In this week’s episode of the Tell Us What You Really Think podcast, Sean and Anthony start with their Australian Property Market update following recent announcements from the RBA increasing interest rates for the first time in over a decade. 

After this, the boys are diving into Crypto and discussing the insights and learnings picked up from the Australian Financial Review Cryptocurrency Summit – namely the regulation around Cryptocurrency in Australia to protect the safety of our finances and which Australian banks are launching their own digital currencies. 

To finish off this week’s episode, the final topic covered is the future of interest rates and how to end the ongoing pain as a result of labour shortages. An ongoing topic for the TUWYRT podcast as rates are predicted to continue to climb and our workforce continues to be held under shackles. 

The list of impressive speakers Sean and Anthony mentioned to follow on Twitter and LinkedIn from the Crypto Space include: 

• Yat Siu (Executive Chairman of Animoca Brands)
• Sidney Powell (CEO and Co Founder of Maple) 
• Anthony Scaramucci (Founder and Managing Partner of Skybridge)
• Chloe White - MD of Genesis Block Journalists) and 
• Jessica Sier and James Eyres from the AFR.

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Episode 10 Transcription

Sean (00:00):

Welcome to the podcast, Tell us what you really think! We're Sean and Anthony, basically just here to tell you what we really think. We cover all things, property, finance, and technology, and we are brought to you by www.ratetracker.com.au. Anthony, welcome back to Tell Us What You Really Think.

Anthony (00:19):

Thank you, Sean.

Sean (00:21):

Mate, when do you read your news? What time of the day? What's your go-to?

Anthony (00:26):

Yeah, Probably, AFR (Australian Financial Review) early in the morning,

Sean (00:28):

Early in the morning?

Anthony (00:29):

Yeah, and then also at night. So I don't have a lot of time during the day.

Sean (00:32):

So you wake up and depress yourself. Yeah? Then depress yourself again before you go to bed.

Anthony (00:35):

Pretty much!<Laugh>. No, I do try to only read certain articles later in the day.

Sean (00:41):

I just see the headlines on the first four pages and generally skip to around page five, where the content starts getting a little bit lighter... Which brings us to the topic that we were chatting about before we recorded the show. What are the headlines around the world at the moment? What things have changed in news in, compared to the way it used to be?

Anthony (01:01):

It's always confrontational. The first articles are where they try to pull on people's emotions, which must work for them! It must get them more readers. So it's no doubt always negative.

Sean (01:14):

I wonder if they do marketing courses to see what triggers people's emotions, what gets clicks based on how much they can make someone think they're gonna be negatively affected by something in the news. That's why they do it.

Anthony (01:27):

Yes.

Sean (01:27):

So what are we talking about today?

Anthony (01:29):

Yeah, we've got some great topics. We're headed over to Sydney to go to the Australian Financial Review crypto summit.

Sean (01:36):

Which was awesome!

Anthony (01:37):

Yeah, so we've got some great takeaways to share with our listeners. Interest rates were a hot topic, and we'll talk about why if they do go up - and it's not if, but when - why it's not necessarily a bad thing.

Sean (01:50):

Yeah, for sure. Then we might cover off on the Grand Prix which is finally back in Melbourne, with lots and lots and lots of people around! I also noticed I was walking down Clarendon Street the other day and there were heaps of Europeans. So whether or not they were coming from overseas for the races over the weekend, they were definitely back and out in force. They were back out at the restaurants, everything was packed!

Anthony (02:16):

Great to see! Haven't seen that in a while.

Sean (02:18):

Definitely. As we do every episode, we'll cover off a quick Australian property update, whether it is boom or gloom. So in a couple of minutes, let's cover off on this and see where things are at.

Anthony (02:30):

Fantastic. So no doubt. We've seen property prices starting to slow, not so much go backwards, but just slow in terms of the amount of growth. And we like to see what Core Logic have got to say, because they've got some amazing data in regards to property prices. Apparently Sydney prices actually fell by 0.2% in March, and then Melbourne property prices fell by 0.1%.

Sean (02:58):

Let's get out there! <laughs>

Anthony (03:00):

Tim Lawless – who I think is the head researcher – made a comment that he's expecting prices to fall and will speed up in these markets. There's a bit of downward pressure coming up, but they're not expecting it to crash. Which seems to be the case, but who really knows.

Anthony (03:24):

But then it's funny, because we seem to look at this through a short lens rather than over a prolonged period. If we cast our minds back to 2020 and 2021, which seems a long time ago, but if you look at some of the growth that we saw, we saw regional property grow up to 30% in some areas and Metro prices grow up to 20% or even more. Look at the change in the dwelling values, which is another Core Logic report that came out. When you're zooming out and looking over a prolonged period over the last 12 months, Brisbane prices went up by 29.3%, Adelaide by 26.3%, Canberra by 21.6%, Hobart by 22.3%, Sydney by 17%, and Melbourne by about 10%. So yeah, when you look over a prolonged period, there's no doubt that there's been some amazing growth and some unsustainable growth.

