“The buffers are breached on half our loan book” – What is Westpac worried about?

Adam: [00:00:30] 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. Hi, Thomas.

Thomas: [00:00:44] Good. Adam, how you going?

Adam: [00:00:45] Are going good. Thomas, We have a winner. Who? I believe we have a winner in the Hat competition. The much talked about. I think it broke the Internet, as they say everyone's talking about here. You can guess all the names of the people in the intro. And to be honest, in keeping with the shambolic nature of said competition where people had the chance to win one of my old hats. We've had multiple entries this week, I'm pleased to report, but I don't think anyone got them exactly correct. But here's the thing is that I went back to find the first voice. If you just had the intro, you would have heard the first voice that says, Have a listen to this. Have a listen to this. And I went back to confirm who it was. And because that was one of the ones from the original intro that we did pre the refresh. Right. I can't find it anymore. So I think I think it was actually Paul Katie, I'm like 99% sure it was Paul Keating. We had a couple of correct entries if you missed that one, because I didn't say Paul Keating. So shout out to Daniel who came in first. Daniel in South Dakota, USA though, which unfortunately, Daniel, I'm going to need you to get to my place to pick it up because I can't afford shipping to the United States. Daniel from South Dakota, he went with Scott Morrison with. Have a listen to this, which I'm pretty I'm like 100% sure it's not Scott Morrison. But then Alan came in. Alan from somewhere in the galaxy. No, sorry. He said, send from my galaxy the bottom. He said it was Peter Costello, which then I was like oh right. Era. So probably it could have been is more likely that than Scott Morrison. That's for sure. But I can still mostly, probably 70% say it's not Peter Costello. Anyway, we're getting, we're getting way out of it. So, so I think we have to avoid that here too. Alan But shout and much respect to Daniel from South Dakota, USA. In fact, shout out to everyone listening stateside. Thank you so much for tuning in. For those of you playing at home, it was, in fact, Paul Keating. Have a listen to Philip Lowe who said interest rates are higher and you just have to get used to it. 

Thomas: [00:02:55] You should be happy that the economy is stronger. 

Adam: [00:02:59] Yeah, I don't listen to it. Homer Simpson Capitalism. Janet Yellen who said it was the US that always pays its bills. Tyrion Lannister, of course, said a Lannister always pays its debts as there was always a clue in that one. And finally it was Christine Legarde who said, Don't let the bastards get you. So thank you for playing along. Daniel If you do want a hat, I've got lots of hats. I've got more hats. And Scott Morrison, so I'm sure we can find something for you. If you can just flick as a note. I will say A we can work out. So thank you all for playing. I think I'm kind of glad that competition's over. Hey, if you're Listening to the show and you haven't subscribed to the show, make sure you do that. If that's why you're listening, why not? That way you'll never miss an episode. You'll be sure to get it when it's fresh. But, Thomas, we've got a massive show coming up. The banks. We're back in the back in the zoo again. Of course, the banks are finding out their buffers weren't big enough. Does that mean just no more Netflix for them or problems for you? One of our listeners sent through a cracking plan to tackle rising interest rates. We'll hear from old Thomas Nostradamus as to why it won't work. And we've analysed the best vessel to hold drinks in. The results are in and we can't keep it bottled up any longer. I bet you can not wait to find out. But first we've got Wendy, self-confessed K-Mart, tragic and unapologetic consumer up against Tony, high flying CEO and business boss Thomas. It's all about mindset. Who's more confident at the moment? Consumers or business? 

Thomas: [00:04:46] Oh, it's so unnecessarily contrived. 

Adam: [00:04:52] Sorry, it was. I was writing down paper on the Cat, and Thomas gives me a few topics that we're going to cover off each week. And I'm like, Yeah. And this one was it was titled Consumers Consumer versus Business Confidence. So I just characterised a little bit with a bit of it is in easy here because If I just said Thomas let's talk about consumer best business confidence, they would change right away. They turn off. No, it's not that they want to find Out who is going to win the fight. Wendy or Tony. 

