TEITR420 Simon Kuestenmacher
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Introduction to Australia's Demographic Shifts
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[00:00:00] Veronica Morgan: In this episode, we unpack what Australia's demographic shifts are really telling us about housing, cities and economic pressure points. And here to help us is well-known demographer Simon Kuma. [00:00:10] We'll dig into his most recent research to understand which demographic narratives are being misunderstood, how migration and household formation are colliding with housing supply,
[00:00:19] Veronica Morgan: [00:00:20] while some regions and property types are benefiting while others fall quietly behind, we wanna understand the foundations of underlying demand, not the headlines, and what [00:00:30] sophisticated property owners and investors should actually be paying attention to over the next decade.
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Meet Simon Kuma: The Demographer's Perspective
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[00:01:12] Veronica Morgan: Our guest today is Simon, aka a demographer co-founder of The Demographics Group, his work focuses on population [00:01:20] change, migration, generational trends, and how these forces play out across housing, infrastructure and politics.
[00:01:26] Veronica Morgan: His research is widely used by governments, planners, and businesses grappling [00:01:30] with long term structural change rather than short term noise, which is one of the reasons we love talking to him. Hello, Simon. Good to see you again.
[00:01:37] Simon Kuestenmacher: It's nice to be back on.
[00:01:38] Chris Bates: I don't say it all my guests, but [00:01:40] you are probably one of my favorite guests. So thanks for coming on again. I think you've been on here quite a few times. Um, you're always adding. A really important part to the, the [00:01:50] overall property debate.
HIGHLIGHT 1
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[00:01:51]
Migration and Its Economic Impact
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[00:01:54] Chris Bates: And when I sort of asked you to come back on, there's a lot of tension around migration in 2025, and I think it's gonna be a big story in 2026.
[00:01:59] Chris Bates: we are [00:02:00] recording this after the horrible stuff that happened in Sydney. the weekend. And, I think what I just wanted to get is this, you know, you're a little bit biased, let's call it, let's you know you are a migrant. [00:02:10] You are, we just spoke on air that you're becoming a citizen, you know, basically now.
[00:02:14] Chris Bates: and so you benefited from Australia's migration policy, but so a lot of Australians,
[00:02:19] Veronica Morgan: Well, I think [00:02:20] Australia's benefited from Simon too, so you know that's something to do here.
[00:02:24] Chris Bates: absolutely.
[00:02:24] Veronica Morgan: part of the topic, isn't it?
[00:02:26] Chris Bates: So, but let's, let's like, I guess, you know, be a bit more of a devil's advocate [00:02:30] you know, you and know migration stats, better than pretty much, you know, most people, right?
[00:02:34] Chris Bates: So where are we getting it right with migration? But most importantly, where are we getting wrong? Is, you know, it is getting [00:02:40] really heated and people are blaming it for all our problems, but it's just obviously not that simple.
[00:02:46] Simon Kuestenmacher: no, not at all.
The Role of International Students
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[00:02:50] Simon Kuestenmacher: So maybe, maybe a good starting point is to figure out why we actually take in migrants, right? And so that there are different migrant categories you could start with something like international students. That's a big [00:03:00] chunk of our migration intake is international students.
[00:03:03] Simon Kuestenmacher: And we essentially at the moment just take them in as cash cows. We're not overly. Strategic [00:03:10] with our international student sector. so what I mean by this is we, over the last couple of decades, pretty much told the universities you don't get, All that much money from the [00:03:20] government anymore. So we defunded universities, but we said to the unis, you can do it like the Americans.
[00:03:25] Simon Kuestenmacher: You can just charge fees to international students and that that amps up your coffers. And so [00:03:30] the uni did that and was really successful and then the government figured. Let's cut funding a bit more. And so the units were like, Hey, no problem. A bit more. And so you kind of create a system where you [00:03:40] tell the uni to rely more international students. the, in the meantime, we kind of, make this a bit more of a commercial operation universities than they were beforehand. So they [00:03:50] like that a lot. so we push more, more international students in that sector. So since we use students, international students, not as a future [00:04:00] resource for workers, we don't care so much about as a system, and we don't care so much about what those international students actually end up with in terms of a degree. [00:04:10] as they're happy enough with a degree, that's fine. And so that creates a system where. Everyone pretends that the system is just fine because the unis go like we are the [00:04:20] Ivy League of the Southern Hemisphere. great stuff. The international students, even if they have a poor experience here, even if the degree isn't up to what they expected it to be, [00:04:30] and they of course go back to Malaysia, China, India and go. This is the Ivy League of the Southern Hemisphere. This is great stuff because this is what gives them, benefit. So everyone pretends that [00:04:40] the system works better than it does, and that's a problem. And we, we, we just park this international student, thing there. But of course it is very attractive.
[00:04:48] Simon Kuestenmacher: International students on average [00:04:50] pay $30,000 a year in fees. a lot of money. So if you take one international student out, you somehow need to create $30,000 worth of. Income for the [00:05:00] unis. this could be done per taxpayer. It's just, you know, uh, slivers of
[00:05:03] Veronica Morgan: Mm.
[00:05:04] Simon Kuestenmacher: penny for each of us if we take an international student out. but of course, international students also create, 30 to [00:05:10] $35,000 of additional economic activity. That is by renting housing, by eating food, by, being visited by their parents. And this creates, visiting friends and [00:05:20] family type tourism. So. An international student creates, activity economically.
[00:05:25] Simon Kuestenmacher: That's nice.
Housing Market Dynamics
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[00:05:31] Simon Kuestenmacher: But of course they need to be housed. So people say, boy, guys, that's quite a few international students. If we , take them off the, off the, then we would have more housing available myself. It's, it's kind of correct the statement because international students [00:05:40] overwhelmingly occupy a very specific type of housing, international student housing purpose, built student accommodation.
[00:05:45] Simon Kuestenmacher: So these tend to be small, self-contained apartments with, [00:05:50] larger shared communal areas. very attractive for property investors because, you get relatively many people on relatively few square meters of housing. So that's. Good stuff. the [00:06:00] rest of the Australian housing market doesn't actually live in the same property.
[00:06:03] Simon Kuestenmacher: So the only problem that international students create for the housing system is that workers that build international student [00:06:10] accommodation, they can't build a family, home on the outskirts of town. So, so they, they dig into the con constricted labor force. That's a problem [00:06:20] there. So that's, that's parked. And then of course, international, international migrants are also skilled migrants, and we want them into the country because we do not have enough [00:06:30] workers in the system.
Skill Shortages and Workforce Challenges
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[00:06:42] Simon Kuestenmacher: this is absolutely crucial for people to understand. And this is something that I demand in the migration debate. I'm not allowing anyone to tell me that we need to cut back migration without telling me the problems that we create. We, we have a high migration number in the system because it helps certain things and it does [00:06:50] help to ease the skill shortage. And the skill shortage is probably the concern that I, as a demographer would put, upfront. this is going to become worse in [00:07:00] the next decade. What do I mean by. Well over the next 10 years, we push the big baby boomer cord out of the workforce and we take in only a smaller cord at the other end, so we [00:07:10] lose
[00:07:10] Chris Bates: Okay.
[00:07:10] Simon Kuestenmacher: We've taken a smaller chord. All the while we sent an ever larger share of our young Australians into the university system, so [00:07:20] 55% of our year twelves that graduated just now, and they will go to uni next year. That means they, and they will then hang out on, on campus for one more degree. [00:07:30] One more degree, one more degree.
[00:07:31] Simon Kuestenmacher: And they ultimately only contribute to the workforce in the mid twenties, late twenties.
