say you know, it could shift in certain areas or have an impact, but I think overall it's going to be it's going to wash out just like it has in as in Victoria.
>> I think eventually well, eventually it will, but the the interesting thing of course and we discussed this last week and Steve put put us 6718 has made a point with this and this is that people are not going to be rushing into new or they'd be very silly if they're rushing into new property just for the negative gearing and the tax benefits because new properties just do not go up in value.
You know, prices the prices will fall for 2 or 3 years in a townhouse before they go up and in apartments they can fall and stagnate for many, many years.
So, you know, Steve is saying your your point is spot on regarding negative gearing. Why send a dollar to save 47 cents unless you pick it up with capital growth.
That is also taxed at 47 cents in the dollar. Negative gearing is just an extension of normal accounting rules.
You pay tax on the net of net of your income streams. If one part of your business is losing money, you can subsidize that for a time, but eventually you need to to fix to fix it or divest it.
Um but the the thing and I think this is why cuz there's a few comments here saying, "Oh, Leith, you're getting so famous now." which you absolutely are, Leith. And it couldn't be more well deserved after years and years and years of banging on about this every single day.
Um you're so well qualified to talk about it and you are the only economist that I know has come out and had a chat about budget bracket creep, sorry. And the blonde masterpiece is very happy with you here and says, "I totally agree that my biggest issue with is the slap on the face, 250 bucks of your own money back and ignoring the indexation of income tax brackets. They don't need any more money. I even want them to backdate income tax brackets 3 to 5 years."
>> Yeah, I mean, look, I I I mean, they've done they'll never do that, let's be honest. But, look, the the simple solution is just to index the tax brackets by 2 and 1/2%. All right, that that's the middle point between the RBA's inflation target. and over you'd think over a 20-year period inflation should average about 2 and 1/2% and the reason why I say do that rather than just index it by the headline inflation rate which is you know if you were to do that at the moment you'd be getting they'd be getting shifted up by that 4% or something or whatever it is the headline inflation rate 4 and 1/2% so the reason why I don't think I should do that is it that becomes pro-cyclical.
The reason what I mean by that is when you get a bout of high inflation cuz of you know high cost pushing inflation from high fuel costs or something and the RBA's trying to slow the economy the last thing you want to do is index the tax brackets by the amount of the inflation rate and over stimulate so if they increase the tax brackets by 4 and 1/2% or whatever I'm sorry I've got a brain fart I can't remember what the headline inflation rate is it's about 4 and 1/2% you then would give taxpayers obviously more money and then they go out and spend it and then that that circumvents the RBA's you know ability to tame inflation so it becomes pro-cyclical it also means when you got an incredibly weak economy so say we're in a recession and inflation's tracking at 1% well you don't want to then only index tax scales by 1% cuz you're not giving enough stimulus to the economy so what you do is you do 2 and 1/2% and you just leave it at 2 and 1/2% it means that when you're in a high inflationary period people don't get indexed as much as the inflation rate so you're not putting as much money into the economy but then in a weak period in a recession you over stimulate so you give people a bigger increase the tax scales more than what the inflation rate is because you're in a recession and then that gives people more money so it ends up becoming like a economist call it automatic stabilizer whereby during a boom or sorry inflation boom I should say not a boom we don't have a boom in the economy we've got an inflation boom during inflation boom you don't put more money in the economy because of the inflation boom and during an inflation bust or recession you don't uh you know take money out of the economy and end up putting it So you you you want to work it up at cross purposes to what they or at uh counter cyclical to what the economy's doing to help the RBI out.
I hope that makes sense.
>> Yeah, yeah. Yeah, it makes total sense.
I think this is another point which has um come out and and you know, I I've learned I've read comments about it before, but I haven't heard much uh spoken about in the media about it. Um but this is from uh Stoney CC. Apologies in advance for the um swearing in this in this >> All right, just just uh maybe maybe someone will get demonetized just to don't fully swear. Just uh >> Okay.
>> Yeah, just just go F.
>> Um I will do that. Yes, sort of what I was thinking. Um I think that the CGT is getting too complicated. What which is what is scaring people and tax accountants are getting are getting hit with questions before they have a chance to analyze what the rules are, alternatives, and what they need to do for their customers. While at the same time, complicated tax systems will skyrocket skyrocket tax accountant fees.
So yeah, without clear direction being put forward, things will go up. It's all just This is Sorry. This is just CGT.
All the taxes are getting complicated, and I believe that this is deliberate.
You F up your taxes, the ATO Fs you up.
The gov is going to clean out your money any and every way they can. This is the that that the the vibe behind that comment is the vibe behind every social media protest that I see, which is that the government is going to do everything that they can to uh rob you of your uh of your money.
There was another good one down here somewhere.
>> Yeah, well, can can I just give a like a quick example, you know, of of the my thinking on it? And this is So I'm often asked to do, you know, extra work, right? So you know, do a consultant's report or whatever, and >> Same.
>> And I'm like, sometimes I'm just like, it's not worth it. Like you do to do a consultant's report uh like say, do a report on XYZ, right? They'll go, "Oh, you know, we'll pay you 10 grand or something."
>> Yeah.
>> To basically give up your weekends for the next two two to three months and work your absolute backside off to write a massive report.
And I'm just like, well, I'm the top marginal tax rate, all right? So, I'm lucky enough to be on that, but uh, you know, I'm at almost I'm at some of the peak earnings of my life, but also at the peak expenses of my life. I've got two teenage kids, you know, expensive.
