The Afterpay payday and and three theories on what it means…

Adam: [00:00:52] 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 is Adam and we're joined, as always, by my little older brother and real life economist, Thomas. How are you? [00:01:04][11.7]

Thomas: [00:01:05] Yeah, good. Adam, how are you? [00:01:06][1.0]

Adam: [00:01:07] I'm doing very well, thank you. Yeah, we should tell the good people out there in case they missed it, that we are now doing super Saturdays here on comedian versus economists. We've teamed up with the guys over at Equity Mates, Get Started Investing feed and the lovely ladies over. You're in good company to put together a whole series of podcasts covering superannuation, which is brought to you by Super Hero. So if you're interested in superannuation and we think it should be because we think it's probably time that the people started paying a bit more attention and waking up to their super, then make sure you check out the bonus episodes started last Saturday. There's another one coming this Saturday is everything you could possibly want to know about Super across four podcasts for Thomas. Yes. Anyway, onto today's show. And this week we are going to delve into the S.V. mailbag, which for those of you younger than 50 is a mailbag is where we used to carry DM's in before we had the Internet. So, yeah, we've got a couple of listener questions to get to a bit later on. Inflation data was out last week, so strap yourself in. We're going to ask Thomas all about what the inflation data tells us. We're going to be talking mandatory vaccinations with a very special guest a little bit later on the show. But first, the big news out today. Thomas, we've talked about acquisitions before on this show, but today was a big one. Talk us through it. [00:02:33][86.1]

Thomas: [00:02:33] Yeah, biggest in Australian history. This is blown up the financial press today. It's huge news square, the US tech giant has bought out or plans to buy out Afterpay [00:02:44][11.1]

Adam: [00:02:45] to 39 billion dollars, I hear. Yeah. [00:02:49][3.7]

Thomas: [00:02:49] Thirty nine billion dollars. Yes. The deal is pitched. The dollar. Twenty six around that mark. It was closed. Share price closed on Friday at ninety six cents, sorry. Ninety six dollars. So that's a 30 per cent gain. So yeah, the deals are 30 per cent premium to the trading price, which it sort of popped in today on Monday. So yeah. Big jump. Yeah. Big, big success story for a little Aussie battler on the global stage punching above its weight, as it were. [00:03:14][25.0]

Adam: [00:03:15] The best quote I saw was from Maeng Lou on Twitter, who said, Square buying Afterpay in all stocks is the ultimate demonstration of how Buy Now Pay Later works, because so they have they have bought it all in square stocks, is that right? [00:03:32][17.1]

Thomas: [00:03:33] Yeah, that's right. So no cash down, just a swap. The swap. [00:03:36][3.1]

Adam: [00:03:37] Brilliant. So what does that how do we view this, Thomas? Is this just more money in the system? Is it what do we make of this big purchase or acquisition? [00:03:47][10.4]

Thomas: [00:03:48] So I thought, well, I think I think there's three stories that are emerging that the right sort of clocked the first. The first is the obvious one, that it's a vindication of the buy now pay later business model. It's a vindication of Afterpay in particular. It's Square coming around to recognise the writing on the wall for the disruption to finance sector that by now payloaders created is here to stay. And they want to get a piece of the action. And it's it's a great news story. Good news for Afterpay in particular and its founders. All great stuff. So, yeah, a lot of the naysayers about buying our pilade are now licking their wounds and the proof in the pudding. By now, Pilade is here to stay. [00:04:29][41.1]

Adam: [00:04:30] There's a lot of naysayers, a [00:04:31][1.1]

Thomas: [00:04:31] lot of nice a lot of short sellers got pretty [00:04:33][1.7]

Adam: [00:04:33] burnt. Yeah, that's right. So is this [00:04:35][2.1]

Thomas: [00:04:36] I mean, look at dollar twenty six. Now that's that's what Squeers pitching, but it got up to a Dollars so not one hundred and twenty six dollars is what Square's pitching is up to one hundred and sixty dollars in February. So it's been on you know, down a good whack from February and everyone thought that was sort of the bursting of the buy in our pilot a bubble and. Yes. And now people think, well, now that wasn't the case. [00:04:58][21.9]

Adam: [00:04:58] Right. So just just to clear that up for the listeners out there, it's 126 Dollars. You did say a dollar twenty six earlier in the show and you just corrected yourself there. So I just know that we've been we've been caught out before doing some pretty ordinary maths. [00:05:12][13.2]

