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Global Energy crisis, Pandora Papers… What’s Next?!

HOSTS Adam & Thomas|13 October, 2021

What’s actually driving this energy crisis we’re hearing about, what did the Pandora Papers reveal and what did they hide, what economic bent will the new NSW Premier bring to the job, and is ANZ too late to the BNPL party? A massive show on this week’s Comedian v Economist.

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Adam: [00:00:25] Hello and welcome to comedian versus economist. We demystify the world of money and help you get a handle on the bigger picture. My name's Adam, and we're joined, as always, by my little older brother and real life economist Thomas Thomas. Good, Adam, how are you? Good. Thanks, anyway. As always, Big Show coming up today. Lots of conversation starters. Now that you're now, you're possibly back out there and socialising if you're in New South Wales. So, you know, if you're out in the valley, you don't want to seem like what you did during lockdown was just binge money heist on Netflix or something with subtitles, of course, because you captured like that and then hope that you understand finance now. So instead of instead of relying on what you learnt during that show, maybe you might have something something out of this show to talk about. But other news, While we were still bleary eyed and a bit stressed out from camping with the kids, we actually recorded an episode. A bit of a different episode for us, an episode all about affirmation. So it's a bit of a departure from what you'd normally get in our in our regular feed. But rather than release it as part of the regular feed, we thought we'd check it out there as a bonus episode. So keep an eye out for that later on this week. I think Friday it comes out. We'd love to hear what you think if you if you like that kind of thing. Thomas does a lot of research and reading and exploration. Thomas have different ideas and success theory, so I'm 

Thomas: [00:01:37] very, very well read in the space way better read than I need to be.

Adam: [00:01:43] So have a listen to that. Listen, I would let us know what you think if you like it, but don't worry at all because we will, of course, keep delivering the half baked topical analysis you know and love each and every week. Speaking of which, Thomas coming up on the show, we've got another crisis on our hands. This time it's an energy crisis, and I'm not talking about the time Byron Bay Ren out of Shakara crystals. It's a real energy crisis and while we're away. New South Wales got a new premier, so we'll take a look at the new one and see if we can work out what happened to the old one. We're going to find out what the Panama Papers are all about, and if it takes off like the Panama hat trend, then we could be in trouble. There's a new big player in the buy now, pay later space, and it's a bit of a milestone because it is now officially easier to track who isn't offering buy now, pay later, rather than who is. So stay tuned for that. But first, Thomas, we caught it on the show a couple of weeks ago. There was much macroprudential in coming out of CBA, with CBA announcing they were raising the floor rate well, dad's home and he's told the rest of the kids to do the same. Thomas, what's going on? 

Thomas: [00:02:55] Yes, sir. After last week announced that they were wanting to all the banks to increase their buffer. So there's a, you know, if you're getting a mortgage at four and a half per cent, they assess you at something like seven and a half per cent with that buffer to sort of protect you from interest rates rising or you getting into financial trouble. So that's what you get. Assess that. And the buffer was two and a half percent, and they've now bumped it up to three percent, right? And this is pretty similar to what Matt Coleman was talking about when we flagged it a few weeks ago. So CBA unilaterally raised their floor rate, trying to get ahead of the curve. And we said at the time, we think this was the bank's flagging to APRA and crew that this was their preferred measure of macro prudential. I think CBA knew it was coming and they wanted to sort of set the tone and say, this is what we would prefer, and I was obliged to have gone. Yep, all right. We'll do that, pump it up two and a half to three percent. So yeah, that's that's where it lends. APRA reckons it'll reduce the borrowing capacity by about five per cent of the of the average borrower. 

Adam: [00:03:59] And so so the big banks didn't follow CBA's lead. But now they all have to effectively say every bank in Australia. Is that right? Yeah. 

Thomas: [00:04:06] Yeah, that's right. That's right. Yeah, the moves that move it move quite quickly, so went through. The RBA started talking about of the Council of Financial. Regulators are talking about it. The NAB came out very quickly, so it was a bit of a surprise move. In that sense, it had happened. It went from rumour to fact very quickly. Mm-Hmm. Yeah, I mean, that's that's where we landed. You should think, think about it is if it does knock five per cent off the borrowing capacity, if that sort of broadly translates to price growth. Most of the major banks were forecasting price growth of five to seven per cent in 2022. So looking at like 20 plus per cent this year, that's slowing right down next year to five to seven per cent. And, you know, five per cent off that. Then you're getting close to sort of zero. And I think that's probably is probably pretty happy with that. It's a reasonably tentative kind of macro prudential measures not to not to be on the stick. 