Everything's expensive when you when you're this age. But I'm just like, well, why would I do something give up work really hard cuz I already work super hard at macro business and then do all the media and all the other stuff I do.
I don't have much spare time. Why would I do that when I've got to give up 40 >> Yeah.
>> Well, what's that? $4,700 of that 10 grand has to go to the federal government. So, basically, Elbow is, you know, this it's this meme, you know, Elbow's now a shareholder in my company.
Once you get to the top marginal tax rate and if you're like me and you work um, you know, you you you you can do take on all different jobs and you're in the same situation.
When when you get that top marginal tax rate, you're like, why would I bother?
I've literally got to give up just about half of this and give up all this time and work my butt off for for $5,300, right? And end up working, you know, an insane amount, giving up weekends for the next two months, all this sort of stuff. It's just not worth your time.
And that's why I think I think honestly the tax rate should be should should, you know, top out at 30% really.
And and we should we we, you know, we should broaden the tax base and get it in all these other areas that we could, like consumption and, you know, land resources, that sort of stuff.
All the efficient areas because like I I've literally knocked back work, which is product which is productivity that got that the economy doesn't get, because it's not worth my time to do it.
It's like it's just going to be too too taxing on my time and and the and the payoff's not big enough.
>> Yeah.
>> Right? So, it's not worth it. And think about it. So, I'm just one person, but there's probably tons of people through the economy >> Mhm.
>> who just go, well, no, I'm not doing that. I'm not going to do extra work cuz it it's a disincentive to do it. Cuz I it you know, the the payoff's not big enough. So, the federal government ends up getting nothing out of that instead of getting you know, say three grand and I get to keep seven.
>> Yeah, yeah.
>> It's it's ridiculous. Massive disincentive.
>> So, totally agree with you. I mean, I've just written a report and and I felt the same at the end of it as well. It was like tons and tons and tons of work. I had to scramble around negotiating for the fee of what I was going to get paid for it and then, you know, your GST and it you know, and and your tax that you've got to pay used to come out of it. And unless it's good for your career, >> Yeah.
>> it's it's you know, unless there's a personal incentive from that point of view, it's just not worth it. And that has been the core of the argument through economists for centuries which is about not taxing earned income but moving taxes to unearned income which is this idea of moving taxes onto land and and um you know, and you know, mineral resources and super profits, banking super profits and so on and so forth rather than taxing some people's earned income and and but one comment I think here which is is kind of quite interesting is um Al- Al- Alessandro uh Berry Berti. Sorry if I get these names wrong.
Leith, don't you think they're keeping some kind of adjustment to fiscal some kind of adjustment to fiscal drag for next year or just before the election as always be a one-off cuz they sell it as them doing something extra while really it's the bare minimum.
>> Oh, man. I love hearing that term fiscal drag. So, fiscal drag, I haven't heard that since university. It's basically that's bracket creep, right? Actually, you know, the Treasury used to call it fiscal drag. So, I think that that's the official term for bracket creep. So, just in case you're non-economist whatever and you don't know what that means. So, the person's just referring to bracket creep. Yeah, I think they're right. I think the government will use this as an investment as a as an election bribe and they'll go, "Hey, we're you know, we're going to give you we're going to increase the top rate to you know, going to kick it at 200,000 instead of 190 and they're going to increase the tax scales a little bit and give us back some of the bracket creep they've taken over the last, you know, 5 years.
Um and they'll use it as an election sweetener.
But what we really need is governments to just index it. And that way And and and by indexing it means they'll have to be more careful with how they spend their money. Because as I as I've said before, and this annoys me about the way it works here, um in Australia, they've got a guaranteed route to just making more and more money every single year in the budget. Bails out their poor decisions, their poor expenditure because A, they import hundreds of thousands of people every year, immigration. And that those most of those people work.
And that increases their personal income taxes, their base. So they go, "Yeah, immigration's awesome."
The federal government doesn't pay for most of that.
Most of the cost of that goes to the states and you know, other areas of the economy.
Um so the feds get all the benefit from the tax revenue side. And then B, we've got this fiscal drag bracket creep where every year play by doing nothing even though we've been going backwards after inflation for several years, just because of inflation, effectively, we get pushed into higher tax brackets and higher average tax rates. So they can do nothing and the share of our income that's paid in tax goes up every single year. Like it only goes up by a fraction of a percent every year.
But over 10-year period that adds up.
And I said in the um said I said previously in the federal budget they said that 52% of federal taxes this year came from personal income taxes and they forecast that by 2030 it's going to be 54.5%.
So they're actually forecasting that their share of taxes that come from income tax is going to rise by 2.5% in the next 5 year or 4 years.
So it's literally in there, baked into the forecast. So they can be, you know, complete completely waste our money uh on a whole bunch of BS. Like there's now 115 billion of off-budget expenditure now in the budget. So that's stuff that's not in the I don't know if I've talked about this before, but I'm going to go for a very quick rant.
Won't be too long, but So if you go back about 20 20-odd years ago when the Howard Costello government was in and we basically got down to almost zero federal debt.
And that's because I mean part of that was because we had obviously commodity boom, but also the the government flogged off a whole lot of assets like Telstra and all this other stuff. So part of that was taking our assets to cash converters and getting cash for it.
Used to pay down debt.
Um Peter Costello, to his credit, um he didn't want to count that all those asset windfalls from Telstra and all this other stuff as budget revenue because it was a one-off, right? It was it wasn't uh regular revenue. So he created this term called the underlying budget deficit. So what that is, that's basically your day-to-day government spending and tax.
