C (2:09)

Yeah, that'd be the worry for the Reserve bank that we're trying to build a lot of homes. Constructing homes is fossil fuel intensive. So there will be a lift, there will be continuing lift. The electricity price story that we've had for the last two or three years, electricity inflation fell to 26% from 37%.

A (2:30)

So can you unpack that for us? Because elsewhere we're hearing that there's, you know because of so many more renewables in the grid that electricity prices are starting to ease, but they're still inflating, just inflating at a slower rate.

C (2:42)

This is because of all the subsidies that have come out over the last four or five months, the federal and state government subsidies. Electricity inflation is still highest in Brisbane at 41, 44%. And that's because they had such large subsidies up there. For instance, we actually see electricity prices negative from around the middle of the year. But because of the way inflation's measured, it's just gonna take some time. Another thing, one of the big stories, big economic stories in the last 12, 18 months with the Trump administration has been the huge ramp run up in gold prices. I know you love a bit of bling, Jackie. Jewellery prices are up 20% over the past 12 months. That is a direct impact of the surge in gold and silver prices. And another thing that might catch your eye cause you love a bit of steak, beef and lamb prices are climbing at more than 10%. That is also because of the US the demand for red meat out of the US because the American cattle herd has fallen because of dry conditions over there, we've been able to supply a lot of cows. But that also means that the price of your mints and your steak have gone up as well by a fairly chunky amount.

A (3:56)

Those Americans, apart from everything else, are taking all of our beef. And this is despite tariffs.

C (4:02)

That's despite tariffs. And you know, I love an Australian cow, but Americans love them even more at the moment.

A (4:07)

Yeah, ok. They're good cows.

B (4:09)

Quality beef.

A (4:10)

Paul. These figures are out obviously two weeks before the treasurer will deliver his federal budget on May 12th and obviously the RBA decision. So the Reserve bank meets next week and they look more likely than not to raise rates despite, you know, this result. Does this inflation result make the treasurer's job even more difficult? How's it sort of playing into the budget prep?

B (4:32)

Well, you could barely. I'm interested in your view on this, Shane. You can barely recall a RBA decision that's trickier than the one they have to make next week. On the one hand, inflation had been rising even before the war, fuelled in part by government spending, but also higher business investment and other factors. And so the RBA was, you know, in the minds of some of its critics and economists behind the eight ball on tame and inflation before the war. Now we have an inflation crisis fueled by factors totally outside of the hands of the Australian, any Australian consumer which has caused a consumer confidence hit to its lowest level in a long time. And the rba, because it only has one lever to pull, is considering raising rates again, which could make the consumer side even worse to deal with the inflation problem that already existed but has also got worse.

C (5:21)

Who wants to be a central banker?

B (5:23)

And they're already split 54 on their last decision. Can you remember a more difficult rates decision than the one next week?

C (5:29)

Shane, in terms of difficulty, the 2007 election decision when the Reserve bank lifted interest rates two or three weeks out from an election that was a particularly tricky one, 2019, where they decided not to cut interest rates just before an election and then did it straight after. That was also a tricky one. This one. It's tricky because it's not the politics or the budget that's to one side. It is the fact and you've touched on it the fact it was a 54 vote. There were four people around that table last month who said let's hold on, we're not sure how this war's going to play out. We may have to make some tougher decisions down the line. And if you read the minutes of that meeting, all nine said, yep, much depends on if the war comes to an end, then yeah, we'll continue on tightening monetary policy. But they know six weeks on there is no one in the world who thinks that this war is over. Like in the last 72 hours the price of oil's gone from about 95 to 120 a barrel. That means it's getting worse and tougher and so the bank has to decide what can we do that high oil price is going to hit consumers. You've touched on that. Which means a slower economy, which means adding more interest rate pain may actually hurt the economy in a really long lasting way.

A (6:56)

Yeah, it's such a tricky decision as you say and it's an invidious sort of set of circumstances. Shane, we already know a fair bit about what will be in the budget and this is par for the course that, you know, governments always kind of leak out or talk about foreshadow the measures that they're going to take. We know there are going to be big, big deep cuts into the ndis. We know there are going to be tax changes around investor perks, CGT and negative gearing changes. Is there anything else major things that I'm missing there? We know there'll be probably extra defence spending. What other measures do we already know about?

