Tag: Plain English

Why GDP Gets So Much Attention

 

Same money, two doors. Most of it went to the houses.

Last time we cracked open GDP and found the weird bit: your house can double in value without the country making one extra thing. We worked out why. You buy a house that’s already there, you’re richer, but nothing new got built. That’s just savings in a nicer jacket. Money goes into a business instead and it buys gear, takes people on, makes stuff. That’s productivity, and that’s the thing that lifts everyone, not just the bloke who spent the money.

So your house doesn’t count. Fine. But here’s the bit you’d be right to ask about: so what? Why does that matter for the whole country, not just for you?

Because the country’s only got so much money to put to work. And where it goes decides what kind of country you end up living in.

Picture all the nation’s savings as one big pool. Every year money flows in, and it has to go somewhere. It can go into businesses that make things and hire people. Or roads and trains. Or it can go into buying houses that are already standing and bidding the price up. Same pool, different doors. And for years now we’ve shoved a massive chunk of it through the housing door.

Money through the productive door, the country can make more next year than it did this year. More stuff, more services, more done per hour. That’s the pie getting bigger. Money through the housing door, the pie doesn’t grow. The same house just changes hands for more. You feel richer because the number on the place went up. But the country can’t actually do or make a single thing more than it could before.

Do that for thirty years and you get exactly what we’ve got. A country that looks loaded on paper and can’t work out why it feels stuck. The money’s real. It’s just locked up in land that makes nothing. And the things that would grow the pie, the businesses, the new industries, got starved of the money that went into property instead. That’s the bit people miss. The boom in one is the drought in the other. Same pool.

Here’s what that looks like on a normal Thursday. The jobs figures came out this week and they were grim. Unemployment up to 4.5%, worst since late 2021. Thirty-three thousand more people out of work, nearly 19,000 jobs gone in the month. Hit young people hardest, youth unemployment’s over 11% now, and this month the losses fell mostly on women. That’s work getting harder to find, which worries a household long before it worries anyone in Canberra. And on the very same day, the share market had one of its best days in weeks. Two numbers, one morning, pointing opposite ways. What’s good for the big end of town and what’s good for your kitchen table just aren’t always the same story.

That gap right there is the whole thing in small. A country can post lovely-looking numbers while the ground under ordinary households gets wobblier, because the wealth and the work have come unstuck from each other. And part of why they came unstuck is where the money went. Money sitting in land that just gets dearer isn’t money building the businesses that’d hire those 33,000.

You see it everywhere once you’ve spotted it. Wages that don’t climb like they used to, because there’s no productivity growth underneath pushing them up. A tax system that rewards buying the thing that makes nothing and punishes building the thing that does, so even more money goes through the wrong door. Smart people and big money chasing the next property deal instead of the next business, because that’s where the easy money’s been. None of these are separate problems. It’s the one problem wearing different hats.

Lets not make it too neat. Housing isn’t all dead weight. Building new homes is good, very good. It employs a lot of people, and having a roof over your head is worth something no GDP number ever captures. And plenty of countries with dear housing still get along fine. One bad month of jobs figures doesn’t prove any of this on its own either, the economy has its own ups and downs that have nothing to do with houses.

So it’s not that houses are the baddie, and it’s not that one bad month of jobs figures proves the whole thing on its own. It’s that when a whole country leans this hard on the one thing that doesn’t grow the pie, year after year, the pie stops growing. And when the pie stops growing, you’ve got less to go round for everything else.

That’s why it’s a big deal. The GDP in not some magic number on the telly. The GDP is the scoreboard for one choice the country keeps making without quite meaning to: do we build the thing, or just sell each other the thing we already built for more. We’ve spent a long time doing the second. And the bill for that isn’t a number. It’s a country that could’ve been doing more, and isn’t.

Your house doesn’t count. Turns out that’s not some quirk of the accounting. It’s the whole story in one line.

The Cleverest Bit of Marketing in Australia Right Now

Two founders in work aprons concentrate on detailed work at a cluttered workbench, while a relaxed man in a pale linen suit leans in the open doorway with one hand extended, palm up, doing none of the work but waiting for his share.
Never done a stocktake. Still wants his share.