And that was actually done for the right reason. But what the governments have done last, you know, decade or so is they've reported this underlying budget deficit, but then they've pushed all this expenditure off bal- off off-budget into these other areas.
And there is an alternative measure that's buried in the budget called the headline budget deficit. And that's basically the cash flow version of the budget, which is what really matters over the long term, right? It's cash in versus cash out. But what they what they report and what's what the media reports is a bit like when you use GDP versus GDP per capita, right? GDP on its own is useless. It's a BS measure, but it's what everyone reports when per capita is what should be reported. That should be what everyone focuses on.
The federal budget, they report the underlying budget deficit, which is basically your ordinary taxes versus your ordinary expenditure. That's sort of layman's, a bit different than that, but that's sort of what it is.
And then they've got the headline budget deficit, which is when you factor in all this other stuff which they've managed to push all all these off-budget uh vehicles. So for example, when you know, the Snowy Hydro, for example, massive blowout in that project.
We've got all the other renewable energy projects. It's all hidden billions and all these different slush funds and all this other crap that's completely non-transparent. Um the hex, you know, the student debt forgiveness, they pushed that off balance sheet as well.
Um all these other areas, they basically have worked out ways to push all this expenditure into these special vehicles and all this other stuff that sits off budget, which is not captured in the underlying budget deficit, which is what the government reports and that's what the government That's the thing that the government holds up and goes, "Look, we're going to be in surplus in 10 years." This sort of crap. They've actually managed to push about 115 billion dollars now into these off-budget vehicles.
And it's just become so non-transparent now. And Chris Richardson, to his credit, the former, you know, partner at Deloitte, he now does his own um consultancy called Rich Economics.
Uh he he's been like one of the main guys who's been pushing to basically for for the headline budget deficit to become the main measure now, because the government's become so dishonest that they've they've now using this bogus measure that was introduced 20 years ago for the right reasons, but is now being used to hide the budget spending in a non-transparent tra- a non-transparent manner. So, anyway, that That's a quick rant, but yeah, we've got 115 billion bucks sitting in these off off-balance sheet, you know, funds and all this other crap that the government does to to to hide the debt, basically.
>> Yeah, again, something that that people don't don't discuss or talk about. Um I wanted to read out this comment because I think that a lot of property investors feel like this. I certainly come across many that feel like this and and um this is from Wally's 7444.
And this is We must have said something in last week's podcast about property investors cuz he's got uh not doing anything as a property investor? How about the huge amount of interest we paid which we we which we only got by working hard. And all the repairs and improvements we made for the tenants while keeping the rent almost stable for 10 years. We are evidently bad people and should be taxed on the small gain we make even though it would be negative after the interest we've paid. You think we should be sacrificed to those young people who spend all their money on travel and clothes should get a home for a cheaper price at close and close should get a home for a cheaper price. Who is selfish in this equation? I do know a lot of of uh investors that have kept rent stable that that didn't rack up rents and and you know, I mean I I can I can name handfuls of them that over the years that I've spoken to that kept rents that didn't rack them up when they could, which is why I think that you just kind of missed it that when cuz costs went start going up, there are a lot of properties that are under rented where they can >> Yeah, that that look that that's possible and and I guess, you know, cuz look Chris, I know in one of his articles he said he he thinks that we're going to get a big spike. I was like, oh, I don't think we will, but I guess we're going to find out, right?
And we don't know until you you don't know until it happen until you actually observe.
So, he he could end up being right and I could be wrong. I hope I'm I hope I'm not wrong cuz if I am wrong, it just means cuz I you know, I care about rental affordability and and it's going to get worse if I'm wrong.
>> I mean, [laughter] I I've always said this at Prosper cuz you you can't blame property investors. You can't fire the arrows at property investors and a lot of people sort of tend to do this especially the ones that aren't that haven't don't own property particularly the young renters will say, oh, you know, these these property investors and it's kind of painted as this idea that you're sponging up rental homes and and you're not giving anything back to the community kind of concept. And I've always said, you know, when I was working at Prosper and we would, you know, advocate for for changes to take speculation out of the property market is that the one to fire your arrows at is government policy cuz government policy has channeled many people into into that sector.
They've taught people. They've breastfed people on the notion that the way to get wealthy in this country is to become a speculator and own a property or two.
And so people that have been doing that for years have said, "Okay, we did that, but we worked really hard to do it, and interest rates were really high when we did it, and we had to work two jobs or whatever else, and now we've got a tenant in there, and we were good to the tenant, and we renovated." There's quite a few comments here with people that have said, you know, we renovated the home, we put solar panels in, we did everything that we could, and now we're getting hammered on the other side of it. And that's why, you know, I think that >> Well, >> the anger I I it's not just that. I think that the fact that the government lied as well. They >> Yeah, yeah, I I think >> And so even if they come even if we get to the next election, and this is why I don't think that they're going to get back in again. I'm I'm in complete contrary to uh people that I talk about I've got a good friend who works in Treasury, he's convinced that they'll get back in, that the polls will swing against them because we've obviously got this split now between One Nation and the Coalition. Um but, you know, they lied. And so anything that they come out next time and say, you know, even if they come out and say, "Okay, we're going to give you income tax cuts, and we're going to we're going to, you know, solve the bracket creep and everything."
Why would you trust them?
>> Yeah, I mean, let's be honest, they lie on everything. All right? So, you know, before the 2022 election, uh I've got it several articles where Elbow was saying, you know, uh we're not going to return to high immigration lists and stuff.
