SPEAKER_01 0:00

What is all the talk about wealth gap? What can he do to sway the pendulum for the average punter?

SPEAKER_00 0:04

There's wealth of 19 trillion in Australia, 13 trillion is property. Probably the silent killer that no one talks about and the government fucking never bring up. But wealth is your assets, not your incomes. The wealth gap is real. It is getting much worse. We're playing with a new set of rules.

SPEAKER_01 0:17

Welcome back to Brick to the Future. I'm Al Lewison. Ken McClellan. Hello everyone. Thanks for tuning in. We love it when people email us and ask us a question or a topic to cover. Paul has emailed hello at opencorp.com.au and Paul said to us, I'm reading lots about the wealth gap in the media. And I've got three questions. What is all the talk about wealth gap? What does it mean? Why is it getting larger? And thirdly, what can he do to sway the pendulum for the average punter? I guess is what he's asking. So, Cam, pretty beefy topic, but I think uh it's a really great one to delve into.

SPEAKER_00 0:51

Alright, the wealth gap pisses me off, and it's something that I've been rabbiting on about for at least the last 10 to 15 years that because having young kids, knowing that it's going to be tougher for them, I don't give a stuff about the back end of my life, it's all about the future generations. That's the way I see it.

SPEAKER_01 1:07

And it so maybe I'm getting to that age where it's and do you want me to give you the definition according to ChatGPT?

SPEAKER_00 1:12

Good one.

SPEAKER_01 1:13

The wealth gap is the difference between how much valuable stuff a rich person has compared to poor people.

SPEAKER_00 1:20

So what's the difference between dumbbell it down?

SPEAKER_01 1:21

I said maybe it's for a 12-year-old.

SPEAKER_00 1:22

Yeah, so you've got assets um versus you haven't got assets. So you've got not. And the biggest assets we've got in Australia are houses versus not. So let's um let's break it down so people understand why the wealth gap's getting bigger and then who's created it, and probably why it's gonna get worse, but then there there is a bridge. There is a way to bridge that health that uh wealth gap, which is something we can probably piece together for people.

SPEAKER_01 1:48

Some massive numbers here. So there's wealth of 19 trillion in Australia, 13 trillion is in property. So that it's gonna angle our conversation today. We're property guys, but it'll be a property conversation.

SPEAKER_00 1:58

Yeah, well, it's what we know about best, isn't it? But um and also with the recent changes, shares, established property are all shit now as far as investment go because the government's taxing the shit out of them. But we won't get into the delve of that. Um we won't delve into that. Let's um let's look at um some understanding on the difference between wealth is the income versus property prices. So we'll give a comparison on that. I'll also give a an understanding of um tax bracket creep. And this is the nasty one the government put in. And then I want to outline what the government have done and why they've set up uh future Australians to fail, because it's going to get worse, the way they've structured our taxes um and what they actually want out of it. Uh, and then we can talk about what people can do to get across the line if they need to. Boomers always fucking rabbit on around, you know, we had 18% interest rates and blah, blah, blah. You know, it was tough when we were growing up. Bullshit. I wish there was 18% interest rates now, and the difference between wages and house prices was what it was back then.

SPEAKER_01 2:54

Three times?

SPEAKER_00 2:55

Yeah, that's right. So but back in the 80s, you know, full-time income was you know 20,000, average home was about 60,000. So about three times. Yep. Yep. Today's about 100,000 for an average income, and the average home's a million dollars. So it's 10 times. So fuck your interest rates at 18%. It is so much harder for young people to get into the property market and to build wealth because the difference between what you can earn and what so the deposit difference is back then on a savings of 20% to get to it, back then might take you um eight per eight months, which is your gross gross pay. Whereas it'll take two years now at the same savings rate as a percentage of your wage. So fucking you know, don't whinge to me about 80% interest rate. So all right, so that's the difference income and house price.

SPEAKER_01 3:40

Yes, and I guess that's why if you look at the stats, uh baby boomers at the same age, 25 to 39, 66% of them owned a home.

SPEAKER_00 3:48

Yep.

SPEAKER_01 3:48

And millennials now of the same age, 55%. So it's a vast drop in ownership of homes in that age breaker.

