Hello, and welcome to The Australian's Money Puzzle podcast. I'm James Kirkby, editor at The Australian. Welcome aboard everybody. Lots happening on the markets as we speak, because it is the morning after Donald Trump's resounding, resounding, clear victory, only the second time in a century that a US president who lost an election came back to win again. And what's really interesting from an investment point of view, and
we're not talking much about this today. If you guys want us to do something on this, we will go deeper into it another day. But what's really interesting is that the US market went up three and a half percent last night. And that's all fine and dandy, and if you see a day where the US goes of three and a half percent, then the ASEX as a rule runs up behind it. But it didn't happen this morning. The market's only open an hour or so and it
is flat zero, nothing, no response. And I'll tell you why, because there's a certain point which we can't keep going up on the back of a market in the US which is thriving on the basis that it's going to be protectionist and it's going to turn in on itself, and it's particularly going to turn hard on China because we're a China proxy on the AX and global markets. And that is what all the institutional disks around the
world would say this morning. Don't know about the ASEX anymore, don't know about that Under a Trump regime, we will
be talking about that as we go. But actually, folks, I imagine I hope at least that most of you have a more burning issue in mind, which is how much you have, how much you have in the bank, how much you're going to make in your life, and how you're going to achieve the elementary what do you might on the elementary targets in wealth building, which might be, for instance, to own your own home, which might be to have some decent amount of super as a start,
and then to do wider things that you might wish to do. And dragging I imagine on that is hex Your hex bill now, the average hex bill is twenty seven thousand dollars twenty six five hundred. Many people listening to this show, I know from the demographic, from the demographics that we see, will have hex bills and they will be twenty seven thousand dollars or thirty seven or
forty seven or higher. And we had some really big news this week, which I hope didn't get lost in our distraction on the US, which is that the government has announced quite remarkable I think the biggest thing that's happened to Hex for many years. Number One, all HEX bills are going to be cut by twenty percent. Number two, the way you pay Hex and how much you have to pay is going to be as simple as that,
and a few other things as well. My guest today is a regular on the show, is also in the top reaches of the top Advisor's list, and one of the youngest at the top of that list. I don't know if he has a X bill. It's Hugh Robertson of Centaur. How are you, Hugh, have you got an X bill?
I do not.
You paid it off?
You do not? You paid it off? And now you say, why did I pay it off? I could have had a twenty percent discount exactly.
That.
Yes, I wonder what percentage of the population have paid off their expill I wonder that's not a figure I'm familiar with. Okay, when people come into you, I'm going to talk to you, both as an individual and as an advisor. Let's first of all tell people, explain to people what is due to happen. Now. This is important because the mechanics of how you pay is going to change, and the twenty percent discount is due to kick in
on June one next year. The mechanics of how you pay is going to change from July one next year. This is a typical complications and there each thing is makes sense in and of itself, but the course as a whole it looks, as usual ridiculously complicated. In any event, that's the plan, but of course the government, that is the alp Albanesi government will have to win to implement this.
But Hugh, could you first of all, would you explain if I came into your office and said, as part of my plans, I've got a hex bit of fifty grand and there's some big changes. What should I do? What would you say?
The first one is the twenty percent one off. Interestingly, it wasn't a recommendation of the University a chord panel, so this is comeing independently of that, which probably is curious as to the timing. So that's going to cost about twelve thirteen billion, might even be as much as sixteen billion when I was trying to look at the numbers that they're going to give us the one off.
So if you've got the average hextead of around twenty seven and a half thousy twenty seven thousand, six hundred thereabouts, that will reduce to twenty two thy eight hundred. So the idea of that is to help with to help with debt and to help with cost of living pressures. So there might not be a direct correlation there, but the and that will be applied before the indexation as well, So I think that's probably interesting.