[00:07:35] Veronica Morgan: How does that compare? We say 20 years ago.
[00:07:38] Chris Bates: Mmm.
[00:07:39] Simon Kuestenmacher: [00:07:40] gigantic, we doubled the share of, of people that we
[00:07:42] Chris Bates: Wow.
[00:07:43] Simon Kuestenmacher: back. So if, if you, if you read a biography of some of the great thinkers, doesn't matter in Australia, in, in, in, in Europe [00:07:50] of like 200 years ago, and you read the chapter about their university experience. This is fantastic because they hang out with the brightest minds that you, you get this [00:08:00] kind of ridiculous idea of what university looks like and now going to university means that you are intellectually speaking part of the top 55% of this country. That [00:08:10] isn't very impressive to be
[00:08:11] Veronica Morgan: No, it isn't.
[00:08:12] Simon Kuestenmacher: Yeah. And that then leads to degree inflation because you go, okay, so instead of being, part of the top 55%, I do a master's.
[00:08:19] Veronica Morgan: [00:08:20] Yes. Mm-hmm.
[00:08:21] Simon Kuestenmacher: of a sudden part of the top 25% or something like this, and they go, well, maybe I do a PhD even if I don't want to go into academia. [00:08:30] And so you, you, you overeducate the country. and of course overed education in, in a formal sense, we are all too dumb. Like we hear all of our listeners, everyone here is too dumb. We [00:08:40] could be smarter, we could be reading more, we could be thinking more of course.
[00:08:43] Veronica Morgan: Mm.
[00:08:43] Simon Kuestenmacher: a system, we spend too much money on educating people, that we actually don't need in the system, [00:08:50] as the Australian economy does not need 55% of us to
[00:08:53] Veronica Morgan: That's fascinating. Well, also there, there's so many different degrees now. It's a pretty basic, like social media [00:09:00] as a degree, like.
[00:09:01] Simon Kuestenmacher: at, at the same time you have something like the Melbourne model at Melbourne University where you go back to smaller degrees. Where you go, there is just a few kind of degrees that we [00:09:10] hand out and you are very free within this, framework to put together whatever you want.
The Future of Education and Trades
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[00:09:16] Simon Kuestenmacher: so that of course, is problematic for the labor force because young persons, [00:09:20] instead of entering the workforce at. 18 in the early twenties, they, they have a delayed, entrance into the workforce. All the while our fees for unity degrees become more [00:09:30] expensive. We don't immediately see this because this is hiddenness as help formally h debt. so education, debt, we don't see that. We carry it with us. So you start work [00:09:40] later and with debt and the pay premium that you get for having received this degree, that shrinks.
[00:09:46] Simon Kuestenmacher: So it's, I can't in good conscience tell a, you know, if a random [00:09:50] 18-year-old comes up to me and goes like, boy, what should I do in order to have the best career chances? Back in the day, and statistically speaking, still true today, it'd say just get as [00:10:00] educated as you can be. Education pays. In Australia, that's still the case, but it becomes less attractive.
[00:10:06] Simon Kuestenmacher: And there are quite a few scenarios where let's say you are in [00:10:10] your teenage years, you start a trade, you, you start earning money. that's positive. you have less debt, that's positive. And then of course, if you as [00:10:20] a tradie, if you, if you become a sole trader, if you become your own boss, then on the statistical average throughout your career, you earn 27% more [00:10:30] income.
[00:10:30] Simon Kuestenmacher: That is like an extra, decade of income throughout
[00:10:34] Veronica Morgan: Ugh.
[00:10:34] Simon Kuestenmacher: life.
[00:10:34] Veronica Morgan: And you don't have the debt.
[00:10:37] Chris Bates: Yeah.
[00:10:37] Simon Kuestenmacher: quite a few scenarios. [00:10:40] Also, you might be want to hedge against a potential hyper, AI future where you go maybe
[00:10:45] Veronica Morgan: Mm.
[00:10:45] Simon Kuestenmacher: the accountants and management consultants of this world, the mortgage [00:10:50] brokers of this world.
[00:10:50] Simon Kuestenmacher: They might be, surpassed through AI quite quickly. But what we won't surpass is tradies.
[00:10:56] Simon Kuestenmacher: Some of the housing developer that we do, I can see a future where this [00:11:00] is done in a factory with cool
[00:11:02] Chris Bates: Yeah,
[00:11:03] Simon Kuestenmacher: and then we, we Lego together a house on site. But, lots and lots of the property development in Australia will be done by bulldozing a [00:11:10] quarter acre block and squeezing three townhouses on top.
[00:11:12] Simon Kuestenmacher: And these are on awkward blocks. This is,
[00:11:14] Simon Kuestenmacher: onsite by humans. The
[00:11:16] Veronica Morgan: You can't manufacture it.
[00:11:18] Chris Bates: You've always got like [00:11:20] 12 million dwellings or whatever, 11 million dwellings. Right. You need to get retrofitted and get renovated. And they're all getting older. Yeah.
[00:11:26] Simon Kuestenmacher: on and on down sites, if you have a [00:11:30] trade, you will most certainly have stuff to do. You will not be
[00:11:33] Chris Bates: Yeah.
[00:11:33] Simon Kuestenmacher: in the next 50, 60
[00:11:35] Chris Bates: But the, the skill shortage though, why is that, like, why is there a skill shortage though? Because [00:11:40] you've got like more people going to uni and then you've got more university international students, so. Couldn't you argue that we're gonna have a super, a lot of education, but is it the wrong [00:11:50] skills?
[00:11:50] Simon Kuestenmacher: Very good. So important is, so the, the people that we, created university, these workers, well, we take people out of the twenties that we kind of in the past had [00:12:00] earmarked to work. They work, but they only work later and they only work certain types of jobs. then of course, what hap also happens over the next, decade is that the millennials, the biggest [00:12:10] generation of them all. They continue to make babies. means they go on parental leave. That means they leave the word of work, at least for a little bit. So you have boomers leaving smaller court, entering [00:12:20] the court that enters, enters delayed. And you have millennials on parental leave that tightens the labor pool
[00:12:27] Chris Bates: Yeah. Yeah.
[00:12:28] Simon Kuestenmacher: All the while the [00:12:30] demand for labor actually goes up because we are a fast aging society, and over the next 15 years, we are doubling the 85 plus cohort. [00:12:40] 85 is another important statistic year. Everyone should remember because it's the median age of death, which means you have a 50% chance of getting older than 55. of the whole [00:12:50] population, over 85, half of them need care on a daily basis. So if we double the 85 plus population in the next, 15 years from [00:13:00] 590,000 people to 1.2 million people over 2040, we need to double the age care system. Spoiler alert, we won't be able to pull this off. The aged [00:13:10] care system is going to be an absolute train wreck. So therefore, my great financial advice don't end up in the bottom third of society financially speaking, [00:13:20] because the public or the private system won't be able to look
[00:13:22] Chris Bates: Or,
[00:13:23] Chris Bates: You will fully rely on your family to take care of you. that of course, opens up the question, does everyone in [00:13:30] the bottom third of society have a family that is able and willing to take care of you? you see how this system is going to be an absolute train wreck, that alone. So, so we have this skills [00:13:40] shortage there. yeah, that makes sense.