C (7:29)

We know a bit around say infrastructure spending. Just this week Anthony Albanese was over in Western Australia and handing out half a billion dollars to some infrastructure works around a very large new port project that's going on there. There's been some money flowing in terms of housing, which housing and tax are just going to be so central to this budget. The NDIS announcement last week was such an unusual budget framing device because look at us, we're slashing and burning spending in an area that affects so many people. That's unusual. But I think they have still held back a fair bit, partly because of what's going on with the war. That's clouding a lot. You've got Albanese doing a lot of petro diplomacy around the region and the final decisions on the budget haven't been signed off. They'll be signed off in the next couple of days. So there's still a lot that we don't know.

A (8:28)

Yeah. Okay. Paul, I'm interested in the framing because at the moment the government's trying to frame the budget very much as an intergenerational equity sort of argument. And I know there are a few other key themes that they want to get across. But you know, they're sort of talking about the fact that young people in particular are very disaffected within this economy. They're more likely to be affected negatively by disruptions to the economy. And of course in housing, it's sort of the big number one thing that makes people feel really bad about their lives, that they're locked out of something that their parents and grandparents were able to do relatively easily. What's the framing for the budget? I think there's a dreaded five planks kind of thing.

B (9:09)

Yeah, maybe I'll turn into a government spokesperson and give listeners the five planks just after the first part of my answer. But you're totally right. The government is framing this as a moment where it will attempt to tilt the balance back in, or at least more in favour of younger generations of Australians who, you know, many economists and Shane and Ken Henry and various politicians have said for years and years, have had the rough end of the stick for a long time and maybe worse off than their parents generation, which is a kind of break in the social contract. The framing has been fascinating because intergenerational equity is the buzzword that, you know, it's been floating around for years. The Prime Minister started off the year talking about it once he shifted off from Bondi, but the government's put a new frame on it to make the intergenerational equity argument fit the current moment with international headwinds and a sense of crisis and they've put this new tag, resilience, around the intergenerational equity component. The resilience frame also takes in supply chain reform and fuel security. But they're wrapping the tax reform agenda with this resilience framing to suggest to the public that we're in a time of crisis. The country feels frazzled, populists are on the rise. People feel like the system needs an overhaul and that one way to make the country more resilient, outside of what we can do to secure supply chains, which have clearly been exposed once again, is to make sure that people in the suburbs and younger Australians, people struggling to get by, feel that they have a greater stake in the economy and have a sense that the future might not be as grim as the last 10 or 15 years, when living standards have been pretty flat. So this new framing has come over the top of the intergenerational equity framing to add a component that makes it more relevant to the current moment.

A (11:02)

Yeah. So, Shane, they're talking there, really, about resilience of our democracy because normally when we talk about resilience, I mean, it's a bit of a government buzzword, isn't it? But I take it to mean more talk about fuel security and, you know, economic security and being more independent in terms of particularly our energy supply. But what Paul was just talking about was more like the resilience of our very democracy and our very democratic system and our social cohesion. Because if people, particularly young people, feel like they're locked out of certain parts of the economy, then they're going to become disaffected. And that breeds. Yeah, a lot of social conflict, I suppose. Is that what you're taking?

C (11:41)

Yeah, it's been interesting how. Because intergenerational equity, that term. Chalmers used that right at the start of the year and it was. It popped as this is. This is the start of the side. And you've seen Albanese really lean into the social cohesion argument came out of

B (11:58)

the extremely exciting roundtable last year.

C (12:00)

Out of the roundtable. And we're going to see elements of that in the budget, which is also intriguing to see what they pull out. But I really want to deep dig deep into why young people are so utterly pissed. And it's understandable. So we're doing a story on, say, negative gearing. So back in 99, 2000, when the CGT concession was introduced, there was about 109,000 people under the age of 30 who owned one rental property. 25 years later, there's 95,000 of them now. The population's grown 40% but the number of young people who have found their way to getting to own a rental property has actually fallen over that same period. The number of people who are 60 or more who own at least one property has increased from about 120,000 to 600,000.