Speaker 3: [00:05:12] So, yeah, we're [00:05:14][1.7]

Thomas: [00:05:15] pretty fast and loose here. [00:05:16][1.0]

Adam: [00:05:16] So. All right. So we're talking one hundred and twenty six dollars share price, which is incredible. If you bought into Afterpay, you know, five years ago. Yeah. [00:05:24][7.4]

Thomas: [00:05:24] Yeah. Four bucks or something. Yeah. Or even when Tencent bought like a like a ten per cent holding in May last year, that's twenty dollars a share. So it's up, you know, up six percent from where they bought it. Yeah. In just a year. So Yeah. Huge, huge growth story for, for Afterpay. And that's like all the headline stories in the AFAS and the financial press is. So that's, that's the line. They're running a good news story. Up you go. A little Aussie battler doing it right. [00:05:50][25.9]

Speaker 3: [00:05:51] Is that what a. [00:05:52][0.3]

Adam: [00:05:52] It's square to the new thing. [00:05:53][1.2]

Speaker 3: [00:05:53] Up you go, a little Aussie battler. [00:05:55][1.2]

Adam: [00:05:56] I don't know that factored into Jack Dorsey's, although you never know with Jack. He's he's a wild one. [00:06:02][6.4]

Speaker 3: [00:06:03] You want to go on? I love this Aussie battler ish [00:06:05][2.7]

Adam: [00:06:06] trait about this company. [00:06:07][0.9]

Thomas: [00:06:08] So I'm sure there will be a cubers to this. Yeah, it's pitch meeting. [00:06:11][3.1]

Speaker 3: [00:06:12] This guy is good. It's a good fit square. [00:06:14][1.5]

Adam: [00:06:15] We've got four corners to a square, but paying for brilliant. It's a match made in heaven. That could have been the rationale for for Jack to do it. We'll never understand these things to us. [00:06:26][11.4]

Thomas: [00:06:27] But that's that's that's the dominant story. But it's not the only story. So the second story is that this is ringing the bell for the top of the hour pilade a bubble and saying like it's there's a lot of players coming into the market now. So PayPal's in the space now. I bought something on eBay the other day and just got unsolicited, got a prompt to, like, just pay it in four easy instalments. [00:06:51][24.4]

Adam: [00:06:52] Oh, right. Through PayPal. [00:06:53][0.7]

Thomas: [00:06:53] Yeah, yeah, yeah. So know that just popped up as a thing I didn't even ask for. [00:06:57][4.3]

Adam: [00:06:59] Did you, did you opt to pay in four instalments for your three point ninety adaptor things. [00:07:07][8.0]

Speaker 3: [00:07:08] I've got. Right. Yeah. So they did. [00:07:09][1.6]

Thomas: [00:07:10] So the system, there's some big guns coming into the market. It's also the same argument goes that buying our pipe pay later is just glorified, layby. And the only reason I sort of was able to get a beachhead in the finance industry is that the traditional banks were shy about offering credit to people without giving a credit check. But it was a regulatory barrier to doing that. The buying now pay later players came in and just sort of just ignored that and started. You know, this is the story goes this dishing out credit willy nilly, like there's no checks on whether you can afford to your for easy instalments or not. You know, the banks saying at the commissioner looks like credit, but, you know, has a different name, so whatever. But anyway, so the business model sort of established and but that means that the big players in the space who have been sitting on the sidelines are now like, well, I can if you know, if we were allowed to just go go for this now or are we just going to go for it? So I think that's one of the arguments I consolidation's inevitable. It's kind of inevitable. The small players probably gonna get bought out by bigger players. Not all the players are going to survive. You think like with, you know, PayPal and Apple and a range of other and the legacy banks getting involved, they can't all survive and can't all carve out a niche for themselves. So consolidation's on the card. But can it [00:08:29][78.9]

Adam: [00:08:29] be like credit cards? I mean, we've got every every financial institution and, you know, even others all offer a credit card. You know, Qantas has got a credit card at Woolworths. They've got a credit card, haven't I? I mean, everyone's kind of can offer a credit card. Can everyone we just end up that it becomes a payment model and everyone just has this paying for and maybe someone will come out with pay an eight on day and everyone to be like, oh, wow, I didn't see that coming. [00:08:56][26.3]

Thomas: [00:08:57] Yeah, I think I think that's right. Become part of the I mean so I think where has it has a wallet offering that with 70 million users. And that's sort of the idea that they can now offer that to their users. But I think that's probably where it's going. It's just like, you know, you buy it on credit cards before now or your your your banking provider is going to give you a and Afterpay option to pay later option. [00:09:17][20.1]

