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Michael's Musings
Musings on money and finance, from a Financial Planner based in East Perth, Western Australia. Nothing on this Facebook account is to be considered personal financial advice.
Big Tech: Innovators or Rule-Breakers?![]()
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A bit of a change of tack here. I’m musing on a bit more than ‘just finance’ after reading an article that defends ‘Big Tech’ against the need for more regulation. The thrust of the article is that Big Tech is ‘different’ and Australia shouldn’t try to apply regulations that limit what Big Tech can do or how it delivers its services. Given Big Tech now represents the world’s largest pools of capitalist money, it seemed reasonable to me that there should be more oversight. Maybe you disagree? Here’s my thoughts..![]()
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Big Tech—Uber, Tesla, Google, Apple—has transformed how we live and work. Their innovations are nothing short of miraculous, reshaping industries and creating entirely new ones. But as these disruptors become the new incumbents, it’s worth pausing to ask: Have they grown too big to care?![]()
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Take Uber: It’s changed how we get around, but what happens when a disruptor becomes the dominant force? Or Tesla: A leader in sustainable transport now under scrutiny for its workplace practices. These companies started by breaking rules and redefining markets—but can they still claim to be the good guys when they dominate those markets?![]()
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Here’s where I get curious. Imagine you’re at a local pub, explaining how a tech giant makes billions in Australia but pays just a fraction in taxes. Would that sit well? Most people, I think, would feel that something’s off. We value fairness, especially when these companies benefit from the very communities they seem to sidestep.![]()
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It’s not all bad, of course. Big Tech has made life easier, more connected, and in many ways more efficient. Google’s free search engine is a marvel, and Tesla has brought electric vehicles into the mainstream. But dominance comes with responsibility. Paying fair taxes, supporting innovation, and fostering competition aren’t just legalities—they’re the price of trust.![]()
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As a financial planner, I look at this from another angle too. Markets thrive on fairness and opportunity. If dominant players stifle competition or exploit loopholes, they’re not just undermining trust—they’re weakening the system we all rely on.![]()
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What do you think? Are Big Tech’s benefits enough to outweigh its failings? Or is it time for them to meet the same standards we expect of any dominant market player?![]()
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📖 For further reading:![]()
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ACCC’s findings on tech giants – www.accc.gov.au/ ![]()
The OECD on global tax reform – www.oecd.org/tax/beps/![]()
Why disruption is just the beginning – hbr.org/2018/12/why-disruption-is-not-enough![]()
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Let’s talk about it—because these questions aren’t just academic. They shape the world we live in.
Two bits of good news in the financial world today:![]()
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1. The RBA has decided to keep interest rates on hold.![]()
– No surprises here – rates aren’t going down, but the good news is they aren’t going up either. While it’s not a huge win, it does mean no extra strain on household budgets this month. Some were hoping for a rate cut, but that was always a long shot, especially with all the government spending to help with energy costs. For now, we can breathe a little easier with no changes to rates.![]()
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2. A great update for WA Government employees with GESB super.![]()
– Soon, if you’ve left a government job, your new employer will be able to pay super into your existing GESB account. This is a big win for those tired of juggling multiple funds – fewer accounts mean less hassle and potentially fewer fees. More flexibility is always a good thing!![]()
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If you’re interested, you can check out the RBA’s announcement here: RBA www.rba.gov.au/media-releases/2024/mr-24-27.html![]()
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And for the details on the GESB changes, keep an eye on their updates: GESB www.gesb.wa.gov.au/employers/super-news/news-and-updates-articles/changes-to-legislation#:~:text=…
Some folk think my last post on interest rates was a tad too negative. So to cheer everyone up, i’ll post below a link to Government Debt, to show just how positive I can be.![]()
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No.. Really.. it’s not as dire as that. But the trajectory is not a positive one. Higher interest rates on ever-higher debt is not a sustainable trajectory.![]()
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But there is a positive side of all of this – and that is in employment. More people are finding employment and unemployment remains at historically low levels – even in the face of continuing record levels of immigration. ![]()
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When central bankers talk about bringing economies back into ‘balance’ to improve productivity and tackle inflation, what they usually mean is higher levels of unemployment, with the people who are left working doing far more work and generally for the same pay. Ergo, higher productivity. This is sort-of what Elon Musk is proposing for the USA economy, but he’s expressing it in nicer words.![]()