Adam: [00:04:57] Is this it like, is this just the start or is it the last 

Thomas: [00:05:00] time they got a little burnt? I think you had with us on the board in macroprudential back in 2017, it was a bit heavy. It had a bigger impact than I think they probably expected it to. So Sydney fell 15 per cent, so to Melbourne, about 14 per cent peak to trough. So it was a little bit like, oops, 

Speaker 1: [00:05:17] they really trying to do that. And yeah, 

Thomas: [00:05:22] so I think I think they're going to it's going slow and steady now. And I just. As the waters of this stepped up the buffer and then see how the market reacts, right? 

Adam: [00:05:30] Awesome. Thomas, you gave me two words today. You said, I want to talk about the Panama Papers. I've got no idea what's going on. 

Thomas: [00:05:37] Yeah, the Panama Papers is another leak. It's a string in in the P leak. So we had the Paradise Papers, then we had the. 

Adam: [00:05:45] Did you say the P leaks, right? Yeah. Yes. We had the 

Thomas: [00:05:51] Paradise Papers, the Panama Papers, and now it's the Pandora papers. Basically, what's happened is somebody or some organisation has hacked into a law firms. So with the Panama Papers they hacked, they hacked into. Mossack Fonseca is a legal firm operating out of Panama that helped rich people hide their money and and stash it away in places where the tax man couldn't get it right. And so someone's hacked, hacked these who with the Panama Papers, they hacked Mossack Fonseca and then released it all to to the public. So people get an idea of who's dodging tax and who's doing dodgy things with their money. 

Adam: [00:06:29] Did they find Trump's tax? 

Thomas: [00:06:30] Well, yes, this is 

Adam: [00:06:32] a no no. Well, this is 

Thomas: [00:06:34] this is the thing, right? So he gets hacked, so someone hacks it. It then gets released to the International Consortium of Investigative Journalists, the ICJ. Right? Guess where they're based? Panama now was a good guess, but Washington? 

Adam: [00:06:49] Right. That should have been a problem, to be honest, when it really should have given me more to go. And then the two words you gave me. Right. Right there in Washington, 

Thomas: [00:06:58] here in Washington. So whoever hacks it leaks it to the ICJ. This journalist group, the journalist group, and then leaks it to they've got 150 global media partners. These are almost exclusively large mainstream media players. So in Australia, it's nine entertainment the AFA Guardian and the ABC. Until they release it to them, the ICJ only releases a very small portion of what they what they get access to. The media partners themselves, in turn, only release a very small portion of it. So we know, for example, that 400 Australians have been named in the papers. Right. But the media has only identified two for us. 

Adam: [00:07:37] Is this like a ransomware model where they're they're just sort of proving that they have it and then they're going to start asking for bidders to remain where they go? Hey, we're just proving that we have this data now. We've got all these papers. Here's a little a little sample just to just to whet your whistle if 

Adam: [00:07:55] you want more. 

Adam: [00:07:56] Maybe transfer some bitcoin to this address. 

Thomas: [00:08:00] I don't know that that's the case. Like with the Panama Papers that came out in 2016, we had the initial flush of data that came out of it, which was about one percent, apparently, and then nothing since it's been locked up since then, and we've heard nothing more about it. Right. And it's kind of interesting for who's not there. So there's no US billionaires, there's no US companies, the big four accounting firms, which is, you know, famous for managing billionaire money. They're never named the big blue chip tax avoiders in the corporate world. Then they're not named either. And the ICJ, you know, for an independent org that leaks sensitive data is never hassled, you know, lives in Washington very happily. It never gets, never gets raided, right? So you can compare that with WikiLeaks, which, you know, had the evidence of US war crimes and then just leaked it and made it publicly available. You know, they we're going to assassinate Julian Assange. Allegedly, it's they're playing a different game and maybe that maybe they're smart. Maybe they realise it that way. You know, the realities that they live in. And if you're going to just start naming Donald Trump, you're probably going to end up dead. But you know,

Adam: [00:09:07] that's that's what. 

Thomas: [00:09:08] Yeah. So maybe that's what they've done. So it's a Michael Michael West. He's an independent journo in Australia. He's an really interesting story on. And the question here. 

Adam: [00:09:18] He's also he's also Batman. 

Thomas: [00:09:20] Is he as Adam West? 

Adam: [00:09:22] He was from 50 years ago. Still relevant, you know. So Family Guy, is you? Yeah. 

Thomas: [00:09:35] Yeah. So yeah, he's he's asking the question, Why do we never hear about the Americans? Why do any here of a handful of Australians? And they think that the interesting thing about the Panama Papers was a hack of a single law firm, the whatever they were called. But this, the Pandora papers, has hacked 14 separate law firms. So he's kind of saying it's kind of it's such a scale that it's not just some do gooder, you know, on their computer, hacking away like it kind of looks like it's a sovereign. And the question he asked is, is this the US trying to trash the reputation of non US tax havens like Panama and the British Virgin Islands trashed the reputation of small scale accounting firms in order to drive rich people to the US? Like thank you saying Rupert Murdoch's based in Delaware and. A notorious tax haven or drive them to the big four accounting firms because we never hear about the Americans and like, So what's going on here? Why don't we never? Why don't we never hear about it? So I think there's an interesting question to ask. Go support Michael West like he does fantastic work, by the way. 