Yeah, that's a very important point. So listeners, I'm sure they'd remember there was always this thing, you know, don't worry about your hex bill. You don't have to pay interest, and that was all fine. That did not mean it didn't go up. People thought it did. There was no inflation for so many years it didn't matter. Suddenly we've had I think it was a seven percent followed by a four percent lift in hex and that the way we're going this year, I would think it's coming in
at about three and a half. That really kicks up your bill. So when you mentioned the indexation. He's talking about the fact that the government have also promised that this twenty percent cup will come before they kick in the indexation, and the indexation's on June every year, and that's why this part of the plant is due to coming on June one next year. Okay, So that's the big thing.
So that that comes in the office is going to be better by five and a half thousand dollars, which is good. And then we've got the change in the minimum incun levels, so this is really overdue, coming in for a twenty five twenty six financial year, so that's going to move up. Everyone's wages have moved up, so that's going to go from fifty four, four hundred and
thirty five thousand up to sixty seven thousand. So if you earn less than that sixty seven thousand, you don't have to make any repayments.
You yes, if you are in less than sixty seven thousand a year, you don't have to make any repair. That doesn't mean that's just kicking your bill down the road, right, You make the repayments, but your bill is going to keep going on.
So this is where the financial planning element comes in. When you start being given these things. Even thinking about this debt reduction that people have been given or not needing to make more as much in repayments, people tend to treat it as a bonus. And if they treat it as a bonus and they spend it and they
blow it. I was looking at just from our hundred thousand, So say you had an income of one hundred thousand dollars that currently you'd be paying five thousand, five hundred, and with the changes, it's going to be four nine hundred and fifty, so five hundred and fifty dollars more in your pocket. So really, with then saying what would they do with that with an extra ten dollars a week, most people probably aren't going to look to do something
substantial with that. But you've got to really make sure that you're not just leaving these debts debts outstanding.
Okay, And there's another thing which everyone should be aware of. I haven't done the maths on this, but hey, I've got a think that's advisor on the show, and I'm sure he's really numerous. That doesn't mean that's just straight away, but here's the thing. The other change is they're introducing a system called marginal repayment, which was recommended. And what it means is you in the up to now you paid what was the interest on your bill, whatever that
bill might be. From July one next year, you pay the interest on your bill above the threshold. So if you have a seventy thousand, how does it can can you bring us through? It's whatever you're over sixty seven thousand? Is that how it will actually come to pass?
The rates are fifteen cents in the dollar up until I think it might have been one hundred and twenty thousand dollars.
And then above that, well that no change from that perspective.
You know, we still want to incentivize people to go out there and work, but then in terms of years to pay off with the new amounts because of the reduction that they're giving. To say, this example of the twenty seven thousand dollars average, with the twenty percent discount, it's now takes the debt to twenty two two and
eighty dollars. And on that person for one hundred thousand, we know that they're going to be they're going to be paying less because of the changes, but now they'll get it paid off in four point four to six years versus five point oh two years. So because of the twenty percent reduction, they're still going to be painted off quicker, which I think is important.
So what do you say to people, have you got a defaud position on Hex?
Yes, it's we've always left let that run in the background, and it's usually a matter of paying off the majority of people that are coming to see us, or also with a debt with a mortgage, and usually we're just saying, look, pay that off more quickly if you have additional repayments, pay that off at your principal place of residence. Because that's not a tax deductible debt. And the interstright volatility's been pretty extreme and it just gives you more capability
when you're paying down your debt. You can either use that to reinvest, you can save up for your kids' education, you can you know, use the money to.
Just pay down debt. In it in an absolute term.
And you're comparing it to to tax deductible debt, which is you're saying you had an investment property versus HEX at least with the investment properties tax deductible. What about the home itself? What about if you have a mortgage.
Probably the interest rate differential the interstrate is higher on your home loan than it is on the indexed amount of the debt with HEX. I think that that important point that you raised is that people really do need to understand that the HEXT does go up and you're forced to repay. So with those repayments years gone by, you do you remember when they used to be there was benefiting pain it off at a quicker rate, the government incentivized it.
Well, yeah, there was in this whole package that was announced. There is no incentive whatsoever that I can detect to pay it off earlier. And there used to be Was it a ten percent discount if you paid early? And they dropped that in two o nine and there's no incentive. Is there an incentive if I've missed it?