Thomas: [00:05:28] Yeah. So I mean. Interesting we could data for the when it's. 

Adam: [00:05:34] Ending up already had I set them up and you've bring out interesting week of data. 

Thomas: [00:05:40] Okay so Tony had a big week this week.

Adam: [00:05:44] Yes yeah yeah, yeah he's. 

Thomas: [00:05:47] He is pumped and is pumped. You know what happened to Tony? Actually. Tony had his biggest. Rebound in January in his confidence levels as measured by the Roy Morgan Business Confidence Index. Sarah? Yeah. Tony had his biggest January rebound on record. Jumped up 10.4%. Well, very optimistic about economic conditions and profitability. He then went over to the NAB's business survey and also rebounded there, jumped up and we're now back at boom boom time conditions based on NAB's business survey. Is looking as good as he's ever looked really apart apart from the immediate rebound out of Covid, which Tony, as you remember, did very well. 

Adam: [00:06:36] It's flying. 

Thomas: [00:06:37] Flying? Yeah. Where we kind Of come off a little from where we were at the end of the year, but we're still pumping along trading and profitability back to boom levels, forward orders and very strong employment is coming off a little bit, but on the whole is. 

Adam: [00:06:55] Does it Fly in the face of all the other rhetoric that we've been hearing about, interest rates going up and layoffs happening in the states. And it just seems like, well, I don't know. I don't understand what this seems like a disconnect there between Tony and the business community so happy. 

Thomas: [00:07:11] I mean, this is what it is. It is a little it's interesting. And as you're saying that when Wendy's. She's not loving it. 

Adam: [00:07:18] not happy. 

Thomas: [00:07:22] so the ANZ, Roy Morgan Consumer Confidence Index fell last week to its lowest level since April 2020. Yeah, so I remember cutting mine back to April 2020. We all thought we were going to die. Wendy's back there. 

Adam: [00:07:37] Oh, no. 

Thomas: [00:07:38] In terms of her confidence levels. 

Adam: [00:07:41] Okay. 

Thomas: [00:07:41] Yeah, Yeah. 

Adam: [00:07:43] So I don't get what I don't get is why is why is Tony so happy if Wendy so miserable? Like, doesn't Tony need Wendy? Maybe we should. Drop his Labour Day paper analogy. I'm not sure if it's helping. 

Thomas: [00:07:57] I mean, it's right. Like, you can't think that this can continue. I mean, it does seem like some of the rebound in the NAB survey was driven by the China reopening story. So a lot of it was the resources sector was pretty big too. That seemed to drive some of it. But even with that, things are still pretty robust and pretty happy. I think, you know, basically the economy is still quite strong, unemployment's very low. Growth is kind of kicking along for now. Business conditions aren't bad and businesses aren't feeling the gloom. You cast over to the consumers. Consumers have just been belted with rate hikes and that's why that's why they're pretty devo and that's really what they're responding to. They like rate hikes as much as plagues. 

Adam: [00:08:45] As pandemics. 

Thomas: [00:08:47] So yeah, so so that's.

Adam: [00:08:50] But rate hikes hit business too, don't they like or not as much. 

Thomas: [00:08:54] Not as much you would think. Yeah I wouldn't, I wouldn't think so. I mean I don't really know how to compare those two exactly, but I wouldn't, I wouldn't have thought so. I would, you know, because it's different households. It's really hard to compare. 

Adam: [00:09:09] But for Tony Wendy's house.