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In Australia, our Reserve Bank is taking a more gentle approach – one that attempts to retain employment gains while dampening demand to bring the economy supply and demand back into order.![]()
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Our Government has made the RBA’s job a little harder because they’ve employed more people into ‘lower productivity’ roles such as care workers and government employee positions that do not necessarily provide as much ‘grunt’ for productivity as employment in private enterprise. Plus the Government has provided for some serious lifts in wages for some government workers. Again, this is beneficial for the care and other sectors of the economy and for employment generally. But it does make the RBA’s job harder.![]()
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In recent times, some commentators have argued that the RBA should have raised interest rates more aggressively to curb demand and control inflation. However, the RBA has emphasized the importance of preserving employment gains while addressing inflation. For instance, Deputy Governor Andrew Hauser noted that the RBA is "data-dependent" but not "data-obsessed," indicating a readiness to respond to economic shifts while considering the broader impact on employment. ![]()
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Governor Michele Bullock has also highlighted the RBA’s commitment to balancing its dual objectives. She stated that the Board is "looking to strike an appropriate balance between the RBA’s inflation and full employment objectives," acknowledging the complexities involved in managing both goals simultaneously. ![]()
Reserve Bank of Australia![]()
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This approach aligns with the RBA’s mandate to support economic prosperity by ensuring both price stability and full employment. While some advocate for more aggressive rate hikes to control inflation, the RBA’s measured strategy reflects its commitment to sustaining employment gains alongside its inflation targets.![]()
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Whether that strategy plays out successfully will to some extent be reliant on workers accepting that inflation is temporary and not permanently high. If workers’ inflation expectations are too high then there is room for a ‘wage spiral’ that causes inflation to settle at a level permanently higher than the RBA’s 2-3% band.![]()
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In the meanwhile, higher rates than many borrowers would prefer, does at least allow for more people to keep their jobs, and that can help more money move through an economy to foster growth and development and opportunity.![]()
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Australia: outstanding government bonds 2024 | Statista
www.statista.com
As of June 2024, the total outstanding value of debt securities issued by the Australian government amounted to almost 907 billion Australian dollars.
Interest rates. ![]()
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So many people tell me that interest rates are "coming down". Asset consultants, fund managers, media commentators. I don’t understand how so many people can continually pin their hopes on something they have no control over. Interest rates may fall or rise or move somewhere around where they are now. I don’t think they are going to fall anywhere near as quickly or as far as a lot of folk seem to think they will. Here’s my take.![]()
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Interest rates are not coming down any time soon. If you are waiting for this to happen, try another strategy.![]()
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One of the great indicators of what’s happening in interest rates is to look at the cost of borrowing for the Federal Government. After all, the Federal Government is the ‘safest’ and most ‘bankable’ borrower in the country. What do you think is happening to the cost of government borrowings right now?![]()
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The chart below illustrates the cost of 10-year debt for the government. Think of it as the interest rate that the government needs to pay to get people to invest in Government Bonds. The chart isn’t pretty.![]()
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At a time when government debt is soaring, and when no-one is intending to reign in that profligate spending, it’s hard to see why interest rates should fall. People far more qualified and informed than me have told me that interest rates have to fall, because there is so much debt in the country/world that this factor alone will constrain expenditure and cap any rise in interest rates. I hope they are correct, but I’m not going to make that assumption. As a financial planner, I’m going to add this as one of a number of possible outcomes.![]()
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Back to interest rates, and a super-quick recap..![]()
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1. Australian’s home mortgages tend to be variable rate. If the economy sinks, our Reserve Bank (RBA) can manipulate short-term rates lower. That’s a handy buffer for those with a mortgage.![]()
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2. The RBA aims to keep interest rates ‘neutral’, where the stuff produced and imported is just-right for the what people are wanting to buy. That is, they try to balance supply-and-demand. Logically, the RBA cannot predict the future which means they will generally be wrong with their judgements (but don’t tell anyone that because it seems the idea is we are supposed to accept that they can tell the future). ![]()