No?
And I think for the majority of people they're happy just to take on the debt. There's talk about different degrees having different costs associated with Obviously, a medical degree is going to give you a very clear career pathway, and there's conversation that they should pay more, and there's people that maybe do an arts degree that probably pay less.
It's difficult that the advice that you would give someone who's going to university is just make sure the degree is relevant and it's something that you're going to need. Don't take on a debt that you don't need. If you're thinking about postgraduate studies and your mid career, make sure it's really applicable to you, because it's going to be with you a long time.
The debt.
It's interesting though the academic see and the studies show that essentially what OC code when the Coalition did something that had never been done before, which is they tried to price education in a fashion that tilted the market towards maths and science. And the evidence so far is that there is no evidence that people change their mind. If I'm going to do medieval art history and someone says, hey, accountancy is much better value, you should do that, I'm
not going to change my mind. And I think that's one point I just want to make to listeners. The other thing is which or if I was really interesting, is someone was doing some modeling on this. This is the hex as it stands.
By the way.
Her name is Alison Preston. I haven't talked to her. She's an economist University of Western Australia, and she says that in terms of paying off hets sorry, this is post if the government's thing comes through. If the government's plan comes through and the twenty percent comes through that men, this is interesting. Men on average will have their student loans paid off at thirty six, I will have none left and women will still be repaying theirs until the
age of fifty. And if you think about it, if you think about it, that's actually instantly explained from an economic rational point of view, because A they earn less.
B the.
Higher earning some higher earning professions are more dominated by men at this point. Still though it's bad. It's a hell of a gap. So that's something too to think about.
That's great research done and interesting. Really got a factor in that family. Absolutely how you have some equality there?
Yeah, it's certainly something that wasn't considered. Just one last thing. If I said to you, is there any is there anything better than X? Aunts to that, there probably isn't, is there? Since at the end of the day it's interest free.
That's right.
We looked at obviously when I had it, I looked at it a lot more detail, and there really isn't it. It's one of those necessary evils. I think in some ways we're very fortunate the amount the inflation applied to our debt has been more generous, and say over in the UK or New Zealand or other systems, when in America there's very much.
That family savings or people just borrow money. We're kind of lucky.
You get an interest free loan from the government for your education. We're still the lucky country in many ways, and there's nothing that we can say about it.
I'm happy with the income.
Above the threshold that that was overdue, and that's something that when you start your career and you're trying to get your wealth creation engine going, that the more money you've got, the better you're also combined to that now with the cost of rent straight away, when I saw maybe an extra couple of bucks ten twenty dollars in someone's pocket a week, that helps with the cost of
living and rent. The one thing that I did question when we're allocating sixteen billion in a budget to an area, I probably think that we could have helped more people. The numbers here is that you're going to help three million people, which is great, but I reckon with sixteen billion we could have helped more people.
Yes, And of course anyone who's paid off says, oh, you know, I would have liked that, and anyone who's coming in the future obviously they just simply get the reset. Can I ask you just one thing, one last thing, which is just looking at it more generally, Does it change your view in any way about the speed at which people should do it and should people not bother to pay a damn thing till this comes through?
Why would you one hundred percent? I would hold off.
And I think if you're looking at debt, it it's going to take you.
You on the average when.
You look at the average tables, if you had the average amount of debt you're looking at the and you currently have that I should say six six four and a half, six and a half years to pay it down. There's no benefit in paying it off quicker than that. You'd get a better benefit, better bang for buck paying down your home loan or saving a deposit. And no benefit for parents to offer to pay down their kids either.
No, because there's no incentive. As I said at the start, that's right now. Yeah, that's a really really glaring error. I think in what they did Okay, we'll be back in a moment. Folks. Hello, welcome back to The Australian's Money Puzzle podcast. I'm talking to Hugh Robertson of The Center or ce NTAU or Group Financial Advisor regular on the show. Now, Hugh, before we got questions on Trump and the election, I did make the point at the start that the US markets went out three and a
half percent and the Australian markets didn't follow that. They didn't follow that because why would they. Because this particular regime that has been elected is protectionist and is particularly so in relation to China. We are seeing as a China proxy on global markets. You can see that straight away. That's why the dollar is going the wrong way this morning.
