AI, AGMs, and Overworked Directors

[Music]

Hello, welcome to The Money Café, I'm Stephen Mayne, contributor at Intelligent Investor, Founder of Crikey and shareholder activist...

And I'm James Thomson, Senior Chanticleer Columnist at The Australian Financial Review.

Now, James, the Lionel Messi of Australian business journalism, Mr Kohler, is having a well-earned break, so I consider myself very lucky, I get to talk to the Kylian Mbappé of Australian business journalism instead. Have you been taking in the World Cup and what's your hot take?

Well, I guess I have. I think it's had a bit of everything, hasn't it? It's gone on for a long time. They extended the number of countries involved from 32 to 48, I must admit I thought at the start of the tournament, oh it's going to drag a bit. But look, it's been great fun, I reckon. Terrific tournament for Australia in terms of the time zones have just worked beautifully. We've been able to watch a lot of it at pretty reasonable times and it's been nice to come into the office and have it playing in the background some mornings. And I think from my limited knowledge of soccer, the best team won.

Correct, yes.

Spain seemed to be the purest footballing nation throughout the whole thing and so I think the right result was earned in the end.

Correct. They just dominated both France and Argentina - and everyone was saying France was going to win. It's just demanded global attention like no other sporting event. I was amazed this morning that the boss of Coke rang the bell at the New York Stock Exchange this morning, Monday morning - why? To celebrate their sponsorship of the World Cup. Since when does a sponsor of an event...? You've normally got to have an IPO to get to ring the bell at the stock exchange.

I think the bell ringing at the New York Stock Exchange has become a little bit less special than it once was perhaps. All sorts of people get in there and ring it.

I completely agree. Now, Russia was banned and China didn't even make the top 48 teams to get to the World Cup, but boy, they're rocking the boat in the AI space, aren't they? You had an interesting column on Kimi and the AI wars...

Yeah, this has come out of nowhere. You'll remember about 18 months ago, we had this - what became known as the 'DeepSeek' moment, when this Chinese AI lab called DeepSeek released a large language model that appeared to come from nowhere to compete with ChatGPT and Claude, which is made by Anthropic. Basically, the same thing has happened again. An AI lab in China called Moonshot AI has released a model called Kimi K3, which only trails the very best bleeding-edge frontier models from OpenAI and Anthropic. The way to think of it is that Anthropic and OpenAI thought they had about a 12-month lead on the Chinese labs...

No, you don't!

Now it looks like that lead is three or four months at best. What does that mean? I think everyone's trying to figure that out at the minute. Obviously it's not great for OpenAI and Anthropic who are charging premium prices for what everyone thought were premium AI models and now that is going to have to be reconsidered. But of course, there's the strategic imperative between China and the US, you know? Could the US Government ban Chinese models, which have become - they've got a 30 per cent market share in the US at the moment because they're cheaper. So, is there a political element to all this?

That's yet to be played out. Of course, the billions in data centres investment just keeps rolling on. Is that going to earn the returns it needs to if the profit pool from these AI models is reduced? That's the danger here, Stephen, these AI models basically become a commodity and it's very hard to make money from commodities.

I was interested to see the SpaceX shares are down to $120, so I'm very happy with my decision now. They floated at $135, I applied for 10, got four, sold three at $150, so I sold three at $15 above and now my remaining one is $15 below the float price and the thing's down a trillion dollars from top to bottom in market cap and poor old Elon Musk is dealing with the issue of being the world's first former trillionaire, how would you cope with that?

[Laughs] Exactly.

Yes, it's burning cash, but it's partly an AI bubble popping element as well, isn't it? Because that's where they're blowing most of their cash, is trying to keep up with the Joneses in the AI space and they're like the ultimate laggard in that space.

That's right. xAI, which is part of SpaceX, it's way behind Anthropic and OpenAI, but you add these two things together, SpaceX sort of tumbling back to earth and the release of Kimi K3. That doesn't make it easy for OpenAI and Anthropic to float anytime soon, I wouldn't have thought, certainly not at the trillion-dollar valuations they were hoping for. That sort of casts a bit of a pall over all this AI trade as well. Just think about OpenAI for a second, they've committed to spend between now and 2030, about US$830 billion. If you go across Microsoft, Amazon, Oracle, Alphabet, they've got about $730 billion of OpenAI spending commitments on their books. Now, what if it all evaporates?