Adam: [00:09:18] Then it just kind of becomes a technology acquisition, doesn't it? You just go look, we're just going to buy everything that Afterpay has built around their model. And I guess they obviously a huge user base now. And I think Square are saying we can take this and make it even huge, huge, even bigger in the US, which is where I think Afterpay we're looking to target next year. So I don't know. Is it just it's just a technology purchase, like a sort of I guess it's the whole business, isn't it. [00:09:46][28.1]

Thomas: [00:09:46] But well, maybe. I mean, like Square's got 70 million customers Afterpay. He's got sixteen million. Like, I don't think I don't think they just don't think it's they're acquiring customers. I think it must be some some tech involved there I guess. I don't know. But I think consolidation is probably inevitable in the space. That means that margins will get crushed. The sort of the big sort of profits, supernormal profits are probably a thing of the past. And so some people are saying that Afterpay founders are cashing out at exactly the right time just to sort of our looms in the rear-view mirror. So well done, lads. I think that's that story. But it's not the only story. The third story is that. Yeah, yeah, yeah. The third story is that the buy now pay later bubble has just been eaten by the US tech bubble. And so the idea here is that with all the money printing that we've had, with all the super cheap money that's created a bubble in Texas, some of the tech stocks are looking super bubbly. And I should say that bubble implies that there's no fundamentals like a droolers billion worth of money. Fresh money printed off the presses is a fundamental like that's not a that's not an irrational thing. But it's feeding its way into these these, you know, eye watering valuations, but that's giving these companies a lot of money to play with and they're looking around, what can we do with this money? What can we can we deploy this capital? What can we buy out? What can we get involved in? And so then the tech bubble is coming after the buy now pay later bubble and going like, oh, well, these guys are making some money. Let's let's get a bit of that action. Yeah. And so that's sort of the third story. It's like and this is this is this is a term we heard after the GFC in the money printing that followed, where everything, all the valuations is going to be stretched and wacky, that we had the everything bubble, that all markets were looking bubbly and stretch. But that's just kind of what happens when there's that much money sloshing around the system. [00:11:33][106.7]

Adam: [00:11:33] Right. So it could or it could all end in tears there. Possibly, but only if you only if you subscribe to that thinking of that at all. The big bubble. [00:11:42][8.9]

Thomas: [00:11:43] Yeah. I mean, again, like bubbles, not the right term, I think, because, you know, typically a bubble means a sort of some irrational exuberance. People are getting caught up on it. People are buying with total disregard for the fundamentals and only buying because the price is going up and they want to sell later. [00:12:00][16.9]

Adam: [00:12:00] You did use the words quadrillion, though, which always gives me cause for concern. [00:12:05][4.3]

Thomas: [00:12:07] Yeah, yeah. But having that much money in the system is a fundamental it's it's not it's not just a rational humans running, getting, you know, exhibiting herd like behaviour. There's a there's a fundamental factor behind them. And then maybe this sort of this sort of works itself out that the square establishes itself, gives it, gives the buy now pay later offering to its customers, and that helps it grow its base and establish itself as a serious financial player. [00:12:32][25.9]

Adam: [00:12:33] Yeah, well, watch this space or watch this square, as it were. All right. Well, look, if you're interested in knowing more about the buy now, pay later space, the guys over at Equity Mates Investing podcast, they did an episode on Zipp and they've done episodes in the past about buy now, pay later. There's one on The Osbournes TV show that they do just search Equity Mates by an hour, pay later. You can find some stuff on there as well as check out Facebook and Instagram for both Equity Mates. And you're in good company podcast. They've both got some gods up there on on by now pilade. So make sure you check those out. Inflation data came out last week. Thomas and I always regret asking this, but can you tell me more about inflation, please? [00:13:17][44.2]

Speaker 3: [00:13:20] Yeah. [00:13:20][0.0]

Thomas: [00:13:20] So remember, this is one of our premier data highlights of of the cow [00:13:24][3.9]

Speaker 3: [00:13:24] on the top shelf, top shelf, top shelf data. [00:13:28][3.6]

