Banks, AI and the Iran War

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[Music]

Hello, I'm Alan Kohler, Editor at Large of Intelligent Investor and Finance Presenter and Columnist for the ABC.

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

And we're the Money Café.

Yay.

G'day, James.

Hey, Alan, good to be back, haven't spoken to you for a while, it feels like.

It's been a couple of weeks, that's right. It's good to talk to you and I've been reading your output and of course, it's always good and this morning you've been talking about the banking summit at the AFR.

Yeah, we had a big banking summit up in Sydney yesterday, sell out, packed room. There's lots going on in banking, it's a pretty good time to be an Australian bank. There's been a big sort of swing in the last six months, where we've seen - there was a concern, I think, probably last November that margins were coming under pressure and maybe profits would too. But that's all swung around, we've seen this borrowing boom in the last six months, led by both businesses and particularly property investors. Margins aren't quite under the pressure they thought, interest rates are going up which is good for banks and they've managed to get their cost down a little bit, which is also good for banks, so it's not a bad time to be a banker, but they are worried about some of these big picture things.

They're worried about Iran at the moment and whether another couple of interest rate rises, what that does to the economy. The big banks particularly are worried about what they see as some structural imbalances in the market. No one's going to have too much sympathy for the big banks, but...

Like what?

What they're thinking about there, is if you're a big bank in Australia, you're asked to do lots of things by the Government, you're asked to keep rural and regional branches open. You're asked to make sure that cash is - you help pay for cash to be sent around the economy. You carry the bulk of the cost of fighting scams, you carry the bulk of the regulatory impost on anything around improved compliance and of course, you pay the bank levy which helps fill our coffers a little bit. But the banks' view is that over the last 20 years, there's been this change in the market where they are now under pressure from lots of other different players who don't bear any of those costs. They might be digital only banks, they might be big tech companies, they may be sort of non-bank lenders of various types, but the overall impact is that the banks end up carrying the can for lots of things and the costs of those things, which is sort of goods for society, general community goods, are not born evenly. The banks view is, well that's okay, but there's a cost to that for us and we will eventually have to think about how that cost is borne.

Well, it's passed on, of course. You and I are paying for it.

Yeah, it's passed on or it results in a lower level of service. I think the interesting thing here, Alan, is that big banks can cope with it, they'll whinge about it, but small banks can't. Smaller banks are struggling, banking is turning into a really scaled game with the technology investment that's required. There's a sort of underlying tone of, everything's all right at this moment in time, but the banking sector's remarkably different over the last 20 years and yet, banks are still a favourite thing for Canberra to kick around. That was just one of the tensions.

I thought your reporting of Matt Comyn's remarks was interesting because he was saying that there's this tension on AI, I thought that was really interesting and it's an obvious tension between being responsible with it and not causing a massive kind of increase in unemployment and on the other hand, the competitive pressure is to use AI as fast as possible. Having spoken to him, how do you think it's going to resolve. They'll probably use it as fast as possible, won't they?

Someone will. Someone will break ranks and start to use it and the others will have no choice but to follow, that's how competition works and I think that's the point that Matt Comyn was trying to get across, that the competitive incentive here is to go fast and sort of break things, break your competitors resolve, break through your customer's hesitancy around this technology, break through your staff's view on whether AI should be deployed. That's what competition says you should do, but I think Comyn is saying, "I'm trying to be responsible and I think large employers need to think about this." How do you do that responsibly? How do you do it in a considered way?

How do you do it in a way that sort of helps the broader community? And yeah, he was quite honest about how he feels that tension and is wrestling with it. Maybe, Alan, it naturally gets resolved because what Comyn's saying is the number of large scale deployments of AI across a bigger organisation and particularly across a big financial institution, it's not as great as some people might think. It's actually going a bit slower than people hope/fear. Maybe there's a natural handbrake on it, just in the way that banks particularly need to be so sure about the reliability and trust in AI, that that will naturally slow things down. I don't know, I think that's a matter of a few years rather than decades.

This crunch point is coming and Alan, that crunch point is going to come for every business owner who will face this moment where they have to decide, yes, deploying AI across my business in a really big way would be great for my profits and all my competitors are doing it, but I know what's going to happen when I do it to Jo or Jenette who I've employed for 10 years and who is sort of a friend of mine, so I think that tension's real.

I think we've been through it before in a much smaller scale, which is call centres in the Philippines.

Yeah, that's true.

The competitive pressure was on companies to do that, to use Filipino call centres instead of ones in Australia. A few companies kept Australian call centres for competitive reasons so that they had a point of difference, but most of them actually used offshore call centres for sure.