It doesn't stack up.

No, I don't think it stacks up. I think Ed Zitron, who is a really fascinating AI sceptic...

'Chief Bear', isn't he, Ed?

He is.

He's the go-to man if you want to hear a contrarian 'this is a bubble' sort of perspective, isn't he?

Yeah, but look, he writes really well and has lots of evidence, does lots of reporting, he's very impressive. His argument is, OpenAI is the Lehman Brothers, it's the linchpin that if that linchpin goes, then this bubble goes. It's a fascinating time.

Between SpaceX, OpenAI and Anthropic, they're all bleeding cash, so something's got to give. There's going to have to be some form of rationalisation, they can't all keep doing what they're doing. The existing incumbent big tech, they've got the balance sheet strength, the cash flow... I mean, interesting that Apple and Nvidia are both now equal top market cap company in the world at $4.9 trillion, so Apple being the big tech company that's spending the least, that hasn't gone all in with massive spending, is being rewarded at the moment for their model of sit back and wait and then clip the ticket, which is how they play it. But I can't see how those three - I mean, I agree, SpaceX were lucky to get the $85 billion away, but you'd think OpenAI - they have raised a lot in the private market, but I don't know if they're going to be able to get mega $85 billion type IPOs away.

I think also with SpaceX, there'll be those 3 million CommSec customers all with the ASIC green light, getting emails from CommSec saying, "Get into SpaceX!" I mean, if it keeps falling, the pressure will come on there about why'd you do that, ASIC and CommSec?

Yeah, I think that is an interesting point. The only thing I keep thinking about, Stephen, is we've seen moments like this before. I mentioned DeepSeek, that passed fairly quickly, the AI trade got back on track, people buy the dips, it's just become such a winning strategy, so I don't think we can rule that out. The S&P 500, it's 2 per cent off its all-time high, we're not talking Great Depression here. So, it's tense, but you've got that, you've got Iran sort of turning into a forever war, isn't it, a little bit?

Oil back to $91, ninth straight day of strikes... The hope was, World Cup, let's all get this sorted out, but the World Cup's over and the Iran War keeps going. The Houthis are getting involved, threatening the Saudis looking at another chokepoint. I'll be interested to see whether the Federal Government puts the extra 16 cents back on, on August 3, because at $91, it's going up. How do you predict though?

Well, yeah, exactly. The sort of intersection that interests me, Stephen, is we've got a lot of upset now and concern about where housing's going. If this war drags on, the inflationary pressures from energy are going to just continue to build. It doesn't leave the RBA with a lot of wriggle room. I mean, if there's one more rate hike and then maybe a second, that's going to be nasty for the housing sector. Clearly, we're getting this sense at the moment, no one wants to catch a falling knife, everyone's waiting to see where prices settle. Why would I buy now if in six months the prices are going to be lower? Sentiment in housing is pretty ugly at the minute. It's sort of a bit of a few interconnected things to watch at the moment.

Absolutely. Now, James, we were a tag team last year at the Macquarie AGM, it's on Thursday in Sydney, I'm flying up for it. But last year, I asked the question whether Glenn Stevens was asleep at the wheel because he'd missed the fact that there'd been a remuneration strike, that the shareholders were unhappy and they got their first ever remuneration strike. Glenn Stevens said, "I mightn't have been very effective, but I wasn't asleep at the wheel." And you wrote a column calling this one of the all-time most memorable AGM lines.

That's right, yes, I hope you're going to set it up for me again on Thursday, Stephen.

Well, to celebrate this, James, I've actually just appointed last night Anthony Macdonald as my proxy. I've only got two shares, so I figured, I may as well, two shares, two speakers... So, if Anthony happens to be walking past, he could just pop in and have a chat and I'll go in as a non-voting but speaking shareholder and he goes in as my proxy and we can have a chat - because it's going to go for three hours, as usual. They've got a climate change resolution and the climate resolution got 35 per cent last year, which was a bit of a shock to them as well to have the shareholders literally revolting on climate. So the market forces people have come back again with a similar hostile shareholder resolution, plus they're coming off the first ever strike.

But all the proxy advisers have recommended in favour, so I think you're going to find that they're going to get comfortable support for all eight resolutions on Thursday.

