Markets, Tech, and a Swift Detour

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

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

And we are The Money Café. James, you're joining us on holidays, good on you, thanks for doing that.

No worries, Alan, always happy to chat.

That's good. I hope you're having a good break, which we've just broken into, but an interesting piece this morning by your colleague, Anthony Macdonald, about quoting the JP Morgan report showing that Australia's stock market has underperformed the world for 11 of the past 17 financial years; and has been persistently underperforming and the result is relatively poor performance by Australian super funds - well, relatively poor compared to the rest of the world. Australian super funds returning somewhere around 9 or 10 per cent per annum and the MSCI World Index has just done 22.4 per cent in the year to June 30. The trouble is Australia super funds are all kind of overweight Australia, naturally, because that's what they do, right?

They're overweight Australia, that is a problem, the last 12 months, I think the ASX200 did 2.7 per cent for the 2026 financial year, Wall Street did 21 per cent, the MSCI did 22.4 per cent. Our home bias - and we do have a bit of a home bias - certainly doesn't help us in that respect. Then of course, layer on top of that, our super funds tend to hold a lot more private and unlisted assets. The funds that have more pure equities exposure, they've done a bit better, but the funds that - and this is the majority of them, including all the big ones that have a lot of unlisted assets, so that's stuff like property, infrastructure, toll roads, ports, airports, then private equity and venture capital. Those asset classes have performed worse than shares.

Alan, I've spoken to the CIOs of AusSuper and Australian Retirement Trust, so they're the two biggest, plus Cbus. I think they're relatively relaxed about where they are. Are they getting that full 22 per cent? No, but are they taking the risk that's involved in getting in that 22.4 per cent from the MSCI World Index? No. So, they have that trade off that they've got to manage. The most important thing is they don't lose capital. They've all beaten their benchmarks which is generally inflation plus 23.5-24 per cent, so a tick there; and they all think something nasty is probably around the corner. This bull market's been running for - it's well into its fourth year now, how long could it go? They're all positioned for downside and to protect their members from downside. In their view, they've probably had a pretty reasonable year, captured enough of that hot Wall Street action to make members feel good about it, while protecting them from the downside. I guess that's up for debate, but it's a tricky job that these super fund guys have got...

They probably measure risk adjusted returns, don't they?

Of course, yeah.

I suppose, if you looked at their returns versus the world returns on a risk adjusted basis, it'd be probably quite different, wouldn't it?

Yeah, that's true. I think there's a couple of things - to come back to that piece that my colleague, Anthony Macdonald, wrote - there are a couple of things to think about. One is, why is Australia a perennial underperformer versus the rest of the world? Well, partly it's because we don't have a lot of tech companies here and that's what's powering the market rally. This is what happens when you have a decade of crappy productivity performance, you get a pretty weak economy that has pretty mature companies in it, very little dynamism and you see a market that's just rolling along. If you're a domestically focused company in Australia, there's no earnings growth to be found.

In fact, there was another story in the Fin Review this morning by another of your colleagues, Michael Read, reporting on the latest OECD employment annual report and it shows Australian real wages have gone backwards by 5.1 per cent over the past few years and I looked at the OECD report and there's a graph in there of productivity performance over the past six years, 2019 to 2025, Australia is the third-worst in the world, only better than Italy and Luxembourg, among the 38 OECD members. It's productivity, that's what it's about, productivity decline and Australia's productivity over the past six years has declined.

Yeah and I think we all - well, 'we all', I shouldn't make sweeping generalisations should I, Alan...

Go ahead, that's what we're all about here.

I think we have this sense that productivity is like this silly idea that basically bosses cook up to try and squeeze more work out of us for less money or something like that, but we've sort of failed to recognise that productivity is directly linked to living standards and we're living it now. That 2.7 per cent that the ASX produced in 2026, well it's actually more like -1.4 per cent when you adjust it for inflation, right? We're going backwards and we sort of can't seem to get out of our way to address anything. The media's got to put its hand up here and any sort of change, we find the loudest voices that are anti-change and there's always voices that are anti-change and we just bleed about it. We all bleed about it, all the time about everything. There's no sort of recognition that we are going to have to change something if we want to reverse this.

