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The Finance Show With Joe
Welcome to the Finance Show with Joe hosted by It’s Simple founder, Joseph Daoud. We chat about the financial issues facing ordinary Australians from managing the cost-of-living to investment strategies in order to help you make more informed financial decisions.
Join us as we discuss finance, mortgages and home buying in Australia!
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The Finance Show With Joe
Aussie Update: Labor's Housing Bill Rejected, Consumer Spending at an All Time Low, Interest Rates Set to Drop
In this episode we break down Anthony Albanese's controversial housing bill, dissecting the shared equity scheme designed to help first-time buyers and the political clash it ignited between the Coalition and the Greens. We'll unpack why the Greens' demands on negative gearing and capital gains tax changes are seen as impractical and explore the limited impact of this bill on property prices due to stringent eligibility criteria. Compare this with the existing home guarantee scheme, and you'll see why concerns about skyrocketing property prices might be overstated.
Additionally, we navigate through the shifting sands of consumer spending from April 2021 to July 2024, focusing on the drastic decline in discretionary spending and the economic pressures driving these changes. Discover the hidden impact of rising taxes on alcohol and tobacco, pushing consumers towards illegal alternatives.
Finally, we turn our attention to the real estate market in New South Wales, spotlighting Catherine Field and Austral as key investment opportunities with promising rental yields and future capital growth.
Follow us for more property news and mortgage advice!
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Anthony Albanese's bill gets denied. Consumer spending is at an all-time low and our interest rates finally going to drop. Catch it all in today's episode of the Finance Show with Joe.
Speaker 2:Welcome to the Finance Show with Joe. He's Joe, I'm just some schmo. And Anthony Albanese's bill just got blocked by a strange coalition, not the coalition the Greens and the coalition agreeing.
Speaker 1:For once, I'm happy, but at the same time there are going to be I think one third of new home buyers or first home buyers are going to be very upset, but I don't think they understand the full ramifications of this bill. Now the coalition is opposing this bill because they oppose everything.
Speaker 2:It's just what they do, yeah, the opposition. That's how it works.
Speaker 1:That's how it works, but the Greens don't want to approve anything in regards to housing because they want to remove negative gearing.
Speaker 2:Yes, Capital gains.
Speaker 1:Reduce capital gains, gains, all these things. The funny thing is I actually don't think they understand what this bill is, because this is a bill specifically for owner occupied properties and you don't get any of that stuff.
Speaker 2:You don't get negative gearing, you don't get you know I don't really understand why they're like I do, but I don't.
Speaker 1:They're basically like it doesn't go far enough, which I guess look, I can understand it, but I don't actually like the proposal that was brought by our on this one, well, the labor party. So this is the shared equity scheme, I believe.
Speaker 2:Yeah, where it's the help to buy. It's the help to buy. Shared equity scheme. Government would support first-time buyers with a smaller deposit to get into the property market.
Speaker 1:So they were trying to help people with a 2% deposit purchase a property. That's all well and good, but it's different to the home guarantee scheme. So the home guarantee scheme is where the government comes in and acts as a guarantor for the remaining 18%. So you would still get a home loan, yeah. Okay, it would be 5% from you, 95% from the lenders, with 15% coming from the government as a guarantor. Okay, but you still have to pay it all back. Yeah, but you own that property outright. From my understanding correct me if I'm wrong on this particular scheme, what the government wanted to do was have shared equity in every single property that was purchased. So it would be 62% owned by the buyer originally and then 38% owned by the government.
Speaker 2:That's potentially the case, I don't know. I don't see. To be honest, I haven't found an article that is actually adequately explaining this bill. They're mostly explaining why, um, these parties were opposed to it. Obviously the coalition's opposed to it, because it's the coalition yeah, that's their job. The greens are opposed to it because they want to include things about renters and stuff and they say that this scheme is only going to further increase house prices, which is stupid again because Adam Bent clearly has never got it like pulled out a mortgage calculator.