What's your sense, Stephen - I mean, the proxy guys seem pretty happy that the Macquarie board has heard the message on pay and pay disclosure particularly, is that your assessment?

It's the usual system of, get a strike, get scared, fix it, don't get a double strike or a second strike. They've moved on the issue of holding back bonuses due to regulatory infractions - that was the issue last year, was ASIC pinging you and all this stuff going on with regulations and you're just giving bonuses as if it hasn't happened. So they have moved on that and that's why they won't cop any big protests. A couple of interesting things - did you know that Shemara, the CEO, has never sold a share and her 1.47 million shares at the moment are worth $376 million because the stock's at $256, which is valuing the company at $99 billion.

So I'm quite proud of giving them their nickname, 'The Millionaires Factory', and it's never been more appropriate because, look, Shemara's got that huge shareholding herself, but the bank itself is its largest shareholder. Macquarie owns 7.27 per cent of the company, which is worth $7 billion, so that is actually just the staff share scheme. This is the one I really find amazing. Each year with their staff share scheme when they're coming up with the bonuses, they have to organise to get hold of the stock to restrict it to give it to the staff.

This year, that figure, they had to buy $734 million worth of their own shares to satisfy the bonus scheme and they bought $681 million of those shares off their own staff who already had previous bonus shares, so in an off-market transaction. That's how the millionaires factory works, it's just long-term share grant bonuses and when the stock's at $256 - remember, it floated at $6 - it is literally a millionaires factory like nothing else Australia's ever seen. So it should be happy days on Thursday because it's never been higher or stronger.

That's right, it's amazing what a record share price does to alleviate any angst.

That's right. When this happens, James, and you're going to an AGM, you think, what can I ask when everything's going so well? One question will be to Glenn Stevens, the Chair, he's been there nine years on the board, he's up for election next year, "Glenn, are you going to run again?" That's always a good question. The other one is the whole audit situation. The last four AGMs, I've been banging on about PwC getting $2 billion over 30 years, "You've never done a tender... Why is PwC the auditor?" They finally, out of embarrassment, ran a tender, gave PwC the punt, put in KPMG and now this is a whole scandal in itself about how KPMG got the job and KPMG former partner Michelle Hinchliffe is Chair of the Audit Committee and was she involved...? That's going to be a hot topic, I suspect, on Thursday in Sydney.

I agree and it's all your fault, by the sounds of it.

Well, it's a good question. "When did you last do an audit tender and when are you next going to do an audit tender?" When the answer is never and never, it's not sustainable and that's where Macquarie was at, they'd had PwC for literally 40-plus years - and including on all their listed funds, it wasn't just the head stock, it was everything. So it was very lucrative for PwC. PwC copped a scandal, out they go, KPMG gets the job, now KPMG's in the middle of a scandal, partly involving the Macquarie tender. There you go.

Yep, what a mess.

Now, you did an interesting column this week, 'Man Overboard', you called it. The too many men with too many jobs in the director club...

Yeah, the idea here is a proxy firm called Ownership Matters does a bit of a score - they score directors based on their workload, so you get two points for being an ASX chair, one point for being a director and there's a sort of sliding scale from there. The argument that Ownership Matters makes, I think it's a good one. Popular directors are popular because they're experienced and sought after. That's okay, but there is a point where you can become what's called 'over-boarded', you can have too many board roles and it's not a problem until it is, until one of the companies you're involved in or, heaven forbid, two or three of them have a takeover on or some sort of scandal or some sort of issue, a CEO transition.

Then the question is, are you stretched too thin and does that become a risk for the companies you're involved in? It's a good question. Gary Weiss is judged by Ownership Matters to be the most over-boarded director in Australia, I think he's got four chairmanships.

Gary Weiss is ridiculous - I'll tell you a funny Gary Weiss story. I went to the Thorney Opportunities AGM last year - Gary Weiss is the Chair of four companies and on three other boards and my question went through a range of protest votes that he'd suffered because of his over-boarding, "18 per cent when you ran for the Myer board, 13 per cent when you ran for the Premier board, 27 per cent when you ran for the Cromwell board... Aren't you taking the message, Gary, that the shareholders are protesting?" You know what the answer was? He's not here, he's too busy, James.