Thomas: [00:09:15] No, but I mean for your view, Representative household mortgage repayments are a big chunk of the weekly budget. Hmm. Capital costs are not on an I don't have hard data on that, but I imagine a much smaller percentage of expenses for a business. So yeah. So yeah, I don't know. But I mean they're seeing that, they're seeing that in the forward orders. The forward orders is interesting. So that's, that's holding up. So like it's not that they, they've got a good vibe about the future, they're seeing it right now in their order flow and they're doing pretty well. But we will start to see the customers that started the businesses like the B2C, the B2B business, the consumers. They're going to have to they're going to have to see some sort of pull back. We saw that. We've got some new reporting season, said JB Hi-Fi, I think, last week saying that, yeah, they're noticing customers are being more cautious than they were this time last year. January sales grew just two and a half per cent and JB Hi-Fi in January was flat at the good guys. Yeah, so we are I think we will see those consumers, I think particularly consumer discretionary, like you look at essentials like grocery prices are up 10%. So you've got rate hikes rising, you've got the essential prices rising. Both of those are eating into what would normally go to discretionary consumer spending, which is where, you know, JB Hi-Fi businesses in that space are going to have to see some softness going forward. You can't have consumers being that pessimistic and that not having an impact on consumer discretionary. I just can't see that happening for the rest of the economy. Business is still looking pretty, pretty, pretty happy. 

Adam: [00:10:57] All right, Tom. So apparently half of all loans have breached their buffers. What are we talking about with buffers? 

Thomas: [00:11:02] Yeah, So we've got an update from Westpac last week. I don't know if you heard of Westpac. They're a fintech specialising in developing services. Yeah, they had this interesting stat that half of their loan book, almost half, 45%, is at the point of breaching their buffers. So when banks assess a serviceability for a mortgage, they put a buffer, there's a buffer there. So they take the current interest rates that they're offering and then they add a buffer, which was about 3%. Yeah. So, you know, if interest rates were 2%, they're assessing you at 5% and then looking at your finances and your bank statements and going, can you afford a mortgage at 5%? Right. So that's that's the buffer. It was quite interesting because before COVID, we had a 2% buffer, but we also had a 7% floor. So it was whichever was greater, the banks had to assess you. So it was either current rates plus 2% or it was a 7% floor, right? 

Adam: [00:12:04] So you always had to be able to afford a 7% mortgage regardless of what the rate was. 

Thomas: [00:12:11] At least. But then when COVID came, they did away with the minimum floor and it kind of made sense at the time because interest rates were 2%, so you were effectively making the buffer 5% which seemed, you know, potentially unnecessary. But in hindsight maybe not such a great move. They scrapped the 7% floor and then just had a two, two and a half per cent buffer and then increased that to a 3% buffer. So that's what we've got now and that's what other banks are looking at you when they're doing your serviceability. But the thing is we've just had over 300 basis points of interest rate hikes. So we've now had for some borrowers who were assessed at around 2% because that's what the market rate was back in 2019 and 2020. Oh, sorry. Yeah, sorry. Post-COVID it was around 2% so plus 3% gives you 5%, but we've just had that 3% given to us from the RBA, so we've now blowing through that buffer. So what you've got now is you've got borrowers who could afford 5% when they got their loan in 2021. Yeah, and now looking at an interest rate that's, that's higher than what they were assessed on. 

Adam: [00:13:19] Yeah. Right. Because the banks were like there's no way it's going to go up 3% any time soon. Yeah. And Phil Lowe was Oh baby. And then quack, quack, quack, quack, quack. And here we are. But finally, this is a result of the fastest kind of rate rise or whatever you call it in economic times in history. So now we've, we've breached the whole with breached our buffers. 

Thomas: [00:13:45] Yeah. Yeah, that's right, That's right. So guess what? ANZ, Shayne Elliott was saying that yeah, the lowest rate they ever gave anyone was 1.94%, right on a fixed rate. We assumed rates would go up to 5.25. We're about where we were at that now. So we're at a very difficult pivot point going forwards. If rates keep going up, we're now looking at, you know, that's more than what some borrowers were assessed on. Right. But what I found really interesting was that there's four for Westpac, it's 45% of them of their loan book, you know, So like a lot of I would imagine, you know, Westpac big name, there's a lot of p I would imagine there's quite a few people at, you know, the majority with Westpac have had their mortgage for five, ten, 15 years or something. Yeah, but 45% had had it between 20 2020, between 2020 and now. 

