The Budget Breakdown

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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 are The Money Café. James, are you still in Canberra after the lockup?

I am in Canberra, yes, a long day on Tuesday, but we survived and plenty of reaction, positive and negative. Some of the stuff's been wild.

Yes. I didn't go to the lockup because I had to do stuff on the ABC News, which obviously gets broadcast at 7 p.m., before the budget comes out, so I had to do my analysis of the budget before I read it, which I think that's a good way to go.

Well, there were so many leaks, I guess it was possible.

In fact, I searched the budget in vain for stuff that hadn't been leaked and I couldn't really find much, if anything.

Yeah, some of the stuff around the tax loss relief for businesses was a little bit unexpected. I don't quite know why we do a lockup if everything's going to be leaked in the three weeks before.

I know, it's amazing.

It's a strange and unique Australian thing.

Anyway, I thought the piece you wrote while you were in the lockup was great and if I can quote from the first paragraph, shareholders are being whacked to give customers a bit of hope and I thought that was pithy and great. Well done, James. Maybe you should just give us a bit of a burst on explaining that.

I think the sort of general idea here is if you've ever been to an ASX AGM, you'll know that the audience is usually made up of older, wealthier shareholders and they are being hit through the combination of changes to capital gains tax, negative gearing and the taxation of trusts. This is designed to, in the words of Treasurer Jim Chalmers, make it easier for first home buyers to get in the market, by ensuring they have less competition from investors and generally trying to tilt, equalise, level the playing field in terms of the taxation of incoming capital. Does it do all that? I guess that remains to be seen. Are there wrinkles with it? Yes. I think the application of the CGT changes and the negative gearing changes to property is good. Perhaps, the application of those changes to investments in other asset classes like equities and certainly early stage capital is a worry and there's this general question of how much intergenerational fairness is created when you grandfather all these rules? Because, in one way, as several critics have pointed out in the last couple of weeks and particularly in response to the budget, you could see this as an older generation pulling the ladder up behind them. They've grandfathered and locked in all the very advantageous tax treatment of their investments and now younger investors going forward won't be able to access that same very advantageous tax treatment.

I think there's a few wrinkles, but, Alan, it's remarkable the number of people who said to me in the budget lockup, "I wonder what Alan Kohler will think of the changes around housing?" Because there is a sense here that housing as an investment - the Government is saying, "We don't want housing to be as profitable as an investment as it has been." And you dig into the budget papers, the Government's also bravely saying, "We're happy to see house prices go backwards," which is something I don't think we've seen a Government say in a very long time.

What I said on the news in my preview, was that to deal with housing affordability requires two things, economics and psychology. The economics are simply supply and demand, you need to more or less flood the market with new houses, more supply than there is demand. You need to both increase supply and reduce demand and they're doing what they can on supply, I think. There's a lot to be done on supply, which there's nothing simple or quick about that. I've been pointing out that the National Housing Accord number, 1.2 million houses in five years, they're way behind on that. What Clare O'Neil, the Housing Minister, says about that is that it takes three or four years for virtually all measures to sort of take effect, so it'll speed up. Okay, let's see what happens.

On demand, there's two ways to reduce that. One is tax reform, which they're doing and the other is cutting immigration, which they're also doing. Just, by the way, on the immigration, it's interesting that One Nation and now the Coalition are carrying on about immigration, but actually immigration's coming down quite a lot. There's a big reduction in immigration going on - not as much as Canada did which was 90 per cent, but still it's a fair bit.

But on the psychology, you need to change the way Australians think about housing from being an investment class and in fact, the best investment class and the way to build wealth, to being somewhere to live. That all changed in 2000 with the capital gains discount, I argue. I mean, it's impossible to be definitive about this and to show it clearly in data or something, but obviously what happened was the house prices started rising at twice the rate of incomes from the year 2000 and I think that was because people changed the way they thought about housing because of the way the capital gains tax discount added to negative gearing and everyone saw it - well, this is a fantastic investment and off we go.

So I do think that that's a precondition to changing the psychology around housing, which they're now in the process of doing.

Is a change in psychology going to make a meaningful difference, do you think? That's the hard bit, isn't it?