Well, look what's happened. All right?
We've never had immigration higher, and they deliberately went after they got elected in September 2022, they did the jobs and skills summit, whereby they used that as a Trojan horse to ramp immigration. I mean, they literally did it, and it was explicit.
Um so, you know, they lie on a lot of stuff. They lie on their housing targets, you know, "Oh, we've got 1.2 million." It was never achievable, right? And then, you know, Clare O'Neil's up there all the time saying, you know, um still crapping on about how it's all about supply, it's all about supply, and you know, not ignoring the demand side through immigration and all this other stuff. So, and then they lie about, you know, the renewables, "Oh, renewables are cheaper, renewables are cheaper, renewables are cheaper." They keep saying it when they're not. Like, you You [laughter] just look at South Australia, right? It's the Australia's renewable superpower. 75% of its power comes from renewables. Most expensive power prices in the world. And despite the fact I'm just going to very quick rant, which is not not related. Only be 30 seconds or so.
The default default default market offer was released this week by the Australian energy regulator.
And that basically cut power costs across Queensland, New South Wales, and Victoria does it separately, but they also cut theirs as well.
Um they're all three coal coal-powered states.
The one state that was that's renewable that doesn't have any coal, South Australia, basically got no price cut.
Right? And then Chris Bowen gets out there and goes, "See, renewables are bringing down your bills. The Australian energy regulator has cut by, you know, whatever."
Um after years of price increases. And the reason why we got the cut was because we had mild weather. So, the weather we had a very mild summer except for a couple weeks over over January.
And we've had very mild weather this year or in the last 12 months.
So, as a result, when you have mild weather, you have fewer extreme days, you get less um times when power prices surge because you get extreme demand or that sort of stuff. We had less of that. So, the wholesale prices fell.
Right? So, it's that that's the reason.
But it's hilarious that the the so-called renewable superpower state of South Australia has A, the most expensive power costs in the country, and B, was the one that basically got no price cuts.
Uh when all the the coal states got price cuts. So, then and then Bowen's line to us going, you know, renewables are our cheapest source of energy. And then and then basically saying that that's why the power cut prices went, you know, fell, which is complete BS. It was it was mild weather.
Um but you know, yeah, they lie about everything, right?
Um you know, so, yeah, but to your point on the negative gearing, right? I I don't blame the investors. That part of the reasons why people negatively gear is cuz they're tax they're taxed so damn hard on their earnings. And it's one of the only areas where you can reduce your earnings and then hopefully make a return at the other end, right? That's our reduced your taxes. And again, if you if we reduce the top the tax rates, we flatten them out to 30% or something, and then got taxes elsewhere, there'd be less incentive to negatively gear, and to do all these tax minimization schemes, which is what cuz it's it was it was one of the only legal tax minimization schemes that was available for wage and salary earners. Like, if you just got a regular job, there's very few avenues to actually reduce your tax. You can put your money in the super, or you can negatively gear, or there's not many options. So, that's one of the reasons why so many people are doing it, because they're getting flogged on their taxes.
>> Mhm.
>> Right? On on the income taxes. So, if you fix that that problem, you fix a lot of other problems.
>> Mhm.
Um and and comments in a similar vein. I won't I won't read the whole comment. Um Gina Ray says, "I don't agree that investing in housing is not a productive asset. We continually work on our houses and maintain them, and it certainly feels like work. Also, I'm pretty sure our tenants think it's productive.
Houses don't just sit there and do nothing. They require ongoing effort and expenditure. If you think shares are a better alternative, I ask how. Usually, people in invest broadly in companies all over the world, so I can't see this helping Australia as much as local property investment. And let's be honest, there are not many people who want to put their money into someone else's start-up business to help fund their retirement. As you've noticed, the problem really took off after immigration was ramped up. So, why punish investors?" And then it sort of goes on on with that. I mean, the productive part of of real estate is the housing, which is why the argument is always, "If you're going to tax anything, tax land." Cuz that's the unproductive part of housing. You don't I mean, this is the This is the argument. And again, we did a lot of work on this at Prosper Australia, but the argument was um regarding the how rates uh um assessed, whether they're assessed on capital improved value, which means that the more money and more investment you put into making your house look good, which improves the whole look of the neighborhood, uh the more you get taxed on it, or whether you're just assessing it on site value as many um uh localities in Victoria in you know Melbourne used to be used to be assessed on site value and someone assessed on capital improved value which allowed a number of studies to be done on the difference in the economic outcomes of the areas that were [clears throat] just in just assessed on site value and the land value rather than capital improved value and of course if you assess on land value there's more of a stimulus then to use the land and to improve your property because you're not going to be taxed more for doing so. So that's that's would be my comment to that but what >> Mine mine is mine is um Okay, so if you're take me for example and I've got I don't know a million bucks to invest.
>> Mhm.
>> It does nothing for the productive productivity of the nation for me to go to turn up to an auction on a home built in 1940s. I'm just picking one a typical Ashburton house where I live like a 1940s house that's been around for years and just buy it like borrow heaps of money oh sorry not not even have a million dollars.
Let's say I borrow I got 100 grand in the bank and I borrow 900,000 or whatever to buy this house.
What's that doing for the economy? I've just taken out a $900,000 mortgage to buy a home that was already built to basically let it out to someone right?
It doesn't do anything.
Um that so that that that's what I mean about unproductive. The other unproductive thing is the fact that Australia's land values our residential property values like in aggregate across the country is now like 12 trillion dollars or something is just insane. Like it would make no difference to the productive capital of the productivity of the nation if that was if that was worth 6 trillion.