Adam: [00:14:46] Oh, so is that what they're saying? Like it's 45% of what, so 45% of their loan book they took on in the last two years? 

Thomas: [00:14:53] Yeah, yeah, yeah, that's right. Since Covid. Well, so between August 2019 and June 2022, some 2022. So right about that. 

Adam: [00:15:04] So this one is Westpac, the only one I mean, this would be this should be should be kind of reflective across the board, right? 

Thomas: [00:15:10] I would expect so. I would expect so. I don't I haven't seen this that reflected for the other banks. Um, we haven't heard from all of them yet I don't think. But yeah. I would imagine that's representative and it probably talks to a bit of churn in the mortgage market. So people shopping around. 

Adam: [00:15:28] The Well I'm doing that right now. I've sort of started having another look at that lenders because I think it's competitive as well as some Some of them are offering deals and cashback and cashback. Companies are giving you 100,000 points and all sorts of things to factor in. 

Thomas: [00:15:43] Yeah, I refinance the other day I got $3,000 cash back. 

Adam: [00:15:47] Did. Yeah. Oh good. 

Thomas: [00:15:51] Paying 7%. No, I mean it's interesting. Like, I think it's interesting because like, you know, the question is the quality of the loan book and this is this is what blew up in the in the GFC global financial crisis in America is that people realise that the loan book for the for the big banks was rubbish and it had all these dodgy, you know, bad debts on their on their hand. 

Adam: [00:16:15] It doesn't mean though necessarily that people are in mortgage stress yet, you know, like it's just that they're, it's just like it's all numbers on a page at the moment potentially where they say, well we assessed them at this march and we gave them a loan. We had a buffer of this much. Just because it's now beyond that buffer, it doesn't necessarily mean they can't make their repayments. 

Thomas: [00:16:38] No, no, no. That's right. That's right. And there are options. There's always options that the banks can do like you can move on to interest only if you're on a principal and interest rate mortgage, for example. And you can take a bit of a breather and just hang out on interest only, or you can extend the loan term and that reduces your weekly payments. So there's still options. We're definitely not in a danger territory here yet. And they're definitely, you know, but the banks are provisioning more against bad debts. So that's starting to happen, you know, and if it goes on for a long time, then it might become a problem. But it's Yeah, but I just thought it was just really interesting that it's that much of the loan book is that recent. So it does mean like what happens in the here and now can have a big impact on a on a big bank like Westpac potentially. 

Adam: [00:17:28] Yeah. Right. Another option of course is you could join the class action against Philip Lowe. For false advertising when he said interest rates wouldn't rise for 2024. That's another way. Maybe you could talk to your bank about pausing your requirements pending an outcome of this class action for which you joined the Facebook group in favour of people against people for Philip Lowe or whatever it is. I heard he's retiring at the end of the year. 

Thomas: [00:18:05] Yeah, his terms up. I think he's done it for his full stint. 