A (12:57)

And is it possible to say what the reasons are for that?

C (13:00)

Because young people have been utterly priced out of the market. So, right, this is what's gone on with when like the average mortgage has increased about fourfold over that period. In Sydney, the average mortgage is now 750, 60,000 somewhere in there. In Melbourne it's about 600,000. When I was a young fella, mortgages were over 20 years and then the banks started to having to as the price of housing went up and people had to borrow more. The average mortgage now is 30 years because the repayments are unaffordable at 20 or 25 years. So that's what's going on. Young people can't get a like have looked at buying a house for themselves, let alone a rental property to make some way into their future. That's why they're so angry. And so I like my understanding about the budget is also that. And it goes exactly to where, where Paul's been speaking, that the government is aware that the anger, the populist anger on the right and the left is being largely driven by the anger amongst people about where their standard of living. If you're older, it's. Things aren't the same. If you're younger, it's because you've got no way getting into the system. That's what's happening.

A (14:18)

Is that really Sisyphean, dare I say it, feeling that no matter how hard you try, the system's always gonna outwit you and the system's not working for you. I'm interested. I mean we can talk about high level framing and sort of like meta arguments and stuff and I'm sure that that's really fun. But you know, when it comes to actually pitching this and selling this to the Australian people, and I'm talking particularly about the tax changes, I want to ask you, Paul, how you think the government will do that because we've had former opposition leader Bill shorten on this podcast as an honoured guest a few times and he's talked about the huge tax pitch he made for the 2019 election, which was famously unsuccessful. It failed badly. How are they going to go about selling these tax changes in on a retail level, given that there will be a big backlash and the coalition is already sort of foreshadowing its criticisms of those tax changes.

B (15:11)

Yeah, there no doubt will be a big backlash. I think it's important to note that, just to acknowledge that the government is going ahead with these tax reforms, which we are very confident they will, even with all of the insanity going on in the world. It could have been the case that given everything else going on, they pulled back, said, now is not the right time, voters aren't ready to have this public debate. But they've actually proceeded and we know the Prime Minister's made up his mind on that and Treasurer Jim Chalmers was absolutely keen to do reform. So that should be acknowledged at the outset. And that's a. That's. They should get credit for that. The framing is already looking different to 2019, when Bill shorten took this massive tax package to the election, was successfully framed up by Scott Morrison as running effectively a big class war. There was a class element to the argument. Shorten argued that the big end of town was running off like bandits and the rest of the were on the back foot. Albanese, despite being from the left of the Labor Party and Shorten, being from the right, learnt very pointed lessons from the shorten expedition and has dropped all the class war language. He's always talked about, you know, the country moving forward as one and leaving no one behind. But he hasn't sought to divide in the way he's talked about economic justice. And I think using the framing around populism being on the rise, people feeling frazzled and that being the argument for making change is more compelling and more saleable and better able to fend off the scare campaign than a class war argument.

C (16:41)

I was just going to add, they've been using this term around we want to give young people a toehold into the property market. Now, that is a difficult argument to. That's a difficult case to oppose. I'm not seeing Tim Wilson standing up saying, no, we shouldn't be difficult finding a way for young people to get into the property market. The argument is how you do it. So that's when we talk, when politically we talk about framing a narrative. That's a good example of it.

B (17:08)

And we have no. It's not clear if the capital gains changes and negative gearing changes in combination will have a hugely material effect on the housing market. Supply is the bigger issue. They will be symbolically very important and might cause between something like 1 to 5 or 6 or 7% on house prices. So that's not going to fundamentally change the housing market. But It's a start. And with some more movement on supply, maybe it is the start of a positive development on making the housing market fairer. But as you say, the coalition is trying to expand its voting coalition and not just pitch to asset owning boomers who are, you know, slowly becoming a dying's the wheel.

A (17:51)

I also say they're dwindling as a voter cohort.

B (17:54)

And so if they're boxed into a really vociferous campaign against this push from labor to make the housing market fairer, they risk narrowing their voting coalition. But on the other side, labor has tried and failed to do this over the years. So there's risk on both sides.