Adam: [00:10:41] They might just be clean as a whistle.

Adam: [00:10:43] The US billionaires and companies that did that ever occur to you? Maybe they're not doing anything wrong. Dollars. So my order is here. Who are you fleeing allegations of four of Donald Trump and and other billionaires of his ilk living happily and lawfully in the U.S., paying their taxes? And you come along. Oh, I'm out of the place. 

Adam: [00:11:14] So. So there's Australians in there and there's are there other other nationalities represented? I mean, it's not just,

Thomas: [00:11:22] oh yeah, it's a full global thing. Like, it's so

Adam: [00:11:25] to everyone, every, every sort of nation 

Thomas: [00:11:27] except the US. I mean, there's like there's the singers. Julie Julio Iglesias is cricket star Sachin Tendulkar, pop music star Shakira. I guess she here is an American. Claudia Schiffer, the supermodel. And she's German. Yeah, yeah. And then, yeah, but not many. Not many Americans. Not many. 

Adam: [00:11:45] Yeah, it was like it's probably with sprinkled a few token Americans in there. Probably. 

Thomas: [00:11:50] Yeah. Tony Blair, the former prime minister of Britain, he got named, and that's maybe, rightly something, but that's kind of about it. As a PM of the Czech Republic president of the Ukraine, three heads of state from Latin America.

Adam: [00:12:02] Sounds like a hell of a party list. Yeah.

Adam: [00:12:04] Oh yeah.

Adam: [00:12:07] All right, cool. Surely more to come from the Pandora papers? That's for sure. Thomas, there's a global energy crisis. Apparently, what's causing it? 

Thomas: [00:12:16] Yeah, high energy prices. Uh, not enough energy. I mean, it's self-evident, but that's what's what's going on to energy prices, 

Adam: [00:12:27] the whole supply and demand it is. 

Thomas: [00:12:29] Everything in economics comes back to supply and demand, you find. Yeah. So yeah, supplies tight. Inventories are super low in Europe and prices are going through the roof. The U.S. gas storage sites in the EU and the UK are just under seventy six per cent fall, compared with the 10 year average of almost 90 percent. So that's well down. But yeah, but if it gets could get worse. So if we get an average winter, so we're coming into the European winter. So this is why it's getting to a bit of a panic station because if the winters are really cold, then and energy prices will really spike. So saying if we get an average winter storage sites will be reduced to just 19 per cent capacity by spring, the lowest level for a decade. But if if we see a heavy winter like a cold winter similar to 2017 2018, then storage will be completely exhausted by spring, which will lead to rationing and a bit of a dent. Then it'll get real. Yeah, there's a bit to this story. Like it's kind of I think it largely it's a Covid disruption. So you should look at the chart of inventories, and I've shared this to our Instagram account. If that's still going gangbusters 

Adam: [00:13:40] at CV podcasts here is up over 500 follows 

Adam: [00:13:44] on as well, while also I got followers. I don't know. 

Adam: [00:13:47] Friends and friends is an old term, isn't it? I like to think of them as friends and your followers on Instagram think Welcome friend. 

Thomas: [00:13:55] Yeah, yeah. But that showed that. So inventories spiked in 2020 as we as the Covid sort of story launched and the economy shut down. And so a lot of gas contracts were cancelled or people, they weren't renewed. But then the economy came back much stronger than expected. Demand picked up much, much more quickly than expected. And now we've got an inventory shortage. 

Adam: [00:14:17] So is it just in Europe? 

Adam: [00:14:18] Is it is it all of Europe? 

Thomas: [00:14:20] It's all of Europe. It's also Asia. Asia's got a big problem, say Asia's LNG spot price went up 40 per cent. It's up 40 per cent, right. We had the largest single movement on Wednesday in history, right? It's is really interesting how quickly this has escalated into a crisis because it's like it feels like to me, inventories is something you've got a bit of a track on. You know, they're at 76 per cent now. Surely it like kind of 81 82. The Lambs, we're looking a bit paranoid, looking a bit empty here 

Adam: [00:14:51] since someone left the heater on. Yeah, overnight, you know who left the massive global heater on? 

Thomas: [00:14:58] Yeah. So it's a big problem everywhere, except in Russia. Russia and Russia's is swimming in gas, and they're doing fine.