Right? So if if we never let our housing stock inflate in value like it had and it was worth 6 trillion dollars instead of 12 trillion dollars household debt to disposable income was 90% of incomes instead of 180% of incomes I'd argue we'd be more productive economy.
Because a lot of that capital that's just pushed up housing values would be invested elsewhere in the economy.
>> Mhm.
>> And that'd be more productive. And and and and just Sorry, one last point. In the early 1990s, Australia's banks lent 2/3 to businesses >> Mhm.
>> and 1/3 to or just under 1/3 to housing and the rest was personal loans, right?
Now it's completely flipped around. All right. So you So you go to now versus the early '90s and now banks lend about 2/3 to mortgages and only 1/3 businesses and personal loans. So it's like 25% businesses and one and the rest is personal loans. So that that to me is a bad equation. So if we went back to 1990 and the total value of the housing stock relative to the economy was I think 1 and 1/2 times GDP.
>> Mhm.
>> And now or maybe it was two. Like I'm My memory's sort of It was under two. Like back then. Now it's four times GDP. So it's roughly it's it's doubled as a proportion of the economy.
Well, how's that made us better off, right? And and now we've just got households that are severely indebted.
We've got a banking system that has become overly reliant on mortgages now, mortgage lending rather than lending to businesses which actually create stuff.
Um I don't That's what I mean about being unproductive. It's not that the house in itself is unproductive. Of course it's not. Like I'm living here, you know, it provides me with shelter. I run macro business out of it. I'm taking this pod podcast in my crappy man cave which needs to be bulldozed, but you know, it's good enough for now.
Um you know, that sort of stuff, right? It It That That provides productivity, but if this house This house probably worth about 2 million bucks. If it was worth 1 million and I'd bought it for half as much as I did, well, it's still I'd still be taking this podcast and I'd still be I wouldn't be talking about housing then cuz we wouldn't have a bubble. Or you know, we wouldn't We probably wouldn't be talking as much about housing affordability, but um I'd still be running macro business and all that stuff. So yeah, it's productive like it provides me with something, but having a housing stock that's worth four times the economy and having households indebted to the tune of 180% of their incomes on average is less productive than if the housing stock was two times the economy, households are carrying half as much debt, the banks were lending two-thirds of businesses instead of one-third of businesses.
Um, you know, that would be a more productive economy in my view.
>> Yeah, I I totally agree. Actually, I think it's I think it's more than I think only about 10% of bank lending last time I looked went into uh business, but I might be wrong on that.
But I I mean, I think the point here is that when you do work, you know, when you do have a property and you do work on it and up keep and everything, that is a productive part of owning real estate is that the you know, keep keeping the up keep of the property. But totally agree. I mean, the tax system has encouraged people to invest here for a speculative gain rather than, you know, as you see in swaths of of land in in America where people are primarily investing for the rental incomes, you know, and the rental uh yields there, you know, are sort of 13 14% um gross even even more than that in in the US.
But of course, then you will have to buy it very low as well. You buy for like 50,000, 100,000. Sorry, I'm scrolling through these comments as I'm talking here. Um Oh, there's one note here. Hi Catherine, I'm absolutely against negative gearing for some and not for all. Either we scrap it completely or we allow owner-occupiers to deduct mortgage in- interest against income, too. I also think the claims that axing negative gearing will increase rents is misleading. Rental yields will increase because prices are falling, but landlords don't set the price of rent, the rental market does. However, anecdotally, I know of many landlords who are not charging market rent to keep good tenants and simply because they are happy not to raise it every year. And remember, that's very different from what you would get if you had black black black BlackRock, you know, a company like BlackRock coming in and buying swaths of rental properties and uh built to rent, you know, the the rents would be would be indexed. But ultimately, I think it's entirely possible that below market rents will increase to the market rate, and this will lead to claims that rents are increasing. Unfortunately, the average Aussie will draw the wrong conclusions when this occurs.
>> Yeah.
>> That was >> Yeah, I mean, it's it's pretty fair point. It's it's I look look I I don't agree with you to allow owner owner occupiers to deduct their mortgage interest.
>> That's what they do.
>> Because cuz that that'll just pump more money into the housing like you know, as I've said, we've already got a housing market that's 12 trillion dollars, four times GDP roughly.
Do we need more capital going into the housing market?
>> Mhm.
>> Like I don't think so. That's just going to increase people's capacity to pay.
>> Yeah.
>> Um like yeah like you know, can you imagine? So, we've just talked earlier earlier in this poddy about how the simple change negatively negatively gearing on established homes has reduced borrowing capacity by about 30% >> Mhm.
>> for investors or it's up to 30%, right?
So, can you imagine the reverse of that?
If the government said, "Oh, you know what? From now on, owner occupiers can now basically negatively gear their established home, right?"
>> Mhm.
>> Borrowing capacity's going to go up, right? So, it could go up by 30% for owner occupiers. And so, if we reverse that on investors, so they got that 30% back, >> Mhm.
>> and then we allowed owner occupiers to then negatively gear, so their borrowing capacity goes up by 30%. It's just going to inflate the hell out of house prices.
We're going to have bigger mortgages, um more capital more of the nation's capital or you know, through the banking system going into housing and it's just going to distort the economy even more. Like we've already got you know, some some people joke or least joke about New Zealand being this, but we you know, they used to say New Zealand's a housing bubble with an economy economy Well, that would literally be Australia. Like Australia is basically a houses and holes economy already.