Sean (04:26):

Exactly. And there's definitely room to move down. Now we know that history hasn't been too kind to us in property downturns, as far as it's very rarely gone more than 7%-10%. Very, very rarely. I think there's been two or three occasions in the last three decades. If that happened and like you said, you zoom out, we actually haven't gone down. We're still up 15% to 20% over the three year periods. So I think it's important. People do zoom out and have a look through a bigger lens than just looking at what's happening today and what's happening next month.

Anthony (05:00):

Yep. For sure.

Sean (05:01):

Nice!

Anthony (05:01):

So over to you, Sean! You're the crypto man. So, what did you think about the summit mate?

Sean (05:06):

It was good. It was good summit that was very well run. I liked the number of presenters that came on and the variety of their opinions was good. I reckon the longest presentation was about half an hour. They were short, sharp, 20 minute presentations. They had three or four people on each panel. They'd go in and wham bam! The journalists were really quite impressive. They knew a lot more than I thought they were going to know.

Anthony (05:27):

Absolutely. Yeah.

Sean (05:29):

ASIC and Ostrack knew a lot less than I expected them to know. I mean, they are the ones that are making the decisions on the future of this technology in this country. The future of this technology globally is unstoppable.The adoption rate is three times faster than the adoption of the internet when it first came out. We heard a number of people speak throughout the day, pointing at different metrics to show how fast and how quick this is growing, which is probably why it is being discussed by a lot of senates and a lot of governments at the moment. What do we do? How do we approach it? How do we regulate it? Regulation is important. Without regulation, it's not going to get mass adoption. So, we definitely need regulation.

Sean (06:10):

And that's what the summit was mostly around. What does the regulation of crypto look like? How can we protect consumers from phishing attempts and scams and that sort of thing, which exist everywhere. 

They exist on eBay, they exist on PayPal. Everywhere there's money, there's gonna be scams. So we're never gonna be able to get rid of them entirely, but we need to protect people from large scale scams, Ponzi schemes, and that sort of thing, which over time as the market cap grows, it will go down that path.

Sean (06:41):

I think one of the most irritating topics for me was that each bank are looking into launching their own official digital currency – and this is not just in Australia, this is globally! So ANZ have now launched their official digital currency, which is cool. Pegged to the Australian dollar, doing all the things it's meant to do, they're gonna go and build their own. For that to work outside the ANZ ecosystem, they need every other bank to build on that same blockchain. Otherwise, those blockchains won't speak the same language. So you can't have Commonwealth Bank go out and build their own. So Central Bank's digital currencies is known as the CBDC. You see it alot in the news, and you're going to see it a lot more. The CBDC and the Commonwealth Bank won't deal with the Bank of America. So, If you've got a transfer that you need to do from Australia to the US right now, you can transfer Australian dollars and pay the commission on the exchange. It then dumps into their account in US dollars. However, with something like blockchain technology, I can transfer you my coins or tokens, let's call it Bitcoin. I think Bitcoin is effectively a perfect solution to that; a universal borderless transfer system where I can transfer my Australian dollars into your US account. As Bitcoin, you can swap it into your US dollars and pay fractions cents in commission, as opposed to going through Western union and paying $75 for the transfer, or going through your bank and potentially paying hundreds of dollars. I transferred some euros to my uncle once, and it was like $300 worth of commission, which is crazy. Just for me to transfer the euros to the other side of the world! I can do that with Bitcoin in a couple of seconds, with effectively no fees! It would be in cents, or maybe very small dollars.

Sean (08:23):

I don't know why the banks are going down the path of trying to build their own. It doesn't make sense! There's a perfect solution. They're saying that they're not happy that there's that no one they can go to about the regulation of Bitcoin. Which is why it's so good, because no one can control it! So you can't have a bank doing anything untoward. Your users are going to use it however they will. The large majority are going to use it for good. There are always gonna be cowboys with cash. There are cowboys with credit card scams. There are stockbrokers that are cowboys, there are bankers that are cowboys. Look at the GFC; that was because of a fraudulent banking system.

Sean (09:01):

I think as soon as the banks see that there is already a perfect solution in the world, with a market cap of just under $1 trillion dollars US for Bitcoin, the entire crypto market is only about $2.06 trillion as of April 2022. When it gets to $5-6 trillion, the market won't be so volatile. You won't have such a small amount of people that can make such big impacts to the volatility. At the moment you can, and it's probably gonna be like that for the next few years. So we'll see! ASIC's take on the regulation - I'm only concerned that they are trying to make the cryptocurrency environment/blockchain environment fit traditional regulation rules. It is new and it is something that needs new thinking. We can't try and adopt the stock market rules to the crypto market. We needs to come up with new rules.