[00:13:42] Simon Kuestenmacher: a big fat problem. Remember that we talk about migration. That was the opening gambit here. so yes, so we have migrants in order to fill the skills [00:13:50] shortage. if we don't do this, there are certain jobs that won't be filled. Essentially, every aged care worker under the age of 40 is imported labor from overseas. [00:14:00] Australians don't do this job, period. If you listen to the extreme voices that say we need to have a migration pause and go back to zero [00:14:10] net zero migration, that is a laughable. because then you create a skilled shortage. It's absolutely bonkers. It's not just aged care truck drivers. 75% of truck drivers under the age of [00:14:20] 45, I think, are imported from overseas. And so this is a, this is a cornerstone job and you can go through the whole system where you go. there are jobs that [00:14:30] are mostly done by imported labor. try to seasonal work outside. we've seen this during COVID when certain
[00:14:36] Chris Bates: Yeah.
[00:14:37] Simon Kuestenmacher: be pulled, when, when fruits just, uh, rotted [00:14:40] away because it didn't have the, the mobile seasonal international workforce operating in this
[00:14:46] Chris Bates: Yeah.
[00:14:46] Simon Kuestenmacher: it is very easy to call for a, of [00:14:50] migration for a minimization of migration.
Reforming the Migration System
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[00:14:52] Simon Kuestenmacher: But this would need to be done with the utmost strategic planning in mind. and when you just [00:15:00] see somebody calling for cutting migration rapidly, they usually do not accompany this with their, with their big strategic vision of how to do this.
[00:15:08] Chris Bates: Okay.
[00:15:08] Simon Kuestenmacher: of course, we [00:15:10] want to remember politically and fiscally speaking, that I find the idea of cutting migration, ridiculous.
Political and Fiscal Implications of Migration
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[00:15:16] Simon Kuestenmacher: Unless the person who wants to cut migration talks about their gigantic structural tax reform.
[00:15:23] Simon Kuestenmacher: What do I mean by this? Australia is fully reliant, not fully, but mostly reliant on income tax. [00:15:30] About 52% of all the money that flows into the budget is income tax. 61% of all the migrants that we take into the country each year pay income [00:15:40] tax straight away. So that means the treasurer would never allow the PM to cut, because this would mean you, you minimize your, your money available in the budget. So it's, [00:15:50] it's laughable at the moment to do this. So let's say you cut a hundred thousand migrant. You cut yourself out of so much money in the budget. And it's, yes, it's true. Each migrant [00:16:00] creates a certain kind of need for additional infrastructure, for additional housing, But of course then if we look at the pure economic data, and this is only looking at, skilled [00:16:10] migrants, so the people that we taking because of the qualifications. the intergenerational report, I think from 2021 or 2022 had a beautiful chart in there that shows. Fiscally speaking, [00:16:20] each Australian born person is a net loss for the budget over time. each Australian born person costs the state about [00:16:30] $109,000 over their lifetimes, whereas each skilled migrant creates about $350,000 in revenue for the budget. Why is that the [00:16:40] case? Well, it's quite simple. The average migrant arrives here at age 24, 25. That is of course, the first expensive 25 years of a human life. When we [00:16:50] subsidize your birth, your education, all the healthcare, that you consume, that is expensive. And then, Migrants in Germany. Germany in my case, so I leave [00:17:00] Germany. I cost the state a lot of money and I go into Australia at 24, 25 straight away. I pay tax here. And it's, it's all well, sucks for Germany, fiscally speaking, but [00:17:10] you guys get nothing but economic benefits. and so that's, that's the idea where we. just get this right from a purely fiscal perspective. We then of course say [00:17:20] so at the moment, I sound like I'm absolutely, pro migration, which I kind of am demographically speaking. I would say in rough terms, call it 250,000 net new migrants a year, which is what we've [00:17:30] done over the last decade and a bit, is about right. Yeah. Plus minus 10% whatever, seems about right. I'm not saying that the migration system works. So that's the important [00:17:40] stuff is, and so if I wanted to be, more productive in the migration debate, I would say things like, well, let's agree that probably demographically speaking [00:17:50] 250,000 people is about right. okay, fair enough. Then I would say we need to be much stricter which language with language requirements, but this is, it's pathetic that we aren't,
[00:17:59] Simon Kuestenmacher: we need to [00:18:00] force our universities into line in terms of how they use migration because what we should be doing is we should actually look at all the data that we have about our future [00:18:10] skills shortages,
[00:18:10] Chris Bates: Yeah.
[00:18:11] Simon Kuestenmacher: we would then only allow the universities to hand out degrees that are somewhat linked to our future skills shortages because this way, if we [00:18:20] manage to get more international students.
[00:18:22] Simon Kuestenmacher: Integrated into the workforce rather than skilled migrants. This would be rather nice because first and foremost, these international students would have [00:18:30] qualifications that by definition are up to our standards. That's good. they pay for their own education. That's rather nice. and they come pre-integrated means we would actually integrate.
[00:18:38] Simon Kuestenmacher: They at least lived here [00:18:40] for three, four years. Before that they had the opportunity to make at least some sort of local friends and know kind of how this system works here. that would be smart. that of course [00:18:50] would mean that we dictate a bit more stuff to the universities. I think that is, Politically an easy win. You could do this, the universities would, would cry a bit, but so be it. we could pull this [00:19:00] off. and then of course, we would need to find a solution to actually link the skilled migrants with the industry and with the geography where we want them much more [00:19:10] tightly. the moment, this skilled migration list operates in a, in a simple way. We say we need a thousand Truckee. that's fair enough. And so the first thousand people that fit the broad other [00:19:20] qualifications but have a Truckee license, they come in and then we just pray that they work as truck drivers and we pray that they just fill all the jobs there. But how do we know that? [00:19:30] if I am sitting in Wagga Wagga in Orange, in, in Portland, and I need a truck driver. People don't even know that these places exist. So there's
[00:19:38] Chris Bates: Hmm.
[00:19:38] Simon Kuestenmacher: no chance that [00:19:40] my regional skill shortage gets filled with this thing. So I would argue we would need to get much closer to, employer, sponsored visas linked to the [00:19:50] regions.
[00:19:50] Simon Kuestenmacher: That's something that
[00:19:50] Chris Bates: Right.
[00:19:51] Simon Kuestenmacher: Appreciate. so we need to reform the system there
[00:19:54] Chris Bates: Yep.
[00:19:55] Simon Kuestenmacher: in migration. that said, of course when people complain about the total numbers and [00:20:00] so forth, they need to know that yes, we are in control of migration to a certain degree. So when we talk about Europe's migration crisis, they deal with what we call [00:20:10] unmanaged population flows. If there is a surge of migrants coming through the Mediterranean, from Africa, from the Middle East. there might be the right numbers in order to stop the [00:20:20] aging process of Europe. there might be the right age, but there's no link to qualifications, language requirements. There's none of that. that.
[00:20:28] Simon Kuestenmacher: We have that at least to a certain degree. 'cause you want to [00:20:30] remember, every Australian passport holder is allowed to enter and leave Australia whenever they want. So that's, that's an uncertainty. the same is the case [00:20:40] for Kiwis. and at the moment we have this massive search of Kiwis into Australia as well, because their economy is tanking a bit and they just come to their west
[00:20:47] Chris Bates: Yeah.
[00:20:48] Simon Kuestenmacher: and enjoy their, their, the [00:20:50] opportunities that a has.
[00:20:51] Simon Kuestenmacher: Australia has to offer.
[00:20:52] Simon Kuestenmacher: of course we have family reunion visas. So if an Australian ris, you know, their Italian, lover, uh, once they've [00:21:00] been overseas or something. Who are we to tell that this Italian guy isn't allowed to come?