SPEAKER_00 3:54

So bang, we've got the uh you know a wealth gap there. So what's another reason it's gone up is because the government is shit at managing our economy, so the cost of living is getting worse. Like that's not a new one for anyone, is it?

SPEAKER_01 4:08

What did you make three packages?

SPEAKER_00 4:10

What do you say? He goes, Yeah, he goes, uh, why why would I pay more tax because you bastards aren't any good at spending it? Yeah. Um, but if we look at it and go, so why is it becoming not because they're shit at managing it, yes, the cost of good going up, and I can't see them getting any better at managing. So I always look at it and go, what can we do with the current circumstance? We can whinge and bitch about the government all day long. It's better to look at it and go, what are they doing, why are they doing, what's their competency, so and what so which way is the the wealth gap going to go? And then if you understand that and you fucking suck it up and you go, well, what can I do about it? Yeah? So if we look at um probably the silent killer that no one talks about and the government fucking never bring up and they squash anytime it's talked about, is the uh wage bracket um you know creep. So if we think about, we've talked about wages haven't gone up at the same rate as as house prices. Um, but wages have gone up over the last couple of decades and they continue to go up. But the amount the government taxes on each bracket fucking hasn't moved. And they know this. So that more people are earning, uh are creeping into the next higher tax bracket. So not only are they shit at managing the economy and everything costs more, they're actually fucking taxing you out of your back pocket more money than they they used to. So it's a like a double whammy. They fuck it pisses me off because my kids are walking into this in a very short space of time. Anyway, so I'm sorry we're getting emotional, but fuck it pisses me off.

SPEAKER_01 5:38

Very emotional.

SPEAKER_00 5:38

Yeah, anyway. All right, let's so we've identified the government is shit at managing the economy, they're not going to get any better, they're not gonna change their taxes because they're shit at managing the economy, and they need to hit everyone on taxes harder, so they'll grab more money out of everyone's back pocket. One thing that people need to open their eyes on and pull the blinds off, when we're looking at any sort of headline tax change in in the government, they don't go, there's a housing problem, so we'll create housing tax chain reform and that will fix the problem. That's bullshit. If they want to fix the housing problem, it needs to be reform on things like you know, delivering houses faster, tack cutting off the red tape, opening up more land, fucking not paying builders stupid amounts of money on um government projects, so that instead of going, we'll tax properties harder because the government, and this is the another scam, the government want property prices to go up. They are fucking budgeting for it to go up. And they desperately want property prices to go up. Well, they're hitting you harder in your tax pocket as well, because 43% thereabouts of a standard home is tax. So as a percentage, fuck they look give us more property prices because it puts more money in their back pocket. So yeah, so they're saying one thing and they're fucking us in the back door in the other way. Uh all right, so we've established why it's happening, what the wealth gap is, and apologies for being a little bit passionate about this, but again, I'm sort of thinking future generations, what's it going to be like? It's gonna be harder. What also pisses me off is the state of our this is this is probably a new one with the current tax changes. I won't go into what the tax changes are, but what it's created, because community in Australia means a lot to me. And if we think about an established area, the way they've made the tax changes, and obviously a lot of people are aware now that they're taxed higher on or they're not getting negative gearing on established homes. So people so investors are not going to buy established homes. So in a suburban, middle ring suburb, um, if we look at that and we go, no investor's gonna buy an established property there. Uh so it'll be homeowners that buy in there. So there'll be more homeowners in suburbs. Instead of when negative gearing was there, we could have our renters and our homeowners living side by side and it created a good community. Nowadays it'll be the haves being able to own a home in those suburbs, the nice pretty suburbs, all homeowners, and the haves-nots need to go and rent somewhere else. So the government has started talking about rent-controlled housing and you know, putting all the renters in one specific area. Now, we didn't want that in Australia. That's America, that's fucking ghettos, you know. So the government are now recreating ghettos fucking in Australia, which is exactly what we didn't want. So, anyway, that's what the community changes have done in the taxes are creating. So, regardless of whether it's good or bad for fucking homeowners or anything like that, it's fucking our community as well. Anyway, uh, what do we want to get to?

SPEAKER_01 8:31

So I'll ask you another question. So, person one earns 200 grand.

SPEAKER_00 8:35

Yep.

SPEAKER_01 8:36

Person two has no job, yeah, but owns an asset worth two million and gets a hundred thousand dollar income from it.