Speaker 1:So they've capped this is okay. The Greens are idiots. I do agree with some of their things but they're actually dumb. And let me explain why. They've capped this where your salary needs to be between $90,000 and $120,000. So you would not be able to apply for this scheme if you make $120,001. Okay, it needs to be between $90,000 and $120,000 that you make Now between that salary range. If you are earning that much, your borrowing is so limited with the current interest rates that you won't be able to purchase something that is going to grow exponentially in value At $120,000 salary per year for an owner-occupied purchase and this is only for owner-occupied purchases, it's not for investment purchases For owner-occupied purchases, you would be able to borrow a maximum of $500,000. With a 2% deposit, that means you're going to have a $510,000 property. What can you buy in Sydney, at Victoria, for $510,000? I don't even know if you can. It's a one-bedroom apartment, western Sydney, certain parts of Victoria or certain parts of Melbourne.
Speaker 1:So like those apartments that are near the Panther Stadium or something, you could possibly purchase something in Liverpool, but they've gone up to about 570 now you could potentially purchase something. I'm just trying to think of other areas like old red bricks in Parramatta, in Fairfield. These properties don't behave like other properties. They don't spike up in value. They're old, they're deteriorated. They're not things that people go, okay, yeah, I'm going to buy that and it's going to make me a ton of money. They're usually in strata lots or their company titles as well. So by him saying, oh, this is only going to drive property prices up, it's not because the only part of the market that is actually affected by this, that is actually affected by owner-occupied properties with that price range, the only part of the market are the market are properties that don't spike up in value like other properties do.
Speaker 1:If this was allowable for investors, if you know, I could go purchase something with a 2% deposit as an investor. First of all, I'm jumping on that. Yeah, super, such a low deposit. But the second thing is, between that 90,000 to 120 thousand dollar range, I'd probably be able to buy something with $800,000, $900,000. Okay, okay, now we're talking. I'm getting house, I'm getting land, I'm buying Perth, as always, or Brisbane, I'm looking at those locations, but for this particular salary. I just don't think that the Greens I think they actually have their own agenda. They keep pushing their extreme agenda of we want negative gearing on, we want capital gains.
Speaker 2:It's never going to happen. Yeah, they want to change the capital gains discount. Okay, I think their basic thing is and this is just really reflective of their voter base, typically speaking is they're constantly focused on renters people who don't own property. Basically, their whole big thing is none of these bills fix anything for renters and there is a rental crisis going on right now in Sydney Eased off, it's finally eased off. It's finally eased off. Well, there you go, but still, that's part of their big thing is making things better for renters. So they keep blocking everything that's going through. Not so much because I think they genuinely think house prices will go up as a result. I think it's just because they're trying to include either renter protections or some sort of rent cap or something like that, I think.
Speaker 1:Labor came in with a bill that was not feasible, and I also think the Greens are just being stubborn.
Speaker 2:The Greens are absolutely being stubborn.
Speaker 1:I think they're not seeking this through. I think they're not actually helping their base. No, I don't think so, Because if somebody could get into the market with a 2% deposit 2% deposit on a $500,000 property is 10 grand. Okay, A lot of these people do probably have $10,000 in savings. I'm not going to say everyone does, but there's a high possibility that I think they're only going to allow 30,000 spots. There's a high possibility that 30,000 of those first-time buyers had $10,000 in savings. He's actually removing the opportunity for them to go and purchase and have something of value to their name because he's being stubborn about rent control and negative gearing and capital gains discount and all those other things.
Speaker 2:Was this the bill that was going to cut taxes for developers who build rental complexes? I don't know.
Speaker 1:Okay, I don't know, but I can get around that too.
Speaker 2:Okay, yeah, okay, yeah. The help to buy. Let's say that's the build to rent bill that I was thinking of, which both the Greens and the Coalition are also opposed to.
