The Nurses Are Skipping Breakfast While We Export $73 Billion in Gold

Episode 2 opens with a check-in on the show's central bet: buy, hold or sell Australia? This time the mood shifts. Greg stays a sell. Adrian gets more bearish. Tony, the panel's most consistent buyer, admits he's being dragged toward a hold. 

What follows is an argument about what's actually happening underneath the headlines. Gold is about to become Australia's second largest export, a $73 billion story this year alone, but the funding for one of its biggest new processing plants came from the United States, not from here. Boards are racing to deploy agentic AI without understanding what it exposes them to, and the cost per task keeps climbing even as the price per token falls. And while Australia exports enough food to feed 75 million people, the panel walks through numbers showing double income households, including teachers and nurses, skipping meals so their kids don't have to. 

The back half turns to two of the sharpest arguments in the country right now: what Ukraine's drone war means for Australia's own defence industry, and why the tax system, on this panel's read, is actively pushing entrepreneurs and founders out the door. Tony doesn't hold back on what this year's capital gains tax changes have already cost. 

Nobody on this panel agrees with each other for long, and that's the point. Line of the episode goes to Tony on where AI adoption is really heading: "It's the new heroin of the 2020s." 

Where do you land? Buy, hold or sell on Australia after this one? Drop your verdict in the comments. We read every one, and the strongest arguments make it into a future episode. 

Show Notes 

[00:00] Buy, Hold or Sell: The Panel Checks In Greg holds his sell, Adrian gets more bearish, and Tony admits he's being dragged from buy toward hold before the show even starts. 

[01:41] Gold Hits $73 Billion, and the Funding Skipped Australia Diggers and Dealers, Joe Hockey's keynote, and the critical minerals processing plant that took six years to fund, with the money coming from the US, not home. 

[05:12] Boards Are Bluffing on AI, and the Bill Is Quietly Doubling Agentic AI rollouts outpacing cybersecurity, the real economics of tokenomics, and why the CFO is now the number one target in every recruitment brief. 

"It's the new heroin of the 2020s." Tony Davis, [13:00], on where AI dependency is heading.

[13:57] Teachers and Nurses Are Skipping Breakfast The food insecurity numbers nobody expects from a country that grows enough to feed 75 million people, and a debate over whether the fix belongs to government or charity.

[24:43] Drones Are Rewriting the Rules of War, and Australia Is Behind FPV kill counts out of Ukraine, four million dollar missiles versus ten thousand dollar drones, and the Australian companies already building counter-drone tech for the rest of the world.

[35:51] The Tax System Is Chasing Entrepreneurs Out the Door The Henry Tax Review nobody finished, the GST nobody will touch, and why small business carries two thirds of the ATO's debt book while paying a fraction of total tax collected.

[45:56] Bradman, Cadel Evans and the Best Sailing Comeback in History The panel argues out Australia's greatest athlete of all time, and John Bertrand's America's Cup story gets its due.

[50:26] Final Verdicts: Two Sells and a Hold Where the panel lands after an hour of arguing it out, and why none of them are as confident as they were at the start.
 
 
Tell us where you land. Buy, hold or sell on Australia after this episode, and why? Leave your verdict in the comments, we want the pushback as much as the agreement.
 
Follow the Australia Inc Podcast page so you don't miss the next one, and subscribe on Apple Podcasts or Spotify.

Transcript

Buy, Hold or Sell: The Panel Checks In

Nick Hossack 0:08

Welcome to the Australia Inc. podcast where we ask and answer the question if Australia was a business, would you invest? Today we'll be discussing the latest business insights into the economy and politics, food insecurity. There's some evidence around that access to food is constrained, drone technology and its increasing importance for defence, taxation, the perennial issue, government changes to capital gains, tax, and negative gearing have sparked calls for more serious investigation into tax reform. To discuss these and other topics, we have the regular lineup. Nick Hossak, Benchmark Analytics. I'll be moderating today. Adrian Turner, CEO of Time Bridge Partners, Tony Davis, principal at Perseus Management. Greg Robinson, managing partner at Blenheim Partners. Before we get to the economic update, fellas, welcome. How's it going? Firstly. And why don't we just do a bit of around the ground? Now we're a buy, hold, or sell podcast. Greg, you're still a cell?

Greg Robinson 1:12

I'm still a cell.

Adrian Turner 1:14

Adrian, what's happening with you? Uh Nick, I'm uh I'm actually a stronger cell than I was last week. Oh, okay. Want to hear more about that.