There was a report out yesterday by Deloitte Access Economics and it's their quarterly economic outlook report and they're predicting a big fall in economic growth this year. Last year, it was 2.5 per cent, they're predicting 1.3 per cent growth in the current financial year, so a big decline. It's quite clear from the detail of the report that the reason for this and the reason for the decline in productivity is that companies aren't investing.

They've got a chart of corporate capital stock growth and it's basically for the past five or six years or ten years, actually, it's been zero, more or less. Companies simply aren't investing and if you look at why that is, why aren't they investing? The answer is they're cruising based on population growth which has been really strong, as we know, and terms of trade which is the commodities boom, so we're in the middle of or have had the second commodities boom in 15 years.

Also, house prices surging again which has produced a wealth effect on consumer spending. Companies haven't had to invest because of all these kind of lucky country effects that have been going on, population growth, terms of trade and house price rises, so they haven't invested and the result of that is plainly a decline in productivity.

Just to finish off this bit maybe, Alan, we often hear the solution from politicians is to encourage super funds to invest in 'x', whether it's housing in Australia or biotech companies in Australia or technology or venture capital or whatever it is. You sort of see these figures where the share market's underperformed for, what'd you say, 11 or 17 years. It's almost impossible to imagine the sort of next marginal dollar that a super fund has should be invested in Australia. It should just be going to the next best opportunity and that's just not going to be here, we just don't have the economic conditions or the market conditions for it, it's pretty sad.

It is, that's right. And one of the worst performing stocks on the market is WiseTech, the stock's down, what is it, I think about 68-70 per cent or something, over the last 12 months. It's not only because of all this controversy around Richard White, the 34 per cent shareholder and - well, it was Chairman, until yesterday - but also, software companies generally have gone down. In Australia, we've had all the wrong kind of tech companies, we've had software companies that have been getting hammered by AI and we haven't had any of the AI companies.

No, that's true and look, WiseTech - the sort of great shame about all this is that, beneath Richard White's personal issues and as you said, he stepped down as Executive Chairman, he's still on the board, still going to be an Executive Director and the Chief Innovation Officer, which sounds pretty cool - but there's a great company inside this whole mess. WiseTech picked a very specific but very economically important niche of logistics software. If you are an importer or an exporter and you get something across a border somewhere in the world, handling all the customs stuff and the paperwork is very complex, way too complex and WiseTech sort of found a way to digitise a lot of that and became the dominant player in that very specific but very valuable niche.

It's a great Australian success story, but as you say, Alan, there's now all this controversy around the founder and the sort of heart and soul of the place and you've got this AI disruption story. I actually think WiseTech's pretty well insulated from the AI disruption story, because AI makes mistakes, are people ready to trust home made systems over a system like WiseTech? I'm not so sure about that and WiseTech's revenue's been going okay. But it's just hard to shake investor perception at the moment, it's going to be a long time before investors are sort of convinced that software businesses like WiseTech aren't being disrupted. They're in the sin bin and yeah, I actually don't think Richard White's resignation as WiseTech Chairman is a massive game changer, as you said...

Well, he hasn't gone anywhere, he's still on the board, he's still an executive and he's Chief Innovation Officer, whatever that means.

And he's still got this giant stake in the business and is heavily influential over plenty more shares.

I think yesterday's announcement is meaningless, actually.

Well, you'd have to say, Alan, at least it's a recognition by WiseTech and White that there's an issue here. Maybe they're not prepared to do much but at least they're prepared to say, "Yeah, look, this is a distraction," as I think he described it.

Do you know Raelene Murphy, the new Chair?

I don't, no. There's been independent Chairs at WiseTech before, the last independent Chair, he resigned en masse with all the other independent Directors because they basically lost a power struggle with Richard White. So history's not on Raelene's side, but...