They would just become a >> Yes, yeah.
>> It'd become a even more of a houses economy.
Um because we borrowing capacity would increase straight away.
Um unless they brought in a whole bunch of other things to counteract that.
That would be the impact. So, I think that'd be really dangerous policy.
>> Mhm.
Yeah, I I agree. I probably I probably wouldn't go for that. I I'd totally agree with you on that. Um I totally agree with you on that.
Actually, it is interesting that's what I was thinking of. You know, I was thinking of something I was going to talk to you about because the last time the borrowing capacity was slashed this much was when we had the Royal Commission into the banking sector.
>> Yeah.
>> And we had a huge credit squeeze and that really produced a very significant downturn.
>> That Sorry, that that was the one that totality said was the biggest in 40 years.
>> Yeah. Yeah. Now and and that was Yeah, I mean that that was really quite significant at the time in 2018.
>> Yeah, and and now now we've got Yeah, well well well well think about it now. So now we're starting from a higher base because prices are so much more expensive now than they were then and we've got interest rates the cash rate now is at 4.35%.
>> Yeah.
>> Uh still markets still think it'll be 4.6, but if it goes to 4.6, that's the highest cash rate in 15 years. Well, that's a lot higher than it was in 2019 ish or 2018-19 we met the Royal Commission and the the credit squeeze from APRA on investors and that sort of thing.
Uh so, you know, if prices fell by 8.2% then nationally and we've got these tax changes and everything else and the a much worse starting point and much higher interest rates.
That's and you know, potential of unemployment now to shoot up because of you know, the the monetary tightening AI, slowing economy, blah blah blah. Um that to me tells you it will be the biggest decline in 40 years.
>> Yeah, I mean I I absolutely don't think it'd be too hard to do that. I think you have to get back to the Great Depression to find what happened, you know, all the 1890s or 1840s. Um I was I was just smiling at this comment. I actually had to it was a uh Mr. Eric Eric Eric Andy who says I actually had to stop watching for a minute because I was laughing so hard when you called the housing minister of flog. Um So, that's one for you. I wish you There's some brilliant comments here that I wish I could read them all out because some of them are really funny. Um but I I maybe we should end with this one because we're going to issue over the hour and then we might get comments saying, "Oh, you've been rattling on for way too long." Uh but method 341 said, "Leith, I would love to hear your thoughts on the AFR article called are migrants driving prices?"
>> Yeah.
>> That was published few days ago.
Um I I I Obviously, it was arguing that they weren't pushing prices. Is that right? Cuz you >> Yeah, yeah, so and I think I actually responded to that person. I apologize and >> "I might write an article on macro business and >> I completely forgot. I might have to do it for next week cuz I just forgot about it. I just forgot about it. Um yeah, it was complete garbage, right? So, it was the usual thing.
Cherry-picked a whole bunch of charts, say, "Oh, look, migrants aren't pushing up prices. It's all this other crap."
You know, how is it that at the start of the pandemic prices went up when immigration turned negative?
Well, maybe that's because uh interest rates got cut to 0.25%.
Um you know, the usual garbage, right?
And then they got the Grattan Institute in there and, you know, the usual flogs.
But um yeah, the thing about it is um I've never argued and I don't think you have or anyone else has ever argued that immigration is the only driver of house prices. It's one ingredient, right? Uh so, you know, you got borrowing capacity, interest rates, tax settings, sentiment, uh incomes. Like, there's a whole bunch of you know, bank of mom and dad. There's a whole bunch of stuff, right? That that um and 5% deposit you know, government policies like 5% deposit schemes, first home buyer grants. It's just one of those factors.
But um in my article next week, I probably will put a chart. I think I've shown it here before where I've done it and Jared Minack's done it with separate data and I managed to get the same result but using I think World Bank data.
Basically, or OECD data. If you plot the change across the developed world since about 2000 2000, I think, and and now or the most recent data we've got, growth in house prices versus growth in population, there's a very strong correlation, right? So so so stronger population growth countries, they've experienced stronger house price growth countries than those with softer population growth. Right? Stands to reason. So that that just tells you that internationally it does have an impact.
Um it's not perfect. Like obviously all this other stuff has an impact as well.
Um but the the bigger impact as I've always said is rents. Like definitely has a much bigger impact on rents cuz rents aren't impacted by borrowing capacity.
They're not impacted by you know uh that you don't leverage rents through the buy buy borrowing, right? So you don't take out a mortgage to buy rents.
So that it it's not impacted by tax settings.
Um yeah it it so it's more of a pure supply demand market. Supply being number of homes built versus demand being number of renters.
Right? It's more of a pure market. And there was that period last decade where rents did fall or rental growth fell quite heavily between 2015 and 2020 because we had that massive high-rise apartment boom. And 60% of apartments are rented versus only about 20% of detached houses.
So the supply of apartments is does matter for the rental market as does immigration. So that's the supply side is mostly apartments. The demand side is mostly immigration. And at the moment the supply of apartments is very weak because we've had the massive run-up in costs.
And you know since the pandemic got built got labor shortages labor we got builders with big build infrastructure projects, renewable projects, all that stuff. So their capacity is not there to build these apartments that the renters typically go into.
At the same time the government's running mass migration which is driving up rents. Now that article didn't talk about that really at all. It was all about just the prices. So they so they cherry-picked the starting point and they BS'd a lot of stuff to basically say don't blame the migrants. Like no one's blaming migrants. We we we we Like I I hate when they say oh you're blaming migrants." It's like, "No, I'm not. I'm blaming government for running an excessive level of immigration that is above the nation's capacity to build housing and infrastructure."