Yeah, that's true. It was interesting, as you say, Alan, just to hear him talking about this stuff out loud. You could sort of see the way he's turning this over in his own mind. I think it's great to hear him talk about it.

Just before we move onto Iran, which obviously we need to do, I did a quick calculation yesterday looking at the cost of AI and as you probably know, AI cost is measured in tokens, they measure it in the cost of a million tokens. Tokens are the currency or the way that AI understands words and a token isn't exactly a word, sometimes it's half a word and it turns out that a million tokens is about 750,000 words and the price of a million tokens in using AI and when you do a query or when a company does a query and gets an output, the output is measured in tokens. The cost of a million tokens has fallen in the past two years from $60 dollars per million, to 30 cents. So it's fallen about 99 per cent, the cost of a million tokens is now 30 cents.

That's pretty much across the board. DeepSeek in China is a bit cheaper, 28 cents last time I looked which was actually a few days ago, so it's changing all the time. But anyway, say 30 cents, right? Then I looked at the MEAA, the journalist union rate for freelance journalism and the standard rate for freelance journalism according to the MEAA, is between $1 dollar and $1.50 a word, so call it $1.25 per word. On that basis, 750,000 words costs $937,500 dollars. None of the newspapers pays $1.25 a word, it's more like 50 cents. If you're writing a thousand-word column or something, you'll get $500 bucks for it, freelance, if you're lucky - maybe, $300 or something.

But even 50 cents a word, which is kind of more or less what people actually pay, is something like $400,000 dollars for 750,000 words. I think that just gives an interesting kind of window into the cost differential that's now taking place, the cost disruption that's going on. I'm not saying that Claude or ChatGPT's 1,000-word column is as good as good as yours or mine, but that's a pretty big difference in cost.

To your point, Alan, even if you brought costs down by, not 99 per cent, but just 9 per cent, that would probably be enough to tilt the economics of lots of industries, wouldn't it?

Yeah. Newspaper companies buying columns to fill up their pages, they're not going to fill it up with AI but I reckon increasingly there'll be more and more AI generated columns, of course, because they'll cost cents rather than dollars.

What about AI generated podcasts, Alan? Never, surely.

Surely.

How could you replace this? You'd pay 99 per cent more for this repartee, surely.

[Laughs] That's right. Now, on Iran, the S&P 500 was up 1 per cent last night, Nasdaq 1.2 per cent, Dow Jones 0.8 per cent. The oil price in the past 24 hours has fallen from - this is brent crude - has fallen from $108 bucks US to $100 dollars US, so clearly markets are saying there won't be a recession as a result of the closure of the Strait of Hormuz, which I think is a big call.

I agree.

I wrote this a week ago for the ABC, the markets are getting it wrong, I think.

To be fair to the markets, there are some signs in recent days that Iran is - their resolve to continue this conflict is cracking a little bit. There are reports as of Tuesday morning that more ships are getting through the Strait of Hormuz, not in massive numbers, but there's rumours that a few ships have paid a fee to Iran to be allowed through, there's rumours that Iran is checking the origins of ships and if they're not US ships, they're sort of being waived through in a few more numbers. That's positive, there's a report around Iran and the US have been talking, that's positive. This is the point where both sides can walk away and claim victory. The US can say, "We've degraded Iran's military capacity in an extreme way." Iran can say, "We've shown the world that we can inflict economic pain with just a few drones and other methods."

This is the moment where both sides can walk away, the strait can reopen and the recession can be avoided, but does that happen within days, does it happen within weeks, does it happen within months...? That's where I think the market might have got the calculation wrong.

I'm not saying there's going to be a recession by any means, I just don't think the risk is zero. I reckon the markets are pricing about a 10 per cent risk of a recession, if that. But that's just too low. It's a question not of binary outcome, is there going to be or is there not. Markets are in the business of pricing risk and I just think they're pricing the risk of a global recession too low at the moment, but as you say, the question is, how long's it going to last and I've been reading various economic kind of treatises on this that if the Strait of Hormuz is closed for three months, then there's a global recession for sure. Probably if it closes within a month, then it'll be okay - I don't know. Of course, if it opens before next weekend, we'll be fine. A lot of it depends on, to some extent at least, central bank reactions to it.