Betty’s brother Kevin rang from Kiama last week, properly worked up. His daughter’s got a startup, a real one, the kind with late nights and not much sleep, and Kevin had just seen something online about the government coming after people exactly like her. “They’re punishing the ones having a crack,” he told Betty. “Did you see what they’re calling it? An aspiration ambush.” Betty hadn’t seen it. But she could hear that Kevin had already made up his mind, and that whatever he’d watched had done a very good job of helping him.

So she went and had a look. And what she found wasn’t really a tax story at all. It was one of the sharpest bits of marketing you’ll see all year.

We’ve spent two posts on GDP (See here and here).  Your house doesn’t count, and the country keeps shoving its money through the housing door instead of the door where things actually get built. If you missed those, the short version is: money put into a business grows the country, money put into an existing house just makes the house dearer.

Well, this week a bunch of young business owners turned that exact argument into one of the sharpest marketing campaigns you’ll see all year. And whatever you think of the politics, the craft is worth a look, because it’s a masterclass in how to win an argument before anyone’s checked the facts.

Here’s the setup. The budget proposed changing capital gains tax, the tax you pay on the profit when you sell something for more than you bought it. The change makes sense for the housing door, taxing property investors harder so houses stop being such a one-way bet. The founders even say they’re fine with that bit. The trouble is the same change also hits people who sell a business they’ve built. Same swing of the door, and it caught the workshop along with the houses.

Now watch what they did with it.

First, the name. They didn’t call it “proposed CGT discount reform.”

They called it an aspiration ambush. Two words, and you already know whose side you’re meant to be on. “Aspiration” is the good thing, having a crack, building something. “Ambush” is the sneaky thing done to you from behind. Stick them together and you’ve got the whole grievance in a phrase a headline writer can’t resist. That’s not an accident, that’s branding.

Second, the line. The letter says, near enough, we work the hours, we carry the risk. You can’t argue with it. It doesn’t mention tax rates or indexation or any of the stuff that makes your eyes glaze. It just plants a flag: we’re the ones doing the hard yards. Try writing a reply that starts “well, actually” to we work the hours, we carry the risk and see how you sound.

Third, and this is the bit I’d frame and hang on the wall, the silent partner meme. Some of them made fake ads casting the Prime Minister as a 47% shareholder in their business. One posted that he’s a bloke who has never done a stocktake and somehow still gets 47 per cent of the business and takes zero risk. That’s the silent partner gag, and it’s perfect, because it takes an invisible, boring thing, a tax on a sale that might happen years from now, and turns it into a freeloading mate who turns up at payday having done nothing. Everyone’s had a version of that bloke. You feel it before you’ve thought about it. Region Canberra

No wonder Kevin shared it. That’s the gag working exactly as designed, it travels from a screen in Kiama to a phone call with his sister before anyone’s checked a single number.

Fourth, the messenger. They didn’t wheel out grey men from a lobby group. They badged it founders under 40. Young, building things, the future. It’s much harder to paint a 35-year-old who started a company as a greedy fat cat, so the campaign chose faces that don’t fit the villain costume.

Put it together and you’ve got a textbook job: a sticky name, a line you can’t argue with, a meme that does the thinking for you, and the right faces out front. It went everywhere. Sky, the papers, an open letter straight to the PM. That’s what good marketing looks like, it makes its point feel like common sense before the other side has finished clearing its throat.

Now, here’s where Betty keeps her wits about her, because clever marketing is exactly the thing you should be most careful around. Being well-sold isn’t the same as being right.

Albanese’s comeback is, frankly, not bad either, it’s just nowhere near as catchy. He says the campaign is being run by right-wing parties and their allies, and that the meme misses how the tax actually works: it’s only paid when a business is sold, not every year, and most small businesses pay little or no capital gains tax when they sell. If he’s right, the “47% silent partner” doesn’t apply to most of the people sharing it. But “it’s only realised on disposal and most SMEs fall under the threshold” will never, ever beat a funny picture of the PM stealing half your business. The truer claim is losing because the catchier claim is winning. That happens a lot, and it’s worth noticing when it’s happening to you. Western Advocate Region Canberra

So two things are true at the same time. The founders have a real point, the tax change really does seem to clip the productive door as well as the housing one, and that’s the exact problem these posts have been about. And they’ve dressed that point in such good marketing that you should slow down and check it rather than just nod along. Both can be true. Usually are.