Who knows? It is impossible to know, but you've got to do it, is all I'm saying. People like Chris Richardson and other economists say, "Well, the change to the capital gains tax discount and negative gearing will make 'x' per cent difference to the calculation on the return from housing." It's like 3 per cent or 4 per cent, not much, and I think that's obviously true, they've calculated that - but it's much more than simply that, this has to change the way we think about housing. But I actually think the only way to stop people thinking of housing as an investment asset and the best investment asset is for it to not be a good investment over a long time. As long as it's not a good investment for 10 years, then we'll stop thinking about it like that.

That's a good way of thinking about it and it's probably only using that lens, it's probably only in 10 years that we'll see how some of these changes around CGT, negative gearing and particularly the taxation of trusts, how big their impact is? Those will take a while to ramp up.

When I first started going into budget lockups 46 years ago - he says coughing - the bloke who was my sort of boss and mentor at the time, Bob Gottliebsen, taught me how to do it - "This is what you do when you go into a budget lockup, you read the speech first, then you read the Treasury's economic outlook and then you write your piece from the speech and the economic outlook." But over the years, I've changed that. I actually don't even read the speech now in the lockup, if I go to the lockup, I don't bother reading the speech, I think it's just guff, it's not worth reading and I don't really read the Treasury's economic outlook either.

So what I do is I look for the - firstly, I go to table 3.3, which is the reconciliation of general Government sector underlying cash balance estimates and that adds up the policy decisions and what they call parameter and other variations which is the windfall gains or losses, the things that are outside their control. It gives you a quick summary of the impact of their decisions and what they're getting from economic - for the Iran War, for example. The Iran War and other commodity price increases this year, in the budget year, which is '26-'27, is extra receipts of $18.8 billion, increased payments of $9.5 billion, so net parameter and other variations of $9.3 billion.

That's the plus for this year. Over the forward estimates of five years, it's $36.6 billion. The policy decisions for the budget year, this is '26-'27, -$6.5 billion, extra payments of $8.7b and extra receipts of $2.2b.

Right, so which says the budget is gently stimulatory.

Yeah.

Which is probably something that Michele Bullock at the Reserve Bank isn't thrilled about, but I guess you might say it could have been worse too.

But it also says the reduction in the deficit is entirely due to economic factors that are outside the Government's control.

It's interesting that I've been thinking a little bit about this since budget night on Tuesday night in America, we had a rather hot inflation print of 3.8 per cent. Inflation there has just been nowhere near the 2 per cent target since basically 2020 or the latter stages of 2020. There's now a 35 per cent chance of a rate hike where we've been conditioned through the combination of gently falling inflation and the arrival of Kevin Warsh as the new Fed Governor to expect rate cuts. A lot of the budget assumptions are premised a fairly rosy economic outlook, which says that the Strait of Hormuz is open relatively soon. There is a downside estimate there where the Government's modelled it all going to $200 dollars US a barrel, but it just strikes me, Alan, that the RBA, Treasury, most investment banks, basically everybody still, the best part of three months into this war, still thinks this is all going to be done next week. It is fascinating to me.

Yeah, well who knows, they might be right. Who knows?

Yeah, true.

The other thing I look at is table 3.5, which tells you how much stuff they've whacked off budget, which is interesting. The one they publish and talk about is what they call the underlying cash balance, which for the coming financial year, is $31.5 billion dollars. But if you add up all of the things that are off-budget, it comes to more than that, $32.5 billion dollars, and it's an absolute record for off-budget items. What they call the budget headline cash balance, which adds the two things together, is $64 billion. Amazing.

Yes, that's the number we should all be thinking about, isn't it?

They call the extra bits that are off budget, they call them total net cash flows from investments in financial assets for policy purposes. You can make an argument that they shouldn't be on the budget, for example, there's student loans of $5.2 billion, Snowy Hydro loan of $3 billion, other loans, Housing Australia $6.3 billion, all this stuff... They're all kind of loans, I guess, they're what companies would call capex. But anyway, there it is.

Alan, do you expect much investor blowback here?

What do you mean by investor blowback?

Well, the framing of this has been that it's sort of a hit on boomer wealth and the calculation here, I think, very clearly by the Government, is that the 2028 election is going to be the first election where Gen Z, Millennials and what they call Gen Alphas, who are sort of teenagers now, are going to account for a bigger share of the vote than the builders, Boomers and Gen X. So the calculation here seems pretty clear that older Australians take a whack so younger Australians can have a crack, to coin a phrase.

To quote yourself!