Thomas: [00:13:28] The inflation data is important because the RBA is an inflation targeting central bank. So inflation is the number one thing that it cares about. Record low inflation rates are based on the premise that inflation is undershooting. The Target band member RBA aims to keep inflation between two and three per cent. So we've been undershooting that for years now. And so that's why inflation is so important, because it determines interest rates, which is the price of money and money is the fuel of the system. So, yeah, so big news and big news in the sense that it spiked up to a thirteen year high of three point eight per cent, yet a big jump. The last time it was that high was back in 2008. Right. And at the time the Treasurer Wayne Swan said that the inflation genie was out of the bottle, OK? And and the RBA hiked up interest rates to seven point twenty five per cent. [00:14:22][53.4]

Adam: [00:14:22] So there's a few things to unpack there. The RBA is not obviously not going to hike rates tomorrow up to seven and a half per cent. Are they talking about raising interest rates? [00:14:31][8.4]

Thomas: [00:14:31] No, no, no. They're pretty relaxed about it. So so what you've got here is base level effects, really. So when because remember, inflation is a percentage change year on year. So we're comparing the June quarter with the June quarter last year and the June quarter last year, 2020 was the height of the crisis. Yeah, yeah. Stuff going on. So the big the big things which which fed through to the inflation, that three point eight per cent was childcare. So childcare became free in twenty twenty is now returned to its normal price. But that means it's sort of gone from zero to whatever childcare is in in the basket. So that's a big increase. Petrol prices collapsed. Remember, oil went negative at some point in in mid 2020. Yep. So petrol prices have rebounded, not high, but back to normal. So that's a big input. And then you had homebuilder home builder grants which brought down the cost of construction. They've unwound and that's pushed up the price of construction again back to normal levels. But because we're tracking the movement with the with the annual price change that's given us our inflation rate of three point eight per cent. But there is a there is a measure called underlying inflation which strips out these one off price changes. And that was that's that's was. Point five percent in the quarter and just one point six percent for the year. So that's what the RBA will be looking at. The RBA be looking at that one point six percent, and they'll be whatever their worries. [00:16:03][92.3]

Adam: [00:16:05] OK, after the press conference [00:16:06][1.0]

Speaker 3: [00:16:07] where they gather together a group of journalists [00:16:09][2.5]

Adam: [00:16:10] through the announcement, we've crunched the data. We've had to look at the underlying inflation [00:16:14][4.0]

Speaker 3: [00:16:15] rate, whatever, as you [00:16:18][2.6]

Thomas: [00:16:18] were. Yeah. So one point six percent. So that's under the two percent. It's still not in the target band. So there's not a lot of heat in the system. I mean, if you look at the if you look at the past six months and annualise that to rather than going year on year, just say, look, if if the pace of growth in the past six months continued for another six months, what would we get? The answer that is one point eight percent, which is the biggest, you know, six month annualised rate in over five years. So it's starting to pick up. We're seeing a little bit of lift, one point eight percent still below the target. So nothing to worry about just yet. Yeah. So we're starting to see a little hit that nothing nothing to worry the RBA just yet. [00:16:53][35.9]

Adam: [00:16:54] So they might. Is it likely to kind of cool off again next quarter or not? You know, whenever we look at it again. [00:16:59][5.7]

Thomas: [00:17:01] Yeah. I mean, definitely come down from that three point eight percent. Yeah. And and it'll anchor around that. That trimmed mean that that underlying inflation rate. Yeah. So we still like the true rate of inflation. We still think is running around two percent, less than two percent. And the other headline figures will probably move towards that. Right. [00:17:20][18.8]

Adam: [00:17:20] So we talk about inflation as being you know, it looks at the cost of the basket of goods, the [00:17:25][5.3]

Thomas: [00:17:26] consumer price index. Yeah, that's what that does. [00:17:28][1.7]

Adam: [00:17:28] Yeah, that's the consumer price index. We actually had a I was going to get to these emails a bit later. We have one here from John Citizen, his name is, which I'm not sure if that's his real name. I hope for his sake that it isn't otherwise. His credit card is being shown everywhere [00:17:44][15.6]

Speaker 3: [00:17:47] it should really get. I'm done with that. [00:17:48][1.3]

Adam: [00:17:49] Stop letting people include his credit card in their ads. But, hey, he sent in. Is it time to include housing costs in CPI? No, we're not. We obviously don't include that in the basket of goods. That's a huge thing in. And he talks about housing costs. Are we talking. [00:18:05][16.0]