I tell you what, you could not pay me enough to be Chair of that company with Richard White there, honestly...

Yeah, tough one.

I reckon she's got her work cut out, somehow.

Yeah, totally. Did you want to talk about Taylor Swift's wedding?

Well, I just thought it was such an incredible phenomenon. I actually wasn't taking much notice of it until I saw Media Watch on Monday night, where all these journalists and everything were camped out the front of Madison Square Garden, knowing they weren't going to get anything. So there were all these reporters standing in the street, reporting nothing, it was incredible. It was a wealth inequality event, I reckon, a wedding at Madison Square Garden of these two characters, honestly...

Well, Taylor Swift's a great sort of cultural phenomenon and a business story - I was looking last week, she's worth $3 billion Australian dollars, so she's monetised her talent in an extraordinary way. Paul McCartney apparently turned up and played, "I want to hold your hand," for the first time in 60 years or something.

At the wedding?

At the wedding. As a wedding gift, yeah, so look, it's a funny time in the world, isn't it, when I think there's been a - I saw something yesterday, the commercial radio stations have carried a Taylor Swift wedding story for the last three days. The wedding happened in America on Saturday and they're still going on with it, so probably a bit to go.

Yeah, and they blacked out the windows or something of Madison Square Garden, so nobody could see.

Yeah.

Unbelievable. Well, anyway, fair enough, they want privacy with only their one thousand best friends.

Absolutely.

Let's move to questions, before we do that, let's have a quick word from our sponsor.

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Just a general advice warning before we go to questions. This is general advice only, if you need personal advice, please go to see an adviser, but listen to us as well.

Joey says, "I love the podcast, listened from the beginning and this is my first question. Renewable projects have high upfront capital costs, but low marginal running costs, so once built, they can undercut other generators on price. Is that cannibalisation effect already showing up in the national energy market and is that why PPAs..." - what's a PPA?

It's a Power Purchase Agreement.

Power Purchase Agreement - "...And the Capacity Investment Scheme are now doing the real work of securing returns, rather than the spot market. These projects are financed over 25 to 30 years, if cheap power is the point of renewables, doesn't that mean prices should keep falling over the asset's life? Are long-term financial models pricing in their own success?" You're a deep expert on this stuff, aren't you, James?

I am absolutely not a deep expert and I'm not entirely sure I understand the thrust of the question. I think why we've moved to power purchase agreements, is that everybody in this market needs more - what's the way to say it? Everybody in this market needs more certainty in one way or another. There's been a lack of certainty in government policy, so these power purchase agreements provide a bit of certainty or some certainty for the project developer, the project constructors and the buyer of the power, of course, who often have different motives to locking in, you know, yes, they want cheaper energy, but they also have carbon emissions reductions plans to meet as well.

So I think there's a few different things, why we're seeing more PPAs in the national electricity market. The Capacity Investment Scheme, I'm not really sure entirely what Joey's getting at there, but yes, these projects are financed over 25 to 30 years and across the course of their life, certainly in the early to middle stages of their life, the cost of the power should reduce, although not hugely.

My understanding, limited as it is, of what's going on in the electricity business, is that there's this tension between falling utility renewables, falling price of utility renewables and the fact that we've got the highest amount of rooftop solar in the world or something and the problem with that is that obviously all the people who were on rooftop solar aren't using the transmission network and those who are left using the transmission network have to pay for it. The number of people paying for the transmission network is diminishing, so everyone has to pay more and the cost of transmission is rising because these solar and windfarms are all over the place, not just in the Hunter Valley and the Latrobe Valley.

There's new transmission has to be built, which is kind of costing a lot of money and the number of people who are paying for it is getting fewer and fewer all the time as more and more people get rooftop solar. I don't know how that's going to resolve, actually.

I think to Joey's point, PPAs are part of that, where you lock in where because the cost of that rooftop solar pushes the price of electricity during the day to zero, these PPAs help provide the developer and the constructor with certainty, so they can actually get the project out of the ground. I think the market's changing, Joey, but perhaps not the reasons that you're thinking.