Tony Davis 1:23

All right, Tony. Still a bye? Uh maybe this guy on my right is dragging me, dragging me from by to hold. So I should move to.

Nick Hossack 1:30

We've got some movement. Yeah. Excellent. I want to hear about that for sure. All right, fellas, let's uh let's do our news update. You've been around the traps, and uh going to start with you, Tony. What have you learned

Gold Hits $73 Billion, and the Funding Skipped Australia

Nick Hossack 1:41

about gold, mate?

Tony Davis 1:42

Uh well, Nick, uh I was in the Golden West, where everything in Kalgooli streets is paved with gold, apparently. Um so I was at Diggers and Dealers, which is one of the biggest mining exhibitions in in the country. Um, and it was opened up by Joe Hockey, of all people. Um, and the reason for that was pretty clear because gold, critical minerals, and all that glitters in the West has really become a geopolitical story, not so much a commodity story. So the mood in the room, I've got to say, was absolutely positive. Um the managing director of Remelius Resources, Mark Zeppner, had said he has never seen anything like it in his career, and he's been around a while. It's not just gold, copper, lithium, rare earths, uranium, the sector that's betting on things like AOA, data centres, western supply chain, security, all of those things are kind of the same bet. One of the interesting things for me, gold is now on track to become Australia's second largest export, only behind iron ore. That's $73 billion forecast just for this year alone. The challenge that I see though, this is this is a really interesting inflection. There's a hard ceiling on the boom. And it comes back to politics. So Labour, the coalition, Pauline Hansen, they're all racing to cut migration. Why is that important to the mining sector? It's important to the national infrastructure sector, it's important to the transition to renewable energies, and it's also important to defence because everybody is needing talent. And that talent does not exist.

Nick Hossack 3:27

Interesting. How is uh how is Joe Hockey received? That's an interesting choice as the keynote.

Tony Davis 3:31

Joe was Joe's Joe's a really good speaker, and I'd encourage the listeners to go and find his intro to Diggers and Dealers. It's on YouTube. So he's talking about Trump, talking about the relationship between Trump and Australia, talking about the geopolitics of China, um, and he has his own investment focus these days with uh Bondo partners and just the mood in the geopolitical room driving capital hard into these sectors.

Greg Robinson 3:58

But where's the value add, Tony? So we're digging stuff out of the ground, which we're getting terrific prices for. Is there a value add? Is there are we more productive? Are we more efficient? You know, and I'm glad I'm glad everyone's excited, but you know, from the point of view of growing the country, have we got smarter in what we're doing?

Tony Davis 4:14

Uh well this is the this is the thing. We we need to. So from a commodities perspective, you talk about critical minerals. Critical minerals is a commodities play, but it has to be a processing play.

Greg Robinson 4:25

I've just been just been working on one of the best that's just got launched, and Mr. Trump just backed it all the way this week.

Tony Davis 4:30

Yeah, so so we know who you're talking about, and we're talking about Sam Regal, right? All right, great effort, right? Fantastic. Scandium, hot, hot property. Yeah. Um, so he got what 400 million US? Yeah. This is the thing. Sam has to build a processing facility. That's right. Not just dig a hole in the ground, and that's why it's taken him so long. Because I think we met him, what must have been back in 2020? Yeah. Yeah. We met him in 2020 and was floating this project around. It's taken him till 2026 to get funding for it. And guess where it came from? The United States did not come from Australia.

Nick Hossack 5:05

That's not good to hear. Adrienne, you're a strong to sell, mate. You must have heard something in the last week or so that's caused

Boards Are Bluffing on AI, and the Bill Is Quietly Doubling

Nick Hossack 5:12

you to move.

Adrian Turner 5:13

Let us know. Yeah, for sure, Nick. So in my travels, I've been meeting with very, very senior people inside the big end of town in Australia responsible for cybersecurity. And all they want to talk about is boards and C-suites racing to implement agentic AI without properly thinking through the attack surface areas introduced into the enterprise. And uh, I think if there's a common theme, it was uh feedback that there's too many executives and too many directors pretending to know what's going on. And uh even in meetings, real time consulting, you know, ChatGPT and Claude to help them with the answers um as part of conversations. So I look at that and knowing some of those people involved and some of those companies involved, and uh it's alarming to me.

Nick Hossack 6:16

Australian specific, or do you think this is a worldwide problem, perhaps with a bit of a concentration problem here?