Adam: [00:15:05] Is that all the all the gas pipelines run through Russia or something from Russia? It's not from Russia. Yeah, they're always laughing. Then Putin and he 

Thomas: [00:15:15] is well, this is the dimension to this. And not to say that he caused the crisis, but output out of Russia has fallen is quite well below. Its five year average seems a lot less coal and gas coming out of Russia and his services, he's open to the idea of sending more, but it's sort of tied in with this. There's the Nord Stream pipeline, which runs directly from Russia to Germany, which isn't online yet. There still is still being negotiated with between Russia and Germany. And at the moment, the pipeline goes through the Ukraine to to the rest of Europe, and the Russian Ukrainian relationships are pretty strained. So Putin is keen to get this Nord Stream pipeline up and seems to be letting the Europeans sweat, not holding back the gas in order to get them to sort of fast track the Nord Stream pipeline is sort of what people are saying. 

Adam: [00:16:06] Well, they wish they were sweating. 

Adam: [00:16:08] Yeah, yeah. Let them shiver. What do people do in the cold? Got no idea, right? 

Thomas: [00:16:17] Yeah, it's a bit of a bit of a political and political intrigue behind the crisis as well. 

Adam: [00:16:22] OK, so Europe's Europe's screwed, and I just screwed. 

Thomas: [00:16:26] China was in trouble.

Adam: [00:16:27] Yeah, China is in trouble. We okay. 

Thomas: [00:16:29] Yeah, we're doing fine so far. I mean, we produce gas coming into we come here

Adam: [00:16:33] in the summer as well, which helps. Well, the EC

Adam: [00:16:36] says it cost a lot to run my economics. 

Thomas: [00:16:38] Yeah, yeah. Yeah, that's true. That's true. Yeah, I mean, I think we're still, you know, thanks to the visionary leadership of the Morrison government

Adam: [00:16:46] and we have people who miles behind 

Thomas: [00:16:48] in the transition away from coal. So, yeah, we're sweet.

Adam: [00:16:52] Parents of Scott will also play Nyota again. Yeah, yeah.

Thomas: [00:16:58] I mean, this is classic, so they're not saying it's it's it's solar and wind forward, and it is true. The wind in the UK has, as been down, has been unusually unwieldy in recent weeks. 

Adam: [00:17:13] So they're trying to pin it on 

Thomas: [00:17:14] wind, but it's still 

Adam: [00:17:15] it's good. 

Thomas: [00:17:17] Yeah, it's still the case that 86 per cent some of the calculated

Adam: [00:17:20] blow damage blow. Yeah, it's 80

Thomas: [00:17:26] 80 per cent of of any project production still coming from fossil fuels. Someone's calculated the 86 per cent of the recent increase in energy costs in the UK comes from fossil fuels, not from gas and wind. Yeah, see, your gas is still three more three times more expensive than wind and twice as expensive as solar. So Bryce. Yeah, yeah, that that argument doesn't seem to came carrying any water. 

Adam: [00:17:49] So coal coal is king at the moment, then? 

Thomas: [00:17:52] Yeah. Well, good time to be a coal exporter such as ourselves, you know? Yeah, we're crushing it. Yeah, but you know, because this is everywhere like it is in China and in Asia, like that's the world's production centre. So if energy prices start spiking there, then that starts pushing all through the supply chain. And so the real question here is like, so it's kind of it, it looks like a temporary thing. Like it does seem that there's enough gas and coal and sort of energy fuels in the system. They're just not making their way to where they need to be. And so that seems to be, you know, the market is sort of sorting that out. And so it doesn't seem like it's a permanent shock, but it has the ability temporary shocks can become permanent when once they've been around for long enough. So like you can imagine, in countries like France, where there's a strong union movement or stronger, relatively strong union movement, if energy prices spike and you've got tight labour markets because everyone's rebounding out of Covid, then that can fuel wage demands. And then once you get that sort of way, once wages come into the cycle, then you can start to see sustained inflation. So I think it's an outside risk, but we could be looking back at this in 12 months as the trigger for increases in interest rates.

Adam: [00:19:11] Well. 

Thomas: [00:19:15] That's the reaction I was looking for. 

Adam: [00:19:19] Really? Oh, yeah. Yeah, that's good. 

Adam: [00:19:22] I mean, I can't quite see how that links up with interest 

Thomas: [00:19:25] rates or inflation. So if it becomes permanent, inflation is at the moment central banks are saying there is inflation, but it's temporary. So we're not going to raise rates to try and fight it. Okay, but then it could become permanent too then. Yeah. Then that was the link I was missing. Right, right. Right. Yeah, yeah. 

Adam: [00:19:40] It could also just be seasonal, right? Like, Winter's going to finish and everyone go, Oh, that's cold. Yeah, yeah, that's it.