But what do you say to clients who say, is there any broad guidance you can give as to allocation for investors in the view of this new presidency?
Great?
Yes, the Dow going up three point five point seven last night is definitely a pro US story. Are you saying there is going to be greater protectionism? Trump's gonna implement all the Republicans are going to tax cuts for corporate There's going to be higher tariffs, tieder immigration, so we're really Trump two point zero is that continuation of the anti globalization perspective.
So from our perspective, it does.
It's a worry for Australia from that perspective, so you really need to take a global outlook when you invest.
I think we've seen, and I think we've talked about it previously, the rise and rise of index funds, not giving financial advice, but now we're really looking to go from those market cap weighted index funds that have really high concentration risk into more of those equal weighted kind of opportunities there because you look at America and the S and P five hundred, well we've talked spent a
year talking about just that magnificent seven. There's four hundred and ninety three other companies and when you looked at it, I was really curious to see if the Dow beat the NASDAK and it did, so I think from a clicktic.
That's and it doesn't very p So you're seeing you're seeing you like equal.
Weighted US I do, and I think you etf to strip out. The big take is that it.
Yeah, and I think from an Australian perspective, the majority of clients we see are very overweighting Aussie and that's going to be a real challenge. I think Europe is coming out of some pretty rough years, so there's opportunity there. I think there's still continued opportunity in America outside of
that top seven. And from the client perspective, it's really to sort of don't be scared of going global because it might actually be safer than domestic because we are a China proxy and the world we're what two or three percent of the world market cap. So unless we've got resources doing well or banks doing well, if we think that the tail wins the technology through AI or healthcare through the GLP ones and all those, then we're not getting exposed to that in the Australian market.
Okay, very good, All right, very interesting. Now the first question was actually from Peter said, is if Anthony Albanezi is going to cut student debt, it's the only point in paying off hex's debt early. I think we answered
that piece. Certainly, isn't any point in rushington pay it off early bit before we see whether this whether this gets through on June one next year, which would imply that the government must somehow be able to get that legislation through, which would suggest that this government would have to be re elected or at least told power in
June one next year. Tim, is it normal that income protection By that he means income protection insurance is going up twenty percent year on year for the older contracts. And is any advisor advising to keep the old terms. I bet they are, but you can tell.
Us you it is.
This is one of the conversation's advisers are having every single day with their clients. Tim might be referring to and actually an agreed value income protection policy. These are ones that were already marked up a little bit more expensive, but you agreed to the value of the on the terms at the time when you took the insurance policy out as oppos to an indemnity one, which is a time of claim you prove what you weren't. But if you have an income or a salary that's highly volatile,
then the agreed value is still important. What we are seeing though, is people are really due to the income protection. People are really assessing their needs again. And maybe you took out the income protection when you had a higher level of dead or kids education expenses, so you can ensure yourself for up to seventy five percent of what
you earn, but you don't have to. You can toggle around with your waiting period, whether it be thirty days and now you've got more money in your offset account in your home, you might be able to go ninety days. You might be able to go a couple of six months a year without needing to claim on your income protection. So you could use your home loan, or you can offset account, or you can use sick leave at work.
So you've got to be clever around building your plan onto what your lever is how much financial risk are you're going to transfer to you personally and be self insured versus the insurance. So that's the things we've changed a lot. We look at the waiting period, we look at the benefit period. Most people don't need to get paid till sixty five. It might only be a two year benefit period, and the actual sum insurance you might not need a full seventy five percent of what you own.
We're not seeing people cancel it, but we're definitely modifying a lot. And the stuff that we're always cautious of is don't just go to something that's cheap, because you know, if you get a cheap policy, you might get a cheap outcome. We just want to make sure you get something that's appropriate to you. So definitely that's a sec advice part.