Speaker 1:Okay, yeah, it's just very cool stuff. Moving on from that, we've got some really interesting data that has come out. So we, moving on from that, we've got some really interesting data that has come out. So we mentioned this two episodes ago where twice a year, the data on retail spending, consumer spending, comes out. It's usually mid-year and then it comes out at the end of the year as well. Yeah, so we've got the july report from the abs. I can't stop laughing because, like, the consumer spending is at an all-time low and this is what the government wanted. When it's how you curb inflation yeah, it's how you curb inflation you increase the interest rates, you make everyone go broke and yay, okay, everything's normal again.
Speaker 2:Yeah, and then you got to start over again and build that up.
Speaker 1:You got people living in tetsu, brisbane, that's neither here nor there, but I just want to give you guys the comparables. Okay, so the consumer spending right. April 2021, you, you remember, you remember, you remember, I remember. I pointed it out too much. I actually don't remember April 2021, everybody was just online shopping.
Speaker 2:Oh, yeah, yeah, yeah, yeah, yeah man, I bought so much athleisure at the time.
Speaker 1:Discretionary spending peaked at 45.6%. So that means whatever you got as your salary, you were spending 46% of that on just whatever you wanted. That has now dropped in July I can't stop laughing. July 2024 to 1.4%. Yeah, that means if you're, if you, I can't stop laughing. Like if you earn a thousand dollars a week, there is a big likelihood that, like I'm talking your retail spending, your dumb shit, you're spending probably 14 bucks a week Like everything else is going on Straight up Groceries petrol?
Speaker 2:Yeah, straight up. I feel that completely because I'm not buying anything. If it isn't food, mortgage or electricity and water and all that shit, I'm not spending. I needed new shoes. I finally got new shoes and I bought them this week because I found a sweet deal on cash.
Speaker 1:Were they the $39.99 Chuck Taylors?
Speaker 2:No, no, these are real ones. No, no, no, no, no.
Speaker 1:but I'm saying were they the $40 ones they had?
Speaker 2:No, no, they were $100, but down for $150. Okay, yeah that's pretty good and I needed new shoes because my other ones literally had holes in the side.
Speaker 1:You can't be walking around with holes in the side, the city, that's again.
Speaker 2:I still have them for housework, but I am feeling it Like that's how much. It wasn't that much. It's not that much money, but it is a lot of money right now. It is?
Speaker 1:It definitely is. And because you live in New South Wales we all live in Sydney New South Wales was hit the hardest, with people spending 0.2% less than they were 12 months ago. Yeah, so they're saying that, like in sydney, australia that is the hub for like businesses are definitely turning over.
Speaker 2:less restaurants are really doing it tough the report said that transport services, hotels, cafes and restaurants are the ones that are copying it the most transport services so I'm assuming I don't know, is that public transport?
Speaker 1:are we talking uber?
Speaker 2:taxis. I I'm going to assume Uber and taxis because I imagine people would be jumping on the train to save money, or buses.
Speaker 1:But they're expensive too.
Speaker 2:Yeah, they have gone up, which again feels backwards. It does. Yeah, what are we supposed to do? Petrol goes up, the train goes up, the bus goes down. How do I go anywhere. You know what?
Speaker 1:I'm doing well. No, like you know, like I'm waking up at like 2 am. Oh, I'm working until 7 am every day, just so I can produce more income for my household. Okay, fair enough, I've got a business running and, you know, I've got people that work for me. But that is what I am doing to make sure that, like, I have a competitive edge over other mortgage brokers.
Speaker 2:Yeah.
Speaker 1:It's just, it's crazy. So I've got a few of my favorite stats here. Alcohol beverages and tobacco has dropped the most, as people are spending 10% less this year than last year.