Anthony (09:56):

Yeah! The technology is different, and the methodology is different.

Sean (09:58):

Everything's different! And not massively different, but different enough that we need to have some new forward thinking people. And ASIC have been consulting with blockchain companies. So, we had some really good speakers that spoke about that. We might even put some links to these people's pages in our podcast description. Because they're really, really interesting people to follow.

Anthony (10:21):

Yeah, for sure. But it's also good to hear that some of the early adopters and fund managers that are leading the way, like Mark Carnegie.

Sean (10:29):

Yeah! He was wicked.

Anthony (10:31):

He was awesome to listen to and mooch information from. So there are a lot of big players that are in the space who are well and truely leading the way, but then the regulators seem to be a long way behind. At that point in the conference, I was a little bit confused with how it all worked, but by the end of it, I was able to understand. So for the people out there that put it in the too hard basket, definitely just start learning about it. Because really, it's the way of the future.

Sean (11:01):

It is. And I think the front page of the Australian Financial Review the other day was "Crypto is no longer on the fringe". And it's not! It's really broken through. So yeah, watch this space!

Anthony (11:13):

Fantastic.

Sean (11:15):

Now onto the necessary evil in home loans, property and banking; interest rates. There's alot of hype, alot of talk. What are we gonna do? Are they gonna go through the roof? Then we've got people like Clive Palmer coming out saying that he's going to put a 3% hard cap on interest rates. I mean that'd be nice Clive, but I'm not sure who pays the bill for the money there? Anyway, Anth, give us a rundown on what we think is gonna happen with interest rates.

Anthony (11:45):

So there's a huge amount of speculation, which is interesting. Six months ago compared to now, it's completely different conversations. The RBA back then was starting to talk about how rates weren't going to move until 2024, said the Governor Philip Lowe.

Sean (12:00):

Well that's going well! <laughs>

Anthony (12:00):

It seems like he's stubborn and he doesn't want to change his old way of thinking. Things are crazy out there in terms of inflation and all those key indicators that they look at. So with interest rates, it's not a matter of if but when, and the key consideration should be how quickly they will go up. So that's really gonna determine what happens and the ripple effect that will have. What we've seen in the market already is that fixed rates have gone up significantly again. I think ING were the latest bank to go up again with their fixed rates by 0.75%. That's, I think five times now in six months, that their fixed rates gone up. So they're pricing the future's interest rates. So, fixed rates have gone from1.8-1.9% to nearly 4%. So we've spoken previously about how it's not in the best interest to probably fix now, because the rates are so high for clients.

Sean (12:56):

No, I haven't fixed any for months!

Anthony (12:58):

Yeah. The consideration just isn't there. So it seems like, the RBA have missed the boat to incrementally go up, and it seems like instead its going to aggressively go up. It isn't an ideal scenario, but we have to be guided by them. Once again, we've got to look at it over a longer period of time in terms of the history of interest rates and what's actually happened. So, we're squabbling over rates being between

2% to 3% from a variable point of view. That's what interest rates are. But if we bring it back to 1987... Sean, what were you doing in 1987? Where were you?

Sean (13:33):

Mate? I don't even know if I was a sparkle in an eye at that point! But I'm sure it was a great year. Not as good as the following year, mind you!

Anthony (13:42):

<laughs> Well, let's look back to 1987. This is anecdotal, but I had this conversation with my mother-in-law the other day when we were talking about interest rates. And she said, "When I was growing up in 1987 interest rates got up to 17%!" So here we are worrying about them racing up to 3% or 4%, when they had to deal with that! So, if you look over the history of interest rates – and we've got a chart from 1987 that we found and we looked at – and yeah, it got up to 17-18%. Then GFC time in 2008, it went from about 4% up to about 9%. So you look at some of those rates that people had to go through, I don't think it's that bad. It's just not sustainable to have interest rates at 2%. Just look at what's starting to happen. Property prices were getting away from everyone, there was no affordability for a lot of people, especially first home buyers. They were trying to buy properties a few years ago for $400,000 to $500,000.

Sean (14:42):

Now it's entry price of $600,000-$700,000!

Anthony (14:45):

And medium house prices have cracked over a million!

Sean (14:48):

Yeah. It's just not sustainable.

Anthony (14:49):

So, rates do need to go up. There's no doubt. It would be nice if it went up a bit slower than what they're now suggesting it's going to go up by.

Sean (14:58):

That will cripple a lot of people.

Anthony (15:00):

Especially with servicability, when people have been relying on their max borrowing capacity.