Well, I haven't actually used that, but now I say it I might. But those well established, wealthier, older Australians are still a powerful group and of course, they're represented by lots of the financial institutions and that sort of thing. Do you expect a big bit of blowback?

I'm just trying to look up a graph I saw in Livewire this morning, I'll just pull it up, which seems to have come from someone called Conrad Francis, Inspired Money. Someone's calculated the difference between indexation of capital gains tax and the 50 per cent discount on the ASX200, holding it for 10 years, so it's a pretty specific calculation, but it's on share investments, the impact of this change from the 50 per cent discount back to indexation of the capital gains tax on investing in the share market over 10 years, starting back in 2011. Indexation was better for investors than the 50 per cent discount, 70 per cent of the time.

So, investors ought to be happy, basically, based on that. I think it probably changes over the sort of time frame that most people probably invest, which is like two or three years or something. But 10 years, if you hold for 10 years, you're better off under the new deal, according to that.

There you go.

There's lots of blowback going on, people are saying that the sky's going to fall down, it's going to be the absolute end of business in this country as we know it, investing, no one's going to invest, no one's going to do anything. I don't know, these are political documents, obviously, budgets, so people tend to go a bit extreme on them.

And this is a particularly political budget, there's no doubt about that.

I always find it a bit bemusing that with companies, what we do is we look at their results each year and the question is, did they beat or miss their guidance and analyst forecasts and what were the results like? We actually don't get companies' budgets. We know that they've got budgets, they've got a budget line for every cost and revenue in the business and the budgets are looked at monthly by companies, but we don't actually get those, what we get are the results. With the Government, we get the results each year in September, nobody cares, nobody looks at the results at all. All we look at is the budget, which is their intention.

Also, the intentions are always over four or five years, what they call the forward estimates, but we have elections on average, every two and a half years, and everything changes all the time. Even between elections, they change their mind every year. The forward estimate intentions contained in each year's budget are completely irrelevant and we all sort of spend hours in the lock up about it and write about it.

Well said, Alan.

Interesting. The other thing to talk about is CSL, what's going on? That was a shocker the other day.

Yeah, I think in some ways this is a bit of a sad story.

Sad for the shareholders.

But, sad in some ways for the country. CSL is one of Australia's great global success stories, we don't have that many of them and we certainly don't have that many of them that aren't based on digging up rocks and shipping them overseas, that's a hugely important industry, but CSL's business is built on real innovation and know-how and the creation of an industry in terms of the plasma sector. But this company's just lost the trust of the market. We've had numerous earnings downgrades now.

Their CEO retired on the eve of results in February, they put out guidance in February and then 90 days later they've been forced to sort of abandon that guidance and hit the market with a profit downgrade, $100 billion dollars of market capitalisation's been blown up in two years. Still, the company keeps telling us that fundamentally everything's fine, there's good people here, there's good business here. Which, you get that companies have got to sell a bit of hope, but there doesn't seem to be the appreciation or intellectual honesty to say, "Yep, we've really got an issue here that we've really got to fix."

So I think it's definitely sad for shareholders, but it's sort of sad that one of our giants has gone off the tracks a bit and doesn't quite seem to know how to get back on the tracks. I think it'll take a long time, CSL is a bio-tech business, drug development cycles are long. Patient treatment cycles are long. It'll take a while for this company to restore itself to its former glory and I'm not entirely convinced at the moment that they know how to do that. They keep just saying, "Everything's basically okay."

You probably talk to the analysts about this, is it true that there's a fundamentally decent business going on there or is there something fundamentally wrong with the business?

No, there's a fundamentally decent business. This business in America where they collect blood, they turn it into plasma products for the treatment of kidney diseases and other rare diseases. Immunoglobulin, that is a good business, no doubt about it. It's a sector that CSL created, but this is the sort of shame of it. CSL was dominant, still is the largest producer and has the largest global market share, but they're now the number three in America, which is the key market and there are questions over basically whether the competitors have eaten their lunch. So, look, there is a fundamentally good business, still throwing off lots of cash, but this is a business that has sold itself as a sort of growth engine and it's stuck in low gear at the moment.

When they were $300 bucks or something and worth $150 billion dollars, there was always a question of whether they could justify the PE that they were on which was always like 40 to 50 times, double or triple the market and it turns out, they couldn't justify that. That's true, isn't it?