A (18:08)

And I mean, so far the coalition signalled pretty clearly, or Angus Taylor, I should say has signalled pretty clearly that he's going to oppose any changes to capital gains tax and negative gearing.

B (18:19)

Yeah, not all his colleagues are sold on that though. Jack, there is a really healthy debate on that, which is fascinating.

A (18:23)

I know, it is really fascinating. It's hard to see how Angus Taylor as the leader will be able to climb back from his opposition to those changes. But as you say, there are elements, younger elements within the liberals who think maybe they should take a look at them. Talking about populism and Angus Taylor, just to take a bit of a swerve, he very much nodded in that direction this week when he made some comments about welcome to country ceremonies or welcome to country greetings being overused. This was after, you know, a lot of people saw it as a bit of a dog whistle because he was asked about the disgraceful booing of welcome to country at some of the Anzac Day ceremonies around the country. This welcome to countries being overused idea is not new. It's something that Peter Dutton brought up bizarrely in the last week of the election campaign last year, and famously it didn't work for him. It was part of a famously terrible election campaign which had a disastrous result for them. I'm just wondering, do you actually think this stuff works for the coalition? Because, you know, labor does steers clear of culture war stuff, but the coalition seems willing to lean into it.

B (19:30)

Yeah, it's such a hard question. I wouldn't discount the extent to which this feeling is. I don't know if the word widespread is right, but it's easy to discount the views of the community on this and suggest that it's a very narrow sky news watching cohort who has this feeling that welcome to countries are overused. I suspect it's a bit wider than that and that there is a genuinely large, maybe not majority, probably not majority view in the community that welcome to countries have been overused. Now, having said that, is it where the Liberal Party wants to be talking about issues like this regularly? Probably not. They're on one nation's patch talking about this stuff. They'll never be as hardline talking on race and indigenous symbolism and migration as Pauline Hanson. They elevate those issues when they talk about them and probably actually shift vote in Pauline Hanson's direction because she is the emblem of these talking points. So they're trapped in one sense, the coalition, because they know that a significant part of their voting base is really animated by these issues. They are, you know, held by people who in the coalition's mind would not be, you know, the coalition would not view all voters who hold these views as racist, who should not be pandered to. They would see it as a more mainstream view than that. So they don't want to dismiss these concerns. They don't want to be talking about them all the time. How do you strike the balance? How do you do it in a way that doesn't turn off, you know, voters in the centre and teal voters and labor voters who are up for grabs? It's really hard. And that's why they're polling in such a poor position, because they haven't been able to answer these questions.

A (21:10)

Yeah, I just think there's. The jury is out for me over whether this culture or these cultural issues, even if they, as you say, they chime with a significant issue proportion of the voter bloc, whether they actually work for the coalition overall, because we don't have any evidence that they do. On another tax proposition that was also maybe a little bit populous, but from the left, Shane, this week the Prime Minister categorically ruled out any idea of taxing offshore gas exports, didn't he?

C (21:42)

He ruled out a gas tax on existing contracts, which is a very different issue.

A (21:48)

Yeah. So let's get into that. How definitive was his ruling or ruling in?

C (21:53)

Well, I point to the fact that he just flew around all of Southeast Asia with some of our biggest consumers of Australian lng, where he made sure saying we're no surprise, no surprises coming your way. This is the diplomacy. We want their refined fuels and their fertiliser. They want Australian lng, especially with Qatar, a very large LNG producer, out of the market because of the war in Iran. So that's the real politic, the people saying, especially on the left, saying, let's just tax everything going out, don't have to worry about the fact that Malaysia or Singapore might say, well, you've done this to LNG might be difficult. You're getting another boatload of diesel or fertiliser or unleaded petrol. That's really what's going on and that's how it's been explained to me that there is a case and you might be able to do it on uncontracted gas, because that belongs to no one and that's open. But if you've got a contract, you can see the leaders of Malaysia and Singapore and South Korea and Japan and China saying, we've got a contract. Honour it and we will look after you. This week, Penny Wong is in China trying to make sure we have access to jet fuel. LNG will be part of that conversation, making sure that we are a reliable and relatively inexpensive supplier of something that's really important to them.