Adam: [00:18:10] Mm hmm. We've had lots of fun with Phil. All right. Let's take a break here. We'll be back with more comedian versus economist right after this. Welcome back here on Comedian versus Economist. And if you're enjoying the show and you like what we're doing here and across Equity Mates media, then we would love it if you took some time to fill out the Equity Mates community survey really helps us understand what you enjoy. What you don't enjoy helps us kind of tailor some of the content that we do on this show and right across Equity Mates media. So yeah, get on to equitymates.com, you'll find a link to the survey there. You can go into the draw for a chance to win $500 as well as tickets to FinFest happening again this year. So head over equitymates.com for all of the details. Thomas We got a really interesting email this week from Zane and Zane. Send us an email cve@equitymates.com and I'm going to read the whole email because I'm not sure I'm going to do it justice if I don't. I had an interesting idea this week that I wanted an economist to help explain, to explain why it wouldn't work. And it's one of those things that just sounds like a good idea. If the reasoning behind interest rate rises is the blunt habit of slow people spending because borrowed money is expensive, would it be better for the people out here who have borrowed to buy homes? If there was a way the Reserve Bank could make the repayments increase the same as they would if the interest rates rose, but that amount was paid off. The principle of the loans. This has two positive effects. The borrowers still feel the same effect with higher payments required out of their pocket. And to the longer it goes on, the healthier the bank's loan book looks because the AVR ratios all improve. So saying interest rate increases means the banks make more repayments, increases borrowers get safer over time. Sounds great. What's the reasoning why this would never work? So my understanding is essentially what he's saying is we're going to raise rates or the kind of the rate of repayment the people will have to come up with, but not actually raise the right underneath. So they just have to pay more, which curbed spending. But in the same way that raising rates would, but without the penalty, like without being punished. And so you still you actually end up paying a lot more off your loan. You pay it off quicker. So is that kind of the idea?

Thomas: [00:20:35] Yeah, I think so.

Adam: [00:20:35] To summarise that. Well. 

Thomas: [00:20:37] No, but no. But you know, it's a ballpark figure. Yeah, I think, I think I think that's the I haven't heard this idea before, but it's an interesting one. Could it work is two parts of that Look, is it, is it possible. And I think the short answer to that is everything in economics is possible. Everything in the economy is a construct we've just made up. Made it up is no natural laws. We can really do whatever we want. Yeah, So they said the really question is do do we want to do it? Every choice has consequences. Said we do. We want to deal with those consequences. 

Adam: [00:21:12] By choosing to record a podcast with the door open means you have geckos, for example. These are some of the consequences that we. Live with. 

Thomas: [00:21:21] No, All the windows are shut and it just. Got really noisy geckos. 

Adam: [00:21:27] Right? Yeah. Okay. So it's all made up. 

Thomas: [00:21:29] Yeah. Yeah. So you could do it and I could imagine there is some mechanism it would probably go through APRA. That means there's some kind of special levy that needs to be paid and gets, you know, can go up and down or can become negative, positive. And you know, they could they could use that as a lever. I could you could have mentioned something like that. And on the face of it, I think it could work. We we are trying to to slow consumer spending.

Adam: [00:21:55] And we're just trying to then control like my my problem with this argument with this model is that I don't want to be told what to do with my money. Like you kind of saying, well, forcing the repayments to go up like you just making it feel painful without it actually being painful fun. But then I'm just like, Well, then don't do it. Like I don't want the pain, you know? Like, I feel like that's like a I guess it's a bit like super. You have to pay super. 

Thomas: [00:22:24] Yeah. Yeah, that's right. I mean, you know, I feel about that about interest rates going up. Interest rates are going up right now and it's just like, wow, this is just money out of my account just because someone's decided, Yeah. 

Adam: [00:22:35] But I'm on team Phil and I believe in his vision. To curb inflation. No, I guess that's right. I don't I don't really understand. Maybe it's not. Maybe it's the wrong approach. As you say, it's all made up, but he's just making up. Or the RBA is just making up interest rates. They're making them go higher just cause. Well, with the plan, obviously it's interesting. 

Thomas: [00:22:56] Like the reason why we have interest rates is because it affects everyone. This sort of a fairness dimension to it to some extent that, you know, if we, if we raise interest rates, that increases homeland rate. So that affects households, but business capital costs go up as well. So they're sharing some of the burden. They're slowing some of their activity. And and really like the official cash rate, which is what the RBA says. That's certainly a benchmark rate for every interest rate through the economy. And the reason why we had such an epic share price boom coming out of Covid when interest rates hit the floor is because the cost of capital all through the system fell to effectively zero or close to it. And so too, it's not just like we we focus a lot on households because, you know, we get the idea of a mortgage holder and everyone either has a mortgage or knows someone who has a mortgage. And so it makes good front page news. But it's not that we're not specifically trying to target mortgage holders. You know, explicitly. That's not the goal to sort of punish mortgage holders. And that would it would be a bit weird to sort of single out mortgage holders. Really what you're doing is something like are we just going to increase the cost of capital for the entire economy? And mortgage holders are just one group that's going to feel that that impact. 

