Welcome back.
Yesterday was a great day, the federal budget dropped.
I’m sure all eyes were glued to the screen, but nonetheless I’m recapping it here.
Some good, some bad, mostly nothing much.
But first…
I did have something written about the best suburbs to op shop in, until last night one of the most iconic news stories of the year broke. An American journalist was accidentally added to the signal groupchat of all the most senior US politicians as they discussed their plans to bomb the Houthis in Yemen, and the chat was leaked to the world.
Who This Guy?
On March 15th the US carried out strikes on the Houthi militants in Yemen, who’ve been attacking shipping through the Red Sea. America bombing the Middle East, what’s new right?
The crazy thing is that a journalist from The Atlantic was accidentally added to a group chat where senior US politicians discussed the operation. The chat has since been leaked and verified as real by the White House. It provides one of the most revealing, interesting and darkly funny insights into US global power ever.
The conversation began with Michael Waltz the National Security Advisor sending a message that the group is for “coordinating” plans to strike the Houthis.
JD Vance responded saying “I think we are making a mistake. I am not sure the president is aware how inconsistent this is with his message on Europe right now. There's a further risk that we see a moderate to severe spike in oil prices… there is a strong argument for delaying this a month, doing the messaging work on why this matters, seeing where the economy is, etc.”
Defence Secretary Pete Hegseth responded in support of the strikes, saying about the messaging “nobody knows who the Houthis are – which is why we would need to stay focused on: 1) Biden failed & 2) Iran funded”
Already this is crazy. They’re discussing military matters solely in terms of the political implications at home, which I had honestly always assumed came second to US military interests. I thought this would be the sort of thing decided by CIA agents and generals behind closed doors, who would then tell the politicians what they have to do.
Pete Hegseth goes on. “Waiting a few weeks or a month does not fundamentally change the calculus. 2 immediate risks on waiting: 1) this leaks, and we look indecisive; 2) Israel takes an action first – or Gaza cease fire falls apart – and we don't get to start this on our own terms.”
The comment on Israel is very interesting. It has appeared more and more in recent months that the US doesn’t have as much control over Israeli policy as it appeared they did, and this confirms it. Israel isn’t coordinating with the US, with Israel being the only country who receives US military help who is allowed to act this way. The fact that the most senior US politicians worry about Israel taking action on Yemen or the ceasefire breaking down is crazy, since you’d just assume that the US would be able to veto any such decision. Obviously the relationship is far more complicated, and I don’t know why.
Moving on, these are the real, verified screenshots of the next part of the exchange.
Madness.
This “loathing of European free-loading” is insane. I can’t believe they actually hold such a contempt for Europe. I thought this was just another posture they were taking as a bargaining chip to increase EU defence spending, but they clearly hold it as a core belief.
Also, note how “PATHETIC” Europe and Egypt are to have it made clear that there will be “economic gain extracted in return”, however there is not this kind of transactional relationship with Israel.
Because the US are “the only ones on the planet (on our side of the ledger) who can do this”, they see their reopening of shipping lanes as a service they’re providing, for which they require compensation. This is a massive change to how US foreign policy used to work, where they saw their position as the global economic powerhouse as payment enough for being the worlds police force.
Conversations continue a little and then just like that its decided, in the groupchat, that the US is going to attack Yemen.
Once the attacks begin and they’re a success, the guys congratulate eachother.
Yes, this is real. You’re reading that right. The US Navy strikes rebel targets in Yemen killing 53 people and the presidents national security advisor responds to the news with “👊🇺🇸🔥”. Steve Witkoff, the US envoy to the middle east later responded with “🙏 🙏 💪 🇺🇸 🇺🇸”
This peak behind the curtain at the way US power works is so revealing and scary. It really is just a group of dudes discussing plans to bomb Yemen in the group chat. The callous way they talk about domestic political optics and extracting economic concessions from Europe is wild, and the speed at which they make such immense decisions is disconcerting. But dropping emojis? I can’t.
The Budget
Labor’s pre-election budget was presented by our Treasurer Jim Chalmers, who got up smiling, and continued to smile for the entire 30 minute speech, which is incredibly unnerving. He’s done this every year.
They played a hot mic clip later that showed Katy Gallagher telling him to “keep smiling!” at a press conference, which is so weird and gross I hate that they feel the need to do that. But anyway, the budget.
Back when it was Josh Frydenburg delivering the Liberal budgets, I would watch it and go “that sucks, I can’t wait for Labor to get in and ACTUALLY do something”. Back then I could look forward to a bright future, but now its here the grass is no greener.
Good News
Starting out positive, there is some good stuff I like in the budget.
Money to produce more metals and finished products in Australia
This is very good. Australia is a mining country, that’s where all our money comes from. Our top exports are iron ore, coal, petroleum gas and gold.