[00:21:04] Simon Kuestenmacher: it's very hard when we say we want 250,000 net new migrants. God knows how many, [00:21:10] Australians fall in love at during their summer holidays. and of course we signed international accords that say things like, you need to take in that many asylum seekers. It's not high numbers at all. but we [00:21:20] signed those things. So
[00:21:20] Simon Kuestenmacher: it's not as much as, um, numbers have gone crazy or anything like this. it's just that we have a system that kind of wants relatively high migration, for skill [00:21:30] shortage, for tax purposes. and that's what we deal with within the system. We should adjust it quite significantly, but it is of course much easier to say. Fewer migrants. Everything [00:21:40] is the migrant's fault.
[00:21:41] Simon Kuestenmacher: High house prices are migrant's, faults. there is a, there is a horrible, terror attack in Sydney. This is the fault of the migration system. Yeah. Who [00:21:50] knows? Would this have been solved? The, the, the, the, the guy who came was 50, so he would've come for 25 years ago during the Howard era. Yeah. So.
[00:21:57] Veronica Morgan: Yes.
[00:21:57] Simon Kuestenmacher: story here?
[00:21:58] Simon Kuestenmacher: What's the migration angle? But it's of course [00:22:00] a nice scapegoating
[00:22:02] Veronica Morgan: Mm.
[00:22:03] Simon Kuestenmacher: and that's also what I consider, that's my main housing narrative is when people say, and you see this quite often from the conservative bend of [00:22:10] politics, not the far, far right, but the conservative right, that say. We actually celebrate migrants.
[00:22:16] Simon Kuestenmacher: This is great stuff, but we, we overshoot the target. And so if [00:22:20] we cut back, a hundred thousand migrants, say we would need 40,000 fewer dwellings in the system, this would be, well welcome and this should drive prices down. And I said, I [00:22:30] like that, that logic does make sense at first. But we had, of course, we, we need to check whether this is actually true.
[00:22:37] Simon Kuestenmacher: would a decrease of migrants actually lead to [00:22:40] lower house prices and the big natural experiment that we ran during the pandemic. reason, for a couple of years, we had negative migration into the country. We lost [00:22:50] people
[00:22:50] Veronica Morgan: Mm-hmm.
[00:22:50] Simon Kuestenmacher: house prices escalated at the ever fastest rate you can, of
[00:22:54] Veronica Morgan: Yep.
[00:22:55] Simon Kuestenmacher: Lower, interest rates. It, it drove this as well. That's true. So [00:23:00] there was plenty of money flowing into the property market. also you can't do anything. You, you only sit at home. So the home becomes even more important in the public imagination, of course. So that all [00:23:10] happened. but then I would point to my.
[00:23:13] Simon Kuestenmacher: Underlying interpretation of what Australia is as a system. Australia is a system that wants house [00:23:20] prices to go up rather than down. so if you think about the players in the system that want house prices to go up, well who is this? If you look at the and politically [00:23:30] speaking, only voters are of interest. 64% of the Australian population vote. There are temporary visa holders. People without a passport. We don't make politics for them. They, we [00:23:40] don't care about them. We don't make politics for under 18 year olds. They don't vote of these people that vote. 64% of the total population, only a quarter are renters. [00:23:50] So.
[00:23:50] Veronica Morgan: Yeah,
[00:23:51] Simon Kuestenmacher: House prices, affordable for you guys? If the remaining 75% actually own their property or have a mortgage on it, that means they want house prices to go up. So [00:24:00] there's a big chunk of voters that want higher house prices.
[00:24:02] Chris Bates: yeah. Obviously it's really heated and it's not gonna go away. Right. So do you think that it's just this misreporting of, you know, the, [00:24:10] the, the numbers were pretty off the charts the last couple of years. A lot of. International universities had to really refill their coffers, right, and refill their student numbers.
[00:24:18] Chris Bates: Migration numbers [00:24:20] half a million. So like people are like worried that it's gonna be this new ridiculously high level then is that, is that what's driving this? Do you feel together with the cost of living crisis [00:24:30] together with the housing crisis?
[00:24:31] Simon Kuestenmacher: they process processes
[00:24:32] Chris Bates: are like, well, there's no easy solutions
[00:24:33] Simon Kuestenmacher: exclusions here
[00:24:35] Chris Bates: blame
[00:24:35] Simon Kuestenmacher: just played at this. All of these things wobble around. And so [00:24:40] what you get used to is, we are high migration nation like everyone who's, anyone who says the opposite is, is just nonsense. We are hyper high migration nation and we work, it [00:24:50] works extremely well because the kind of amount of crime and problems, social problems that we have are nothing compared to countries with much fewer migrant numbers.
[00:24:57] Simon Kuestenmacher: We need to also remember that. [00:25:00] So you have the high migration numbers, and you said this is net terms. We got half a million a couple of years ago and people go, this is insane. You take in twice as [00:25:10] many migrants as usual, all the while, while we have a high of living crisis, while we have house prices escalating, you are not, doing policies for us. I can do [00:25:20] averages. So I'm quite relaxed about this. So what happened here is, as you mentioned, Chris, we filled in the university spots. All we've done is we, we [00:25:30] couldn't take in migrants during the, lockdown years. So what we've done is we took in three and a half years worth of international students in one and a half years.
[00:25:39] Simon Kuestenmacher: That's it. [00:25:40] That's the whole story. If you take March, 2020, this is the start of the border close until today, and you average this migrant intake out, you [00:25:50] compare it to the same amount of migrant intake. Before that, we are pretty much even
Conclusion and Final Thoughts
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[00:25:54] Henry: I'm on a personal mission to help more people make better property decisions. You know, most people don't realize that they [00:26:00] can cost themselves hundreds of thousands of dollars over the medium to long term when they make property decisions without all of the information that they need. And what I do is help people with [00:26:10] tricky real estate problems, which offer masqueraders simple questions like, should I sell my investment property because the interest re payments are hurting, or should I buy before I sell?
[00:26:19] Henry: [00:26:20] Or the other way around. You could connect with me and access all of the tools that I've created to help you make better property decisions at Veronica Morgan dot com au. And there you'll find [00:26:30] resources for first home buyers, details about my buyer's agent mentoring program. You could connect with my Sydney based property management and buyer's agency teams, Australia wide vendor advocacy.[00:26:40]
[00:26:40] Henry: Or ask me for introduction to the small group of buyer agents that I would personally recommend across the country. That's Veronica Morgan dot com au. If you're considering a property [00:26:50] move, which is buying your first time, upgrading, renovating, or investing, the team here at Alcove would love to help you think through your decision and get the finance right.
[00:26:58] Henry: Please go to [00:27:00] cove.com au to reach out.
[00:27:01] Veronica Morgan: This is not hitting the headlines, Simon. My understanding is that a lot of the international students, there was [00:27:10] some controversy a while ago because there's a lot of these sort of non university colleges who were taking in students but weren't actually studying anything. They're going [00:27:20] out there and riding delivery bikes and, and driving Ubers.
[00:27:23] Veronica Morgan: So is that a thing? Is there a, a large percentage of that cohort that are actually [00:27:30] students?
[00:27:30] Simon Kuestenmacher: That kind of stuff needs to be closed. When I talk about migration
[00:27:33] Veronica Morgan: Hmm.
[00:27:34] Simon Kuestenmacher: that's what we need international students The way that I would want to see international students is [00:27:40] from a workforce perspective and from a university perspective.
[00:27:43] Veronica Morgan: Yep.
[00:27:43] Simon Kuestenmacher: be some sort of ratio in there
[00:27:46] Veronica Morgan: Mm-hmm.