SPEAKER_00 8:43

Yep.

SPEAKER_01 8:43

Who's wealthier?

SPEAKER_00 8:44

Uh yeah, this amazing. Well, let's asset asset growth. Well, let's look at the core of strands. You know, and you know me as well as anyone. I'm shit at saving. When it whenever we were kids in our you know twenties, I'd get a pay rise and I'd fucking spend it. You're not alone, like that's that's uh that's human nature, isn't it? Yeah, you get more money and you you know you can exp go out a bit more and you go on a holiday or you piss up against the wall and a car. Yeah, that's right. So high and this is what is all I mean, we deal with a lot of high high net worths, uh, but and amaz they're probably the ones that get hit harder. If they're earning a shit ton of money, they're used to an extravagant lifestyle, and they get to retirement and the wage stops and their lifestyle drops dramatically. It's like this fucking big slap in the face. Here's life for you. So you're so to answer your question, the person who's chipping away at a lower wage but has managed to get themselves an asset that has got time to build wealth for them will ensure that they become far more wealthy than someone earning a bucket load of money.

SPEAKER_01 9:46

That's right. Well, wealth is your assets, not your income. So if you're not working but you get 100 grand for your assets, you're wealthier than the guy making 200 or 300 grand.

SPEAKER_00 9:53

Yeah. So if we go, well, I've got a bit emotional about this because it does piss me off because I start thinking about my kids and their kids, those sort of things. People need to understand and forget being sooky about it. The wealth gap is real, it is getting much worse. The government is working against you. They're they're basically made these changes, they're fucking they're fine. Their income goes up at well above inflation while everyone else's goes up under it. They've they've looked after themselves, they've made tax changes, they've benefited from it, and they've slapped the door closed behind everyone. So once everyone realizes that these changes are in place, the government don't give two shits about us, they can't manage the economy, and the gap will get larger. Once you suck that up, then you go, all right, what is the bridge? What can I do to get onto the other side of the wealth gap if that's what I want?

SPEAKER_01 10:40

It's never going to change. And the the stat we had before, um the baby boomers, they had 66% home ownership before they were 39.

SPEAKER_00 10:51

Yeah.

SPEAKER_01 10:51

Millennials are 55%. Compound growth is what creates absolute real wealth for people. So if you bought a house when you were 30 and sold up in your 70, it's probably gone up 20 times. If you bought the same house when you're 50 and sell it when you're 70, it's nowhere near it. Yeah. So the answer is the wealth gap is because people buying assets earlier and allowing compound growth, which is growth on growth over a long period of time, to increase their wealth. If people are just spending their wage and not buying anything, guess what? They're not increasing their wealth.

SPEAKER_00 11:21

Yeah.

SPEAKER_01 11:22

So the solution is as soon as you can go and buy an asset, a property in this case, you get in the market because you're going to have compound growth.

SPEAKER_00 11:30

Yeah, but then and that's I reckon people there's then there's there's multiple ways that we help clients with that. Um, I think the next podcast, which we've done it on before on rent vesting, I want to do it a little bit different and go into a bit more on our strategy and what we actually did, but what we're what I'm helping my kids to do. Um there's multiple ways to get into the property market, but it's not what our parents did or their parents did, because that doesn't work anymore. We're playing with a new set of rules.

SPEAKER_01 11:56

Yeah, that's right. What was your what was your deposit saving time from it? Eight eight months versus 44 years, or what was the step before?

SPEAKER_00 12:02

Yeah, it is much, much harder. Well, two twofold. And this is the compound issue. So you look at it, you go in the 1980s, um, there was no Saturday trading. You know what I mean? People had the shops were open nine to five. There wasn't the temptation to buy shit. You know, and so people actually were, you know, society allowed us to save more, to spend less, even though there was more money. You know, and so people could pay a house off in fucking five years just by smacking some money away. Nowadays, I do you know tests with my kids where I say to them, I'll give you 500 bucks if you can last six months not buying any shit online or no Uber Eats. It's a fucking thing or like there's no chance they're gonna get through that. Um we've had this um a few times over, but yeah, it's and I know you've done shit similarly with your kids about don't don't have soft drink, but that's just games you play. But it's just trying to get kids to understand that they don't have to fall trap to everything, and that's not talking kids, I'm talking 20, 30 year olds. Everything is so cash out now to them as opposed to the former savings. So, yes, there's a bucket load time more that you're required to save for a deposit.