Sean (15:05):

A lot of people have gone max. They not coming in saying, "oh, I'd love to buy a place with three bedrooms and two bathrooms, because that's what I need." Instead, its "What's my maximum I can borrow?" And then they go to market. They're not asking "What do I need ?" and then coming in to talk about funding. They're basically saying "What is my max?" And then they're going to find a property that's about a thousand dollars under that.

Anthony (15:27):

And then they're coming back to us few months later saying "Oh, can we fix now? We're just worried about rate rises..." And it's it's unfortunately too late. So, those clients maybe in the gun a bit when rates do rise, but when you look at the history of time and what's happening, rates being at a higher level isn't the worst thing.

Sean (15:46):

No, definitely not. It's all about control and keeping things steady. Speaking of steady, our third topic today is one that every single person in this country has been affected by. It's something that doesn't appear to be going away with the current approach to how we're doing things. Now, you and I, we're no politicians by any means! And we generally don't talk about anything that's too politically driven. However, we are still facing huge skill and labor shortages. In construction, hospitality, even professional 

services. Everyone is facing these labor and staff shortages because we effectively still have people stuck at home isolating for seven days. Every single time they walk past someone with COVID. So if we keep this mentality and we keep going around in this circle, but some people have had it and then they become a close contact and then they still have to go home for seven days because there's now people are being a little bit more loose about it. However we've got people that are willing and able – and not sick – at home isolating for seven days. In my opinion, if you test negative that day, go to work. And if you're not sick, but someone at your house might be, then get back into it. Even when you are infected, you might be sick for two or three days, and infectious for a bit longer, whatever. I don't know. I don't know the ins and outs and I don't really care. If you're not unwell, then you should be going to work. Why does it have to be a hard and fast seven days for everyone? Because there doesn't seem to be any point in putting this many people out of work for so long, given there seems to be no apparent way to control the spread in any case anyway, so we need to drop the rules altogether. And when we look at another nation as a model as to how this is working.

Sean (17:36):

You look at Sweden's approach. Now, obviously they were in the firing line early on. Then it turned out that they're about the same as everyone else. Because, it appears nothing works. Then, their GDP growth is back to pre-pandemic levels already. They're moving forward and their inflation is set to peak in the next few months at around 4.5%. I'd hate to see where ours is going to peak, and the US is already up to nearly 8%! Now I think their 7.5% in the most recent for announcement. And Sweden are looking at being back at 2% by the end of 2022. Their inflation is not fueled by printing money. It's fueled by cost of oil, which was global as a result of the Russia/Ukraine issue and was captured on transport costs, and also their food prices. Now this is funny. Sweden's non-alcoholic drinks have increased, but their beer prices have remained steady. This is f**king priorities man! These guys are doing it. Right. So yeah, like I said, no crazy money printing and putting themselves into a position of uncontrollable debt. They're a beast of a country, they have no skill shortages. Their unemployment is coming down and they've had no COVID protocols at all for the last six months.

Anthony (18:56):

And they're going to the pub, and their beer prices are staying the same!

Sean (19:00):

This is an interesting concept and it just appears that they at the same stage as just about every other country in the world.

Anthony (19:06):

They're definitely leading!

Sean (19:08):

Yeah. So, another point to support my opinion that everything should be removed is that the daily deaths globally are now back at what they were in March 2020 before this whole thing started. Let's go back to what it was just before March 2020. Let's get back into it!

Anthony (19:29):

Yeah. Let's get people back to the significant issues of the economy, which can't happen if we keep going the way we're going. Just get everyone back to work, get everyone back at it, back firing!

Sean (19:41):

Agreed! Mate, it's not a topic that we like to chat about, but just something that's important which needs to happen. Obviously in this world of doom and gloom, costs of living skyrocketing, war, media exacerbating the situation.. In closing, what does this breed for people looking to take that leap forward and really propel themselves?

Anthony (20:08):

There are going to be opportunities for a lot of people. And when there's a challenge – and we've seen this in our business – challenge creates opportunities. So for people that know rates will go up and know that there may be a knock-on effect with property prices, be ready for the opportunities to present themselves. Some people may unfortunately be under mortgage stress in these times and may need to sell at a lower prices. So be ready. We're seeing a lot of clients maybe starting to see that that, and getting themselves ready to be in the market later this year. Take advantage of it! People did back in 1987 in the market crash when we got to 17% back at GFC, when it got to 9% interest rate.

Sean (20:49):

Yeah. That's the time to strike!

Anthony (20:50):

They're the times to get into the market. So take this opportunity now.

Sean (20:56):

Definitely. So, we'll wrap up there mate. Thanks. And thanks everyone for listening! We hope you've got something out of today's episode, which is brought to you by ratetracker.com.au, where you can track your home loan interest rate in real time. And we can't wait to be back next week. Enjoy.

Anthony (21:11):

Fantastic. Thank you.