Australia’s housing market is the second riskiest in the world

Bryce: [00:00:03] I'm Bryce Leske and welcome to The Dive, the podcast that asks, Who said that business news needs to be your business? We're back with another episode of one of our favourite formats today, the three stories and 15 minutes, and I'm challenging my co-host to get it done in under 15. These are the headlines that caught our attention in the past week. The International Monetary Fund has labelled Australia's housing market the second riskiest in the world. South Korea is paying reclusive children at $500 to go outside and we might finally have an effective vaccine for malaria. So many questions here, some great ones. It's Monday, the 24th of April. And to tackle these stories with me today, it is my pleasure to be joined by my co-founder at Equity Mates, Alec Renehan. Ren. How are you? 

Alec: [00:00:46] Good, Bryce. That's good. I thought you'd forgotten about us here. 

Bryce: [00:00:50] Yeah. It's good to be back on a new podcast. Yeah. 

Alec: [00:00:53] Well, last time we did this format, three topics in 15 minutes, Darcy and Sascha had some fun and said they didn't think I could do it. They thought I would waffle out a little bit too long. So let's prove them wrong today.

Bryce: [00:01:05] Well, Ren, I'm just going to get my timer up here right now. I tend to agree with them, but let's see how we go. The timer has started. Ren. The first story is actually the People's Choice winner from our poll on Instagram, the International Monetary Fund released its bi annual World Economic Outlook report. And in it labelled the Aussie housing market as the second riskiest in the world behind Canada. Now, that's a pretty alarming headline, but what is the IMF actually measuring here? 

Alec: [00:01:35] So they looked at five metrics and the 27 countries they scored got a score between zero and four zero being lowest risk for being highest risk. And it's all relative. They're all scored in relation to each other. These five metrics are then combined to get a total score. So, Bryce, I'm going to give you the metrics. You guess where you think Australia went between zero and four. Love is the level of household debt as a percentage of disposable income. 

Bryce: [00:02:03] I would say that that would be pretty high risk. And so I'm going to go to 4.

Alec: [00:02:07] Yeah, we got a four. Australia is one of the highest risk countries in the world. Here we have our total household debt as a percentage of disposable income is about 200%, just under 200%. For context, the US is at about 100%. 

Bryce: [00:02:21] Wow. 

Alec: [00:02:22] Second metric, the share of debt outstanding at a variable interest rate, so not at a fixed interest rate. 

Bryce: [00:02:30] The banks love a variable interest rate here, so the percentage outstanding 50%.

Alec: [00:02:36] About 70% of Australian debt is on variable terms. Unlike America, where you see a lot more fixed home loans for the full length of the term. We got a three out of four for this one, so not the worst of the 27 countries, but certainly risky. Metric number three, the share of households owning a home with a mortgage. 

Bryce: [00:02:57] Oh, that's a good one. There'd be a lot of boomers who don't have mortgages, so I think the number would be lower. I think we would have got a three out of this at like, again, 50%.

Alec: [00:03:07] We're going two out of this not so bad. 2021 census found that about 35% of homeowners in Australia have a mortgage and that number's almost identical in the US and the UK. So we've gone four three two. Okay, now we're up to metric number four, the cumulative house price growth between 2020 and 2022. So how much prices have run up in the last three years? 

Bryce: [00:03:34] Four. 

Alec: [00:03:34] Four out of four. You've nailed it between March 2020 and March 2022. So that's actually two years, 25% increase. Final metric number five, cumulative interest rate policy changes. So that's basically how fast have interest rates risen. 

Bryce: [00:03:52] Incredibly quickly. Four. 

Alec: [00:03:53] Four out of four. You've nailed it there, where Australia is experiencing our fastest rate hiking cycle on record, with the cash rate moving from 0.1% to 3.6% in less than a year. So roll that all together. And the IMF have said out of the 27 countries they measured, we are the second riskiest country. Did I tell you what the riskiest one was? 

Bryce: [00:04:16] Canada said it in the opening. 

Alec: [00:04:18] What about fortify that information? 

Bryce: [00:04:21] A little bit of fun there and some interesting stats. But does this assessment from the IMF mean we should be cautious about investing or even buying property? Sum it up for me. What are they actually saying? 