Righto.

Bushy says, "Hello, Money Café crew. Alan described on the show how to imagine the difference between a million, a billion and a trillion using time. Here's one you can use with that distance that really boggles the mind, especially since Elon has claimed trillionaire status. If you allocate a millimetre as a dollar and then understand that there are one million millimetres in one kilometre, that kilometre becomes your million dollar market, 1,000 kilometres' worth is one million millimetres, so that distance is $1 billion dollars, further than Sydney is from Melbourne on the most direct drive. Here's where the numbers seem make-believe. The equatorial equator is approximately 40,000 kilometres, near enough for our example, that's 40 billion millimetres, 40 billion millimetre dollars for our example. To get one trillion millimetres requires 25 laps of the earth at the equator. That's a lot of millimetres, even for a rocket company or an electric car company to cover and I don't think they can." That's more of a comment, Bushy.

It is and I reckon my analogy was better than his, to be honest.

Fair enough.

Which was time, which was - for those who can't remember this - a billion seconds ago was 1952, a trillion seconds ago was 52,000 BC, when we shared the planet with Neanderthals. Okay, this is a long question. Paul says, "I'm a long-time listener to The Money Café and wondered if I could pick your brain about a stock I own. The business I have a modest investment in is a speculative biomedical research business, originally listed as IHL, which I invested in through a family trust structure a few years ago. The business became dual listed on the Nasdaq and then eventually de-listed on the ASX to be listed on Nasdaq under IXHL.

The company's called Incannex, I-N-C-A-N-N-E-X, and while there was communication to shareholders at the time around administration support regarding the delisting, from my perspective there has been little communication or support through the process. I've emailed them, but I've never once received a response. My primary issue is I've currently got no way of being able to access my holdings, nor do I have any way of knowing how I might be able to sell."

So, this company is a cannabis business, as their name suggests and they don't make any money...?

No and over the last five years, Alan, their value has collapsed, I think it's down 99 per cent. Alan, I think Paul's got a point here, it is fairly shabby treatment, to be honest. If you want to move the listing from Australia to the US, you should put in place the supports to carry those ASX shareholders who once funded you, to continue to support them. Clearly, from what Paul tells us, Incannex hasn't done that. I guess the one thing I'd say, Paul, is I think the relevancy principle from my year 12 accounting studies is always important. This entire company is worth $44 million bucks. I don't know if you had a big stake, I presume a modest investment is a modest investment, I would just ask your accountants to figure out how to claim this one as a tax loss and stop worrying about it, to be frank. That's general advice, but...

But also, you should be able to sell it at one of the online brokers. You can usually sell Nasdaq stocks with Australian online brokers, or else contact Computershare.

Yeah, contacting Computershare would be a good way of doing it, I think.

They've got a trading platform you can trade stock on.

They do and they should be able to repatriate the funds to you or the tax loss or however it works.

Trevor says, "With the AI data centre boom driving massive and new electricity demand, companies are relying on old renewable energy certificates to offset their power consumption. These certificates represent recent generation from old wind and solar farms, they're not additional, they won't drive construction of any new physical renewable supply or storage to handle new baseload demand. Is this just a state-sanctioned greenwashing campaign that will bid up the price of certificates that retailers pass on to households and businesses. The price has gone from $2 to $7. When will Government get real with guardrails for AI data centre energy use?" It's a fair point, actually, and I think he's probably right.

I think the last question Trevor asks there is really the most important one. I don't know quite how the new demand from AI data centres is connected to the rise of the price of renewable energy certificates, but the question of how Governments are going to force these many AI data centres that are in the pipeline to provide energy, to provide grid connections, to provide some sort of funding for transmission upgrades and grid upgrades, I think that is hugely important. So far, the Federal Government has gone with a very sort of hands off-ish type approach, which I think there's a set of principles that the data centre operators agree to. I mean, that sounds very wishy washy to me. I think there's going to need to be something a bit tougher than that, that says, "You want to build a data centre, you've got to figure out the power." That's it.