Unlike other petrostates in the Middle East or the resource rich USA, we don’t dig it up ourselves to sell overseas for a big profit, and we don’t use the resources we have to cheaply make stuff here. What we do is sell the rights to our resources to private companies, local and foreign, who dig it up and then ship it overseas themselves.
We sell iron ore, which we could first turn into steel, and then turn that steel into something else, but we don’t. We sell coal and gas, which we could use to subsidise cheap electricity for manufacturing and technology industries, but we don’t. Instead private companies sell us back our coal and gas at high prices, which we then burn for electricity, and the excess money goes to private businesses in Perth and Texas.
Selling unfinished goods is a big loss to our economy. The government’s investing more money into “green metals” which is a hilarious marketing phrase, but a good idea none the less.
(Of course no metals are ‘green’, there’s a massive environmental impact to producing metal but I guess the idea is that they can be used for ‘green energy’. They could just as easily be called ‘military metals’ or ‘car metals’, because of course, metal is metal is metal)
We should invest more money into making stuff of value in Australia, so I think this is good.
Health
An increase in medicare rebate is very good. Bulk billing has declined in the past few years, and this is a good and important policy to fund. Bravo
Student Debt
They’re going to wipe 20% off everyone’s HECS debt, which I’m personally happy about, as well as loosening the repayment rules a little.
Not to be too much of a stick in the mud, but of course we used to have free university in this country… but still this is a nice policy. I don’t know if it’s the best use of government money, but I like it. It’s good.
Social Housing
The wait time for social housing in Victoria is 20 months for people deemed ‘high priority’, and significantly longer for others who need it. The governments says they’re building 55,000 more “social and affordable” houses in the next 5 years.
I’m not sure what ‘social and affordable’ means exactly, and even if all 11,000 per year were social housing it would still fall short of demand, but at least they’re doing something.
On a personal note, I looked into renting a studio apartment in Moonee Ponds which was part of the governments affordable housing scheme, as it was one of the cheapest rentals listed on realestate dot com, but I found I would’ve been unable to qualify because my income was too LOW, and therefore I would be under ‘rental stress’ and so couldn’t get access to cheap rentals that’re part of the scheme… The logic of this seemed strange to me but anyway, just an aside.
Bad News
Tobacco
A funny point I learnt from the budget is that the government has decreased projected earning from the tobacco tax by $6.9 billion dollars(!) over the next 5 years. This is apparently because of the “booming sales of illegal tobacco”, fuelled by the insane price of cigarettes in this country.
Australia has the highest tobacco tax rate in the world, for every $50 pack of cigs sold the government makes $34, and with the banning of vapes and other alternative nicotine products (which in almost every other country are encouraged with tax breaks and ad campaigns for harm minimisation reasons) this shift to the black marked was inevitable. The treasury department advised the government this would happen back in 2023 when they imposed further tobacco tax hikes.
The governments plan is to make nicotine so unaffordable to people that they are forced to quit out of economic imperative. Of course, world history should tell you that banning people from making their own choices about what they want to put in their bodies rarely works. Look at the US prohibition of alcohol and the war on drugs as examples.
And the same has happened here. Vapes and snus (those white pouches) are still available everywhere and everyone I know smokes imported cigarettes, because to be a legal pack a day smoker in Australia costs almost $20,000 a year.
This means the government has lost out on billions of dollars which are now going to organised crime. Perhaps a rethink is in order, and we should follow the path that almost every other country in the world is, of accepting that people are addicted to nicotine, and want to be able to buy it if they so chose, and make safer alternatives legal and cheap to encourage people to take them up.
But I’m no expert
The Stuff They Left Out
Apart from the usual points of education, economic resilience yada yada, the budget was presented primarily as addressing the crises of ‘cost of living’ and ‘housing affordability’ that politicians love to talk about. I have a problem with the language used here.
What isn’t a ‘crisis’ these days
First of all, the word ‘crisis’ is misleading, and deliberately used as a marketing tool for governments to shape the discussion around their failures. The word implies a discreet period of bad times, which will eventually come to an end and everything will be well. The problem is that the government isn’t doing anything to end these crises, and they will, as such, continue to be something we live with for the long term.
They didn’t actually do anything to fix the root cause of these crises, which I’ll go through now.
‘Cost of Living Crisis’
Put simply, during covid production went down, and lots of borrowed government money was pumped into the economy. Demand was artificially curtailed by lockdowns and then once they ended, demand rebounded and supply wasn’t there to meet it. Combine this with the war in Ukraine driving up oil prices, which makes everything more expensive, and you had a period of major inflation.
This means today, my $30 is worth less than it was 5 years ago, and my pay hasn’t increased enough to make up for it. Unless you were already rich, you’re likely poorer today than you were 5 years ago.
The only way this ‘crisis’ will end, is if the poor people who are experiencing it somehow get more money. This hasn’t happened, and today real wages in Australia are almost 5% lower than they were 5 years ago.