>> It it it doesn't it doesn't take a lot to to um understand that. Couple more comments.
I'll read this one out because I do know I need to do this. So, Catherine needs to improve her background and get rid of the Teams and meeting blur. And put together a respectable backdrop. Perhaps raise the camera up to eye level so she isn't looking down investment property microfinance. I absolutely do, the reform Samuel. Um and it's a it's a Zoom blur and it's because my office is always a mess so that you don't have to see the mess that sits behind me.
>> Well, I I I tell you what, I've got all this stuff in the background to cover up my disgusting walls >> [laughter] >> though, so it's as I say >> been a long time since since we started using a Zoom a lot where I have not invested in a camera and I've just clicked on record and blur. So, um point taken reform Samuel. Some I'm sure many people other people think that as well, so that's why I'm reading that one out.
But I thought I would finish with this one because I think this is one where we kind of overlook it and and there's this concept that young people really don't do this a lot and my line of business I come across it all the time, but uh this is from Ross um Perry who says, "My daughter is 23. We live in Sydney. She and her boyfriend have saved 50 50K. They want to buy something like most other people. A few months ago I suggested rent vesting as a way to start. Maybe buy a house in a country town, work up to a bigger deposit. So, Labor have now just killed off off killed that off and made it completely pointless. So, all you smirking budget lovers, what do I tell them now? This policy has not helped them at all. Looks like just a grubby tax grab."
>> Yeah, well >> And they're all upset about it though.
>> Yeah, but but to their point, right? So, you know, why if the government done the same thing but then cut their income taxes so they could actually save more money cuz they weren't giving so much away to the government, well then you wouldn't be as annoyed about it, right?
>> Well, well I I agree. I mean that that that is the core point about this is if you're going to take speculation out of the property market, you have to compensate it on the other side with a We shouldn't be taxing people's labor wages. That is my my thing. Actually, there was a comment on that. I couldn't find it again. But but Steve Paul came back, which which I think this is kind of encapsulates this argument, came back to Ross and said, "Wait for houses to drop, make sure their jobs aren't going to be replaced by AI. Financial reset is coming. They're going to rug pull the middle class to separate them from assets." So, he's saying, "Wait till they drop and get in." And then Ross Perot has come back and said, "Huh, so you want everyone who's worked their ass off to lose value in their house.
Lots of hard-working people have recently bought property to live in. I'm sure they'll be they'll be thrilled at the thought of their house going down in value. Seriously, you know, this is the core problem which I keep saying, "Nobody wants What is the point of buying property when you >> Yeah.
>> prices go down? Well, now, in Germany, cuz I've written a lot and I've done lectures on Germany and how they do it over there and it cuz and and you would know this, from those people that came over Do you remember that time those people in Texas came over and we met them in the city and went for a walk with them. And they their idea was, you know, we don't buy housing. We can afford to buy the house in our in the best neighborhood in Texas on, you know, on a single income. And but they don't buy until they're ready, you know, until they've coupled up and they're ready to stick their kids through school. And that's kind of like how it operates in Germany as well. You you rent for a long time until you're At least that's how it was. I don't know if things have changed.
>> Yeah, but I mean, unfortunately, like, you know, we we don't have long-term tenancies here and you wouldn't want to do it cuz it's just it's so insecure.
So, it's all right if you're young, but you've got families and that. You don't want to be rooting like >> And also in Germany, when you move in on that tenancy, the place is gutted, you know, so you have to like put your own kitchen into it and everything else.
>> Yeah, you get like 10-year lease or something like that. But yeah, completely different system. Look, I mean, fair enough, but I don't I I understand that point of view. If you've just taken out a mortgage and like one of these new first-time buyers who use the 5% deposit scheme.
You don't want to see your home fall in value, right? Cuz it could be negative equity and you And then you also have the annoyance of I just paid this and it's worth that. I could have paid that if I waited, right? So that's So that's So that's That's pretty annoying. But I mean, I I I personally don't Sorry, my alarm's going off. There you go. Um I I I personally don't um I Maybe I'm different. I don't know. I don't really care the value of my house. I I paid this house off, so I'm lucky enough to fortunate enough to be in that situation.
And I think it's cuz I've got two teenage kids and I'm worried about them. So I'm sort of a has-been, right? I'm 48. I'm a has-been. Like I've already had most of, you know, I've obviously still going places, but but I'm already here and I've already got the house and I got the, you know, the wife and all this sort of stuff. I'm like the dude from um Lying in the Deep Blue Sea. Lying in the You know that uh fantastic song by Talking Heads. I I'm that bloke.
I'm worried about my kids.
All right? Cuz So they're they're they're teenagers. Got one 18-year-old, one 15-year-old about to turn 16.
If the housing market If the house prices in Melbourne don't go up or even fall a bit, I'm actually happy because it means that they'll have a chance to get in the housing market at a reasonable price. And if if if say Melbourne's already flatlined pretty much for 5 to 7 years. It's basically got done nothing.
If we get another 5 to 7 years of that, it could be that by the time my daughter buys or if she buys in a decade, she might actually be able to buy relative to income for the same price I purchased at.
>> Mhm.
>> Which would be great. Cuz that actually But if prices keep going up, yeah, okay, I'm richer on paper, even though I'm just living here, it doesn't do anything for you.