Thomas: [00:18:05] Yeah, this is this is a this is a big issue in economics at the moment because house prices established house prices and not included in the basket of goods measured by the CPI, right? Yeah. So rents are rents are included and new construction costs of building a new house, they're included, but established dwellings and land prices are not included. And the ABS view is that land is an asset, not a consumable. So it shouldn't be in the consumer price index, right? Um, yeah. But it's it's a bit of a tenuous argument because with the CPI, we're trying to capture the cost of living and buying a house is part of the cost of living. And so we saw the ECB recent the European Central Bank. They recently announced that they were going to start looking at house prices in their inflation measure, but they haven't announced how they're going to do that. But they just they said they want to come in over New Zealand. The government has asked the Reserve Bank of New Zealand to consider interest. So consider house prices in their interest, in their interest rate decisions. So it's not directly including in the inflation measures, but wanting to bring it into the into the sphere of debate. But some of this idea, like you drop interest rates because consumer price inflation is low, but that creates asset price inflation and booming and booming house prices and sort of the clearest evidence of that. [00:19:22][76.6]

Adam: [00:19:22] So what happens if we do include house prices? Has anyone done that before? [00:19:26][3.4]

Thomas: [00:19:26] Well, actually, funny you should say that, because I actually did it this week. [00:19:29][2.5]

Speaker 3: [00:19:29] I had a look ahead of the curve. [00:19:31][1.6]

Thomas: [00:19:31] Yeah, yeah, yeah. So what I did is I gave house prices a twenty per cent weighting. Construction cost like twelve percent. No, eight per cent. So I did another twelve percent based that on established house prices. And what it shows is that the headline inflation, three point eight percent, that's the highest in thirteen years or something. But that house price adjusted inflation rate that I created running at five point seven percent, which is the highest rate in twenty years. And it's kind of an intuitive point. We know, like house prices are just going bananas. So if you take a look at the last three months of house price growth in Sydney and you analyse it, so assume that the pace of growth over the past three months is continued for the next nine months to give us a year that gives you a house price growth rate of 30 percent cent. Yeah, well, that's huge. So house prices are just. Yeah, they're just tearing away in Sydney right now. So it's a huge price growth. And so, yeah. So is obviously going to be much higher when house prices are growing like that. Like they're just they're just on a tear away. Mm. Yeah. And so, and I think it's, I think it's brilliant. I think it's particularly relevant for young people who are trying to save a deposit because your deposit increases proportionally as house prices increases what you've got to come up with as a deposit. So it's the cost of living for you. You're trying to save for a deposit. House prices going up means less getting more expensive for you. You've got less free money. So I think it is particularly for young people. I think it is a. Really relevant thing to be to be bringing in, and, yeah, I think I don't think we can get away, you know, it was easy to use this as a sideline, but when house prices were cheap and it wasn't such a big story, but now they're so expensive and such a burden on budgets, I think it's probably time to include them. [00:21:07][95.5]

Adam: [00:21:07] Right? Well, it's time to hit the streets again. I guess we've got lots of we've been living a lot of protesting in the last few weeks. This week, we're going to be protesting to include housing cost in CPI. Thank you, John Citizen, for your question. [00:21:19][12.1]

Thomas: [00:21:20] I'm just going to tack myself onto a freedom [00:21:22][2.1]

Speaker 3: [00:21:23] platform [00:21:23][0.0]

Thomas: [00:21:26] that included house prices in the CPI banner. [00:21:28][1.9]

Adam: [00:21:30] John Citizen. He actually did also mention, he said after hearing Thomas's voice over in the Virgin Money ad, he might have another career waiting in the wings or maybe a side hustle, at least. So apparently, apparently, not only is interested in housing being included in CPI, he also liked the dulcet tones of your voice in a money ad. So you're not alone, by the way, we have had some other folks I've heard some people refer to you as the white Morgan Freeman. That's a big call. But apparently very few people like listening to you. [00:21:59][28.9]

Thomas: [00:22:00] Yeah, I think it's just because we record so late at night in a largely drunken time, we get around to it, [00:22:06][6.0]

Speaker 3: [00:22:06] go to sleep. But I [00:22:09][2.5]

Adam: [00:22:09] mean, it's not like I've never rung you when I've had, you know, having trouble getting to sleep and just asked you to explain quantitative easing or something, like a lot in no time. [00:22:21][11.5]

Thomas: [00:22:54] Welcome back here on comedian versus economist and Thomas, we are now going to talk about mandatory vaccinations, big news out of the US the last week or so, Facebook, Google, Wal-Mart, Disney World. In fact, the whole Disney company are now talking mandatory vaccinations. And look, we thought we're not equipped to deal with this kind of this kind of big issue ourselves. So we thought we'd bring in an expert for the first time ever on comedian versus economist. We've got a very special guest joining us. Couldn't be more special. In fact, please welcome our dad Colin to comedian versus economist. Good dad. [00:23:36][42.1]