Adam: [00:24:21] But I guess but they're the group that feels it probably more than most, you know, like. We can't where you can't where you can't write off your. Losses as a household. You got some bad debts as you just write those off. But you can't have my house. It's still running operation. It was still running. So this is where we really where we run swimming and Nepal and also it's from central. Central operations. Yeah. 

Thomas: [00:24:55] I mean there is an interesting point in the sense of like where you work the interest rate lever, you get a big impact out of the house, out of mortgage holders because it's a big chunk of their weekly budgets. And so it does have a big effect on spending. But that's not true for wealthy households. For wealthy households, their mortgage repayments are very gentle, tend to be very small proportion of their budget. And when interest rates go up, it doesn't have a big impact on their on their consumption because they have quite low marginal propensity to consume because they're quite wealthy and they just buy what they want. And if there's more money left over than they just invested. Hmm. You know, like a very broad brush brush picture in a way. Sort of The weird thing about interest rates and using interest rates as a lever is the people who are most responsive to interest rates are lower income people, right? Because they really feel it. You know, it cuts back on their spending. It wipes out their discretionary spending and then in worst case scenario, gets into their essentials. They cut back on essentials. And that's not happening for higher income people. And so we're you know, they're kind of at the at the extreme wealthier people are sort of immune to interest rates, although all that changes is with the course of their investments and their wealth creation. It's not changing their day to day spending. And so if we're trying to if we're trying to cut back slow spending, then we're really putting all of that burden on lower income people and asking asking them to shoulder that burden. And when rates go down, this is sort of the story we're trying to, you know, induce just to spending. And people, lower income people have a higher propensity to consume and they get free, more disposable income. But we're really trying to steer the entire economy on a rudder, build out of poor people effectively. That's a bit weird. 

Adam: [00:26:51] So what's the alternative, then, If if interest rates is a pretty terrible lever, as you just described, what's the what's the alternatives? 

Thomas: [00:26:59] I don't Know. I don't know that there is. And the inequality dimension to it is that one of the one of the benefits of being wealthy is that you don't care what the government does. You don't care what happens to interest rates, it is not going to break you. You what happens with tax rates doesn't have a huge impact on you. You get to live the life you want and it sort of changes how much is left over at the end of the day. But it doesn't really impact you, your day to day decisions. You're not thinking about it. And so. It's the unfortunate situation that anything that's going to cause wealthy people to change their behaviour, their spending behaviour is going to wipe out poor people. Like it's anything that big is going to have an intense impact on poorer people. 

Adam: [00:27:46] But couldn't we just tax rich people?

Thomas: [00:27:51] In theory. Yeah, but been there. Bit of luck at the gig in like, what are you going to do? Like, they're not going to really, you know, you increase the income tax rate to five basis points or something. It's not going to have a big impact on their spending decisions because it doesn't. Not, not, not not enough to sort of shift the whole trajectory of the economy. 

Adam: [00:28:17] But well, if you tax them enough, like everyone's got a threshold.

Thomas: [00:28:22] Sure. Yeah. Yeah, yeah, yeah, yeah. We could set up a 60% marginal tax rate and, you know, yeah, it's still low over the ATO and you just like monthly board meetings at the ATO. 

Thomas: [00:28:37] High marginal tax rates going up to 55% this month. Inflation's getting out of hand. 

Adam: [00:28:42] There must be something we can do to kerb spending of wealthy households. Surely we lock them up. You add that on Tuesdays and Thursdays, if you were in over, if you in over $300,000 a year. And your number plate ends in an. Even number, you can go shopping on Wednesdays. Like, you know, we keep water usage. When we had the. We had the drought everyone on board In. 