But it also means as a parent, I'll have to help them more because they're going to need bank of mom and dad to be able to buy.
>> Mhm.
>> And that's going to make me worse off, all right? So you know, if if Melbourne prices double in the next 10 years, well, then I'd have to somehow find a way to kick my daughter a million bucks or something so she can or 500 grand or something to get her in the housing market, which then's going to negatively impact me cuz I'm not going to be able to retire. Um >> It's just on that cuz there's on social media people saying, "Well, you know, now the bank of mom and dad won't be able to do it because, you know, we're getting all our uh you know, capital gains is being taxed and differently and everything so that they're not going to be able to help their kids. So, how does this help the kids? Because now they're having the money taken off them. This whole thread, I mean, Ross Perry, you've got like a whole argument going on here as I scroll down. The people coming back saying, you know, you're very negative, thinking so negative, you'll never get anywhere with your investments. This is just I mean, so it's quite a funny argument that's going on here, but um yeah, people saying, you know, we don't want you investing in country towns and buying property cuz that's pushing out the people from there. It's it's an ongoing argument, but we really have been we pushing it this week and we we haven't even got through all the um the housing cycle data, but we didn't >> Uh yeah, sorry. I we we we keep we keep promising that, don't we? And um but see, it's not cuz it's not time sensitive. It's like one of those things where, you know, um I can I'll have to pull it out before the next quarterly data comes out cuz I'll have to update it all.
But um yeah, we're definitely I've got them I've got them here. Well, I'll definitely run through them, but I just think, you know, we end up just having such a good chat about all It's such a hot topic now at the moment.
Just this housing correction impact of the budget changes, a lot of debate.
It's worth having uh these these discussions on it while while it's hot cuz it In a few weeks' time, it might not be hot and then we can talk about the non-time sensitive, you know, stuff.
>> Mhm. Mhm. Yeah, absolutely. And you know, it's really good going through the comments and thank you to everybody who engages with this content and leaves comments. We really do appreciate it and, you know, it's great to sort of get your opinions and read out the good and the bad. So, keep them coming and we will be back next week and next week we will we'll make time to go over the um cyclical data that you've got and uh anything else that's come up. Do you Do you have any final words for us, uh, Leith?
>> No. Um, just, uh, yeah, grab the popcorn and enjoy the ride. If you If you're sort of like me who doesn't really care what happens to house prices. Like I don't sort of Like I'm not, you know, I'm not invested in it. So, I don't really care. Like I'm a I'm a I'm an observer of of what's going on. So, I don't really Yes, I own this house, but I don't I don't really care. Um, it's actually a pretty good time. It's actually a great time to write articles.
So, for um, MacroBusiness readership always goes up whenever whenever there's a down cycle in property. Even though I'm not writing the clickbait I used to write.
I'm I'm pretty I've been a bit more factual about it, but um, you know, not doing, you know, "Warning!" You know, that sort of crap I used to write, but um, yeah, it's it's it's a really It's a very interesting time. And I think also, not just the I I think, as we've said, we're going to be in for a pretty big housing correction.
Uh, I mean, all the all the factors are lining up. Now, it could change. Like, the government could come out and uh, reverse track and then, you know, throw a whole bunch of stimulus and whatever and, you know, and it could that that could stifle the the downturn, but as it's standing right now, all It's a perfect storm building. All right? So, if we started off at a super expensive level of home prices, we've now had the RBA tightening, partly because the government spent too much at the start, but now it's caused by external factors because of rising energy costs and everything. So, the RBA is tightening. We've got very You got historically high interest rates. Well, high in terms of last 20 years.
Um, and then we've got now a weakening labor market. And now I've got these tax changes, which just came at Let's be honest, they came out of nowhere, right?
3 months ago, nobody thought these tax changes were coming.
And then it became a rumor, and then the rumor got steam, and then it became like it was got almost a certainty, and then we actually going to end up getting them.
Massive change in the market. And I really encourage people, if you want to sort of get a real-time read on what the industry is thinking. Go and follow Tom Panos on YouTube.
Cuz he does great shorts and stuff. Now, he he's an auctioneer in Sydney and stuff and I actually really like Tom and I respect him cuz he's he's fought cancer like four times. He's been to the brink of, you know, death from what I've heard.
And he's come back every time and he's a really sort of positive just one of these guys who just always walks forward, right? He's one of these guys like he can be getting he he he he's just always moving forward sort of guy, which I I respect those sort of people no matter how tough it gets, he just keeps moving forward.
Uh but he give he's given some great sort of insight into what's going on in the industry.
And what the thinking is and on the ground. And you know, if you want to get a sort of boots on the ground feel, he he's a really good guy to follow.
And yeah, I just think this this period that we've got now is going to be, you know, we we can look back on this in 5 years and go, "Geez, that that that was a that, you know, that was a very interesting time." Bit like the Royal Commission was an interesting time at at at the time.
But I think this is just going to be bigger than that cuz we've got the negative gearing changes.
We've got the capital gains tax changes, which were flagged at that time but never came through.
And then we've got this, you know, these high interest rates and now we've got obviously the war in the Middle East and we don't know how long this thing's going to drag on for. Now we've got the AI rolling out across the economy, which is threatens to just push up unemployment. So, yeah, it's it's grab your popcorn. It's going to be a good fun ride.
>> Yes, if if we weren't in the middle of it, I would it would be a bit more funner. Anyway, we'll call it a day there and we'll we'll reconvene next week.
>> Sounds great.
>> See you then.
>> See you.
>> Okay, bye.
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