He's too busy to turn up to the Thorney Opportunities AGM and the real joke with Gary, he's 73, he's paid $750,000 a year, he's actually the CEO of Ariadne, which is a Brisbane-based company - it's only a property sort of company, but he's paid as a CEO of one company and then he's off as the Chair of four others and on three other boards. He's Deputy Chair and Lead Independent Director of Myer and their shares are in the toilet at 26 cents. With Myer, it's all hands on deck and the guy who's literally the lead independent Director and Deputy Chair on a four-person board, he can't possibly do that job properly when he's got all these other - he's a full-time CEO and he's got seven other gigs. He's an NRL commissioner, for goodness sake.

He's out there negotiating $5 billion broadcast deals with your employer, Nine. How's he fit that one in? He does that, what, 10 o'clock on a Sunday morning? So it's an interesting issue and he is at the sharp end of that, I'll tell you.

Yeah, it's interesting and it's always a conversation in the lead-up to AGMs and I'm sure you'll be asking plenty of pointed questions when the season rolls around.

Indeed, James. Now, we've got a lot of good questions, including some female questions this week which was great, but before we get to them, let's have a quick word from our sponsor.

[Recording]

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Before we start, as Alan intones every week, this is just general advice and if you want specific advice, talk to a real expert. Now, we'll start with Koby. Koby says, "As a mother of two young sons, I'm concerned about the new capital gains tax changes. If the goal is to improve housing affordability, why are young Australians who invest responsibly in shares or ETFs to save for their first home being caught up in these reforms? A young person earning a low income could end up paying a minimum 30 per cent tax on their investment gains, despite not owning property or contributing to rising house prices. Aren't we making it harder for the next generation to save for a home by penalising sensible long-term investing?"

Now, we've had a number of questions about the 30 per cent thing, it is probably at the very, very sharpest edge of the changes, isn't it?

I think so, yeah. It's fascinating that the Government's sticking with this. You can understand what they're trying to do in the property market. I think there's some unintended consequences with the 30 per cent tax on non-property assets. I'm surprised there hasn't been a backdown, but here we are and I think Koby's right. I'm not entirely sure that this tax is where we want to go, is it, Stephen?

I agree, but look, it's been legislated, so they've done it. When you twin it with the trust situation - the absolute sharp end of this is long-term unrealised gains within a trust and a lot of people have got their retirement structures around that, so they're copping it and then of course, you've got the young people saying, "All the opportunities that my parents had... I'm just trying to get a few capital gains on my ETFs just to try and get ahead and bang, the Government's taken me 30 per cent, even though I'm only earning $20,000 at uni," or something like that.

To exclude the tax-free threshold for someone who has no assets except they got lucky on crypto or some flying rare earth stock or some big tech stock, I just can't see how you can justify removing it from the regular income tax arrangements and saying that capital income is different and taxed higher than labour income. It's all income, it should be the same, I would have thought.

Good call. Lee from Brisbane says, "Love the podcast, here's my question. The Federal Government seems determined to make Australia a home for the next wave of AI data centres, with faster approvals and promises that operators will cover their own power and grid costs. But even if they pay their own way, what do we actually get? Most of the gear's imported, they employ relatively few people once built and much of the profit's likely to end up offshore. If the economics of generative AI never catch up with the spending, are we giving up land, water and power, for a construction boom that leaves Australia with very little once it's over?"

Interestingly, in New York, for instance, the Governor has just put, I think, a one-year moratorium on data centres and they've already got 130 in the state of New York and the argument being that little councils aren't in a position to negotiate with Oracle and big tech and so we're going to hold it for a year. This has sort of fracking comparisons, where central governments or states or federals sort of lean in and go, "Oh, no fracking..." So, look, there is a backlash, I'm not so sure that it deserves a sort of a national approach which we seem to be toying with. You can't leave it to your local council, the State Governments in Australia already dominate the planning on major projects, so I'm not sure...

I think Lee has articulated this question really well and actually, Anthony Albanese sort of asked this question last week in his big AI speech, he said, "We don't want this to be a construction boom and that's it, we need to lean into this AI boom in a sort of more sustained and sustainable way." I think Albanese's right and Lee's right, we do need to find ways to get the most out of this boom, not just make it a construction boom. While it's the biggest investment boom since the mining boom, it's very different and Lee's hit upon that, there are a lot fewer jobs involved, a lot of the equipment's from overseas and a lot of the profits are going to flow overseas. It is going to be really tricky, but you sort of look at the Australian economy and you do think, can we afford not to be a part of this AI boom? We don't exactly have a lot of other strengths to rely on at the moment.