Colin: [00:23:37] Good to catch up with you at last. [00:23:37][0.0]

Adam: [00:23:41] Well, indeed. Indeed. [00:23:44][2.5]

Adam: [00:23:45] So we're going to look at this issue of companies mandating vaccinations. And we thought that you're a you're an H.R. manager with, what, about 90 years experience in the business. So who better to be across all of all of those kinds of issues that this raises than yourself? Have you heard anything within the industry so far around mandatory vaccinations? [00:24:08][23.8]

Colin: [00:24:09] Well, people are talking about it or they're writing articles about it because it's perhaps expected that it will happen at some stage. And I think we're wondering how it's going to happen. [00:24:18][8.4]

Adam: [00:24:18] But and so the big question is like, is this is this legal? Can companies force you to be vaccinated? [00:24:24][6.1]

Colin: [00:24:25] If a company is going to do that, it has to have some authority to do it. So have a legal authority could come through the employment law, could come through other law done by government, if you like. Perhaps the weakest form of authority. It could have it could be its own policy and procedures. You know, have those policies and procedures vary from time to time, never reach? Well, no. Well, perhaps perhaps the employer might say we now have a policy about that. But there's some it's a bit problematic. That second part right now, you've got the public health orders coming out and they are very powerful. So when the public health order comes out and directs the company to do something, there is no wriggle room there. [00:25:09][44.1]

Adam: [00:25:10] So they're the same ones that are making people say stay home, for example, say that's a public health order. When we hear about cities going into lockdown because of Covid, that's a public health order that says stay home. And so you get fined or you get whatever locked up in worst cases if you've breached that order. [00:25:27][17.4]

Colin: [00:25:27] Yeah, the I think the army might knock on your door and say, what? What are you doing? [00:25:33][5.1]

Thomas: [00:25:33] But what do they do? They need it. They need it. I think with the QR codes and the check ins and things like that, [00:25:40][6.5]

Adam: [00:25:40] like, is that a health order? [00:25:41][1.6]

Colin: [00:25:42] Yes, it is. So companies are directed to have their their chicken square box, whatever it is, and QR code on the on the door or somewhere and you're expected to use it. Similarly, employee's going to work now, generally have to check in to the workplace through the QR code. Not sure what it's like down in the other southern states, but I see up here in Queensland, a lot of people seem to ignore it. [00:26:11][28.6]

Adam: [00:26:11] Yeah, I don't know. I've been watching too closely what other people are doing, but certainly I've been scanning in. But an employee employee can't go [00:26:18][6.6]

Thomas: [00:26:19] on a sovereign citizen. I'm not I'm not [00:26:21][2.2]

Adam: [00:26:21] doing that, for example. [00:26:22][0.9]

Colin: [00:26:24] Well, I can share a story with you. We had one the other day who didn't want to use to use the QR code because he was concerned about privacy provisions and he didn't want his daughter going to China. I don't know how he knew that was going to happen, but [00:26:37][13.0]

Thomas: [00:26:37] were using Tik-tok to [00:26:38][1.0]

Colin: [00:26:39] Tik-tok. There are people have got concerns about it. And then if that's the case, then they have to have a lawful and reasonable direction to do it. Right. [00:26:49][9.6]

Adam: [00:26:49] All right. So talking about companies making Covid vaccinations mandatory. So this is in the in the private sphere, right. So you talk about needing it to be lawfully backed. So these are private companies that are making it, what, a condition of employment. So there's a difference between mandatory and compulsory. Right. [00:27:10][20.8]

Colin: [00:27:11] Explain that to me. I would get that from [00:27:13][1.8]

Adam: [00:27:13] I don't trust him with his words. He doesn't really have [00:27:15][2.4]

Colin: [00:27:17] that coming back. Coming back to what you say. You can put whatever conditions you like, if it's reasonable on your employment contract. So if you're signing someone up for the first time, you can say, well, it's a condition of your employment that you agree to these provisions. And if the person signs it, then it's it's applicable. [00:27:36][19.1]

Adam: [00:27:37] And if I don't sign it, that's just a choice. They may say, well, [00:27:40][2.5]

Colin: [00:27:40] this is wrong. [00:27:41][0.8]