Most central banks are in the business of cutting at the moment, cutting interest rates, but Australia's Reserve Bank is increasing rates and I was interested yesterday, James, that Paul Bloxham of HSBC put out a note in which he started by saying, "Australia's economy needs a downturn to deliver the necessary disinflation to get inflation back to the RBA's target of 2.5 per cent." Then he ended it by saying, "Will it be a recession? Time will tell." Bloxham's flirting with the idea that Australia might need a recession, he's saying it definitely needs a downturn, not sure about a recession.

It's an interesting idea, isn't it, Alan? I read that too and sort of thought, gosh, that sounds awful. But you think about and I guess that's what the RBA needs to engineer, isn't it? A reduction in demand to try and take this inflationary impulse out. The RBA's big concern here isn't just the immediate spike in inflation related to Iran. It's the potential for a change in inflation expectations. I think that's what the RBA's really worried about. Inflation is already too high, you get this hit from energy and then you get a resetting of inflation expectations, where people's psychology around inflation starts to shift and they expect prices to keep rising indefinitely. That's what the RBA believes it has avoided as it's fought inflation over the last few years and it definitely doesn't want to go there. Maybe Bloxham's right, you do need a downturn of some sort to try and right the ship, flush inflation out completely.

In fact, headline inflation is 3.8 per cent, which is well above the target, but that's what it is now. Jim Chalmers revealed to us the other day that Treasury's forecast for inflation as a result of the Iran war, is now 4.5 to 5 per cent, so a full 1 per cent higher than it is now. Treasury and the Reserve Bank's forecasts are usually the same. Presumably, the Reserve Bank is also now forecasting 4.5 to 5 per cent inflation. If that's the case...

That would be a temporary thing though, wouldn't it? As long as the Iran situation resolved, that would be a temporary spike and then we'd be back to fighting the old ghosts of inflation, I guess. That's the one positive, I think, that that 4.5 to 5 per cent inflation shouldn't last too long, providing the Strait of Hormuz gets reopened.

It's interesting, isn't it? During the 1970s, the Federal Reserve took that view that this won't last long, the '73 oil shock in particular. Arthur Burns was running the Fed at the time and his attitude was, well, it won't last long, it'll be fine. He was more worried about unemployment rising because obviously there was a big hit to the economy as a result of the 1973 Yom Kippur War oil shock and so he didn't worry, he looked through it, as they say. Then, Paul Volcker came in the middle of '79 and that was right in the middle of the Iranian revolution and he had to basically restore the Fed's credibility, which had been destroyed by the poor old Arthur Burns who just didn't really do enough to control inflation at the time.

This is the thing for Bullock, isn't it, Alan? There's a danger in looking through this, there's a danger in saying to people, "I know this hurts, okay, we're not going to raise rates. This supply shock isn't your fault, we're not going to raise rates. That's the danger that it gets away from you and inflation's got away from the RBA once already, it's a tough one.

What the Fed's experience in the 70s and the early 80s experience shows us, is that if they don't retain some credibility and muck things up, it gets much worse, because Volcker had to take interest rates to 18 per cent and cause a shocking recession in order to restore the Fed's credibility. We can probably argue, did he need to do that? I don't know, but that's what happened. Anyway, that's what Michele Bullock and the rest of them - would be going through their mind, if they don't act today - which today is Tuesday - if they don't do something today, then they might have to go harder later, I guess that's what they're thinking.

Exactly right.

As you say, it's all about inflation expectations and making sure that inflation doesn't get embedded in the economy through wage claims and all the CPI adjusted costs that go up just with the CPI.

Exactly. Should we do some questions, Alan?

Let's do some questions. Before that, let's hear a word from our sponsor.

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[End Recording]

Before we do the questions, Happy St Patricks Day to you, 17^th of March.

Of course, thank you, Alan, totally forgot about that.

Are you a bit Irish? You're a bit Irish, aren't you?

Well, no. My wife's family is a little bit Irish. My family's heritage is German and Scottish, so there you go.

German and Scottish, I think that's mine too, in fact, I know it's mine. German and Scottish, there you go.

Well, Happy St Patricks Day anyway.

Okay, first question's from Luke, "Here's something I haven't heard talked about. In the short time between now and the May budget, do you reckon there could be a bump in property prices due to it being potentially the last chance to buy an investment property that may be grandfathered into the old favourable 50 per cent CGT, capital gains tax, discount?" Interesting point.