The other thing that's really interesting here, Alan, and I really think this will be important. In America, we are seeing quite strong community data centre protests, which has become quite a political hot potato. There's been some states and local governments that are banning data centre build out. I think we live in a pretty sort of feverish political environment at the moment. One party or another, I suspect it'll be One Nation, will latch onto this data centre story and try and capitalise on data centre opposition. I think is going to become a pretty big political issue in the next 12 to 24 months.

Yeah, I think you're right. As you say, it is becoming one in the US.

And in Australia too, we've seen some quite big protests against the data centres in Southern Highlands in New South Wales and then Lane Cove in Sydney. This is coming and I think Trevor's right, the Government is going to have to get real on these guardrails. I think having a set of assumptions or agreed principles, that's not going to cut it. Ben from the Sunshine Coast, says, "Love the podcast and have a question. An Australian tax resident considering buying a two-bedroom ski apartment in Japan as a holiday home that I'd also rent out. Before the federal budget tax changes, my understanding was that I could generally claim any rental loss, including interest and other deductible expenses against my Australian income.

With the new negative gearing rules, do the restrictions apply to an established residential property in Japan, or only to Australian residential property? In other words, can an Australian still negatively gear a foreign rental property or are those losses now quarantined? I'd love to hear your thoughts."

Apparently the answer's, yes, you can.

Right.

This is from AI, from my AI friend. I haven't gone into the budget details or found the fine print somewhere, but anyway, AI tells me that, yes, a foreign existing residential property can still be negatively geared against your other income, so that's interesting.

That's very surprising. Ben, do your own research here. It seems to run counter to what we're trying to do, doesn't it?

No, but they're trying to encourage new residential investment in Australia, so they're saying that negative gearing can only apply to new houses here in Australia.

But can it apply to established foreign houses?

They probably don't care whether Japan has new houses or not?

No, I know, but why do you still get the negative gearing benefit then? Surely, close that loophole too and encourage Ben and other investors to...

To invest in new houses in Australia.

...new houses in Australia, not a Japanese ski apartment.

Get a new build ski apartment at Falls Creek, do that!

That's right, yeah.

Shane says, "Love the pod, fellas, but a couple of blokes talking about how free childcare will be like outsourcing parenting to the Government is a bit much. The parenting burden still falls largely on women, cozzy livs means that it ain't the 1970s anymore and families need two parents working. Imagine the economic unlock of getting more mums back to work, might even reverse the declining birthrates so there's more of us young folk to look after you guys in the nursing home. We're already inheriting a toilet of a planet, you blokes got a free uni, give us free childcare or go up and scrap your franking credits and capital gains tax concessions." Good on you, Shane.

Shane does say that he's just joshing, but I can see this happening. I certainly didn't get any free uni, Shane. I think generally you guys have been very supportive of free childcare. You're trying to nationalise the whole system, aren't you, Alan?

I'm all about nationalising childcare, only because I'm against subsidising all these bloody corporate outlets. Every time the Government turns around, they sort of increase the subsidy for childcare because they can't think of anything else to do. All these bloody corporate outfits just getting subsidised, heavens above, I'm sick of it.

I think Shane's joke about scrapping your franking credits and your capital gains concessions...

We should probably skip to Mike's question, who says, "Love the show, but stop saying, "Free school, free childcare..." etcetera. It isn't free, we all pay for it in tax and our children are increasingly going to pay for it with all this debt." Yeah, fair enough.

Well, ironically the children who are being looked after - right... Tim says, "I hear you talk a lot about AI in your personal limited use cases and that the business case for AI is to replace human labour but my personal experience is quite the opposite. I run a small professional services business, approximately 100 staff across Australia and the Philippines. My most used application has gone from Outlook to Claude in the space of three months. Myself and my team are using it constantly, finding new uses on the daily. In my role as General Manager, it's really given me multiple assistants that can analyse our business, our clients and our points of friction to unbelievable detail and accuracy.