The government is addressing the ‘crisis’ by giving electricity companies a $150 per-person subsidy for their bill at a total cost of $1.8bn, and a tax cut of a few hundred dollars per person which will cost the government 17.1bn.
These policies cover everybody. Gina Rinehart with her $30 billion dollars will get the $150 electricity subsidy and a nice tax cut of a few hundred bucks. This is not an efficient allocation of the governments money to help people in the short term, and does nothing to address the underlying problems causing the ‘cost of living crisis’ in the first place.
This isn’t even a new ‘crisis’, just a continuation of the pattern seen across the developed world since the late 1970s where money is increasingly concentrated at the top of society, and the people at the bottom get disproportionately poorer. Pumping people up with a bit of short term cash fixes nothing.
‘Housing Affordability Crisis’
Over the past 50 years house prices in Australia have gone up almost 4x faster than wages.
This is because tax policies have made it the best financial decision for people with lots of money to buy multiple investment properties, since they get tax breaks and incentives to do so. If you’re smart and have a couple million sitting around, you buy a house. You’re crazy not to.
It’s a great investment. The price of the home increases massively, you get to earn rental income from tenants, and you get to write off the depreciation on your taxes as a loss, decreasing the amount you owe the ATO. Then you can either sell it at a massive profit and get a discount of 50% on capital gains tax, or if you decide to pass it on to your children you get to pay no tax at all, because unlike most countries, Australia has no inheritance tax.
How the housing market SHOULD work, in an ideal world, is that people who need a house to live in compete amongst each other to buy one. But in Australia we disproportionately incentivise rich investors to enter the market, competing with regular folks to buy the limited number of houses available. This increases demand, and increases price. This is the simple reason why we have some of the most expensive houses in the world.
Therefore the way to solve the ‘housing affordability crisis’ is to remove the incentives for investors to compete with regular people for housing, and the price will go down. This is obvious and everyone in politics understands this. So why don’t they do something about it?
They can’t actually fix the housing crisis because the people who’ve profited off it (baby boomers and their trust fund kids) will be furious, as they see their millions melt away once the mario kart red mushroom of tax incentives is removed from the market.
Obviously “who cares”, but this is bad economics. The shock would be felt across the economy (see the Financial Crisis of 2007) and rich people (who donate to political parties) will revolt against the government and vote for the other guys. Labor tried to propose small changes to these insane tax policies in 2019 and the Murdoch Media scare campaign that followed led in part to Scott Morrison winning the so-called “unwinnable election”.
Therefore, no government wants to do anything. But they can’t do nothing either, because people are rightfully upset that they’ll never be able to afford a home in the city where they grew up.
So instead they sit in the middle, pursuing inoffensive, but ultimately meaningless policies around the edges which will only push Australia further and further into the neo-liberal hellscape of a future we’ve been barrelling towards since the 1980s.
Damned if you do, damned if you don’t, and so they don’t.
What Labor did announce in the budget that they’re going to decrease ‘red tape’ around property development, and subsidise the adoption of ‘modern construction technologies’. This will benefit property developers, and make it cheaper and easier for them to build more and more copy-paste homes on former farmland on the outskirts of the city.
Sure this gives people more places to live, but it’s not smart. Australia has just passed America as the country with the largest average house size on earth, driven primarily by the explosion of these large developments. The government should be focussing on more medium and high density housing around already existing infrastructure, not building more affordable mansions past Geelong.
Their other policy is to give more money to people to ‘help them own their first home’ and other shit like this which will only add to demand, and increase prices further.
Having people invest in housing is bad for the economy overall too. When people in America or Germany are rich, they are incentivised to invest their money into a business or the stock market. These investments mean businesses get more money to make stuff, and they have to hire more staff and the whole economy benefits. In Australia rich people invest in houses, which sucks money out of the economy and into their pocket, producing nothing.
We got ourselves into this mess with bad economic policy, and we’re still digging a deeper and deeper hole because this is the unfortunate problem with democracy. Governments aren’t incentivised to set the country up for long term success because short term pain means losing an election.
We’re increasingly moving closer to having a land owning nobility who suck all the money out of the peasant class who have no choice but to pay them exorbitant rents.
Perhaps one day we’ll reach a French Revolution level of dissatisfaction and bloodlust for our land owning lords and the government will actually do something, but for now, as Labor’s made repeatedly clear since they got elected, it’s business as usual.
Other News
Honestly, idk. I think that might be it for me this week.
I’ll drop the op shopping suburb rundown next time, and for tonight I’m going to go for a walk and get something to have for dinner, because I’m out of aldi salmon.
Until we meet again
This timeline is so bizarre and worrying that trying to ignore it has become a sport. Your interpretation of current events is all a brother needs. Cheers for publishing these, Charlie.