Speaker 2:I have two theories on this. Yeah, as it relates to alcohol, the beer tax has gone up and it just keeps going up. So, like a case is now like what? 65 bucks on average. It used to be 50 to 55, that was normal. Um, so last year and a half it's gone up to, yeah, 65 bucks. Smokes, and I don't know about anybody, anybody else, but nobody's buying them legally anymore. Basically, everybody's buying the dodgy ciggy ciggies that are just imported by, frankly, organized crime. Okay, it's been because the tax on legal ciggies is so high and it just keeps going higher, that when you find, when your regular tobacconist just has the, um, this illegal stuff, this imported stuff, and it's only 15 bucks as opposed to 60 bucks, it's a no-bra60.
Speaker 1:It's a no-brainer $60 for a pack of cigarettes. If you're a pack-a-day smoker, that's a $420-a-week habit.
Speaker 2:Yeah, and it's a complete no-brainer. People are switching now because vapes are a bit harder to no, they're not actually. Here's the thing. There's a whole black market with nicotine and everyone's buying on that. So none of this like reporting is being like reported to the government so you think that the data is skewed because of illegal activity? Yeah, 100 I think I think the abc released a report and it's something like 45 of tobacco sales are illegal. What?
Speaker 1:yeah, it's like ridiculous so okay, let me, let me. I'm getting rid of that one. This, it can't be illegal. This one has to be darted well, official. But clothing and footwear is down three percent, yeah, yeah. So nobody's buying clothes anymore. People are buying foot shoes. This is one like during covid, I could not get for the life of me like the pair of Nike's that I wanted. Now they're in discount bins. Like you can find Kobe's on the shelf, you can find Jordan's on the shelf. I love sneakers. I've played basketball for 20 years, retired now, no longer the Lebanese Draymond Green, but that is a lot less than what it was. And then this is the big one, and this is the state that's known for culture, fashion, food, everything. Victoria is spending eight percent less on clothing and footwear than they were a year ago 100.
Speaker 2:That's where I'm saving my money. I'm just not buying any clothes, I'm talking victoria as a whole.
Speaker 1:So their property prices are down, investment is down in the state, but also spending is down as well. Yeah, so I think victoria might have its own little mini recession, just that state alone, because they're just not income producing enough for the supply that they have, all the employment that they have. If we get hit by massive unemployment, I think it's going to start in that state first, before it starts anywhere else interesting.
Speaker 2:Do you think that it's because of victorian policies, um, that are actively trying to tackle these things at the expense of, let's say, investors or big business and stuff like that? Victoria has always been left-leaning, yeah, yeah, yeah, behind that. No, no, no, I'm not even necessarily saying that, but just their specific state policies. Because New South Wales, we're kind of just not really changing anything. We're just full steam ahead. This is what we're doing, and obviously we're not buying anything. No, we're just full steam ahead. This is what we're doing, and obviously we're not buying anything and nothing's changing. So then there's no point at which the market sort of does its downturn, does a reset and then has the opportunity for an upturn. We're just sort of plateauing. Yeah, is that a bad thing for us and a good thing for Melbourne in the long term?
Speaker 1:No, See, this is why I'm not the economist no, no. So the way that, like any trough, anything like that, like people are exiting the market in Victoria in droves Okay, I could go on a Trump rent right now, but I'm not going to. Last episode, I complimented Melbourne, but there's a new investor tax on property and you can't lease the property as well because there's an oversupply Okay, and you can't lease the property as well because there's an oversupply Okay. So, if you're getting 2% yield on a $500,000 property, but you also can't find a tenant for the property, and then, on the back of that, because there's so many extra apartments coming in, there's so many new buildings, you can't receive the capital appreciation. At the same time, you're going to get this stagnation and I think Victoria's poised to have their own mini recession in that state alone, because data's on the wall People are spending a lot less.
Speaker 1:What happens when people spend less? People lose jobs. What happens when people lose jobs? Oh, okay, housing goes down. And then what happens after that? Well, we've got all this housing coming in Cool, who can afford it outside of investors? Well, investors don't want to invest there because you've thrown all these new taxes there. They're going to get invested in queensland. That's my little prediction on victoria. Okay, will I be right?