Adam: [00:27:41] So what about people who are people who are already employed, though, like people who signed up to an employment contract? And if you're working at Disneyland, you're jumping around in a Mickey Mouse suit all day, happy as Larry in your job. And then Disney says, look, if you want to. Keep working here, you need to go and get a Covid jab, can you say no? Can you respectfully decline or or shake your head? Obviously, because Mickey can't talk. [00:28:04][22.7]

Colin: [00:28:05] Yes, well, you can decline. And that brings with it probably disciplinary provisions. I think so. So if if you're going to do that, it comes back to that term. I think you talk about lawful and reasonable. So it's fairly problematic as to whether that's reasonable. You can't just say, well, it's covid-19 and we think we think it's reasonable. You've got to have some reasonable reason for saying that. Who determines that? I would think it was an employment law matter would go to the Fair Work Commission, which is the body that overrides employment relationships is when you get into the disciplinary procedures. So you say I'm going to give you a lawful and reasonable direction to do this. And if you deny it, we're going to take disciplinary action, which could go all the way to summary dismissal because you can't place someone who's not going to follow a reasonable and lawful direction. [00:28:58][53.5]

Adam: [00:28:59] I don't know if people who have already joined up the whole debate about whether it's reasonable that that seems the reasonable bit seems the bit that could be correct. [00:29:07][8.1]

Colin: [00:29:08] Correct. And that's why it's problematic. And it's a bit like horses for courses. What's reasonable for one business won't be reasonable for another and so on. So it's a hard to have a blanket sort of ruling to say this is going to be reasonable. There is in general terms, if you might not know this, but you can have an employment contract which talks about your job and what it is. And that's that's the work you do. But your employer can still give you a lawful and reasonable direction to do anything right now. But now the reasonableness there comes out. Well, have you got the skills to do it? Yes, you have. Can you do it safely? Yes, you can. I directing you to do something illegal? No, not. And am I paying you the right amount of money to do this? Yes, I am. Well, what's your problem? [00:29:53][45.1]

Adam: [00:29:54] Right. So this could this does this open the floodgates to other mandatory conditions, like, you know, you must wear a loud shirt on Fridays, which is no problem. No problem for you guys out there in Cairns, obviously. But it affects you where you are and all the time. [00:30:08][14.6]

Adam: [00:30:09] But what we do at the local [00:30:16][7.4]

Colin: [00:30:17] local hospital is that I have to say you and talk to me. [00:30:20][3.3]

Adam: [00:30:22] But no, [00:30:22][0.3]

Adam: [00:30:23] I mean, it is this is this is this is the chance here that if this goes through, then we could start to see other social changes being pushed through in this way, whether it's I don't know, the one that comes to mind for me is is smoking. You know, like could that could companies go, look, we're not going to let people smoke at work anymore or around the workplace or or we're not going to have people who smoke. You know, we're not going to employ anyone who smokes. Like, can we go down that path or [00:30:54][31.1]

Colin: [00:30:54] we'll see the discrimination laws and we're discriminating against this person because they're a smoker. And if I am, then it's got to be a reasonable decision. So there's some reason I'm doing this, not just a social win, if you like, and that's where the reasonableness comes into it. So is it reasonable to direct me to wearing a Hawaiian shirt? Well, it is. Maybe if I mean, in the wine bar, serving cocktails or something, I can understand that, but generally not. [00:31:26][31.6]

Thomas: [00:31:26] So, is it is it is there a big difference with the US in the sense of like a lot of companies are coming out and do this? We haven't seen any of it talk in Australia, like, is there a different regulatory system there? That means it's possible in the US and it's not possible here. [00:31:38][11.7]

Colin: [00:31:39] I'm not familiar with the regulatory system there. But if you think about it in Australia, what's our vaccination rate at the moment? I think we have that 16 per cent that we were 18 per cent. So I think what's the practical, practical position here? Is is it practical to to direct everybody to be vaccinated that worked? Well, no one's going to do that because we can't physically do it. I think it's going to be interesting in law when we get to Christmas time and 80 per cent of the population are vaccinated. And there's a if you like, there's a critical mass that supports vaccination. Where do we stand with the other 20 per cent that are not vaccinated? And will we be looking to then make that compulsory? So. Well, because it's now available, it's we've got good supply of vaccination. There's no logistical impediment to you being vaccinated. Now, you might have some other reasonable issues. You might have religious issues or health issues or whatever, and that's fine. You can go and get the evidence to prove that. But generally speaking, do we want to settle with just 80 per cent of our workforce vaccinated [00:32:48][68.8]