Thomas: [00:29:20] Yeah. Look, all things are possible in economics. Yeah. You know, maybe something a bit Stalinist like that. My mind flood. I wouldn't. I'm not imagining reality. 

Adam: [00:29:31] Well, the trouble is, you go online shopping now. 

Thomas: [00:29:36] Rich People have found a way, again. 

Adam: [00:29:37] With their Internet, they're probably got, like, the top plan. You know, they're getting to 56 megs download spending faster than the time to render. Hey, do we go to the intersection of the economic community where we go to for answers? Or is it all just nine something we really do? You know, think about it. Well, I think I'll ask around. Well, crunching numbers for you To crunch some numbers and find out if we got Any answers. 

Thomas: [00:30:15] I can't really think of something that we don't lean on poor people. And it's just simply because poor people are more responsive to broad policy things. So unless you, you know, specifically go out and slash the tires of BMW or something less. 

Adam: [00:30:32] No financial advice. Yeah, well.

Thomas: [00:30:36] Let us know if you've got any ideas about how we can shift the trajectory of the economy without leaning heavily on poor people. Not to hear. Slashing the size of the rich. 

Adam: [00:30:50] All right, Thomas, to finish off this week, finally, we've got some good news. What is it? 

Thomas: [00:30:56] Hmm? You know, we love an Aussie battler here at Comedy vs Economist. 

Adam: [00:31:00] We sure do. 

Thomas: [00:31:01] Yeah. So some good news for Aurora. We know our Aussie company all listed on the ASX shares pumped last week, up 14.5% on Wednesday. I think it was, and then it closed the week about 20% higher, huh? So yeah, pumping along that they reported their results, announced the 8% increase in net profit after tax in the six months ended December 31. The other big thing is the announced that in the last three years they've added 200 customers also, so the uninsured. 

Adam: [00:31:37] And so it was at some sweet margins because of course. We haven't told people what they do yet. so they've just got this company by about 200 customers. It's like it's a stall. The markets, what does Aurora do? 

Thomas: [00:31:57] they make beads and dream catchers. 

Adam: [00:32:02] Healing crystals? 

Thomas: [00:32:03] This is they're a they're a can maker on board. Yeah. Actually bottles beer cans are that kind of business.

Adam: [00:32:10] Still 200 customers is not a lot.

Thomas: [00:32:12] No but I think they're big volumes like know it's it's. 

Adam: [00:32:15] So they sell to like I don't know forex or. 

Thomas: [00:32:17] Someone something like that you know. 

Adam: [00:32:19] Breweries or whatever it is. 

Thomas: [00:32:20] Yeah. Yeah. Something like that. I wouldn't say so. Yeah. So I think 200 customers is quite a big deal. Yeah. So they've been pumping long, their volumes are up 10% of the six months to December. So I. 

Adam: [00:32:32] So. 

Thomas: [00:32:33] Wouldn't they, they just make the cans and the bottles for, for Yeah. 

Adam: [00:32:37] For this doesn't. Seem like a new Idea. This cheeky young start up came along and said you know what, we're going to make cans and bottles, we're going to put drinks in them. 

Thomas: [00:32:54] But not now. Well, what you. 

Adam: [00:32:56] Mean for drinking sex is right. Get rid of your Delia Gallagher. Go to Ken. Put down your mead. Right. Yeah. 

Thomas: [00:33:17] No, but what they're saying is that they're really they got ahead of the curve with small cans. So there's this thing and there's been a big shift towards 250 milk cans, particularly for soft drinks, but also for Seltzers. Pre-mixed spirits and craft beers are even going in. The smaller. 

Adam: [00:33:36] I've noticed that the big can has gotten smaller. I thought it was just shrinkflation. I thought it was how the packets of chips went from 50 grams to 45 to 40 or whatever. And we all. Had the copper because of inflation. So I didn't realise that. What? Is there another reason for that small candidate? 