Thomas: [00:19:48] But typically, I mean, it is always funny that you like the economy does this. It throws up crises. But then because there's so many agents involved and there's so many ways to adjust that more often than not, we just adjust through it so people will consume less energy and other things. And and that's kind of the miracle of of the price system is that it gives it gives a very clear signal about where resources need to go and you sort of you see to fumble through these crises because this is what this is, what the six crisis this year or something. 

Adam: [00:20:19] Oh, there's a crisis every week. Like what happened, like the US debt ceiling thing. Everyone was like, Oh, this could be the end. And then Biden came in. And, you know, we're going to say we're just going to delay a bit longer. We're going to postpone it. 

Adam: [00:20:31] It's like, what was that an option? What do we do? Well, I would tell you, like, it's the end of the world and you could just postpone 

Adam: [00:20:39] it for like three months or whatever. Like, it's not possible. It's just the media medias. The media obviously loves the crisis, right? 

Thomas: [00:20:47] Yeah. Yeah. I mean, gas prices have gone up five fold. So I think that's, you know, that's crisis territory for sure. But we kind of we're more resilient to crises than we used to be. I think it's probably the probably the takeaway, not one. 

Adam: [00:21:01] Oh, that's a lot of taking in the first half of this show. So we're going to take a break there. Grab a word from our sponsors why we're doing that. What are you gonna leave us a review on iTunes that would be much appreciated? Or better still, you can send us an email Covid, Equity Mates dot com or on the website Equity Mates dot com forward slash CV. We'll be back with more comedian versus economist right after this. Welcome back here on comedian versus economist and Thomas New South Wales got a new premier, yeah,

Thomas: [00:21:31] he does

Adam: [00:21:32] the job for about a week now. We can home. 

Thomas: [00:21:35] Yeah, just in time to open up the I've been up the state courts deliver our Freedom Day since 

Adam: [00:21:41] he's all over the news. Yeah, I saw that today all over the papers. It's a good look. 

Thomas: [00:21:48] I couldn't

Adam: [00:21:49] stop for the good of the show and just like here I am

Adam: [00:21:54] and I'm just reopening things. 

Adam: [00:21:56] Yeah, it's all me. Everyone is 

Thomas: [00:21:59] brilliant. Yeah, it just every image of him having a beer at an open pub like, I'm the guy who opened up the pubs again. 

Adam: [00:22:06] I'm the guy. Those who came before me obviously didn't know what they were doing, but it's taken me two days. Two days I went back over and Kenny wasn't like Donald Trump. Someone like that would just have a few days. I would just be like, This was all me. I don't think. I don't think, what's his name? Perrottet, I don't think he's like, I don't think he's a 

Thomas: [00:22:25] Trump, though he was. He was. He was. He was back in Trump back in 2016. That's one of the things we've learnt. 

Adam: [00:22:30] Yeah, there's a there's a big difference between supporting Trump, I think, and behaving like Trump. Yeah, yeah. Anyway, what's what's what's his name? Dominic Perrottet? What's Dominic's? What's Dominic's deal? 

Thomas: [00:22:42] Yeah, still a bit of an unknown, but the general feeling in the people who know him and the commentators and other politicians in this space seems to be that he's a pretty he's on the hard right. So he's a he's a Catholic conservative, quite famous for opposing gay marriage and abortion. But that has a sort of an economic dimension where he's got he's got a quote here. I strongly support the principles of free markets. I oppose plans for more social engineering, more welfare handouts and the continual obsession with our rights at the expense of our responsibilities. So there are all things that can be said of the conservative politicians bread and butter, but like whereas like Scotty from marketing is a bit more, it seems to be a bit more of an opportunist isn't like ideologically wedded to anything in particular. 

Adam: [00:23:30] You're a big fan of the guy. Yeah, yeah, you're a big fan. I think I come the

Adam: [00:23:36] next another election looming pretty soon. I reckon just you might want to give Scott and let him know that you are available to work. But the work, the campaign trail, 

Adam: [00:23:45] because,

Thomas: [00:23:46] well, no, I don't think I don't think that's a I don't think that's a contentious view. I think everyone who 

Adam: [00:23:53] knows that line, like, you know, 

Thomas: [00:23:56] in terms of Canberra insiders look at anything, any, anything, even Scotty himself would pretend to be an ideologue. Where is the consensus seems to be that parity is he's he's fully into neo liberal sort of economics and is much more economically conservative than Berejiklian. Yeah, so he say he's coming out of the Treasury, so he was the treasurer until recently. He oversaw there's a lot of privatisation. So he oversaw the government's sale of the 49 per cent stake in WestConnex for 11 billion. He oversaw the sale of the electricity distributors and generators that land titles registry, which is a monopoly, by the way. So like, I don't know why is selling a monopoly is ridiculous. And then he had a plan to sell off all of the state's plantation forests in a billion dollar one off deal. But then the Black Fire Black Summer fires sort of knock that deal off the table. So he's yeah, so he sort of seems to be very pro privatisation pushes that very hard. Hmm. He also one of the criticisms Saul Eslake says it's turned the New South Wales government into a hedge fund. Do you remember interest rates hit the floor? If you were a state government, you know, effectively rock solid investment so you can get money at super cheap rates. So the New South Wales Treasury borrowed $10 billion at very low rates and then reinvested it in the stock market and other financial assets. Brilliant. Yeah. So potentially going to my government if it goes away, if it goes all right. 