No. Well, it's about fast and reliable compute at the end of the day. We can't sit back and say, "We don't want fast and reliable compute, we don't want to have the capacity to tap into the best and greatest AI models out there." I just don't see how we can step apart from this sort of global trend. You've got to have good rules. Down here in Melbourne, I think there's a billion-dollar one going into Footscray at the moment, close to $2 billion near Tullamarine, near the airport, that NEXTDC's doing. At some level, the cat's already out of the bag in terms of there already is a gold rush in terms of approvals that have been given and construction's underway.

But there's a lot more in the pipeline as well, a lot of that $800 billion that big tech's talking of spending, is for the pipeline and not all of them have been approved and there is a growing backlash. I don't see how we can necessarily totally step away.

I think it's good Albanese's sort of made this a priority. We need to figure out the right path through it, it's not going to be easy.

I agree. Simon says, "With all the calls to regulate the big four accounting firms with the scandals at PwC and KPMG, if you go back a generation, recall that there were actually five big accounting firms, from Arthur Andersen being the fifth pillar. Arthur Andersen dissolved following their cover-up and shredding of documents in the audits of Enron and WorldCom..." I remember those days - "Which were uncovered after the collapse of those entities. These audit cover-ups were because Andersen's advice arms were being paid millions each week so the audit practice didn't want to disrupt the relationship with the valued clients..." Sounds very similar - "This resulted in the Sarbanes-Oxley Act being rushed into the US. Does Australia need a similar law to Sarbanes-Oxley to protect investors from these predatory consulting firms?" Boy, Simon, you're not holding back there, mate.

Do we need a separation of audit and consulting? Not sure we need to go that far, we need to do something though. What irritates me here, is the Government's had, after the PwC scandal, options to tighten the regulations around these businesses. They've had them on the books or under consideration for like three years and nothing has happened, it's very strange given you've got Labor Senator Deb O'Neill has done such a great job, really, campaigning or crusading on this and she's just got no support from within the Government, none. They don't even seem that interested in doing anything now, even with the KPMG scheme blowing up. So there are things you can do and I know you're big on audit tender periods...

Yeah, mandatory - this is the UK rules, you must do a tender every 10 years and you must rotate every 20 years. But on top of that, I just had a thought bubble right now, what about ASIC appointing auditors? Take it away from the boards. If ASIC appoints the auditors, then the measurement becomes, how tough a job are you doing holding the board to account? How rigorous are you and are you managing your conflicts? As opposed to a board saying, "Well, we've got a pretty cosy run with this auditor, let's keep them here for three decades."

What do you do, do it like a barrister system, next cab off the rank type thing?

They have this mandatory rotation thing, but you actually have the regulator, ASIC, more involved in the appointment. It's more saying, "Well, the auditor is actually our cop on the beat, so if we're the regulator we're going to get more involved in audit selection, audit assessment..." Literally, just don't leave it to the boards and shareholders and get the corporate plod more involved in the system and then I think some sort of audit regulatory body, maybe - I think Alan's mentioned that before as might be a solution. I don't know if the full-on Sarbanes-Oxley and the full-on prohibition is a realistic solution.

Yeah, but please, Labor, do something! Don't just keep sitting on your hands.

True.

Kaylah says, "Long-time listener, thanks for your helpful podcast. I'm fairly new to investing, I'm putting money away for private high schools and have spent a few years building a modest portfolio of Vanguard ETFs. My question is about diversity. With the MSCI ETF and others such as the Ethically Conscious International Shares ETF growing well, must I diversify with an Australian-exclusive ETF? They've been growing more slowly and appear to be filled with banks and other companies low on the innovation side." That's a good question, isn't it, Stephen? General advice only...

Yes, that's right.

I really have to underline that and highlight it, but I think Kaylah's quandary here is one that a lot of Australian investors will need to confront in the next few years because think about where we are, the RBA has to slow down the Australian economy, has to - Michele Bullock's been very clear on that - and so, profit growth in Australia is going to be weaker, particularly in domestically focused businesses like the big banks, as Kaylah says. So, with a slowing Australian economy, is this the time that if you're not already holding Australian shares, is there really much argument to hold Australian shares over a diversified bucket of international shares?