A (23:21)

Yeah. And the reliability is so important for investment. Paul, Politicians always say they don't want to play the rule in or the rule out game, but he didn't actually. Albanese, in his comments did not actually rule out the possibility of a future tax, perhaps on, as Shane said, on uncontracted gas exports.

B (23:38)

Yeah, he's. As we talked about this last week, didn't we, the Prime Minister has, over a period of weeks now, slowly crept up to the point where he has ruled out any move in the budget. Took him a while, but he got there. So we know there won't be anything imminent. It would make it very hard to make these arguments with Asian trading neighbours to keep supplying us with fuel, as Shane says. But you are right, I don't think it's totally dead. The idea that in the next year or two the government does something to tweak the prrt, which is this tax that we don't raise much money for because these massive companies are still writing off their. Their project costs when they set up these LNG facilities about 10 or 15 years ago. There is such a palpable sense in the community now. There's been a really effective campaign. I mean, I was with friends on the weekend who don't really follow politics, football with them and they. One of them was Conservative, one of them is probably a Labor Liberal voter and they said, well, we're seeing all this stuff from David Pocock in our social media feeds. Why the hell's the Prime Minister. Yeah, why is the Prime Minister not getting more revenue out of that? So there's this populist campaign that's been run. Some of it has been quite misleading from Some of the advocates, but nevertheless, it's out there. There is a strong appetite in the labor backbench to do some more here. The treasurer was interested in this gas tax idea leading up to the budget. So while now might not be the right time, and I suspect given the Prime Minister's strong language this week, we won't see anything in coming months even. But in this term of Parliament, it wouldn't surprise us at all, I think, if the government had another look.

A (25:07)

Yeah, that's what's so interesting. They definitely haven't knocked the idea. It's not dead. Buried and cremated, as our other friend of the podcast, Tony Abbott, might have said.

B (25:16)

We need Tony back on to talk about Angus Darling.

A (25:18)

We need Tony back.

B (25:19)

I know they're very close.

A (25:20)

Well, Tony's gonna be at the Sydney Writers Festival for anyone who wants to see him talk about his book, which we did interview him on the podcast about. Shane, it's always a pleasure to have you on. Are you gonna be. Do you do some sort of Rocky Balboa style training in the lead up to the budget lock update? Do you sort of haul logs through a remote forest in Philadelphia or.

C (25:39)

Well, I don't have to go to Philadelphia. I was just. Last weekend I was running in the dark in the hills of Canberra, which are much prettier than the main streets of Philadelphia, let me assure you.

B (25:52)

You could run up the stairs of the National Library. That's quite.

A (25:55)

You could. That would be actually iconic. I would.

C (25:58)

Look, I'll get shots. Me and the dog Coco will be

B (26:01)

there wearing your budget tie and your budget socks.

C (26:04)

Oh, the flying pig tie. The flying pig tie. But you know me. You know me, Jackie. There'll be a Kate Bush reference somewhere and that'll get me through. Yeah, Kate is the driving light.

A (26:16)

I look forward to it. And you know. And Kate Bush as well as Gen X, she's firmly placed within the two generations of the generation wars that we're having at the moment, so.

C (26:24)

And as you know, Gen X is. We are the forgotten generation, Jackie.

A (26:28)

Yeah. And the coolest people. Other people won't acknowledge it, but we are the coolest.

C (26:32)

True.

B (26:32)

If you call yourself cool, that's your first problem.

A (26:35)

If you have to tell people you're cool, you're probably not cool. Anyway, thanks so much, guys. See you soon.

C (26:41)

See you soon. Cheers, Jackie.

A (26:50)

You can read all of our political news on our website, cage.comau and smh.comau Today's episode was produced by Chee Wong with help from Debbie Harrington. Our executive producer is Tammy Mills. And our podcasts are overseen by Lisa Muxworthy and Tom McKendrick. Before you go, please follow Inside Politics and leave a review for us on Apple or Spotify. I'm Jacqueline Maley. Thank you for listening.