Alec: [00:04:31] Yes, you should be cautious about buying property. It's the biggest investment you make in your life. Well, for most people and the most debt you'll ever take on. But in terms of the property market now, there's obviously risk and we've seen the prices fall a little bit recently. But we should also be mindful that cause of the collapse of the Australian property market come every few years. I remember there was the Australian Big Short maybe about ten years ago. We've certainly spoken to a number of people in the industry who think that the. Is going to happen. But the Australian property market just keeps on keeping on, albeit I think it's down about nine or 10% from its peak. 

Bryce: [00:05:10] Now I'm not feeling it that. Sure. Yeah. 

Alec: [00:05:12] So I think like always go in with your eyes wide open and always be aware that whenever there's this much debt and this much mortgage stress, there is risk. 

Bryce: [00:05:21] Love it. Well, then that came in at 4 minutes 51. So you have a couple of minutes to catch your breath. But our next story really captured our attention. I love this. I wanna to understand more about it. South Korea is paying lonely young children $500 a month to re-enter society. Where do I sign up? 

Alec: [00:05:41] Look, if it didn't cost more than $500 to fly to South Korea and move there, maybe we would be going. So this is a policy from the South Korean Ministry of Gender Equality and Family. And they are paying young people aged between nine and 24 years old. They're paying them 650,000 won a month, which is about 500 USD or about 750 Aussie dollars. 

Bryce: [00:06:06] A nine year old taking in 500 a month. 

Alec: [00:06:08] Yeah, now they will receive this payment if they re-enter society and attend school, university or work.

Bryce: [00:06:15] What do you mean re-enter society? Like what's the actual problem here? 

Alec: [00:06:19] Yeah. So according to the South Korean ministry, about 3.1% of Koreans aged between 19 and 39. So that equates to about 338,000 young Koreans are, quote, reclusive, lonely young people. And that's defined as living again, quote, in a limited space in a state of being disconnected from the outside for more than a certain period of time and have noticeable difficulty in living a normal life. Pretty vague definition. 

Bryce: [00:06:47] Yes, super vague. Does this just mean playing computer games? Like is this just a South Korean problem? Does this flow to just most young teenagers living in their bedroom here in Australia? 

Alec: [00:06:59] Maybe. But it goes a step further. This is growing condition known as hikikomori. Japanese word that loosely translates to pull back. 

Audio Clip: [00:07:09] I went through my first hikikomori phase when I was young. It's as if the lights have been turned off. So I have no willpower, no desire to do anything. There is nothing inside anymore.

Alec: [00:07:23] Japan has reportedly nearly 1.5 million reclusive, lonely young people who are known as these hikikomori is according to a Japanese government survey. And basically, they just don't leave their house at all. And Australia, there's not. It's not too bad, but there hasn't been heaps of studies in Western countries. Some people suggest that the name Hikikomori has created this perception that it's more of an Asian problem. But as we were researching this story, there are some studies that are starting to be conducted in Western Europe and in the United States, so probably going to be more written about this in the coming years. 

Bryce: [00:08:02] Fascinating. I guess the question is it's a bit of a bribery strategy and is this something that's been tried before? 

Alec: [00:08:09] Yes. So some Korean cities and local governments have already had days, to use your word. Bribery systems in place. Seoul, the capital of South Korea, has had a reclusive youth support project that provides mental health counselling, hobby development, work training and life coaching for isolated young people. 

Bryce: [00:08:28] So Ren, is there any information on how they actually measure if you're re-entering society?

Alec: [00:08:33] Yeah, I mean, schools work. Universities, like a lot of those places, know if you're attending, like that's.

Bryce: [00:08:40] Our sports to that level that they're literally just not going to school. 

Alec: [00:08:42] Yeah, yeah, yeah. 

Bryce: [00:08:43] Well, anyway, Ren, we are still on track for three stories in 15 minutes. Two down, one to go. More than half a million people die every year from malaria, and Ghana has just become the first country to approve a new malaria vaccine. The question is, is this the beginning of the end of malaria? We're going to answer that right on the other side of this break. Welcome back to the Dive. I'm Bryce. I'm here with my co-founder of Equity Mates, Alec Renehan. Ren, and today we're unpacking three interesting business headlines. Now for our final story. Today, it's about the malaria vaccine. Do we finally have a vaccine to solve malaria? Ren Firstly, how bad is malaria? [00:09:24][40.5]

Alec: [00:09:25] It's bad. According to the World Health Organisation's 2022 Malaria report, in 2021, 247 million people were infected with malaria and 619,000 people died. It's a big killer, especially in sub-Saharan Africa. 