That's a really good answer. Okay, very interesting. Interesting, isn't it that crosses over in all insurances. I did something on private insurance, private health insurance that is, and four hundred thousand people in the last two years downgraded their health insurance from gold to silver or whatever, silver to brands. Same thing. They say, Okay, I'm not going to drop it, but you know, really look at it and say is it applicable to me? Just means that once a year,
having a damn hard look at it. Okay, Rob says, would it make a big difference to government deficiency if all public servants traveled economy always? Are they our servants or are we the increasingly vexed public there? Yes, okay, this is that we're keeping away from politics.
Rob.
Yeah, I don't know. They all seem to They all like to treat themselves. It seems to me on all sides of parliament. That's all I have to say.
Did I say the Singapore Prime minister recently traveling in a planing, he always flies economy.
Did I say that.
If economy isn't he great? Reminds me of the wonderful Chuck Feeney who was the Atlantic philanthropy's man, who was a billionaire, gave all his money to charity later on huge benefacture of universities around the world, and he created basically he didn't create Judy Free, but he was the first billionaire and the free business in the US. Chuck Feeney, who died recently, and he always traveled economy and when he was asked why, he said, we all arrive at
the same time. Okay, Now I've got some very good questions coming up from doctor Joseph, from and from Augustin and we'll be back in a moment. Hello, Welcome back to the Australian's Money Puzzle. Hugh Robertson of the Centaur Financial Advice Group, speaking on the show today. First question is from doctor Joseph. I have exposure to the artificial intelligence AI opportunities by being invested in the US megacap
tech giants as well as Copper. You've thought it through, Doctor Joseph, would having exposure to international data centers overkill or is this necessary to capture the full opportunity? Okay, number one, we don't advise. Number two, We certainly don't talk individual advice. It's as information only. But I will say that I would include data centers certainly in the AI opportunity for sure, and the big super fronts for sure are including it. If you think of what they've
paid for air Trunk recently. You see this CDC auction coming up now as well, and obviously the share price hot share price of next DC and also Mcquarie that is the Mcquarie Technology Group as opposed to Mcquarie Bank.
What do you think you the idea Yes, yes, says over exposure, but yeah, you're investing in that thematic and there is a diversification benefit there. I do like the concept of when everyone's digging for gold, sell the shovels, and I think our data centers are that sor it's a nice little infrastructure play. You're not going to get the same returns that you're going to get in a AI leading kind of invention like a chat GPT of the world. But it's appropriate whether you be in all
three of those. Again, if it's I do think that AI is going to be that once in a generation opportunity that we get from an investment perspective, and you just don't know which area is going to hit. I was just spent time at M I, T, and Harvard a couple of months ago, and hearing them talk about how they're what they're doing with AI just absolutely blew my mind. And some people have spent over a billion dollars and they've made never made a dollar of revenue.
So depends where you're at what you want from your from your investment.
Did did though, I'm sure it was all wonderful. Did you come away with any specific investment lessons?
No, there's out of AI. It's going to be there's going to be a lot of failures. There's going to be a lot that are commercializing. You're going to hear a lot of really good star stories and good narratives that just won't come through. So for me, it's still allocate money to it, but know the risks that you're taking in that area. I think a lot of the really great ones are going to be via private equity.
They won't be public for some time, so I'd rather take something that's a little bit more established, like the data centers, for example. I think that's appropriate.
Yeah, okay, it's interesting. I covered a corresponds upon a time, the dot com boom, and I was actually technology editor of a business of what was then Business Review weekly magazine, and I must have met, I don't know, fifty one hundred dot com companies. They were just queuing off basically, and as you say, they are great stories, marvelous stories, great ideas, and three three came through in the end. There are only three that I know of that are
still there today. One completely went onto the radar and I missed it completely, and most people did, which was car Sales, which is a leader to the readestate dot com dot U Norea, part of NewsCorp, Disclosure and Seek. The Bassett brothers, I can remember them coming in and talking and they were just another They were just another couple of young guys jumping around the office, excited about what they were planning. And I had seen so many, but they were one. But they were one for everyone
that worked. There was thirty forty that that didn't work, So keep that in mind.