Well, I think so, Alan, but what we've discovered in the last little while, I think, is that the company now admits itself it became too bureaucratic, it didn't respond to competitors enough. Competitors have come in and changed the pricing structure of the market, introduced other products. I take your point that maybe the market got ahead of itself with the valuation of this business, I get that, but there's no real excuse for the market leader to take its foot off the gas and allow competitors to eat its lunch. I think that's the bit that should be frustrating shareholders. Yeah, okay, the valuation gets too high, it comes back down a bit. But for the business to sort of have these cracks in it, that's the real worry.

Just to finish up on CSL, do you think and do analysts think it's fallen enough now or is there more to go? Is it time to buy it yet?

Well, we're not going to give specific financial advice, but analysts are still worried, that is the question they are all - a lot of the notes were titled something along the lines of, is this the bottom? The reason I don't think it's the bottom, is because think of what's going to happen here. At the moment, we've got an interim CEO and a Chairman who's about to leave. What we'll have is succession at the CEO level and the Chairman level. Now, the way these things go in almost every case, is a new CEO comes in, does some big hifalutin review, finds all these skeletons in the closet and rebases the earnings with a bunch of write-downs and profit downgrades. Maybe CSL can avoid that fate, but do you want to bet on it at the moment?

Well, the acting CEO's done a fair bit of that, hasn't he?

Well, he's done a bit, but the interim CEO, his message on Monday was, "This is a fundamentally good company, I hope this is the bottom, I expect it is." I think the problem CSL has got at the moment, is that the market doesn't believe what they say and so his pronouncement that this is the bottom, that's not going to hold water, investors are going to want to see more evidence.

Okay, time for questions now, before we get onto them, here's a quick word from our sponsor.

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And just remember that we can't give specific personal advice, this is general advice only. First question's from Aiden, "Simple question, why can't investments, property dividends, capital gains, etcetera, be taxed exactly like income tax but in a separate bucket? Why can't all income from assets have a tax-free threshold, e.g. $18,200 like income, then scale like income tax? Wouldn't this simplify the tax system, reduce reliance on income tax and still encourage investments? What am I missing?" Well, that's kind of what capital gains tax does. The reason they've got the different tax for capital gains is the idea that we shouldn't be paying tax on gains that are the same as inflation or the inflation component of your capital gain. Now, you can disagree with that principle or not, but that's the idea. Anything else, James?

I think part of the reason you have a different tax system is also that you want to encourage investment. We provide tax incentives, which is what the CGT discount is, to encourage investment and so you have a different regime than you would to work in. Maybe Aiden's idea simplifies everything, but historically, we've tried to give a little bit more for investors.

That's right and it's worth noting that tax on income is also subject to inflation, but on the brackets, so we have bracket creep. That's given back occasionally, but nowhere near enough. The main tax distortion in Australia, is that we don't tax consumption enough or as much as other countries do. I think most countries tax consumption 15-20 per cent, some go 25 per cent, we're at 10 now so there needs to be possibly more of that, which would take some pressure off income.

Absolutely. Andy has a related question, "I feel we spend a lot of time debating super and other tax concessions, but we don't talk enough about why Australians are so obsessed with amassing assets. Residential property in Australia has now hit a staggering $12.6 trillion and super, $4.5 trillion. A huge driver of this seems to be a rational fear the age pension is essentially a survival payment at the poverty line. Australians have realised that if they don't buy property and hoard assets while they're working, they won't have a dignified life in retirement. We've created a system where people feel forced to stockpile houses and super capital, because they can't trust the Government to provide a decent floor. If we actually had a reasonable and liveable pension that people could rely on, wouldn't that take the pressure off this massive asset hoarding cycle?"

Yes, well, as one of those who is obsessed with amassing assets, I think this is a related question because it comes back to tax again. We don't raise enough tax to have a liveable pension. I suppose you could regard the compulsory super as a tax, which is meant to offset the aged pension or at least supplement the aged pension. So, if you see it that way, I think that adds to it.

I think the premise of Andy's question that we're all obsessed with hoarding assets, we're not obsessed with it, the Government literally forces us to do it. We literally do not have a choice.

Through compulsory super?

Yeah.

That's right.