It's possible. I don't know that we need too much else to give us a bump in property prices at the moment. I know there's been a bit of softening in Melbourne and Sydney in recent months, but I'm still struck by UBS economist, George Tharenou. He says we're in the middle of an up-crash in pricing, which is a sort of cool idea. He points out that prices nationally are rising about 9.2 per cent, year on year, at the moment. It's the fastest growth in about five years. I don't think we need too much else, Luke. Could we see a further acceleration? Don't know about that. Probably not with the threat of interest rate rises, it would be unusual to see an acceleration on top of that. I reckon the housing market is flying along at the minute, frankly, absolutely flying.

Which is incredible, when you think about it. There's been this national project ever since the Housing Accord of 2022 and they said we're going to actually flood the market with apartments all through the cities and prices will stop rising so much and it's been a complete failure. I reckon, rarely do you see a policy fail so obviously and badly as this, unbelievable. Just to conclude on that, I think there's no doubt that the CGT discount will be reduced, probably in the 33 per cent. If they weren't going to do it, they would have said they weren't going to do it.

Yeah, the kite has been flown very successfully, actually, hasn't it, Alan? There's been very little pushback.

I think they're all saying, "Okay, we're right to go, let's do it."

We're right to go, yes, exactly. Gavin says, "Alan, of all the arguments you could have offered as a reductor ad absurdum on UBI - that's universal basic income - why think the fact that it is payable to people with jobs? If the UBI is an in-work benefit, wages don't need to be enough to live on by themselves, they only need to supplement the UBI, hence the marginal cost of hiring is drastically reduced, hence there are many more jobs, hence a UBI might not be the answer to the end of work. It may be the reason why the end of work never comes..." There's an optimistic view. "But if the UBI is to create jobs, paying it to people with jobs is not a bug, it's an essential feature, indeed the essential feature, indeed the one feature that absolutely must be retained if the basic income is made less than universal."

Okay, fair enough. I'd have to look at a transcript, but I basically said it shouldn't be paid to people who are rich. I don't think I said it shouldn't be paid to people who have jobs. But to be honest, I hadn't thought of what Gavin's saying and I think that's an interesting point. If the UBI, whatever rate it's set at, if that actually leads to a reduction by that amount in wages, then that's interesting and would probably be the right thing to happen. I'm not sure that would happen that simply, it's kind of an interesting theory, but would it really just simply knock off wages. And don't forget, in order to be useful, a UBI has to be living amount, it can't be the level of the JobSeeker at the moment and probably can't be the level of the aged pension. It's probably got to be double the JobSeeker, I don't know, it's got to be an amount that a family can live on, otherwise what's the point? That's a fair bit. Then, the question is, if it's set at roughly the average weekly wage of $100,000 dollars a year and then people who get that amount of money, $100,000 a year, just get paid by the Government instead of paid by the company, which is what, presumably, Gavin's talking about, then why bother working at all? You'll get that money anyway. You won't show up to work, what's the point?

My question would be a little bit simpler than that, Alan. Why are these workers needed? What are these workers going to do? I think that's the problem with AI, isn't it? The potential is that it eliminates jobs. I'm not sure why the elimination of jobs leads to more hiring. The economics of it doesn't matter, there's either work for the person to do or there's not.

I don't buy the idea that AI is going to take all jobs, I think that's ridiculous. But I think it'll take a lot of them, for sure.

I guess what I mean, is companies aren't just going to create work because there's a UBI to supplement the wage, there's got to be work to do. Those jobs that do get eliminated, don't just get replaced with something else just for the fun of employing someone, do they?

No, I think you're right, sure.

Anyway, we'll see.

Heath says, "I was hoping you could clear up what must be a misconception about inflation and interest rates. My understanding is that inflation is bad because it creates undesirable rises in costs, an effect of which is reduced consumer spending, which inhibits economic growth or causes consumer pain. To combat it, the Reserve Bank raises interest rates, increasing the cost of borrowing and reducing consumer spending, which inhibits the inflationary effects of runaway economic growth. Why does the source of rising costs matter though? Wouldn't rising inflation eventually kill itself by having the same effect on runaway inflationary consumer spending as rising interest rates? Why wouldn't it happen sooner since everyone has to pay the increased costs, not just mortgage holders?"

Yeah, that's a fairly interesting and important question in some ways, Heath, and it comes back, I think, to what James was talking about before and that is inflation expectations. If inflation is rising because of demand, because demand is strong and there's just more demand than there is supply of stuff. Then, inflation gets embedded, everyone expects it to happen, then it just feeds on itself and keeps going. The reason the Reserve Bank raises interest rates, which in turn, as you say, is another price, the price of money goes up, the reason they do that is to supress demand, to stop demand rising and that will then bring demand into line with supply, that's the idea.