[00:27:47] Simon Kuestenmacher: it should be less than 50%.
[00:27:48] Simon Kuestenmacher: A third is good, [00:27:50] of ratio international students to local students. So, um, to increase the university experience for everyone.
[00:27:56] Veronica Morgan: Well, that's exactly right. I mean, it's funny 'cause my daughter's about to go to uni next [00:28:00] year and she's just had a gap year. And, and I've been thinking to my, I'm a bit surprised she decided to go to uni. I'm thinking might she should come and become her dad's a builder, you know, she, she should become a builder [00:28:10] anyway.
[00:28:10] Veronica Morgan: Anyway. And I've been thinking about that because a lot of my friends whose kids have been going to uni, they do talk about the university experience is very different to when we were at university. And [00:28:20] a lot of the unis are still largely on online, not even a campus experience.
[00:28:25] Simon Kuestenmacher: that's the kind of stuff where I get absolutely mad about it. So [00:28:30] when we think about what university should be, so let's, let's design a university that works. Some of the
[00:28:35] Veronica Morgan: mm.
[00:28:35] Simon Kuestenmacher: get bigger and bigger, 50,000 students, whatever. It works, as long as you, within the [00:28:40] degrees create cool, functioning subunits, that's fine. So you would want to have whatever student numbers, and you would say, and the research suggests about a third of international students is fine. [00:28:50] So, more or less, yeah, there's different research, but rule of thumb, a third. So you go, we shouldn't do more than that. that's important.
The Integration Challenge for International Students
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[00:29:02] Simon Kuestenmacher: Then you want to go, well, because people say international students do not integrate into, the overall student experience.
[00:29:04] Simon Kuestenmacher: And that is by design because we screw it up. so, and this is my, my research when I was at uni about, [00:29:10] friendship formation. You make friends with whoever you hang out with at uni for the first two weeks. It
[00:29:16] Veronica Morgan: Yeah.
[00:29:17] Simon Kuestenmacher: your daughter goes to uni, the first two weeks, she [00:29:20] will meet the vast majority of her friends because you enter this new, exciting space of your life cycle.
[00:29:26] Simon Kuestenmacher: You, you are all new, to this thing. You're all extremely [00:29:30] open-minded. And so you are
[00:29:31] Veronica Morgan: Hmm.
[00:29:32] Simon Kuestenmacher: to make new friendships. So cool. So you form your circle of friends and that's it. What do we do with international students? It is bloody comical. So we, [00:29:40] we take them onto campus a month before we take the locals onto campus to allow them to integrate into Australia to get used to it.
[00:29:47] Simon Kuestenmacher: Well intended, but so we only take [00:29:50] internationals. We give them like one or two, locals who go, show them the pubs and the, the koalas and whatever, and you go, that's it. So they form their friendship circles [00:30:00] with each other. Then
[00:30:01] Veronica Morgan: Of course.
[00:30:02] Simon Kuestenmacher: students in purpose-built student accommodation where, where the occupation rate is about 95% to a hundred percent internationals.
[00:30:09] Simon Kuestenmacher: So they [00:30:10] hang out with their, with the international housemates. So of course they're going to only make international friends. That is by design. That is not because they shun Australians or because the [00:30:20] Chinese are not compatible with the Australians or something like this. That is nonsense. This is us messing it up from the get go.
[00:30:27] Veronica Morgan: Yeah.
[00:30:28] Simon Kuestenmacher: research on this. that is [00:30:30] stupidity. That is something that we could fix through design and we should.
[00:30:33] Simon Kuestenmacher: so we got that element of the unique experience.
[00:30:36] Chris Bates: look in your, let's say you, over the next five, 10 years? I mean, there's gonna be [00:30:40] massive challenges with. everything, to be honest. You know, obviously the cost of living, you know, we've got issues with, infrastructure, we've got in issues with housing, et cetera. But is there a [00:30:50] rosy picture for Australia on the horizon you know, is there a a way that we can sort of path our way through this and, or problem's only gonna intensify [00:31:00] because the structurally the system's built the wrong way.
[00:31:03] Chris Bates: When you add in more people and you add in, you know, these problems are just gonna get worse. As you mentioned around aged care, [00:31:10] but obviously there's no better option potentially, but, 'cause you've got it so hard to change the structure. So what's our future, I
[00:31:17] Simon Kuestenmacher: What
[00:31:17] Chris Bates: and what's the realistic.[00:31:20]
[00:31:20] Simon Kuestenmacher: realistic.before we look at the path, forward to understand what Australia will look like in the
[00:31:24] Simon Kuestenmacher: I mean.
[00:31:24] Simon Kuestenmacher: years.
Australia's Economic Outlook
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[00:31:36] Simon Kuestenmacher: Let me just compare Australia to the rest of the world. We must remember that we have all the reasons to be much, much more optimistic about our future than many other places. our business model in Australia is very simplistic. We do [00:31:40] four things and four things only to make money. That is mining, that is, agricultural exports. That is tourism and international students. That's it. That is all we do. That is [00:31:50] how we create wealth in this country. none of these four pillars are at strategic risk of being demolished. world sees about 50 to 60 [00:32:00] years worth of population growth, a hundred years plus of urbanization.
[00:32:04] Simon Kuestenmacher: This is when you need steel. That's our INO. That's our coal, electricity consumption, goes up [00:32:10] for, for a while. We thought we have another 25 years worth of, electricity growth. then decline. we now with data centers probably have 30 to 35 years more international [00:32:20] energy use.
[00:32:21] Simon Kuestenmacher: So that means our energy exports will be there. yields in agriculture around the world are at risk. that means food prices [00:32:30] escalate. Terrible news for the bottom 2 billion people of this planet. Great news for us is one of the biggest food exporters in this planet. Great news for us. The Asian Middle class, [00:32:40] the Asian global middle class, these are Asians that are rich enough to consume globally and they continue to grow massively.
[00:32:46] Simon Kuestenmacher: That's our tourism base. We remain a convenient [00:32:50] flight, a convenient same time zone, a trip away from the biggest, largest emerging middle classes in human history ever. and of course, international education. [00:33:00] These new found middle class members across Asia, they want an English speaking university degree for their kids.
[00:33:06] Simon Kuestenmacher: That's what we offer. Our business model does not need to be reinvented. [00:33:10] Yeah.
[00:33:10] Simon Kuestenmacher: Yeah,
[00:33:10] Simon Kuestenmacher: create
[00:33:11] Simon Kuestenmacher: it.
[00:33:13] Simon Kuestenmacher: we just need to find a way to better distribute this and to better actually make sure we, we, we get enough money out of our mineral exports in [00:33:20] particular, that makes up the lion's share. but my home country of Germany, for example, that completely needs to rethink its business model.
[00:33:26] Simon Kuestenmacher: Is forecasting the next 10, 20 years for Germany [00:33:30] is. Impossible to be honest. Forecasting the next 10, 20 years for Australia is, is, will be pretty close, I would say in forecasting that. So that's my [00:33:40] baseline argument. So now let's look at our problems, in-house in Australia.
Housing and Infrastructure Issues
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[00:33:47] Simon Kuestenmacher: What do we have? And, and you point Chris to, to infrastructure shortages, to, skilled shortages.
[00:33:48] Simon Kuestenmacher: There's to [00:33:50] escalating housing costs, cost of living crisis. plenty, there's plenty there to go wrong. And I think we should,
[00:33:56] Simon Kuestenmacher: So speak.