Adrian Turner 6:21

But I th I think it's a worldwide problem, yeah, right? So there's a lot of uh hype around the potential of AI, and I I think what we're gonna see is a spike in a dip. Like if I talk with people in the trenches, they're not getting the return on the investments yet. Um and so there's there's gonna be some disillusionment around it. Uh and then the other thing that's going on is this this whole push around tokenics. So tokens are the unit, the economic unit for AI. And a token is about four characters. And um what's happening what's happening is the cost for this going down. Oh, just is it going down or is it going up? It's going down, but the complexity, the complexity of each of the tasks is going up more than the cost is going down.

Nick Hossack 7:10

So just a quick clarification when you talk about a token, yeah. So four characters per token. Yeah. For an average search, say, I want to find out who all Australian Prime Ministers, you know, since 1900, um, since Federation put that into Chat GPT. How many tokens is that taking up?

Adrian Turner 7:29

Oh, look, actually, Nick, the the way to think about it is just to give you a sense of scale, is is uh Morgan and Stanley are estimating by 2030 uh quadrillion tokens used a year. Um massive, massive numbers and massive scale. Right. Um two two things worth noting, right? One is the cost of those tokens have come down by 10x in the last 12 months. But if you think about like a customer service interaction, 12 months ago you were talking to a chatbot and the chatbot was going, Hey Nick, thanks for that. I'm gonna hand you off to a person. Now that same uh agentic system is interacting with systems of record, generating workflows, um, there's inference involved, and there's probably 30 or 40 times the tokens being used. So the the budgets are um being blown out around this as well.

Nick Hossack 8:22

That's a really interesting update. Uh all right, Greg, you're talking to everyone every week.

Greg Robinson 8:27

Well, I had a really Adrian's far better equipped than I am on terms of AI, but I had a couple of unusual conversations this week. One was with a chair who's across three or four uh technology organizations actually saying the pricing of the tokens is doubling and going to double again. And to your point about other corporations actually making money on an enterprise uh wide level. This individual and one other individual that I spoke to just returned from the United States and gone and seen some of the major organizations over there. And the questions they were talking about was in the implementation of enterprise-wide AI, are you achieving cost savings? The answer was, can you imagine the big balloon? And I've squeezed it on this side, but the air hasn't gone across to this side. So every time we squeeze, we're actually now spending more money in another direction. So this is really fascinating. So this whole, I'm I'm just from that point of view, I'm just quite fascinated, Adrian, about are they gonna is it gonna make it?

Adrian Turner 9:26

But there's a simple fix, right, to the good enterprises are doing. Um so if you route every request to the same frontier model, you're paying about uh $18.40, right, per million tokens. If you route it to to the model that's most appropriate for what your your task is, um the blended average is about $2.30. So you can take cost out of it if you're thoughtful about what's this um, you know, what's the decision architecture for the enterprise and what specific models does each decision type need? Yeah, interesting.

Nick Hossack 10:05

Greg, uh just just back to you. Um when you're advising boards on senior roles, uh are increasingly people asking for AI management skills. Uh is that exper skills and experience?

Greg Robinson 10:20

It's just starting to happen a little bit, but I'm with Adrian. No, nowhere near enough. And look, it's moving at such a pace, most people still haven't got their head around data and the value of data yet. So AI is this next next level.

Nick Hossack 10:32

And people are putting in applications um for the jobs that you're looking at.

Greg Robinson 10:36

Well, they don't do that. We go and find them, Nick.

Nick Hossack 10:38

It's true, but they uh at some point they have to put an application. Are they emphasizing uh that uh you know that AI experience?

Greg Robinson 10:45

Well what I would say, Nick, every every Tom Dick and Harry is claiming themselves to be an AI expert. Yes. And our role is to peel their back and actually find out what it is.

Nick Hossack 10:52

And how do you do that?

Greg Robinson 10:53

By a lot of background referencing, and speaking to people actually know what it is, and it's actually a really finite space. It's tight. So there's a lot of claim out there.

Tony Davis 11:04

Here's my observation every CFO in the country right now had better get across this cost equation. Tokens deploying for what model, for what purpose, and do they really need to be deployed at all? Are we just getting fat and lazy and asking AI to do things that we would expect our managers and teams to actually do? I mean, I'm as guilty as the next of actually, oh well, Claude, why don't you you know do this for me, right? You kind of get a little bit a little bit on the lazy side. Oh, it's so easy to use. Why don't I just get Claude to do it and I'll go make myself a cup of coffee? You're right.

Adrian Turner 11:41

And on the on the CFO thing, um, look in the last weeks and months, these big announcements, right? Kohl's offshoring a bunch of people, um, Qantas offshoring a bunch of people, uh, Origin Energy offshoring a bunch of people. And I think they're not really thinking through the supply chain, the information supply chain implications of that. And I would not be surprised at all if if if we read in the news here in the near term about uh some major you know cyber incidents as a result of not thinking that through properly. So it's false economies.