Adam: [00:25:24] Yeah, if it goes well, I'm not sure that's what I want my premier doing. But yeah, but then I want him telling me that he did it after it, after he nailed it, though, because then I'll be like, Oh yeah, he did that. Mm hmm. No idea. You were ever doing that. It's crazy. I believe it's a work that they will read is going to come back is why that is mostly in Dogecoin. Yeah. But if he comes out ahead of time, you know, he's like, Look, this is my plan. I'm going to take everyone's money and I'm going to stick it in the stock market. I remember that. You can't do that, right? That's insane. Yeah. You know,

Adam: [00:26:02] if you find out about these things later on and it's all gone swimmingly, then yeah. Hats off. 

Adam: [00:26:07] Yeah, yeah. So yeah, it's yeah, 

Thomas: [00:26:10] it's a risky strategy, but we'll see how it plays out.

Adam: [00:26:13] All right. So it's still in there. 

Thomas: [00:26:15] Yeah, I think so. Yeah, as long as there's not an energy crisis or some kind of 

Adam: [00:26:18] is he taking any profits? Eddie would be doing? Well, I know.

Thomas: [00:26:21] Yeah. You. I don't think he's personally managing the money. 

Adam: [00:26:24] Only so far off at. It's not a lot. Nancy Pelosi, the Whale, the whale of Wall Street. I wonder if I feel betrayed him. 

Adam: [00:26:38] Coffee trade. Well, there you go. Can you coffee trade the New South Wales government? 

Thomas: [00:26:43] I'm sure someone's managing the money for them. Yeah, but it's this that is sort of on the conservative side. The other thing, though, is it does seem to be intellectually committed to it, which, you know, he's a conviction politician, which is great if you like their policies and terrible if you don't, you're right. And so he's commissioned a report into ending stamp duties on property sales and then replacing them with a broad based land tax. Yeah. And so this is all this like makes the point that they pretty much every economist in the country thinks this is a good idea, and every enquiry into the tax system has recommended it. But no one has ever had that. Commentators in slex words to to take it to the take it to the public because properties is such a tetchy topic that no one wants to talk about it. So, yeah, so so far we don't know. He's commissioned the report and he's talked in support of it, but it would be interesting to see if he delivers on that one. 

Adam: [00:27:36] Maybe another interesting make sense to get rid of stamp duty. 

Thomas: [00:27:39] Oh yeah, yeah. 

Adam: [00:27:40] We don't even use stamps anymore. So Gladys is gone. She she left sort of unceremoniously. I heard she didn't have to go. I thought there's a lot of talk saying she had to go and she was forced out. But she didn't actually have to go, did she? She was just being investigated, investigated.

Thomas: [00:27:58] And so, yeah, this is a live look. It's terrible. The bureaucrats who have got in and it's sort of guilty, guilty before proven innocent and all this sort of stuff. And it's like, Yeah, but she didn't have to resign. There was no pressure on her to resign. 

Adam: [00:28:12] Well, there was a bit 

Thomas: [00:28:14] well, yeah, there was a very good look if it if you genuinely believe you've done nothing wrong. 

Adam: [00:28:18] I mean, if someone launches an iconic investigation against you, there's pressure to resign. That's the other. Yeah, there's 

Adam: [00:28:26] maybe no one said you have. Maybe no one said you have to resign.

Thomas: [00:28:29] No, no. I mean, she could have like, you could have stepped aside for a little bit. She could have stood down as as premier, but she chose to quit. And, you know, like if she was genuinely in the clear. Like, I think it would have been possible for her to say, Look, I think I'm generally don't think I've done anything wrong. I'm happy for act to review the situation and do. Let's just get on with the job of managing the state. But I think she kind of knew what was coming and goes like, Oh, there's there's no future for me here. I'm out. And we know a bit of it already because a year ago, she fronted Ike to testify kind of in the case against her then boyfriend or onetime boyfriend. I forget his name now who did some dodgy stuff and seems that she may be supported him in doing some dodgy stuff for giving some favours to people in his electorate. Daryl Maguire, is that it? 

Adam: [00:29:23] Yeah. Who was it? The Wagga

Thomas: [00:29:25] one? Yeah, yeah, that's it. That's it. So she's sort of incriminated herself already, and some people are saying it's kind. It was kind of surprising that she stuck it out through that period, given that she didn't come out particularly well. But I think I think the general feeling is like in women that they've everyone's dated. A dodgy dude has done some dodgy stuff, and it's not fair that she has asked the cop the flack for it. 