Nobody can increase supply at the drop of a hat, they can reduce demand, so that's what it's about. You're right though, if the price of, say, petrol, rises suddenly, that reduces demand itself, that's true.

Over time...

That's right. People can't replace their petrol driven cars immediately with EVs, they can do it over time, but they can't do it straight away. Basically, they have to buy the petrol.

Yeah, some things are discretionary and some things are non-discretionary. You can't not eat. Inflation doesn't kill itself in food, it just feeds on itself, it keeps chasing itself up because people can't stop buying food. Eventually, they can. Eventually that demand is destructed, but not initially, so there's a lot of pain before you get to the inflation killing itself point. That's why central banks try and have stable prices, because they don't want that pain, the gap between the period of pain is not good for economic growth.

Nathan says, "Curious about what you think of Allegra Spender's latest tax white paper, in particular the five key changes she suggests, which are, dropping income tax rates by 2.5 cents each bracket; reducing the CGT discount to 30 per cent; tax all investments income at a minimum of 27.5 per cent; limiting negative gearing to only offset investment gains, not work income; updating super tax discounts to be consistent across income levels. Do you think this Government would view sweeping changes like this as too politically risky?"

Yes.

Yes.

There was an interesting piece by your colleague, John Kehoe, in the Financial Review the other day, in which he quoted an unnamed anonymous Labor MP saying, "Jim Chalmers wants to do reform but Anthony Albanese clips his wings." I think the rise of Pauline Hanson's really made Anthony Albanese more conservative, more cautious than he was already, so I don't think there's going to be any big reforms, but I did see Allegra Spender's tax reform paper and I thought it was great. I thought, firstly, good on her for doing it and I thought the ideas were fine. Terrific.

And if you pick some of these off by themselves, Alan - we will see a reduction in the CGT discount, we think. Taxing all investment income at a minimum of 27.5 per cent, not sure we get there. Updating super tax discounts to be consistent across income levels, might get there eventually. Some of these ideas, maybe governments come to eventually. They're relatively sensible. But all at once, that's the problem. We probably do need the big bang tax reform all at once to reset the place, but that's the hard bit, isn't it?

Yeah. I think the one thing missing from Allegra Spender's paper was resource taxation. Big picture, I think that the tax system needs to do more taxing of immobile capital, because capital is really mobile, the reason that company tax has come down so much, it used to be 60 per cent, now it's 30 or something. The reason for that is because it's so mobile and also that is the reason that we can't have the top marginal income tax rate above 50 per cent, there's probably pressure to bring it down because people on high wages can move it around. The immobile capital is housing and resources, they can't be taken away.

I do think that we need to tax our resources more than we do, especially LNG - and also housing in some way, the CGT discount is one way to do it, but I think there's probably more that can be done with land tax and I don't think this will ever happen, but the primary residence probably needs to be taxed in some way, either that or through an inheritance tax, but none of that will be done, of course.

That's a long way off. I was thinking about this, Alan, Chalmers and Albanese to some extent have built this budget in May up as a sort of major moment. You mentioned Pauline Hanson, I wonder if this crisis in Iran also gives them cover to walk back from that and delay the pivotal moment even further? I don't know, we'll see.

This is a long one, shall I read it out? [Lakshu] says, "I feel like Alan is panicking more than necessary about AI and he's bought into Elon's sales spiel. It's likely that robotics, specifically humanoid robotics, precision robotic manufacturing and self-driving will introduce more job loss, however this will be after multiple iterations over 10 to 15 years. However, AI will not cause major job losses in software development, it will just mean a larger number of smaller companies with niche focus areas..." And then he's run through all the reasons for that. "In conclusion..." he says, "All large language model AI does, is accelerate software development. You'll need human oversight. This is not chess or go, it's real life business applications with real business consequences. In the case of medical applications, it's a matter of life and death. I do enjoy the show, but I got peeved about the oversimplification." It's interesting, isn't it...?

Yeah, that's fair enough. Lakshu sounds like he's working in the sector and he's got lots of views. Of course he's right, you will need human oversight. The question is, if you had a team of - I'm picking a number here - if you had a team of 10 software engineers, does that 10 software engineers shrink to seven? In which case, that's a 30 per cent reduction. Multiply that across the software development sector, that's a lot of jobs. We've already seen WiseTech and Atlassian and Block take out fairly large chunks of workers. I think you can say it's not going to happen, but then you look at what's happening in these companies and it is happening.

Yeah, it is.