Speaker 2:probably not I mean you could. You can't predict the future, that's the whole thing, but it's just it's.
Speaker 1:you know, if it wasn't for their tourism which is great, and the way that they plan the city, they'd probably lose a lot of their big events. They already lost the Olympics. Like Brisbane got the Olympics, not Melbourne, there's heavy investment in Brisbane. I want to go into our next topic. So the Federal Reserve dropped their interest rate.
Speaker 2:This is the American RBA.
Speaker 1:They literally dropped it by half a percent, first time they've done a cut since 2020 during COVID. I want to make some predictions for the interest rates, as the consumer spending is at an all-time low. They're saying that the overnight cash rate is predicted to be 3.2% by next year, which means my interest rate, your interest rate, is going to be about 5.2%. That'd be great. That's going to increase your spending, I think, for, like your scenario, your spending goes up $22,000 a year. That'd be awesome.
Speaker 1:The banks are already reducing their fixed rates, so Macquarie has led the way with 5.59% fixed for two and three year mortgages and 5.79% for investment loans. Even interest only is down to 5.89%. I really like we have a rate update. This Tuesday. The RBA is meeting. We said it with the episode with Manny. We don't think they're going to drop the rates because Australia is slow to the party, as always. Marijuana has been legal around the world for 20 years, but Australia I don't know what it is here it's not illegal, I mean it is illegal, but it's just like walk man walk around the streets.
Speaker 2:It doesn't really seem that illegal.
Speaker 1:It's not like we don't have dispensaries, yeah yeah, yeah, 100%. Do you have any predictions for this Tuesday?
Speaker 2:Look, I'm a bit of a pessimist. I just don't really see the rates falling. Like you said, we're slow to the party, so I just don't really the rates falling. Like you said, we're slow to the party. So I just don't really as much as I'd like it to happen, because, good for me, I don't see it actually happening. I definitely just see them keeping it going, because what's inflation at? What's the inflation rate at?
Speaker 1:Well, this is the thing. This quarterly report said that it was only 0.2%. Oh well, then they should. Year on year we're at like 3.2. Okay, but like the economy only grew by 0.2% in the last quarter.
Speaker 2:That was buoyed by both immigration and government spending.
Speaker 1:But if you annualize data, like if you annualize that 0.2, that becomes 0.8.
Speaker 2:So you're saying we have inflation possibly under control, possibly Like these rate rises have actually done their job.
Speaker 1:Finally, they're saying that. But who's the reserve bank ran by? It's ran by, not Phil Blow anymore no, not Phil Blow, but it's ran by a bunch of schmucks, ex-bankers and a lot of the time. They're thinking and I'm going to be honest with you they are a business. They need to start thinking about their profits as well and all that stuff. They're making record money right now. All the banks are. They need to based on the fact that they gave out so much money during COVID. They're going to recoup those funds. But this is the issue. Australia's always slowed to the party. How much more can people take? And it's getting to the point now. I'm refinancing personal loans for people everywhere. I'm helping people get out of debt. People are coming off their fixed rates still so phone call this morning I was on 2.2%. My rate's about to jump up to 8%. What can you do for me?
Speaker 2:That would hurt so much.
Speaker 1:A lot of the banks are predicting these interest rates drop. It's returning buyer sentiment to the market. People want to buy property now because they're like, oh, I'll buy it now, I'll buy it cheap, and then when the interest rates go up, my house will go up in value yeah, but just not picking up the vibe.
Speaker 2:I'm just not picking it up, I don't know, because it's all vibe, isn't it like we don't? We don't know? Sentiment's the professional way to say it. I'm saying vibe, consumer sentiment is definitely on the way, this bloke buys houses on vibes, more vibes.
Speaker 1:I love it. No but um. The one bank that I want to touch on a and z has tipped the rates to go up yeah, what the fuck?