That’s the lesson, and it’s a bigger one than capital gains tax. The side with the better slogan isn’t automatically the side that’s right. They’re just the side that hired the better wordsmith. Your job, Betty, is to enjoy the craft, and then go and find out whether the thing it’s selling you is actually true.

Funny old world. We started by working out why your house doesn’t count, and we’ve ended up watching the country’s smartest marketers fight over the door it should’ve been going through all along.

Your House Doesn’t Count (And Other GDP Surprises)

A whole house, and the scale reads zero. That’s the thing about GDP nobody explains: a home going up in value adds nothing to what the country actually produces.

A couple of weeks ago I drove seven hours to hand out how-to-vote cards, then wrote the whole thing up. Quite a few of you read it. This week my big adventure was reading about capital gains tax for forty minutes on a perfectly good weekday because a Michael West Media piece landed in my inbox and I couldn’t help myself.

Every time the New York Times, Michael West Media or The Conversation turns up, I do a deep dive. A very deep dive. So between the seven days at a polling booth and the forty-minute tax binge, I think we can all agree: I need to get a life.

The good news is I’m going out with friends this weekend. Nice wine, good food, great company. Long overdue.

Before I go and remember what conversation with non-economists feels like, here’s the thing that piece explained that finally made GDP make sense to me after years of nodding along and understanding nothing.

The two kinds of “investing”

There are two ways to put your money to work. They look the same. They are not.

You can buy something that already exists, like an established house, and wait for it to go up in value. You end up richer. Good for you. But nothing new got made. The house was already standing. No extra jobs, no extra goods, nothing extra for the country. Your wealth went up and the nation’s output didn’t move an inch.

Or your money can go into a business. The business buys equipment, trains people, makes products, hires staff. That lifts what the country can actually produce. More gets made for every hour worked. That’s productivity, and productivity is the thing that makes wages rise over the years, for everyone, not just the person who put the money in.

So one is a win for you. The other is a win for you that’s also a win for the whole country.

That was the click for me. I’d always heard “investment” and pictured someone buying a rental. Turns out economists barely count that as investment at all. If it isn’t increasing what the country can produce, it’s really just savings wearing a nicer jacket.

Why it matters for the budget

For 25 years Australia poured its money into the first kind. Existing houses. The tax system practically begged us to, with the 50% capital gains discount and negative gearing making an established property the smartest tax play going.

The result is a $12 trillion housing market, nearly four times the value of every company on the stock exchange combined. A mountain of money sitting in houses that just go up in price, instead of in businesses that build things and employ people.

As one financial writer, Harry Chemay, put it in Michael West Media last week, residential land “may appreciate over time, but it does not by itself generate any economic output.” A house going up in value makes the owner richer without the country producing a single thing extra. michaelwest

That’s what the 2026 budget is trying to shift. Nudge the money out of “buy an old house and wait” and into building new homes and backing businesses. Whether it works is a separate question, and the government has done a woeful job explaining any of it, which I got into elsewhere. But the idea underneath is sound, and it’s the first time I’ve properly understood why anyone bothers measuring productivity at all.

If you want the plain-English version of what the budget actually does to your tax, I wrote that for Betty from Blacktown here. The polling booth piece, if you missed it, is here . And the family farms and capital gains argument is here.

Right. Wine.

Albo the Silent Partner – a budget explainer for Betty from Blacktown

Somewhere in Blacktown, Betty is reading the budget papers. Her accountant isn’t answering. Her family’s at work. The Treasurer is on the telly saying “distortions. This post is for her.

G’day Betty.

You rang your accountant. He didn’t ring back. Your daughter’s working two jobs and your son-in-law’s on night shift, so the family WhatsApp is all emojis and no answers. Meanwhile every news bulletin has someone in a suit yelling about “indexation” and “distortions” and you’re left wondering whether the bloke on the telly just took something off you or gave you something, and whether you should be cross about it.