We're still in our infancy, our Claude bill's gone from $0 to $10k per month in less than a quarter. But truthfully, I'd happily pay five times that for what we were already getting out of it. So my question is, is this a massive Jevons Paradox? All I know is that I'm all in and loving it."

Yes, the Jevons Paradox says that when the price of something goes down, use of it goes up and that's what seems to be happening with the price of intelligence. Obviously the price of AI is going up, but the price of intelligence has collapsed from AI versus human intelligence. So what's going on is people are using AI far more than they used to use humans.

It's funny though - is what Tim's describing there really Jevons Paradox? I mean, his bill's gone from $0 to $10k per month in three months.

So it sounds like he hasn't actually unloaded staff?

Yeah.

I don't know.

Congrats, Tim. There are great gains... This is the thing about AI, I think it's possible to believe multiple things at once. It is possible to believe that this is a revolutionary technology that eventually will change the way that basically everything is done. It's possible to believe that, it's also possible to believe that we're facing a - that transition might happen over years or decades, it's going to be pretty disruptive for society. It's also possible to believe that the AI winners now on the stock market are overvalued because not everybody's in Tim's position. In fact, we're very early on in this but there's no real signs of any great productivity boost anywhere in the world from AI at the moment, which is interesting. I think, as I say, it's still early stages, but it's almost four years after the release of ChatGPT - I was talking to my kids about this - it's interesting that there hasn't been a sort of revolutionary AI app on our phones yet, for example.

There are some great stories of people's personal productivity being changed by that, but at an organisation wide point, I've spoken to some of the top consultants in AI in the last three weeks and even they say it's just not showing up at the company level. Because what is required to properly embed AI, basically involves upending the company. You need to redesign your workforce, you need to redesign your workflow, you need to redesign how decisions and permissions are granted to do things and that's just really hard. Alan, you remember we used to have these people - listed companies would get stuck with these ERP replacement software projects.

They'd bring in an enterprise wide software platform, often SAP or something like that and it would just become this multi-hundred million dollar time suck. I think that's what AI might be like. But in the short-term, the price is escalating, it's not going down. It's shot through the roof. You can probably get more bang for your buck, sure, but yeah, if you scale Tim's experience across the economy, if everyone's costs have gone up 10,000 times in the space of three months, then either this doesn't work or we need to start reducing costs pretty rapidly.

Yeah, but Tim's very happy with his $10,000 cost, he reckons it's saving him money or whatever...

And it may be that he's getting more bang for his 100 people than he's ever got, but previously it would have required him to hire to increase his staff numbers by 25 per cent to get that bang, so he's not doing that, is he?

No, that's right and as you point out, we're very early days, we're very early into this whole revolution, it seems to me. We've got time for a couple more questions probably, I'll just skip to Shaun - "People say that falling house prices reduce consumption through the wealth effect, but lower house prices also mean lower mortgages for new buyers, leaving them with more disposable income to spend in the real economy. There may be a short-term hit to consumption, but over the long-term wouldn't a more affordable housing market create a stronger more productive economy?" Absolutely, Shaun, no doubt about that. It'll take a while though because the new people coming into the market are well and truly outnumbered by those who've got mortgages they've just taken on in the last few years, which are still quite high and the fact that their house price has actually come down, for a lot of people means this is bad, particularly for those who bought with a 5 per cent deposit under the Government scheme, they're in danger of going into negative equity pretty quickly.

I think you've also got to remember, there's a lot of activity that's built up around our housing sector and house prices. Think of all the mortgage brokers, conveyancers, lawyers, buyers agents, all that stuff. Now, you might say, "Well, they've had it good for a long time, they can suffer in their undies." I think we've got to be pretty careful about the second and third order impacts of a sustained fall in house prices, this is not a country that's ready for that, it's just not, so let's see how that goes. There's a few questions around the new money laundering reforms that have come in from July 2026, that the real estate industry has been exempt from for 25 years.