Adam: [00:29:49] Not a good defence in in court, though, is it or it is not 

Thomas: [00:29:53] a precedent for that one, actually. 

Adam: [00:29:57] I think we've all been there, haven't we? Your honour. I think we've all had those relationships. I had a girlfriend once, so the work of him a while, it was gone, you know? Yeah, yeah. The other thing 

Thomas: [00:30:12] is that that Morrison and crew, the public sentiment has been more PD for for Gladys Berejiklian than anger. And kind of maybe because they don't know what she knows in this story, but generally they read, there's a bit of sadness people leaving flowers outside parliament. And some Morrison's come out and say, Well, this is why we're not. We haven't followed New South Wales lead with a federal EITC, so there's no federal body that investigates corruption. Oh yeah, and Morrison. 

Adam: [00:30:42] So I think for anyone that doesn't maybe isn't familiar with the term independent commission against corruption. Yeah, that's right. So ICAC's stands for so, so right. So there's no federal independent commission against corruption. 

Thomas: [00:30:53] I know. Yes. And Morrison promised one three years ago, but just haven't hasn't delivered on it, mostly because there's just continuing string of scandals coming out, which 

Adam: [00:31:03] you don't want to be sort of in the guns against that.

Thomas: [00:31:07] Yeah. Delayed and delayed on introducing that, even though like cases like this prove it to me, it's very necessary. But I did. There's sort of there was a draught plan for a some some commission. I forget the exact name now, but you a much weaker version. The Centre for Public Integrity, which is an independent think tank of legal heavyweights, said it would be the weakest integrity commission in the country if it was if it got up. Yeah, yeah. So Morrison is definitely not in a rush to get that going and kind of use this as a way to get talking points on why we shouldn't have a federal like. 

Adam: [00:31:46] Heck, yeah, I remember talking to a taxi driver in Cambodia and he was like, We've got a we've got an anti-corruption squad in here and it's the most corrupt

Adam: [00:31:57] like organisations like. The most corrupt part of the government is the anti-corruption. 

Adam: [00:32:04] Yeah, whatever it was, team or whatever. Because yeah, he's saying it's it's just rife within Cambodia. But yeah, I'm sure there's I mean, that's not the single them out, as I'm sure there's problems all over the world. But they yeah, it's I guess it's hard for anything too big to have that true independence, I suppose. 

Thomas: [00:32:23] I mean, yeah, we've got a strong rule of law, strong civil society. I think Australia can make it work. It's definitely better than nothing. I think we can say, Yeah. Hmm. 

Adam: [00:32:32] Yeah. All right. Well, before we before we go, we've been a chockablock episode. I did just want to talk touch on a new player in the buy now, pay later market. Thomas ANZ entered the market this week. What's going on there? 

Thomas: [00:32:49] Yeah, radical steps for NZ. Yeah, jumping in to buy now, pay later. Uh, new foray for them into the credit provision services. It's not something the bank has done before. 

Adam: [00:33:04] No. 

Thomas: [00:33:04] Yeah, I mean, all the big four in now to buy now, pay later. And more people are joining every day. And I think like I think we we talked about Afterpay a little a few months ago kind of flagged this like Afterpay as a concept isn't a buy now, pay later, as a concept isn't particularly novel or innovative or amazing. And so it doesn't deliver a lot of there's not a moat protecting buy now, pay later as a concept. So anyone in the U.S. is worth seeing a flood of entrants now, and this is kind of thing of like car like it seems to be a lot of businesses trying to carve out regulatory loopholes to to operate in. So you think of like Amazon with the Flex delivery service? Yeah, we have a trunk trucking company because we don't allow our delivery drivers to drive minivans. So what would it drive sedans? So they kind of carving out a new that 

Adam: [00:33:58] we have a trucking company, Ren. All our vehicles are Ford Festiva is from 2003. Yeah, exactly. Yeah.

Thomas: [00:34:06] And then Airbnb is a hotel used to be highly regulated. Airbnb just came on and found a niche where they didn't have to have to deal with any of that regulation. Yeah, Uber with like taxis, taxis used to be highly regulated. They came in and found a niche. And so it seems like the first mover into a into a highly regulated market that finds out it finds that niche that isn't squashed immediately can make some super normal profits. And it feels to me that that's what that's what Afterpay did is effectively it's credit. It's offering credit. You're saying like, you pay a little bit now and then you pay a little bit more later on will cover the rest like you're giving the customer credit and credit provision is highly regulated and the banks have been, you know, there's A. There's a whole body to monitoring the bank's behaviour. And so buy now, pay later carved out this niche where the banks weren't allowed to tread and then created a credit, a profitable business. But now that now that they're broken, that seal the banks are like, well, OK, if we're allowed to do that, this is pretty simple concept for easy payments. Sure. OK, we're in there, too. Yes, they're coming in as well. 