Let me have a crack. No jargon. Promise.

What actually changed on budget night

A week ago, on 12 May, Jim Chalmers handed down the budget. Three things matter for normal people:

One. From July 2027, when someone sells an investment, a rental, some shares, a business, the tax rules change. The old deal was simple: hold it more than a year, only pay tax on half the gain. The new deal: you only pay tax on the bit that beats inflation (the “real” gain), but with a minimum tax rate of 30% on whatever’s left.

Two. Negative gearing, where landlords offset rental losses against their wage, gets limited to new builds only, also from July 2027. If you’ve already got an investment property, nothing changes for you. You’re grandfathered in.

Three. Family trusts get a minimum 30% tax from July 2028. This is the bit that’s upsetting small business owners, because a lot of them run their butcher shop or tradie business through a trust.

What it means for you, Betty

Here’s the thing the government has been hopeless at saying out loud: if you’re a pensioner, the minimum 30% tax on capital gains doesn’t apply to you. Pensioners are exempt. That’s in the budget papers. Nobody’s said it on the 6 o’clock news because it doesn’t fit either side’s story.

If you own your home, your home is not touched. The main residence exemption is untouched. Sell the house, no tax. Same as it ever was.

If you’ve got a bit of super, your super is not touched. The CGT discount inside super funds stays.

If you’ve got a rental you bought years ago, nothing changes for you unless and until you sell, and even then the old rules apply to the gains you’ve already made.

So far, so boring. So why is everyone yelling?

Why everyone’s yelling

Because of the bit that isn’t about Betty. It’s about Betty’s nephew Luke who runs a life-coaching business, or your neighbour’s daughter who started a little software company in her garage. When they eventually sell, the government takes a minimum 30% slice. Small business owners have started making AI memes of Anthony Albanese photoshopped into their shop windows as the “silent partner” the bloke who didn’t do any of the work but turns up on settlement day with his hand out.

That’s the meme. And memes win arguments these days, Betty, whether we like it or not.

Now , the government will tell you there are small business CGT concessions that still let eligible owners halve or even wipe their CGT bill on sale. That’s true. They are real and they are generous. But Jim Chalmers spent a week not saying it loud enough, and Anthony Albanese spent a week saying “we’re returning to the pre-1999 system” as if anyone under 50 remembers what the pre-1999 system felt like.

The bit that should actually worry you

It’s not the policy. It’s the competence.

A week after budget night, Labor’s own backbenchers are telling journalists they can’t explain it. The Prime Minister himself admitted yesterday that the trust changes “will take longer to develop”, which is political code for we announced it before we’d finished designing it. He’s said he’ll bring the CGT legislation to Parliament “in a fortnight.” Everything’s in a fortnight. Nothing’s actually happened yet.

If your accountant won’t ring you back and the Treasurer can’t explain the policy on Insiders, that’s not your fault, Betty. That’s theirs.

What to actually do

  1. Don’t panic-sell anything. The changes don’t start until July 2027. You’ve got over a year. Existing assets are mostly grandfathered.
  2. If you’re a pensioner, breathe out. The minimum tax doesn’t apply to you.
  3. Keep ringing the accountant. When he finally picks up, ask him two questions: does anything I own get caught by the new rules, and if so, when do I need to decide anything? That’s it. Don’t let him bill you for an hour of jargon.
  4. Watch the trust stuff. It’s the bit most likely to change between now and when it’s legislated. If anyone tells you what the final rules are before about September, they’re guessing.

The bottom line

The budget isn’t the disaster the memes suggest, and it isn’t the masterstroke the press releases suggest. For most pensioners and most homeowners, very little changes. For people who own businesses they plan to sell, or who use family trusts, there’s real stuff to work through and the government hasn’t finished working it through itself.

Anthony Albanese has earned his new nickname. He is the silent partner, silent on the bits that would reassure you, silent on the bits that would honestly admit what’s still being figured out. Until he starts talking like a human being instead of a Treasury press release, Betty from Blacktown is going to keep being confused. And so will the rest of the country.

Hang in there. Ring the accountant on Monday. And if he still won’t pick up, ring me.