It is the big question, isn't it?

Yeah.

We've got $4.5 trillion of super and our market's not big enough for it, so it's all a question of offshore, how much...? I remember when the Future Fund got set up, that was one of the big debates, is the Future Fund going to be a patriotic, nation-building sovereign fund, or is it going to take a diversified global point of view? They went for the latter. The Future Fund has a relatively tiny allocation to Australian shares and has performed very well taking that sort of private equity global shares alternatives approach. That's the question that Kaylah's asking, is as a retail punter, how do I get on this international game? Because the international scoreboard has outperformed and that's primarily just been big tech. The US is 70 per cent of world stock values at the moment still, which is an amazing stat.

Kaylah's already holding the international ETFs, she's saying, "Do I need to diversify into Australia?" I guess what I'm saying, is geez, it's hard to make the argument right at the minute, Kaylah.

Yeah, it's like when do you jump off? You think bubble's coming and the bubble's going to pop, when do you jump off?

That's true.

The history is littered with, "I think this is the top..." and then it goes on for another two years or whatever. That was the story with big tech into the Tech Wreck and GFC, that was the story, is that the last two years kept on going when a lot of people were saying, "This is ridiculous."

Yeah. If you're holding the indexes though, MSCI World Index, S&P 500, they do offer you diversification within those indexes. I'm not sure diversifying into Australia just because you feel you need to have some Australian shares and that's what a "diversified" portfolio looks like. I don't think that's the reason, I think you want to be confident that the Australian market's got something to offer, that's the question you should be asking.

True. Julia says, "Thanks for the insight and information. I appreciate your encouragement for women and girls to ask questions and engage in investing. London Stock Exchange Group's seventh 'Investing in the green economy' report indicates that by market cap, the green economy has now surpassed healthcare to become the world's third-largest industry. What are your thoughts on the green economy as an investment theme in Australia and why do we hear relatively little discussion about the broader investment opportunities in green products and services? Australia has a recognised strength in areas such as water innovation, natural capital and environmental services, plus great potential in the circular economy to improve productivity.

Finally, I'll be interested to hear your views on green bonds, their successes, shortcomings and whether they've lived up to expectations as an investment vehicle." The green economy, James, is it a real thing or is it just a marketing thing, that something is branded as 'green'?

I think there's two things going on here. One, is it can be a bit of a marketing label used by investment houses to push different products, so I think that's part of it, but one of the reasons you don't hear so much about it - I think there's two - one, is that energy security has become a bigger issue than the energy transition in the last few years with the war in Ukraine and now in Iran. But the other thing is, a lot of stuff that we might have called the green economy 10 years ago, is actually just the economy now. Rooftop solar is a pretty accepted part of Australia's energy mix, we don't really need to call it out, everyone's got solar panels on their roofs, or a lot of people.

It's just part of the way that the National Electricity Market and the national energy industry has changed. I think that's part of it. Have green bonds lived up to their hype? It's a pretty small corner of the market. I think from what I understand, they've done fine.

I mean, the Federal Government, the Australian Office of Financial Management, they offer green bonds and they say, "Buy our green bonds and we'll use it for public national green projects." They're just going to perform as well as any other of the trillion dollars of Federal Government bonds, they're not going to trade at a discount or a premium and, okay, you can say, well, this particular bond I'm buying that I'm lending the Government money, they're going to hypothecate that money through to this particular latest $20 billion Snowy Hydro blowout, for instance.

At the end of the day, it's all just the overall Government borrowing scheme, maybe you feel better and unless there's actually a preferential tax or a capital adequacy difference in green bonds, it really is mainly just marketing and I personally think the best way to look at this is, to not go the positive, but to actually go the negative and when you invest, make sure you're not investing in tobacco, coal, armaments or whatever it is that you particularly want to avoid. That picks up the ethical investing side of things which is tied up in that broader green economy thing. But look, it's a huge part of the economy. I didn't realise it was deemed to be bigger than healthcare now - and we don't have enough renewable energy stocks on our ASX. I think we are a bit thin in the green economy space in terms of public companies listed here, because it is a bit dominated by foreign companies and private operators and the like.