We're not hoarding assets in super because we all want to swim around in pools of dollar coins, the Government forces you to do this to take pressure off the aged pension. Andy's sort of suggesting that if the aged pension was bigger, then we wouldn't have to hoard assets, but the choice we've made is that we do hoard assets so we can have a more sustainable pension system and we don't have to jack up income taxes or other taxes to increase the aged pension. I'm not sure where Andy expects the reasonable and liveable increase in the aged pension to come from. It can only come from taxation or a reduction in spending, which would be aged care, healthcare, NDIS and defence.

That's it. The NDIS is being cut, they think, maybe, hopefully.

Yeah, well, look, they're relying on a huge cut to the NDIS.

They are.

It's in the outer year of the budget, but I think the number is something like $19 billion dollars of reductions in the 2030 financial year. So, wow, are they going to be able to do that? Let's see.

By the way, the biggest spending item in the budget is hospital funding, which was announced in January as part of the national hospital funding agreement with the states, but because it was already announced a few months ago, nobody cared. That's $18 billion dollars or something. PD says, "The Anthropologist, David Graeber, posited that there's a whole class of salary professionals whose jobs are pointless and stupid. These jobs are particularly concentrated in the FIRE, that's finance, insurance and real estate. If AI is able to automate a lot of these pointless jobs into oblivion, then surely society will be better off as the people currently occupying these mindless bureaucratic roles are forced to seek more societally beneficial and useful jobs. Perhaps the balance will swing towards more socially beneficial and less well-paid jobs such as teachers and nurses."

I actually wanted to answer this because I think it's a good point. In fact, I've been reading stuff that points out that all the statements that AI is going to remove all jobs and everything are made by people in those kind of industries and they can see AI replacing those industries. Whereas, most other industries will not be replaced by AI for a very long time, like trades and all that. I think there's a point to what PD is saying.

I think so. There's obviously a lot of subjectivity around the pointlessness and stupidity of someone's job. What might appear pointless and stupid to PD or the anthropologist might actually be a reasonably important cog in the wheel. I take the point that there's a lot of meetings that could have been emails in many workplaces and lots of waste in those industries, finance, insurance and real estate. There's probably also lots of bureaucracy in Government services and the public service and that sort of thing. So, I guess the question, though, to take those two jobs that PD suggests are socially beneficial, teachers and nurses, how do they get affected by AI? A lot of nursing will be handed to humanoid robots eventually you would think and a lot of teaching, education is right in the gun of AI.

I should have said, by the way, I don't agree that all these jobs in finance, insurance and real estate are pointless and stupid, no, no, no. That's not true. For all of our finance, insurance and real estate listeners, we don't agree that your job is pointless and stupid.

Andrew has a bit of a related question, "If AI causes unemployment of 10 to 20 per cent given the budget is highly reliant on personal income taxes, how will this affect Government revenue?"

Poorly, you would think. Not well.

I did sort of sit there in the budget lockup, Alan, thinking yesterday, there is a bit of talk from the Treasurer at times like this. Obviously, the forward estimates cover the next five years and some of the budget projections go out for a decade. You look at some of these projections and you think along the lines of Andrew's question, what's the economy going to look like in 10 years, 5 years even? Will any of the firestorm about CGT and negative gearing make a jot of difference, if, as Andrew says, we did have unemployment of 20 per cent? We will have some serious budgetary and economic problems that will make all that look like window dressing, wouldn't we? None of that is really even remotely canvassed in the budget.

No, that's right. The Australian Government is not alone in this, I think governments all over the world are basing all of their budgeting on the proposition that AI will not cause some sort of job apocalypse, that's what they believe. They actually aren't thinking about it, really. I think they're not thinking about it, they're basically just trying to ignore it.

Yeah, it's a bit like the situation in Iran, everyone's just hoping it will sort itself out, maybe it will, I don't know.

Mind you, I can't think of what would the Government do? If they thought, well, maybe there's a 50 per cent chance of 20 per cent unemployment, what would you do? I don't know. I mean, you'd probably have to work out a plan, I suppose, that's the thing. You can't really implement the plan, can you?

No, I disagree with that. If you thought that unemployment was going to go to 10 to 20 per cent in the next five to 10 years, surely the biggest item in yesterday's budget would have been a retraining package, the likes of which the Australian economy's never seen, a skills and workforce realignment package, some sort of different way of taxing - an announcement on how we're going to tax AI token usage, something like that.

Yeah, that's true.

There's ways you could prepare, I've seen none of that.

No, that's true.