I understand Lakshu gets peeved, I totally get that, but again, just think of that pool of 10 software engineers, Lakshu's totally right, they're not all going to be eliminated, but if 30 per cent of them are eliminated, do we have an economy that's ready for that job cuts of that magnitude? Hopefully it never happens, totally get that, but I think we've just got to be alive to the possibility. You can get as peeved as you like, but...

As you say, it's happening already. This argument about how many jobs that gets displaced by AI reminds me of climate change. There were strong views both ways, climate change is going to be a disaster, civilisation is going to come to an end. On the other hand, climate change is bullshit, don't worry about it, it's fine. There's this kind of argument going on that really is unresolvable, except by the reality, in the end. A mate of mine works for a national retailer and he was saying the other day that they've got 600 people, what they call 'above the store', that's not in the store but basically running the operation. He reckons that over time, not next month, but over time, that will be reduced to 60. I don't know, will it be 60? It won't stay at 600.

I totally get what Lakshu's saying and there's lots of examples where the generalisations that people like Alan and I make are probably going to be wrong. I won't speak for Alan, but I guess what I'm trying to say, is we should think about the potential that some of these prognostications are right or even half-right. We have an economy where, as we've just talked about with Allegra Spender's tax changes, getting any sort of reform through our economy has become almost impossible and yet, we are sort of looking at the potential for a world where unemployment - let's just say unemployment goes to 10 per cent, Alan. The last time that happened I think was in '93, after the early 90s recession, didn't last too long and that's good. We do not have an economy that is prepared for 10 per cent unemployment at the moment.

No and in fact, as you say, 10 per cent unemployment is a recession and what happens in a recession is that interest rates are cut and Government spending goes up and the recession is removed or at least overcome by Government and central bank action and then unemployment comes down again. If 10 per cent unemployment results from AI, then cutting interest rates and increasing Government spending won't help, won't change things, because it's something else apart from a recession. The other point to make on that subject, is that last night, Nvidia Chief Executive, Jenson Huang, said that he expects at least $1 trillion dollars US in AI chip revenue over the next two years. Now, even if he's a little bit right, even if he's close to being right, that $1 trillion revenue is coming from companies and those companies are not giving Nvidia a trillion dollars in revenue and keeping all their staff, they're not, they can't. If the companies of the world, giving Nvidia a trillion dollars in revenue a year, had also kept all their staff, then that trillion dollars goes on prices. It's not going to go on prices, because it's going to improve productivity, that's the whole point of AI, is to increase profits and to increase productivity. There's no way that it's going to go on prices, it's going to come off costs and costs are people.

Indeed. Alan, let's finish with one from the delightfully named 'Krusty', who says, "Is it possible that this latest Middle East conflict is all because it could potentially be the last chance to extort money from basically every person in every industry around the world, all because in 10 to 15 years, with the current trend of electrification of our infrastructure and every aspect of our lives continues and as battery technology progresses, we'll all have EVs, home batteries, AI robots, self-driving cars, etcetera, and won't need oil as much anyway?"

I tell you what, this current war in Iran, the closure of the Straits of Hormuz, is going to hurry that along. Everyone's had a bit of a shock and everyone around the world has realised that oil is still very fragile as a product, too much of it comes from the Middle East and the Middle East is not stable, we now understand again. The big winner from this, by the way, is China. Obviously, China, in the short-term, is taking a bit of a hit because it gets 80 per cent of its oil from the Persian Gulf, so it's got a problem. But long-term, it's completely dominating the manufacture of renewable energy equipment, solar panels and wind turbines and electric vehicles. That is going to be accelerated now.

It's all a bit of a reminder, Alan, it feels like there's a lot changing all at once, isn't there? Energy transition, AI transition, climate transition... It's going to be a big next decade ahead. Anyway, it's exciting and scary and absolutely fascinating all at the same time.

I think the themes are well expressed in the Academy Awards or movies at least, because I think last year there was Everything Everywhere All At Once, which is what it feels like and this year's big winner is One Battle After Another, which is also what it feels like.

Very nice.

Okay, very good, great to talk to you again, James.

Good to be back.

See you in a couple of weeks. Thanks, everyone, for listening to today's episode of The Money Café, I'll be back next week with Stephen Mayne, send in your question to themoneycafe@intelligentinvestor.com.au, keep it short and we're more likely to read it out and answer it. The long ones are often fantastic questions, but really, just take too much time. So, until next time, I'm Alan Kohler, Editor at Large of Intelligent Investor and Finance Presenter and Columnist for the ABC.

And I'm James Thomson, Senior Chanticleer Columnist at the AFR.

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