[00:33:58] Simon Kuestenmacher: try to think how could [00:34:00] we become a more complex economy that would create more wealth? there there's a thing called the Global Economic Complexity Index, where we measure 130 countries.
[00:34:09] Simon Kuestenmacher: We just say, [00:34:10] how complex, how diverse is your economy? We rank a hundred and fifth.
[00:34:14] Simon Kuestenmacher: what and Ivory Coast. Yeah. So we are not
[00:34:17] Veronica Morgan: wow.
[00:34:18] Simon Kuestenmacher: there. and I'm at [00:34:20] countless events each month, where we discuss with politicians, with industry, how should we diversify the Australian economy? And the, the immediate that the two easy [00:34:30] answers, that I think are both unrealistic. the first one is value edit manufacturing. the standard answer. we should not export, iron ore and coal. we should export steel.
[00:34:39] Simon Kuestenmacher: [00:34:40] live animals. We should export juicy steaks. You know, that's value added food, manufacturing
[00:34:43] Veronica Morgan: Yeah.
[00:34:44] Simon Kuestenmacher: that is what should, would create much more money for us. We don't do this because [00:34:50] manufacturing in Australia is stupendously expensive. Even if we automate the living hell out of the process because our electricity is much too expensive, so our electricity should be [00:35:00] half the price.
[00:35:00] Veronica Morgan: Why is ours so expensive compared to other countries?
[00:35:04] Simon Kuestenmacher: policies, negligent policies, well-meaning policies. but it's, it's, it's [00:35:10] naive. We should be half priced and that should be a major policy focus. And I'm reasonably optimistic that we make energy cheaper in the coming decade, whereas I'm convinced that we make [00:35:20] housing more expensive. that's an aside there.
[00:35:22] Simon Kuestenmacher: It's because if you housing. Wants to be expensive. They're only players in the system. Almost only players in the system that want house prices to go up. They [00:35:30] politically have so much more clout.
[00:35:31] Veronica Morgan: Hmm. we saw that when Bill Shorten kind of when he lost the un lose, but it actually kind of said, I make housing cheaper.
[00:35:37] Simon Kuestenmacher: Yeah. Through my policy things people said, [00:35:40] how about not, this is my biggest asset. I think that's a terrible idea. And then he lost the unusable election. Everyone in the political system listened carefully to that and They know that [00:35:50] now, so nobody's touching house prices. We only make pretend policies that look like they're making housing more affordable while they do the exact opposite.
[00:35:57] Simon Kuestenmacher: First home buyer grant. Super for [00:36:00] housing. 5% home loan guarantee. These are ludicrous policies If you want house prices to go down,
[00:36:05]
[00:36:05] Chris Bates: I'm just thinking, so we've got this good economy, right? Okay. I guess it's not great for the environment. [00:36:10] potentially with the energy it's maybe not great. obviously we've got agricultural, which is also subject to climate change, to be honest. So maybe we're shooting ourselves in the foot there a bit.
[00:36:18] Chris Bates: But, the international [00:36:20] students and our tourism book, you know, we're basically selling our country, right? To anyone who wants to come here and spend money here. Like there's a lot of capture cash, you know, like it makes sense, right? But, obviously [00:36:30] housing, right, is the, the thing that we need to solve the most.
[00:36:33] Chris Bates: Because if people don't feel like they've got shelter or got an ability, like, and obviously energy, we could potentially do it. You know, they're throwing out [00:36:40] rebates on batteries and solar and,
[00:36:42] Simon Kuestenmacher: Batterie.
[00:36:42] Chris Bates: know, but, and electric cars. So to solve housing is what the New South Wales government's doing and say Victorian and, and Brisbane [00:36:50] to potentially a lesser extent, like around increasing density.
[00:36:54] Chris Bates: The right move. and should they just go turbocharge on that even though it will [00:37:00] piss off basically lots of people and it will affect house prices because it does affect people. is that the right move?
[00:37:05] Simon Kuestenmacher: at this as a, as a sim city style computer game. Yes, our [00:37:10] cities should densify. Our cities have outrageously low population density. a Australian city on average has a population density. This is about four to five times. [00:37:20] Lower than an equally sized European city, which in turn means that we need four times the amount of electricity wire, sewage pipe, edge, rails, roads.
[00:37:29] Simon Kuestenmacher: You get it. It it's [00:37:30] expensive to operate on a big canvas. fair enough. But Australians like the lifestyle of quarter acre blocks or, or big blocks, separate homes. and now we say, let's, let's actually minimize this. [00:37:40] Let's build more density. the town planners have it right. At his best urban planning practice, congratulations. The problems that, of course, any builder, any developer would tell you [00:37:50] is that the square meter of housing, on the outskirts of town, you bull off a bit of land in on the urban fringe, the square meter of housing costs half of what a [00:38:00] square meter of housing costs and medium density or high density in the middle in our suburbs. And also it's faster to build on the
[00:38:07] Simon Kuestenmacher: Hmm.
[00:38:07] Simon Kuestenmacher: town. So if you operate a me, a [00:38:10] city like Melbourne. Where we grow by a hundred thousand people a year, it's a lot of growth. Are we building the fastest and cheapest way of housing on the outskirts, or are we [00:38:20] building the more expensive and slower way of housing? The urban planning documents tell you things like we want 80% of population growth to occur is infill [00:38:30] and only 20% on sprawl. Because this minimizes our sprawl that minimizes our yearly infrastructure, expenditure, as, as a city. That's good. [00:38:40] It's good practice. The problem is, of course, that at the point of sale, building on the outskirts of town is heaps cheaper. that's what we do. if all [00:38:50] housing ever was provided by the state. Which I don't want by, by the way, but,
[00:38:55] Simon Kuestenmacher: Good.
[00:38:55] Simon Kuestenmacher: was, the equation would be different because then you would, would factor in long-term [00:39:00] infrastructure costs. But we don't, if I buy a house in, in and Melbourne's west,
[00:39:05] Veronica Morgan: Yeah.
[00:39:05] Simon Kuestenmacher: that's what I buy.
[00:39:06] Simon Kuestenmacher: And I don't pay for the infrastructure, in any direct [00:39:10] sense.
[00:39:10] Chris Bates: Hmm.
[00:39:11] Simon Kuestenmacher: what do I care? I buy that house because I can afford it. so we don't plan cities. all that strategically. Of course we have the overarching long-term [00:39:20] issue that, bit of a history lesson. If you go back to the end of the second World War when we were home to 7 million people in this country. we then quadrupled the population in the 80 years since. That's a lot of [00:39:30] growth. all the while, while we went from seven to 28 million people, we added one new city to Australia. That's the Gold Coast. The Gold Coast was the smartest thing we've done in the last 80 [00:39:40] years, for better or worse, in, in Australia, I think we should have built eight, eight, gold coasts in the last 80 years rather than one.
[00:39:47] Simon Kuestenmacher: One new, massive city, per decade. Sounds [00:39:50] about right. but we haven't done this and so we put ever more people into just the same amount of cities and then we wonder why they sprawl. It's kind of, it's kind of comical,
[00:39:59] Veronica Morgan: I've never [00:40:00] wondered about, you know, how other than the capitals how a city is created, but, so how was the Gold Coast created and how would somebody need to create a new city?
[00:40:09] Simon Kuestenmacher: [00:40:10] So in a sense you don't, usually when you build a city, you build up a tiny settlement into a gigantic settlement
[00:40:16] Veronica Morgan: Right? So it's.
[00:40:17] Simon Kuestenmacher: of tiny settlements. so put this in [00:40:20] some sort of like, cute way, it is utterly plausible that in the next 80 years we double the country. Yeah. So we go from 28 million to
[00:40:29] Veronica Morgan: Hmm.