SPEAKER_01 13:08

So, Cam, you've explained and you've been passionate about why uh these things have happened. Um, and there's lots of education around now, and like we know firsthand that people can come, they can educate themselves about how to invest, but a lot of people never take action. What's holding them back? Why aren't they doing it? Like, what are you seeing?

SPEAKER_00 13:26

Yeah, I think it's that um people in when you're earning enough money or you come from you know middle income families, there there is enough. There's not enough pain of being poor in life to actually go, shit, I need to do something. You sort of go, I'm okay with comfortable, and comfortable is normal around me. Well, comfortable normal around me is now the reality is you're going to be poor because you can't get into a home soon enough. And while that's I think it's while it's the case for everyone, when people en masse go, this is the current way we live, they sort of shut it out and go, Well, this is I'm just going along with everyone else. It's shit for everyone else, so it can be shit for me too. So they know they need to do something, but it's like they put their head in their sand and in the sand until at some point everyone gets a light bulb moment. And the later you leave it, the more fear and stress kicks in because you know that it's building, it's like pressure, you've got to do something, you've got to do something. Um the the issue I see with many most people, and this is probably what our team work through, is identifying the risk on what their investment is. So even if they've got the bank balance, um, and we say to people, hey, if you've got the mindset and the and the money to put into it, we can help you get there. A lot of people have got the money and they've got the income and they've actually saved enough deposit or they've got their own home, managed to get it, but owning your own home doesn't make you wealthy because even if it goes up in value, so does every other home in the area go up in the same at the same level. So you can't draw on it to really live a good lifestyle. So you need to buy an investment property or two to to you know set yourself up. So people understand that they've got the bank balance or equity and they've got the want to do it, but they just it's okay just to do fuck all. Or there's always an excuse. Like people, you the self-talk excuses in your head, you know, I'll do it later. Too busy with family, um, you know, um work's too busy. They should be the reasons why you do do it. I want more time with my family, I want to work less. I know that the pension's not going to be there. Fucking, it's coming for you. Poor is coming.

SPEAKER_01 15:31

Yeah, and look, 25 years of doing this and talking to clients and people through our doors and people we've helped, the the ones that are always the trickiest are the very high-income earners. Yeah. They're earning three to five hundred thousand, they think the music won't stop. Why do I need to invest? Why why should I do something? And they get a really rude awakening when retirement comes because their wage is cut off. They haven't taken the steps they're younger to get that compound growth.

SPEAKER_00 15:53

Yeah. Well, you know, like the area I live is um, you know, middle ring suburbia, sort of out of suburbs a little bit. You know, great demographic, um, but not extremely wealthy people. So my mates in our local community, the footy club, uh, you know, teachers, business owners, trades, you know, all those, so people on vastly different wage brackets, and the amount of friends and family I've helped who are on you know, teachers' wages and uh to build four or five properties, people don't realise what they can do until they sit down and actually analyze it or get someone to help them with it.

SPEAKER_01 16:25

Yeah, so they'll they'll eventually own their own house, they'll own four or five investment properties, and they might be sitting there with a ten million dollar retirement stack instead of a guy that was earning 300 grand not investing, yeah.

SPEAKER_00 16:37

Yeah, well I'm in I'm thinking right now of uh you know um Mick and and Emma, so Edo's. Yeah. So they've got their own home and four investment properties, both teachers. You know, that's that's the sort of life-changing shit that can happen if people pull their finger out and open their eyes. The issue is that house prices are going up at a faster rate than you're able to save. So it's just saving, earning a shit ton of money, and saving pretty much as hard as you can. I don't see how you can save enough deposit to buy a home in where most people want to live. But there's other options. So anyway, we'll get into that next time. Um, go through the steps that you can to bridge the gap. Or if you need, people can contact us at helloopencorp.com.au. That's it. Awesome. Anything else you want to go through? Hopefully that's given people an understanding of what the wealth gap is, why it's been caused, and that there is a bit of hope there. There's just you got to think of it and play by different rules.

SPEAKER_01 17:31

Thanks for tuning in.