But, yes, you're totally right, those are not easy issues to get your head around and filled with risk. What if you do the world's biggest re-training program and the AI wave turns out to be nothing? It's a tough one.

Let's go to Jack, "Just listened to a short piece put out by Stephen Koukoulas regarding the most recent rate hike. He notes that the recent oil shock has spiked inflation leading to this hike, but makes a great point that generally fuel use in the economy won't be impacted by a rate hike and this is asking businesses and mortgage holders to do the heavy lifting and bring spending down. Keen to get your take on whether you agree with Stephen and if you thought the hike was a misstep by the RBA and should have been a hold instead? Love your show, keep up the good work." Well, it's interesting.

I think we get a lot of these questions, particularly around when there's a rate hike and particularly when it's driven partly by supply side issues. Why isn't there another way? Why doesn't the RBA do something else? I think over the years we've canvassed lots of different ways, increasing contributions to superannuation, different interest rates for different parts of the economy... It's all sort of interesting in theory and Michele Bullock said this on the day she raised rates, we've only got one tool, it's a really blunt one, we're sorry about that, but that's all we've got, we can't invent another one. So, do I think it should have been a hold? No, because inflation was building well before the Iran energy crisis started. Over the next six months, we're in serious danger of something that's going to look a little bit like a wage price spiral, because if you think about it, we've got the minimum wage decision, which they'll probably increase the minimum wage by about 4.5 per cent. We've got some big increases through retail awards and our awards in the care economy coming through. Those inflationary pressures continue and then you've got the Iran War. Then you've got the problem we've got - in some ways, it's a happy problem, but the problem we've got is that spending in the economy is still really strong.

I wrote about this last weekend for The Fin, we've had this boom in household wealth, $3 trillion dollars over the last couple of years, that is just underpinning spending. People, they get grumpy about interest rate rises, that confidence goes down and then what do they go out and do? They spend. People have been conditioned - the connection between interest rate rises, unemployment rises, financial markets feeling any pain, it's just not what it was. The RBA's got a really tough job, it's really going to have to whack the people who deserve to be whacked the least and I don't know what else they can do. That's why I'm worried about this, Alan. Is there a chance for policy misstep? There is, because Bullock is fighting both inflation and inflation expectations getting away from them, the rate hikes don't work like they used to.

Yeah, I think it's worth pointing out, the rate hike that just happened wasn't because of the war in Iran, it was because of inflation that occurred before that. I do think that they've got an eye on what's going on with the Middle East, but it's really, as you say, because of inflation rising beforehand. So, yeah, businesses and mortgage holders are doing the heavy lifting, it always happens, that's what happens, that's the problem. It's possibly worth pointing out that there was at least one person on the monetary policy board who thought it should be a hold, it was 8-1 and we don't know who that was, but I reckon it probably wasn't one of the five economists on the board because economists generally think that rates need to go up, but non-economists don't.

It's going to be such an interesting little period over the next little while. There's so many of these forces sort of colliding together. Geopolitical mess with Iran, Australia's low productivity, AI... The budget last night was the most interesting in years and I think they're only going to get more interesting as time goes on.

Do you think we've got time for one more?

One more, here's one from Brad, "With potential and likely changes to negative gearing and capital gains tax in the upcoming budget..." We've got those now, Brad, "What are your thoughts on the likely impact on the stock market? Bullish move, direct and indirect through super, if the changes are only made to property... Are there any other investment types that may be affected by redirection of funds?" This is an interesting question because shares should become marginally more attractive now that the hit to property taxes is there.

Except the capital gains tax...

Yeah, then you've got the capital gains tax issue.

That affects all assets, right?

Yeah, that's right, perhaps with the exception down the track of start-ups. The other way to think of it, I think, Alan, is just to think of the general backdrop for Australian shares. Particularly, this time last year, we had interest rates coming down and the Government spending pretty freely. Now we've got interest rates going up and the Government trying to restrain its spending, it's quite a different backdrop for the economy. I reckon that's the thing that I'd be thinking about around stock market investing.

Yes, stock market investing is particularly difficult at the moment because the market is up, particularly in the US because of AI - nobody's really got any idea what AI's going to do and it's kind of going sideways in Australia because we don't know what's going to happen with commodity prices.

Yeah.

Thanks for listening to today's episode of The Money Café and thanks to James for popping on from Canberra where he's still getting over the budget lockup. 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 and Columnist for The ABC.

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

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