Ironically, Stephen, the Government could get a better bang for its buck with this AI strategy. It's talking about basically making data centre operators bring renewable energy to the grid and then organise grid connections. Ironically, the AI boom could be the reason that we finally get our energy transition really stocked up. There could be a double win there and I think that's something the Government's trying to engineer. Let's see how it goes, but...

We actually had a question later, we probably won't get to it, but someone saying on data centres that Tasmania should be the home of Australia's data centre industry, as long as you've got the fibre under Bass Strait working, because unlike with transmission lines, with fibre there isn't the latency of long drags, so you can drag fibre a long way and of course, Tassie's got surplus green energy, whether it's hydro, whether it's wind... Tasmania, as a clean, green data centre hub, pulling those cables under Bass Strait and keeping the compute firing in Melbourne and beyond.

There you go. Cam's got an idea for us, Stephen. "Why doesn't the Government lower the tax on overtime to encourage productivity? We have awards that state your base wage now, so why not lock that in for the current income tax thresholds and have a much lower tax rate on overtime hours above the threshold?" Interesting idea, Stephen, but practically difficult.

Can you imagine the complexity of that? Cam's saying, "I sometimes don't take an overtime shift because who wants to pay 47 per cent to the Government?" So I actually think the solution to his problem is just lower overall taxes on middle Australia and it's ridiculous that the top 47 per cent rate starts at $190k or whatever it is, it shouldn't start until at least half a million. Can you imagine the complexity of calculating your tax where, what's an overtime hour and what's a different hour? It would just get gamed, I think, Cam, it would be very complicated and get gamed. But I'm all for lowering income taxes and maybe putting up the death duties and higher resources taxes to fund it.

I wrote a piece last week about productivity and why we aren't outraged about that and that is - Shane Oliver, veteran economist at AMP, that's his top thing, we broaden the GST, we bring income taxes down and we get rid of other state-based taxes that lean on productivity. We have these ideas, they just get nowhere.

Yeah, exactly, lots of ideas... But keep the ideas coming, we love to get them.

Yeah.

Lincoln wants us to have a fight between the generations, I think, James...

Let's do it.

He says, "No doubt, the cost of living and cost of property has gone up drastically, but the current young generation just have too much 'need it right now' mentality. I've got the same old phone, same old shoes, same old car... I've rent shared, BYO lunch to work, etcetera... Too many young people I know rent a two-bedroom unit by themselves, always have the latest phone and clothing, a fancy brand-new car on loan, buying coffee and lunch every day... Is it actually just really tough out there or is this generation just doing it wrong?" Now, Lincoln, you forgot to mention all the international travel and holidays as well. Lincoln, you can't just stereotype, whether it's race, gender or even generation. There's some young people who are massively good savers, who are doing what you're doing, Lincoln, and there's others who appear to be. I think maybe we notice more because of social media. You see Instagram, someone's on holiday in Japan and the oldies look at that and go, "They're always just on holidays." What do you think, James, are the youngsters living it up too much, or what?

I think Lincoln's forgetting the sort of chicken and egg thing here. If it looks impossible for you to get into the housing market any time in the next 30 years, are you not entitled to spend a bit more of your income on rent and stuff that gives you a bit of pleasure now? I think this idea that people of a certain generation have - you can sort of live frugally, work hard and a house will miraculously be within your reach. The numbers just don't add up, it's just not how it works anymore.

It is interesting, isn't it, though, with the bank of mum and dad equation, this whole sort of early estate management to help the kids into property and then you get this debate about - you haven't done it hard enough, son? If you hadn't done this round-the-world trip, you might have saved for a deposit. That discussion, that negotiation, that little subtle debate is happening in families up and down the breadth of the country, but I don't think there's an argument for starving the young. The HECS debts and the cost of housing, it has never been tougher to get ahead without the bank of mum and dad, that's just a fact.

And no doubt, as you said, lots of people make lots of sacrifices throughout the period, but people in - I'm not sure if Lincoln's old or young or what they are, but older generations did have the sort of tailwinds of 40 years of generally falling interest rates, yes, I know, they got up to 18 per cent, you don't have to tell me again, but generally falling interest rates, generally rising asset prices, generally more largesse from the Government, including free university for a long period. Those are big tailwinds that are just not available to younger people today. The result is very high asset prices that are going to be a huge issue for a long time to come.