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3. Supply and demand are tricky to get right when immigration is the highest on record. Australia is a nation built on immigration. But it seems that a succession of governments have failed to do a good job of navigating that immigration to better balance supplying the needs of the existing community as well as those new folk. That extra ‘demand’ creates a bit of tension in economies. That tension is good in some ways but can be tricky in others – things like the cost of living, and maintaining living standards, and interest rates.![]()
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4. A MichaelsMusings reading of the current state of affairs, is one of massive transition. You know the list – energy transition (not working); Boomer retirement transition; climate change and global tipping-point transition; just-in-time to just-in-case transition; deglobalisation transition; geopolitical power transition; technology and Artificial Intelligence transition; post-pandemic reality transition; arguably a monetary transition (just ask any Bitcoin acolyte)… the list goes on. And on. It’s not exactly a stable state of affairs.![]()
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5. Periods of strong transitions create opportunity and vibrancy and excitement and employment prospects. They also create enormous job loss and insecurity; a tightening of the win-lose outcomes for businesses and people trying to create careers in those businesses; and massive redundancy. In other words, the risk/reward equation goes through the roof.![]()
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When you mix all of this hotchpotch of observations from this aged Financial Planner, the result you are looking at is a higher cost of capital. Those with money want more surety, and in the midst of heightened uncertainty, they want a higher return for their hard-earned (sometimes) cash.![]()
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These periods of transition can be enormously profitable. Just think of the more obvious transitions that might come to mind and the redundancy they created.. Beta vs VHS (the lower quality VHS won. Who’d have guessed that?); DVD to streaming services (what’s a DVD, you ask?) Sailing ships to steam (it didn’t happen overnight, but within an incredibly short period of time, sailing ships became worthless and were left to rot or moved to scrap); MySpace to Facebook (a lot of people will ask "who is MySpace"? And there is your redundancy). Ai is likely to accelerate the rate of change for most of these transitions. But Ai isn’t just Ai – there will be winners and losers in this race, too. More losers and more winners, with less options for those in the middle.![]()
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If you’ve read this far, thank-you. Now let’s get back to interest rates.![]()
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Looking at the 10-year Government Bond yield chart, you can see that each time the rate falls, it edges back up again. Michael’s version of this is that it is not just standard "market volatility" and uncertainty. I think it’s a vast body of folk who are trying to ‘wish’ those rates down, back to where they’ve been for quite a while. Interest rates have been lower for a long time now. Back in May of 2003 those 10-year rates were about where they are now. That sort of timeframe is a lot of people’s entire working lives. Dinosaurs like yours truly, remember when interest rates were dramatically higher. Current rates seem about average when you take a long enough timeframe.![]()
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Interest rates are tricky little blighters. Up, down or sideways, they are the grist to the daily mill of our lives. ![]()
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I hope you’ve enjoyed my musing on interest rates. When reading this or any of my notes, remember the Great Disclaimer..![]()
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The Great Disclaimer![]()
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Nothing in this post of on this site is to be taken as personal financial advice. It is nothing of the sort. These are my musings on all things financial. I’m human, and therefore prone to not knowing the future (thanks for nothing, Nietzsche). ![]()
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If you read my musings and decide to take some sort of action with your finances or accounts, please understand that you do so of your own choice. I am not responsible for that choice. You are. Even if I know you. My comments here do not take into account your personal circumstances or needs or objectives or wants or dislikes or assets or liabilities or income or expenditure or provisional versions of any of these wonderful financial terms. These musings are of a general and factual nature. Quite a lot of them may not even be factual. They’re just opinions. Guesstimates, if you want.![]()
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If you want me to be responsible for your actions then simply sign a Client Services Agreement, pay my fee and let’s sit down for a full financial planning discussion. Otherwise, I disclaim any responsibility for errors, omissions or inadequacies of my musings and my notes.
No rate change on Melbourne Cup day. As you would expect, given there is no action being taken to reduce inflationary pressures…![]()
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For those who love to read more.. ![]()
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In Brief: Statement on Monetary Policy – November 2024
www.rba.gov.au
In Brief: Statement on Monetary Policy – November 2024