Speaker 2:I just I just feel like I'm on board with a and z again. I don't want that to happen. Maybe I'm just pessimist. I'm just like I prepare for the worst, hope for the best. But unemployment's still at 4.2%, and what does that have to be Around 5%?
Speaker 1:This is my issue with unemployment, though Just because somebody's employed doesn't mean they're making enough money. There's a difference between unemployment and underemployment. You can be employed and working two hours a week. This is true. This is true. You can be working and you can be eight hours a week.
Speaker 1:Yeah, just because just because you are employed does not mean you have a sufficient enough salary. And are they looking at that data as well? Are they looking at the underemployment data? Because I can guarantee you, there are a lot of people out there that are working permanent, part-time, they're working these hours and they are not receiving enough money to be able to sustain a living.
Speaker 2:I mean, that's definitely true.
Speaker 1:Interest rates. Are they going to go up down? Drop a comment below. I would love to know.
Speaker 1:I want to get into a market update and specifically I want to talk about Sydney Southwest. So I want to kind of touch on where we think the best buy is currently, and there's three suburbs in particular that I think are good. We've got Austral, we've got Leppington and we've got Catherinefield. So Austral the prices have steadied. Austral's only grown by like 1% in the last year, but the rental yield has increased. So the rental yield is up to about 5%. So you're buying at about $890,000. That's the median sale price. You're getting about $750 a week rent there. So you're going to get a yield of 4.4%. I did the calculation before the show. How good am I? But 4.4% in New South Wales, sydney, sydney-based, 45 minutes away from the CBD. That's a good score. Leppington prices have dropped due to oversupply. There are too many properties for sale there Crazy. It's down 2.1% in the last 12 months, but rent is up 8% and it's up to $745 a week, which is 3.3% yield.
Speaker 2:And that's a result of the landowners wanting to pay back against their interest rates.
Speaker 1:Yes, that is fantastic. That is fantastic. That is great, like that is a great buy. My personal opinion, not advice, not specific, very general, very general advice, just data, but that is great. Rental yield, and then lastly, is Catherine Field is up 5% for the last year and rent is steady at $700 a week. So Catherine Fields is still getting a little bit of that capital growth. But it's at a point in the market where these three suburbs, they are doing so well right now. And I'm thinking to myself okay, austral, which has always been considered like a premium sort of suburb, especially with all Badger's Creek, everybody talks about it at every barbecue. Oh, the airport, yeah, it's close to there. I just think Austral right now, personally, that is probably the best buy in New South Wales. If somebody approaches me and they ask me for general advice, I think that that might be the best location for them to purchase. What do you think?
Speaker 2:I mean, it sounds good. Ostril, right next to bloody Elizabeth, green Valley yeah, okay, my grandparents lived there Anyway, so is it a good location Actually? Yeah, it's pretty nice. It's quiet, if that's what you're into. I think it's a bit of a pain in the ass if you need to work in the CBD or in and around the CBD, which I guess a lot of people do, but not everybody does. Yeah, I reckon it'd be great if you're a trainee. What if you're a school teacher? Oh, fantastic, then there's a bunch of schools around there.
Speaker 1:Okay, what if you're a nurse or you're in hospitals? There's got to be hospitals. I'm pretty sure it's in the Liverpool area, hospitals close to.
Speaker 2:Liverpool.
Speaker 1:Yeah, I would say the Liverpool Hospital. So yeah, so pretty close. You could even go Campbelltown If you are in the market and you're looking for something that's a good buy in a good location that effectively would probably go up in the near future. That will help you pay your mortgage repayments, especially because of that rental. I can't believe how good that rental yield is. Take a look at Austral. I think that would be a good one for you. There you go. My name is Joe. That is definitely some schmo. If you need any help with your finances, your pre-approvals, you're a first-time buyer, you're looking to refinance, maybe some debt consolidation or investing in property, you can visit us at wwwitsimplecomau.
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