Thomas: [00:34:01] Well. This is how it got reported in the AFA. I think it's saying like it's that. Yeah, these small cans are lighter and more convenient for millennials in Generation. Z and just feel like, well, I don't. 

Adam: [00:34:18] I lift heavy cans. Yeah. this Is the result of 24 by seven gyms. People are, people are going to the gym more like back in my day, the only bicep curls you did. Was with a bunch of them. You can get to the gym at night time, etc. and drag. 

Thomas: [00:34:42] But I reckon this is like, you know, like with the tiny home movement movement in quotation marks. Yeah. Like they said, like all your millennials just prefer the minimalist lifestyle. It's like, no, they're living in caravans because the housing market has so fundamentally failed them that they can't afford homes. Yeah. So I kind of feel like, is this just us going like, yeah, millennials prefer less beer to more. And we're giving it to them because. 

Adam: [00:35:11] The six pack is as shrunk as well. It's no longer a six pack, it's a for our right. It's four pack of smokes. You not going to get a carton going to one beer and it really is what it is now. Yeah.

Thomas: [00:35:31] Yeah. So I reckon that is a bit of shrinkflation. I reckon it's know firms getting away with offering a bit more.

Adam: [00:35:38] I also heard that they like see the ability to decorate a can. It's far as far as like there's a shift towards cans over bottles too. So not only are we sort of shrinking, we're not just shrinking cans, we're getting rid of bottles. Moving away from bottles. 

Thomas: [00:35:54] Yeah. Well, I don't know about that on a, on a whole level, but definitely a role is saying that. They're saying like huge demand for cans. It's all about the cans now, right. Yeah. 

Adam: [00:36:04] I don't know. Maybe it's like an Instagram thing. Like the ability to decorate cans is important.

Thomas: [00:36:09] Like, what do you mean, What do you mean? Decorated can. 

Adam: [00:36:11] Like, put pictures on the can. It's easy to do it on a can than it is to decorate a bottle.

Thomas: [00:36:16] Like when you get home.

Adam: [00:36:19] And you know not for the favour of making the drinks. Oh, okay. Yeah, right. 

Thomas: [00:36:29] Is it not? I know. Apparently, no matter what I said. Yeah, really. 

Adam: [00:36:36] It was never, it was never a consideration for me when I don't drink a lot anymore. But when I used to, it was never a consideration. What. What it looked like. It was very much about what was inside. And I don't know if this is a part of the Instagram generation where, you know, the same reason that we have we have mirrors in the headphone section at J.B Hi-Fi now. But I never have. Oh, right. I was never worried. I was never worried. A great deal about what my headphones looked like. When I was listening to music, I was just because I wanted to listen to music. Well, I guess also we just we just again, we just assumed that the headphones looked ridiculous. They did back in the day. Those wide things With that little foam. 

Thomas: [00:37:22] You know, and the other interesting things I saw here. So Endeavour Group's CEO Steve Donoghue, he Endeavour group do them if he's in BWC, they're saying their fastest growing product is the Suntory 196, a pre-mixed spirit made from vodka, soda, lemon and a fermented liquor called Shoji. 

Adam: [00:37:40] Yeah, good. That's good. If people are worried about ChatGPT and it's going to take it all. These jobs, I don't even know what a drink is anymore. Like, shochu kombucha. Seltzer people would Very good. I think I'm. I'm now feeling old. I'm officially feeling old. Because I don't know what Suntory is. 

Thomas: [00:38:09] I mean, if it doesn't end like. Oh, it. Sounds terrible. Uh, to tune in next week for more old men complaining about things. 

Adam: [00:38:22] All right, let's leave it there. Thank you so much for tuning in. I would love it if you left us a rating and a review wherever you get the podcast. Also, don't forget about the Equity Mates survey. It's your chance to have your opinion on what we do here and right across Equity Mates media. Thank you once again for tuning in and we look forward to talking to you again next time. Bye for now.