I think we've got time for one more, let's finish with another female question which is targeted at you, James. Jacqui of Dulwich Hill says, "This is for James and his apparent ignorance of smoking rates and the facts indicated in his episode on July 8. I've waited until this latest AIHW data was released to unleash my concern for his overconfidence in excise-related and health promotion strategies of the Federal Government, specifically the Department of Health. Smoking rates have continued to trend down, we're almost on the floor for a whole-of-country population. It's gone down faster than previous prevention plans have predicted and vaping rates have stabilised."

Now, I won't read the whole thing, but Jacqui's basically saying, "Stop focusing on the headlines and the organised crime stuff and don't advocate for lower taxes because the policy is working and the issue is not the overall volume, because the overall volume continues to fall, so in other words, great public policy outcome. The only concern is the share of that volume which is illegal. I think everyone agrees that 50 per cent taken by the bikie gangs is a ridiculous public policy fail." Maybe we can agree... I think Jacqui is saying that she agrees that the states need to get into the organised crime and the Feds, but she's basically resisting the idea that you'd cut the tax to fix the problem.

Jacqui's right, the latest data that was out late last week, last Friday, it's certainly encouraging. Daily smoking among Australians aged 14 and over, it's down from 19.5 per cent in 2001, down to 5.6 per cent. That is a great public health result. Is it all because of the tax? Jacqui, in her question, refers to some academic research, certainly the tax is important, but so are things like plain packaging, banning tobacco advertising, creating smoke-free public places, graphic health warnings, mass media campaigns, supporting people to quit. Jacqui refers to Professor Becky Freeman and she's got a list, yes, certainly tobacco taxes are on there but it's not the only item on there. I'd also just refer to a little note of concern expressed by the Australian Council on Smoking and Health about what the data says. What the data says, the question they ask, is do you smoke daily? Which is a good thing to ask but what the Australian Council on Smoking and Health is concerned about, is that they've heard from a lot of doctors that some patients who have previously smoked one to five cigarettes a day are now smoking 10 to 15 or an entire pack because they're so cheap, because illicit tobacco is everywhere and its market share is something like 50 per cent.

So, Jacqui, I take your point, we have done a great job on getting smoking rates down, but I would be very concerned, like the Council on Smoking and Health are, that the tax regime has allowed illicit smoking and illicit cigarette sales to explode raises some concerns about whether we can keep those smoking rates down.

I agree. James, as a failed gambling reform campaigner, I used to always say, "Treat gambling like tobacco! How can the same country have the world's lowest smoking rate and the world's highest gambling rate?" Australians are losing $30 billion a year and it's the fact that tobacco is still there, it's not accepted in polite society, but with the gambling, even the Labor Party runs four poker machine venues, the Labor clubs in Sydney and Canberra. Would the Labor Party run tobacco shops? What would the community say if the Labor Party was running a chain of tobacco shops at the same time as they're trying to regulate tobacco?

That is literally what happens in the gambling space, they run poker machine venues and at the three-day ALP national conference in Adelaide this week, there won't even be a resolution saying we should divest from the gambling industry. Sorry - I've had to finish with a big rant there...

Fair enough.

It is interesting how Australia treats the different sin industries, isn't it?

Yeah, totally.

Tobacco versus gambling...

It's a good point, Jacqui - and I've got to say, Jacqui's on the winning team here because the Government's made it very clear that it's not going to touch these excise levels. All my arguments don't really count...

I agree that they should cut them by 80 per cent temporarily and only let the big boys like Coles and Woolies and IGA sell tobacco for three years, so just totally shut down every single tobacco shop. Then put the tax back on, but they just need to do something. In a sophisticated democracy, you cannot have bikie gangs doing billions and billions, costing the Government literally $7 billion in excise now because they've got 50 per cent share, it's just ridiculous.

Yeah.

And on that note, James, we better wrap up. But thanks for listening to today's episode of The Money Café, I'll be back next week with the Kylian Mbappé of Australian journalism, Mr James Thomson, so Alan is continuing his well-earned Lionel Messi break, so send in a question and James and I will answer it together by emailing themoneycafe@intelligentinvestor.com.au. Until then, I'm Stephen Mayne, contributor at Intelligent Investor, Founder of Crikey and shareholder activist.

And I'm James Thomson, Senior Chanticleer Columnist at The Australian Financial Review.

Talk to you soon.

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Got a question for next week? Please send it to themoneycafe@intelligentinvestor.com.au.