Audio Clip: [00:09:44] In Kenya's western city. Of course, my parents worry for their children who live online. Cases of malaria are rampant in Kenya. 

Alec: [00:09:55] But if people have ever travelled to Asia, they've had to get the malaria tablets. It's a going concern in a lot of the world. 

Bryce: [00:10:04] Yeah, I when I travelled India for about a year, I had to take malaria tablets. My travel partner as well, she took them and you can get crazy dreams. Yeah. And it can really play with your mind a bit. So great to hear. There hasn't been an effective preventative measure like a vaccine though. Ren. But is that until now? 

Alec: [00:10:22] Yeah. Effective preventative measure is the operative word because there is one vaccine in existence most corrects which in clinical trials reduce the number of malaria cases among young children by almost 50%. So not bad. 

Bryce: [00:10:36] Not bad. 

Alec: [00:10:37] But it does have shortcomings. The biggest shortcoming is that the World Health Organisation's goal for malaria vaccine efficacy is 75%. So it wasn't quite there. And also Musker has a really demanding schedule. It requires three or four doses by age two and which is a challenge for parents and a challenge for health care delivery, especially in some of those poorer places with less health care infrastructure. But there has been some good news. A pilot project launch in 2019 in Malawi, Ghana and Kenya has saved more than a million children receive at least one shot. But it's not quite the effective vaccine that the world was hoping for. And that leads to our recent of development. 

Bryce: [00:11:20] Yeah, well, you said that the World Health Organisation has had a long stated goal of a malaria vaccine with at least 75% efficacy and a vaccine developed by Oxford University 21. They always have just numbers in their names with reach to 77% efficacy initial trials. 

Alec: [00:11:39] Yeah. Now this work started in 2019 and a lot of Oxford's work on the malaria vaccine actually informed their work on their COVID vaccine. So Oxford kicking some goals at the moment. Now, the reason we're talking about this story today is that Ghana has become the first country to approve this new 21 vaccine. But this approval is quite unusual. It's come before the publication of final stage trial data. That data from a phase three clinical trial with 4800 children is due to be published in the coming months. And I think that indicates how important and how needed a more effective vaccine is. It's unclear when the vaccine may be rolled out in Ghana because other regulatory bodies, including the World Health Organisation, are still assessing the oh 21 vaccine's safety and effectiveness. But this Ghana approval is also notable because it's the first time a major vaccine has been approved in an African country ahead of wealthier Western nations. 

Bryce: [00:12:41] So then what is the future of malaria, Ren? 

Alec: [00:12:44] Well Bryce you're likely going to be buying anti-malaria drugs when you travel for a little while longer. Okay. This is a really exciting and really good news story. For years, malaria has killed around half a million people a year and we may finally be seeing big steps towards an effective preventative measure. And we're seeing a lot of money committed to rolling the vaccine out in sub-Saharan Africa. Oxford University has a deal with the Serum Institute of India to produce up to 200 million doses of the 21 vaccine annually. And GlaxoSmithKline, the maker Mosquirix, has committed to producing up to 15 million doses every year through to 2028. So while Oxford's vaccine might be more effective than GSKs, both vaccines make a real difference. And we're starting to see that in the data. The World Health Organisation recently said that in the areas where the Mosquirix vaccine had been given, child mortality dropped by 10%. 

Bryce: [00:13:47] Love to say it, Love to say it will rain. That does bring us to the end of our three news stories for today. You did make it in under 15 minutes, so congrats. You can tell Sascha and Darcy to go stick it. And we will be back on Wednesday with an episode on the electric vehicle court case that is happening here in Australia. And then on Friday, we're looking at the Tupperware business. Is it going out of business? If you can please write and review the type, just leave a comment. It's a small but meaningful way that you can help support us. We appreciate your support as always, and Ren, we'll pick it up on Wednesday. 

Alec: [00:14:18] Sounds good.