Adam: [00:35:14] Y and Z, they've teamed up with Visa. 

Thomas: [00:35:17] So new kid on the block. 

Adam: [00:35:18] That's formidable.

Adam: [00:35:20] Yeah, yeah. Yeah. 

Adam: [00:35:24] So like, you know, you start, you start getting into some pretty massive players like, Yeah, that's right. You know, and you look at Afterpay and that's the big one of the new breed. But there's so so where of all these other ones come from then, like the what is it, zip and hum? And there's tons of other new sort of start up bar now, pay later is on the market now. 

Thomas: [00:35:48] I mean, you could almost white label the business, couldn't you like? There's not particularly not particularly complex business. You just raising capital and providing people with credit like you don't even you don't even check and credit scores are doing anything like that, right? Right? Yeah, I know. 

Adam: [00:36:03] Because, yeah, I don't know if it feels like now the now the big boys are here. Like, it's going to be tough for these, these little start-ups to stay around. 

Thomas: [00:36:12] I reckon I reckon there's also like a composition effect, like you see, like we talk about this with electric vehicles and the EV market. Like it? Yes, it's a it's a growth industry. Yes, it's going to be massive. But there is no projection of growth that means that every company in the EV sector is worth what it's worth. So the market tends to take take punts on, you know, whatever the company rising to the top and not being one of the ones that gets killed. And I think the same thing is going to happen in buy now. Pay later is not big enough for everyone to survive. And not all, not everyone's going to make it work. And so I think we're probably we're coming into a period of probably a bit of consolidation, a bit of a bit of rationing

Adam: [00:36:58] in the EV market, at least. Like if you look at Tesla, a lot of people say Tesla is like a software company. They're not a they're not a car company. So they are building electric vehicles, but they're building like essentially, you know, like an operating system for a car and subscription services and all that stuff that goes in the car. Whereas this is really pretty basic, kind of. We'll give you some, you know, you buy something and then we'll we'll cover it until you pay in four easy instalments. There's not a lot of room for like a subscription model or or enhancing the product in any way kind of is what it is. I mean, some of them, they're differentiating a little bit like ANZ said they're going to do. They'll let merchants choose the time by which loans have to be repaid, so it could be three to six month terms. So, you know, there's longer terms, maybe is the thing. But I don't know either. The those are the pub the other night and you can like. So you scan the QR code on the table to place your order and you do like you order online. But because you're online, ordering online for your your meals at the pub, you can pay with PayPal as I could pay with PayPal. So I did that just because I could and then I could pay in four instalments,

Adam: [00:38:09] so I literally paid for my son, so I'm still paying for it. You're always pay for it, and it's all later just because I can now pay for my sanity. The power in four easy instalments.

Adam: [00:38:22] But I just had this thought that I don't know what it does to my credit rating.

Adam: [00:38:27] It imagine getting to nine for a home loan because you're putting on a new lease on credit disaster. So.

Adam: [00:38:35] So there's probably a bunch more stuff to come out of it. But yeah, it really feels like now it's now. 

Thomas: [00:38:41] Now it's a crowded space. 

Adam: [00:38:43] Yeah. Yeah, the landscape might be might be changing. All right, we better wrap it up there. Thank you for your insight. Once again, Thomas, as always, thank you. Don't forget, you can check out all of the great podcasts across Equity Mates Media Get Started Investing feed Equity Mates Investing podcast. You're in Good Company. Talk money to me. Don't forget also that we've got that bonus episode coming out this Friday. We would love to hear what you think about it. If you'd like that kind of content, so if you do, or if you don't even send us an email Covid, Equity Mates dot com or head over to the website Equity Mates.com forward slash CVE and before I run out of breath, totally check us out on Instagram and Facebook at CVE Podcast. But that is all for us. Thank you for tuning in. We really appreciate it. We'll talk to you again.

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Meet your hosts

  • Adam

    Adam

    Adam is the funniest and most successful comedian in his family. He broke onto the comedy scene as a RAW comedy national finalist before selling out solo shows at two Adelaide Fringe festivals. He’s performed stand-up to crowds all over Australia as well as enjoying stints on radio with SAFM and most recently as a host of the Ice Bath on Triple M. Father of two and owner of pets, he may finally be an adult… almost.
  • Thomas

    Thomas

    Thomas, the economist, is the brains of the outfit. He studied economics and game-theory at the University of Queensland and cut his teeth as an economist at the Reserve Bank of Australia. He now runs his own economics consultancy, with a particular focus on the property market. He lives with his wife and two kids in the hills outside Byron Bay.

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