Matt says he suspects there's a link between the Government's 5 per cent deposit scheme and those changes to the money laundering laws which might sort of lean even further on the property sector. He says, "The door is closing for the billions shovelled into our property market from around the world. There's now a date the massive loophole is closing, dodgy money is flying into property as a last ditch of easy money laundering. This isn't necessarily being picked up as foreign ownership as it can often be overseas transfer to new or existing Australian citizens, often family. All of which occur without scrutiny. I predict a severe and protracted plateauing of prices after this date."

Alan, I think you've looked a little bit about this, there has been this line that foreign buyers have pushed up the property market with dodgy cash. Is the problem really as big as Matt's suggesting it is?

I don't think so. I think foreign buyers, it's pretty minimal, really. I don't think there's a lot of evidence. This idea that Australian housing is used as a money laundering tool, I don't know. A lot of people say that, I haven't seen much evidence of it.

There was quite a famous study, it's quite old now, but in Canada which has a similar experience in the property market to Australia, where there was a bit of money flowing through, so maybe there's a bit on the margins. I don't think there's billions flowing into property and I don't think there was billions flowing in from foreign linked buyers before the deadline came in on July 1, because we would have seen our market which has been going backwards. Hey, is there time for one more, Alan?

Yeah, go on.

Chris says, "Love the show, keep up the work. Alan's idea for increasing Government tax needs to include gambling. We spend $31 billion dollars on gambling each year, $1,500 bucks per person. Everyone's whinging about affordability but spending their wages on this week's multi. Every TV channel and streaming program is flooding with gambling ads for sport. The UK has introduced taxes on gambling, pokies, online gambling and sports betting, where they clip a hefty percentage of each dollar gambled, taking billions off the betting companies and into Government to pay for social services and support gambling addictions and hopefully discouraging it like the tobacco tax has done for cigarettes. Alan, when will you start flying this flag for us?"

I thought there was a couple of interesting things about this question, Alan. One, is the idea that there's no gambling taxes at the moment, there are huge taxes on gambling.

That's right.

Aside from stamp duty, that's the only thing that's keeping State Governments alive is gambling taxes, that's why they keep allowing gambling.

That's right, I reckon that gambling taxes are a real problem because it prevents State Governments in particular from doing something about it.

The other thing I just picked up, was hopefully taxes would discourage gambling like the tobacco tax has done from cigarettes.

It has not.

I mean, the tobacco tax has been one of the greatest failures of tax policy - it might be the most interesting case study of taxation policy in the world. Chris, smoking rates are going up, not down, it's just that it's all illegal tobacco. The estimates from the industry are now that illegal tobacco is 50 per cent of all tobacco sales in Australia and tobacco sales have started edging back up again because the illegal tobacco is so cheap and plentiful and everywhere. I think this is the thing with gambling taxes. You could already get online if you're so inclined and want to dodge the gambling taxes and find ways to bet with cryptocurrencies beyond the reach of Government's long arms and I think that's what you'd get with - you'd be back to the days of the SP bookie in the barber shop.

Because the idea of tax fixing everything, there are unintended consequences and I'd urge you to have a look at the tobacco tax and the unintended consequences from that, it has been a public health and public policy disaster.

Well, enjoy the rest of your holiday, James.

I might need a cigarette after all that. I'm kidding, I'm kidding...

You don't smoke, do you?

I don't smoke, no, that's true, but I do gamble every now and again. I think Chris is right about the level of harm, we do need to approach this more - just be careful what you wish for on tax.

Thanks, everyone, for listening to today's episode of Money Café. I'll be back next week with Stephen Mayne, send in your question to themoneycafe@intelligentinvestor.com.au. Until then, I'm Alan Kohler, Editor-at-Large of Intelligent Investor and Finance Presenter, Columnist and Podcaster with the ABC.

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

See you soon.

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