But AI, this is how I always talk about Mark Zuckerberg and you think, okay, he made Facebook, but there was a million people trying to do exactly what he did, so you go. So it's not I want to be the next Mark Zuckerberg. There was hundreds and thousands of people trying to do that exact same thing. So there's always the element of luck. And that's why you don't go into just one. You diversify. And if you think, okay, like that venture capital world, that AI world, that's really risky.
I think if you can just come back a few.
Degrees of risk, you just need to let the risk takers go for it.
But you can still pick it up.
And if even if you had a got sick ten years ago, real estate dot com ten years ago, you're going to be pretty happy with the return that you've got.
Yes, yes, absolutely, yes, very true, very true. So you're saying to me, let other people make the mistakes first, aren't you. Yeah, of course that's right. The innovators don't always aren't always the ones that make all the money, as we know. Okay, final question, Augustin, amazing podcast. I
never miss it. Thank you, Augustin. I read your article in The Australian about the This was actually an article I commissioned on four oh one K plans and whether the Angus Taylor, the opposition finance person, had floated in a single sentence to me I see in an address a few weeks ago the single the words US style four oh one K plans, and he rattled a few cages and some of the industry funds were instantly saying, no, we can't have four oh one ks. But Auguston asks
how do they work? And why are they being considered for Australia's superannuation system. Now it's the extent that they're being considered. All Anger Sailor said was that our superannuation system should be more aligned to global systems such as four oh one K. There's all sorts of aspects of four oh one K, one of which is that it's voluntary and that's very different than our system, which is mandatory. However, it does have some really interesting things, and one of
them is that you don't pay taxes. You accumulate, you pay tax that you start to tap it. And I like that because it gives everyone a fair chance. If I inherit a whole bag of money and I just drop it into super every year, it just kind of stagnates. I think in terms of wealth building and entrepreneurialism. But if as I accumulate, if I in my working life, if I am able to put more into SUPER, that's
when I want the tax bricks more. And I think our system is tilted towards older Australians, and most older Australians if we put them in a room and interrogated them hard with a big bright lamp over their head, would probably eventually say, yeah, it's true. Have you ever looked at for a one case do you what do you think of them?
Yeah? The nuances there's different.
Usually you've got employers match the contributions as well. So I like the idea if you're going to pay welfare to someone at the end of the day because they don't accumulate enough capital, then it's worth giving up the fifteen percent tax on earnings now so they can have that self determination.
So I feel we've always said.
That supers a concessionally tax vehicle versus starting to seed as the wealth creation vehicle, and then you could tax it at the end when there is a big bulk of money. I think the four to one case probably a bit better from the tax advantage there because if I have, if we've got clients that generate one hundred thousand dollars er income out of their pension, would they
mind paying tax? Not really, they want they want Australia's future better for their kids and grandkids, and they're happy to pay the tax.
I just listen to.
Your point there around do we feel the systems more built for those nearing retirement? That's one hundred percent sure, and I think it would be great.
Well in retirement. I think you in it. Yeah. The the issue that the amount you can put into super now on a tax efficient basis is more or less back only back to where it was about ten years ago, I think I certainly. I think that's that should be reviewed. I hope that was in some way useful to you, Augustin, and I hope it puts it into context as well. I think that there could be a lot more review of how it all works, and there could be there could be your review of our big super works as well.
Because if the r b A and the and ASSIC and the IMF are all lining up with the things they want to check and examine investigate, I think it's time for a broader review of how big super works, particularly in the context of some big funds. Okay, terrific, Thanks very much, Hugh. Great to have you on. I knew it would be good, it always is.
Thank you very much.
He picked a good day to come on.
Yes, excited and you know we could have gone before the Melbourne Cups. We could have got some tips. You've kind of covered off on everything this week.
Yeah, yeah, it's been a it's been a it's a been a curious week. But thanks very much for coming on the show, and thank you everybody for listening. Let's have some more emails the Money Puzzle at the Australian dot com dot au. Talk to you soon.