Adam: [00:32:48] in the US, the federal government has said they're going to make it mandatory for all the government employees. Is that something that. We're likely to see in Australia as well, like we've talked about the private industry, but is is the government possibly going to head down this this path, do you think? [00:33:03][14.6]

Colin: [00:33:03] Well, the federal government is an employer of the Australian public service. That's what you're talking about in America, so that their own employees and they're putting it they're putting out a lawful and reasonable direction through some method to say this is what you've got to be and that's got to stand up to the employment law. Presumably the same as everybody else does. So will we head down that path? I think we will in time. As I said once once, that there's a critical mass of people vaccinated and that's what everyone's done. And I think there'll be a move to to get everybody vaccinated subdirectory, other discrimination. [00:33:38][35.0]

Adam: [00:33:39] All right. Well, Dad, thanks for joining us on comedian versus economist. I hope you are suitably honoured as the first guest we've ever had on this show. You've had a good time. Thanks for as good catching up with you. Not one that makes. All right. Look, before we go to that, I just want to get to a couple of listener emails that came through during the week. First of all, David from Hobart. G'day, David. And get a Hobart shout at everyone down there. The other week, Thomas mentioned something about monetary policy, which I think is the name for what the government and Federal Reserve do to help stimulate or temper the economy in different ways, e.g. official interest rate. I've also heard people talk about fiscal policy in the same way. Is there more to this than just the official cash interest rate? And are these two things the same? Thomas, would you like me to feel this one first? [00:34:24][44.9]

Adam: [00:34:25] No. You have little faith. No, I don't [00:34:32][6.4]

Thomas: [00:34:32] think we're going to keep this tight. No, if he's got a right monetary policy, is interest rates also money printing now in the modern era is everything the RBA does. RBA is in charge of monetary policy, is controlling the money supply and the price of money. That's what monetary policy is about. Its companion in the space is fiscal policy. Fiscal policy comes out of Canberra and it's government spending, taxes and transfers and that sort of thing. Yeah. So everything's a simple rule of thumb fiscal. We're talking about Canberra monetary policy. We're talking about the RBA, which is in Sydney. [00:35:03][31.2]

Adam: [00:35:04] All right, very good. They go, David and Patrick, send us an email. And Patrick asks, Is there any possibility that with unemployment figures dropping, those who aren't in the labour force are motivated to start applying for jobs, while those who have been applying unsuccessfully for a long time become demotivated and stop applying, therefore causing the numbers to seem consistent, even though those people applying change. So what do you reckon, Tom? [00:35:29][25.1]

Thomas: [00:35:30] Yeah, now this is spot on there. So there's there's a phenomenon called the encourage worker effect or the discouraged worker effect. Remember, the unemployment rate is it's a percentage and it's the number of unemployed people as a percent of the number of people in the labour force, but the number of people in the labour force changes. So to be in the labour force, you've got to be actively looking for work or actively working. And so when they when the economy is improving in the job market improving, people will come out of retirement, although if they stopped looking for work, they'll start looking for work. So the labour force grows or if the job prospects are terrible, then then they'll leave the labour force. And so that that tempers the the number of people in the job, which which which mutes the changes in the unemployment rate. And so the key thing to look for is the participation rate. So the participation rate is a number of people in the labour force relative to the population. And that gives you a guide to what's happening with with that encouraged or discouraged workers. And so recently we've had we've had a strong labour market. But so the unemployment rate's been coming down four point nine per cent in the latest observation that's going hand in hand with an increase in the participation rate. So that's actually a really good news story. So if you get a decrease in the power in the unemployment rate, but it goes with a big decrease in the participation rate, then you think like job creation is not actually that great. The labour market is not doing that awesome. But if you get what we got, which is a fall in the unemployment rate alongside an increase in the participation rate, then you know that the economy is going great guns, right? [00:36:58][89.0]

Adam: [00:36:59] Awesome. Well, there you go. Keep up the good work. [00:37:01][2.2]

Adam: [00:37:03] Yeah. Ruvo, good job. All right. [00:37:06][3.1]

Adam: [00:37:06] That does it for this week. Thanks a lot for tuning in. Big thanks to our dad, Cole, for joining us all the way from Sunny Cairns. Yeah. Was a bit of a bit of fun having him on the show. So thanks once again for tuning in. We look forward to doing it all again with you next week. We'll see you then.[00:37:06][0.0]

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