[00:40:29] Simon Kuestenmacher: [00:40:30] million people.
[00:40:31] Simon Kuestenmacher: It is plausible if you take this as a serious assumption, which. It really might just be the case. do you [00:40:40] want to have the 28 million new Australians settle? It's a computer
[00:40:45] Veronica Morgan: Hmm.
[00:40:45] Simon Kuestenmacher: Australia right now and a box of 28 million new Australians. Where do you put them? [00:40:50] Doubling every city from Wagga to Sydney to Perth would be a bit naive. I, we shouldn't double. Melbourne and Sydney. They kind of came at the, are [00:41:00] maxing out, the function. So let's draw Melbourne and Sydney in Perth by one and a half, but that means. are some cities that we should probably quadruple. There should be whole new cities that we should [00:41:10] build. We would then want to think where those people would want to live, where we would want these economies to settle. This, for example, would mean that most people want to hug the, [00:41:20] seaboard. so we would probably want the last, the vast majority of those people live somewhere between Adelaide and Cairns. Somewhere along there. Yeah. mostly between [00:41:30] Melbourne and, the Gold Coast. Maybe something like this. It's certain that this will happen in my, in my humble reading.
[00:41:35] Simon Kuestenmacher: If we take this as a given, we know that new settlements will, will occur. We know [00:41:40] that places like Newcastle will, will triple, quadruple in size. That whole new areas will spring up. By this point in time, we must have a fast rail corridor to connect the whole eastern seaboard [00:41:50] that is financially speaking dumb right now. is an absolute necessity in 80 years.
[00:41:55] Veronica Morgan: Hmm.
[00:41:55] Simon Kuestenmacher: if we were even remotely smart, we would draw this rail [00:42:00] corridor on a map right now, we would earmark these areas for development. So that we do not need to build around development that we do not, so we can actually build cheap [00:42:10] infrastructure in the future.
[00:42:11] Simon Kuestenmacher: This would be a simple task we could do right now. It would be cheap as chips. It would minimize future infrastructure costs like crazy. Are we going to [00:42:20] do this? 100% not because this would first of all mean would need to stand up and say to the public, we will double the Australian population that is unpopular.
[00:42:29] Simon Kuestenmacher: [00:42:30] We are shying away from this, so we are therefore going to build dumber rather than smarter infrastructure.
[00:42:35] Veronica Morgan: Not only that, we need cooperation and coordination for that to [00:42:40] happen. You know, we're,
[00:42:41] Veronica Morgan: we are not,
[00:42:42] Veronica Morgan: areas.oh, we're not good at collaborating across our states and territories for starters. And with federal, I mean, yes, COVID was a great example of where there was [00:42:50] a period of collaboration. But we know there's not a lot of unity and unity of purpose.
[00:42:55] Simon Kuestenmacher: So, and also we have short political terms and you, you're kind of [00:43:00] hinting at a, at a, at a problem there, what I would consider the politicization of infrastructure.
[00:43:05] Veronica Morgan: mm-hmm.
[00:43:05] Simon Kuestenmacher: gets not built, but gets decided, by politicians. it [00:43:10] doesn't need to be this way. So that of course means we are not the system to build infrastructure where it is needed the most. We are [00:43:20] incentivizing the system with infrastructure where it is wanted the most.
[00:43:23] Veronica Morgan: Yes. Yep.
[00:43:23] Simon Kuestenmacher: By the, of course the marginal seat gets a bit more infrastructure dollars and this, each party might have a [00:43:30] pet project, that just happens to service their particular corner of the city a bit more. that's silly. We could theoretically create a system where the politicians decide on the [00:43:40] money, the, the pool of the money, the size of the bag, and then a. panel of experts, let's call it Infrastructure Australia, it already exists. They [00:43:50] already publish an infrastructure priority list. Yeah. And we then essentially say prioritize infrastructure, you build it, you make these decisions. We could then do bigger, grander, more [00:44:00] long-term planning rather than the short-term political planning.
[00:44:02] Veronica Morgan: How frustrating it must be for those who work in Infrastructure Australia. We did actually do a, an episode on, interviewed [00:44:10] somebody from there years ago, and I, all I could think of is how frustrating must that job be?
[00:44:14] Simon Kuestenmacher: Oh, you write this list, you have all the plans of what's the
[00:44:17] Veronica Morgan: Uh,
[00:44:18] Simon Kuestenmacher: then email. Yeah, just here. just put it [00:44:20] right into the top drawer,
[00:44:21] Chris Bates: Uh,
[00:44:21] Simon Kuestenmacher: drawer, probably.
[00:44:22] Veronica Morgan: yeah, sorry, because that electorate doesn't want it, that one does. Like what a bloody nightmare
[00:44:27] Chris Bates: Simon, I've got a one,
[00:44:29] Chris Bates: two [00:44:30] topics I wanna talk to you about, and we're running outta time. We've only got 10 minutes and I've gotta get a property number so it's getting tight. So the, uh, AI and work from home, let's actually, let's put 'em together. [00:44:40] And o obviously everyone's got an opinion on ai, but you, I do feel like you come with a, a, an informed opinion on it.
[00:44:45] Chris Bates: And secondly, knowledge workers and the battle between work from home [00:44:50] and return to the city. cause that's huge impact, right? Like, you know, these building, these cities, if you have to be in the office, then it's different. So. What's your take on where we are in these debates and how intrinsic [00:45:00] are they into where we're heading?
The Role of AI and Remote Work
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[00:45:01] Simon Kuestenmacher: So if, if I look at ai, I'm of course not the technical expert,
[00:45:05] Simon Kuestenmacher: my main view of AI is that quite a few tasks that we do, become. [00:45:10] fast, they might become instantaneous or much faster. If you write an email, with ai, it's faster so you save a bit of time. You can read an annual report much faster [00:45:20] through with the help of ai by asking questions, you might be able to create a PowerPoint, presentation faster.
[00:45:24] Simon Kuestenmacher: You program faster. So that to me tells me that quite a few of the technical tasks [00:45:30] that make up our work life, they become much faster. These happen to be the work tasks that I might as well do from home. Because why the hell do I need to sit in an [00:45:40] office with noise canceling headphones to write emails? makes no sense whatsoever. each job also has a more interpersonal, creative tasks that require me to [00:45:50] work collaboratively with other people. These tasks can be done via Zoom or something. That's fine. But we can, they, we know that they're better in office. And so as [00:46:00] AI, gets thrown at the workforce more and more, the chunk of the pie chart of your day that is made up of technical tasks that shrinks. The, the part of the pie chart that makes up your, [00:46:10] interpersonal tasks that increases. So
[00:46:12] Chris Bates: Mm
[00:46:12] Simon Kuestenmacher: of work wants. To be going back to the office more over the long term. So I think that AI
[00:46:18] Chris Bates: mm.
[00:46:19] Simon Kuestenmacher: the word of work, [00:46:20] which in term, puts more people into the office. That is quite remarkable.
[00:46:24] Simon Kuestenmacher: Of
[00:46:25] Veronica Morgan: Hmm.
[00:46:25] Simon Kuestenmacher: consider that, we move away more, more from a [00:46:30] industrialized economy into a knowledge economy.
[00:46:31] Chris Bates: Yeah.
[00:46:32] Simon Kuestenmacher: more people have a job that kind of, sort of takes place in an office. so that increases. And of course we continue to grow the overall [00:46:40] workforce. So I think that the office towers, that the inner city in the long run will be just fine.
[00:46:46] Veronica Morgan: Hmm.
[00:46:46] Simon Kuestenmacher: am not concerned about the exact timing of this [00:46:50] process because I don't own billions of dollars worth of office hours, so
[00:46:53] Chris Bates: Okay.
[00:46:54] Simon Kuestenmacher: care? but, in the long run, I see more more drivers push people back into the office. this is well beyond [00:47:00] the idea of where do workers want to be and what do bosses want.
[00:47:02] Chris Bates: And then if the mining sector is automating and the agricultural is automating, you know, as in using a lot of [00:47:10] technology to do stuff, and then we become more of a service knowledge base economy. But then that just, it's really hard to start an office. Like you can't start a city and [00:47:20] get talent and start a, you know, because why would I move to this, new region?
[00:47:23] Chris Bates: Because my job prospects are very limited.
[00:47:25] Simon Kuestenmacher: You would move to the new city. We wouldn't build 12 new cities at a time. You'd build like one or two at the [00:47:30] same time, and you're moving there because you're incentivizing cheap housing. It's just that simple. the new city would need to be connected really well to the next place. so you have [00:47:40] people moving there ideally. relocate part of university campuses there. So you have this kind of part of the
[00:47:46] Chris Bates: Right.
[00:47:47] Simon Kuestenmacher: and then you grow the workforce from [00:47:50] out of the university as well as a Kickstarter. you make it very attractive, for businesses to settle there by
[00:47:56] Chris Bates: Gotcha.
[00:47:56] Simon Kuestenmacher: like small tax cuts and so forth so it [00:48:00] can be done.
[00:48:00] Simon Kuestenmacher: The Gold Coast work, the Gold Coast of course,
[00:48:02] Chris Bates: Yeah.
[00:48:02] Simon Kuestenmacher: a hundred kilometers away from Brisbane. It is reasonable distance, and so that's how you would. [00:48:10] through this, you know, the next city wouldn't be in the middle of nowhere. The next city would be within an hour's drive or two hours drive of the next thing. it can be done. I [00:48:20] think that
[00:48:20] Simon Kuestenmacher: That AI.
[00:48:21] Simon Kuestenmacher: the world of work. It's definitely here to stay and I convinced that in Australia unemployment will remain low. because as I mentioned at the beginning, [00:48:30] the skill shortage is so severe that this won't be, wiped out at all.
Inflation and Economic Predictions
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[00:48:34] Chris Bates: what's your thoughts then on inflation then, you know, you can see the demographics, you can see
[00:48:37] Simon Kuestenmacher: You see the
[00:48:38] Chris Bates: got all this migration, this [00:48:40] demand
[00:48:40] Simon Kuestenmacher: all this might raise and
[00:48:41] Chris Bates: competing over, you know, a finite amount of
[00:48:43] Simon Kuestenmacher: over, you know, falling better
[00:48:45] Chris Bates: a and a global sort of challenge with this?
[00:48:47] Simon Kuestenmacher: you know, had a glue wall. She,
[00:48:48] Chris Bates: when you look at it from a [00:48:50] demographics point of view that we're, you know, this is a trend that will go back to low inflation, low growth. You may, you mentioned about low unemployment, or do you think that inflation's gonna stick [00:49:00] around?
[00:49:00] Simon Kuestenmacher: If I look a decade ahead, demographically speaking, we want to have hyper, hyper high consumption in the next decade because we push the biggest generation [00:49:10] ever, the millennials through the highest spending phase of the lifecycle, the mid forties. All the while as we retire. The baby boomers, we, most of them are already retired, so we have detailed spending data about them. Baby [00:49:20] boomers in retirement increase their spending. so you have the richest generation. Boomers and the biggest generation spent more money than. in the next decade, that should be [00:49:30] inflationary. It's great news if you're Harvey Normans, if you're barbecue laws, you know all the businesses that help you to fill your house with crap.
[00:49:36] Simon Kuestenmacher: They have a killer decade ahead. Great news for them. that is [00:49:40] inflationary in nature. There's more that feeds into inflation than just consumption. But consumption, demographics suggest higher. Rather than lower, inflation, which of course means the RBA, [00:49:50] which has one tool, to, calm down inflation with the cash rate, they would probably need to have the cash rate higher rather than lower for longer. which in terms means that these interest [00:50:00] rates, I wouldn't expect them to go down
[00:50:02] Veronica Morgan: That is an interesting way of looking at it.
[00:50:04] Chris Bates: Property Dumbo for us.
The Median House Price Debate
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[00:50:05] Simon Kuestenmacher: Well, the property Dumbo at the moment, I would say the dumbest thing is to think [00:50:10] about, median house prices. because the median, of course is the middle house. Yeah, it's, it's the middle house. You line up all the house prices, the median price, the house is the one in the [00:50:20] middle. It's a very useful measurement if you, society resembles a bell curve, eh, couple of rich people, a couple of poor people, most people in the middle. Median measures [00:50:30] are useful there. What we have in Australia increasingly is a U-shaped society, literally the opposite of a, bell curve in that thing. The meat in-house, [00:50:40] yes, it moves a bit more, whatever, if housing gets more expensive, but what a pointless measure because the rich people, they wouldn't be seen dead in a million dollar home in Sydney. [00:50:50] The poor people they could never, ever dream of affording a million dollar house in
[00:50:53] Veronica Morgan: Yeah.
[00:50:54] Simon Kuestenmacher: So it is a kind of a silly measure. It is a useful measure. If you look at the median house price for a three bedroom [00:51:00] house in Surrey Hills, that's okay as a measure.
[00:51:03] Simon Kuestenmacher: the median house price per city, I'm like, yeah, a
[00:51:06] Veronica Morgan: I am, so,
[00:51:07] Veronica Morgan: I'm so with you on that. And in fact, very [00:51:10] recently add to this, Dumbo, the Office of Fair Trading in New South Wales is proposing new legislation, around underquoting. And one of the things that, uh, is on the [00:51:20] table is a statement of information each which you have in Victoria, where the agent prepares a statement of information for buyers that shows their most three recent relevant [00:51:30] sales.
[00:51:30] Veronica Morgan: Back up their estimated selling price, but also on this proposed form is the median price for the suburb. And I've just gone back and I said that. [00:51:40] Meaningless. it's ticking a box for the sake of ticking a box. You know, it gives no meaningful information to a buyer. But I did. I did.
[00:51:48] Veronica Morgan: You know, if, if it's gonna be the [00:51:50] median for a three bedroom house in this suburb, fine. But the reality is, even that you are using such a small data pool when you cut it down to, you know, when you, when you. Drill it down to that level, it's more [00:52:00] meaningful, but you, you statistically, unreliable amount of data that you are using.
[00:52:04] Veronica Morgan: So it, it is just a, it's, it's an absolute crack up. So I love that. Dumbo. I'm in full agreement [00:52:10] of it.
[00:52:10] Simon Kuestenmacher: Fantastic.
Conclusion and Final Thoughts
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[00:52:11] Chris Bates: Thanks so much for coming on Simon.
[00:52:13] Veronica Morgan: Simon,
[00:52:13] Simon Kuestenmacher: absolute pleasure.
[00:52:15] Veronica Morgan: always great chatting to you.
[00:52:16] Henry: If you have a question that you'd like us to answer in an upcoming [00:52:20] q and a episode, you can send us a voicemail or written question via the website. The elephant in the room.com au. Or you can email us directly at questions [00:52:30] at the elephant in the room.com
[00:52:32] Henry: au.
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