Greg Robinson 12:18

Actually, just on what Adrian and Tony have just said, just for some numbers behind that, uh, we put out the monthly and the quarterly in updates, and the number one person in the target of the zone at the moment is the CFO.

Nick Hossack 12:29

Yeah, interesting. It's going back to just going back to uh Tony's point, uh do you think it's a likely outcome that we do become just overly dependent, just both in our jobs, you know, personal lives on these AI models, and then there's a sufficient concentration for them to go one day, well, they're all hooked, they can't go without us. Let's just let's just triple the price of tokens, then we'll triple it again, and we'll triple it again in a couple of years, and we're gonna get a much more much bigger share of their wallet, and there's nothing they can do about it. Of the 2020s. Is that gonna happen, Adrian, or is there enough competition from China and the AI models to commoditize it?

Adrian Turner 13:10

Yeah, I think you're gonna have a counterbalance from the open weight models. So what what I'm hearing from people is the the vertically integrated, you know, big players that dominate the market today, because of this cost equation, the open weight models are gonna play a bigger role. So the conversations I'm a part of now are how do you wrap and and and secure and provide governance and controls around those models.

Nick Hossack 13:35

Okay, look, thanks for that, Adrian. I and thanks, guys. I think that was a really good, really good introduction. Let's change gears and move to food insecurity. Benchmark Analytics Political Data Alert delivers the latest economic and political data with clear facts and analysis, giving media and public affairs professionals an early read on the figures that matter and the stories they will

Teachers and Nurses Are Skipping Breakfast

Nick Hossack 13:57

drive. All right, food insecurity. Very interesting uh exchange with Adrian during the week on the topic of food insecurity. He said there's actually some numbers around which are showing there are some Australians having trouble accessing the amount of food that they need and want. I was amazed. Uh I went to the ABS, looked at some statistics myself, and uh perhaps framed it a little bit conveniently for my political view uh on this, and that is that there's it's probably not a a problem. But Adrian uh had some convincing data. Adrian, why don't you take us through it?

Adrian Turner 14:32

Yeah, Nick, it's uh and you don't expect it, right, from a country like Australia, uh, particularly because we generate enough food to feed 75 million people, and we export most of it, $80 billion uh export market. So there's really a few things going on. I mean, one is around affordability and peacetime, and the other one is the resilience of our food system under shock. So that could be war, that could be drought, that could be right now we're staring down the barrel of bird flu, which will have an inflationary impact on all protein because 54% of Australia's protein comes from poultry and eggs. 54%. So let's look at the numbers. It's cheap, right? It's cheap. So there's different numbers out there and different methods, but um, so the ABS official number is about 13.2% or 1.3 million households have have either run out of food at some point or struggled to afford food. That's uh one in eight. Uh food bank uh calls it one in three households with a slightly looser definition that says um it's about uh I can't I can't get the dietary foods that I want. And then if you go deeper on this, it's a mainstream issue, it's not a fringe issue. So let's go down to people with disability and health issues. Uh, those households, 67% are food insecure. Single parent households, 68% renters, 48%, uh, and even high-income earners, right? So one in five household earnings, 91,000 plus, uh, were food insecure. So you go, well, who's queuing up here? And I have been involved in in giving back in this area to you know to help. And it's double income families, and it's it's teachers and nurses who are they're around the breakfast table, they're not eating breakfast, and they're saying to the kids, don't worry, yeah, we'll we'll eat later, you eat now. And they don't. They're foregoing meals, and they're the ones that uh increasingly are turning up um for these you know food banks.

Nick Hossack 16:45

Just a question there. When uh I don't I've never been to a food bank, I'm fascinated with what you're saying, uh, in some ways shocked. Family turns up to a counter of one of these food distribution centres. Are they provided with food? Um in the absence of identification, do they need to show who they are, where they live, what their income is, anything like that? Do you know? I don't know, Nick. No. Because I I mean I've just it's anecdotal, I suppose, but I've just observed over the years, every year, the problem seems to get worse. You you'll see on TV um the CEO of a particular organisation saying they've never seen it as bad. And I can't help but feel is that really going is it getting worse every year, or is it part of the sort of the marketing ploy for getting donations and and getting government money? Maybe that's a little bit cynical, I suppose. But I come back to this point that if there is actual food insecurity in Australia, that's got to be primarily government responsibility to fix, right? This can't be left to sort of NGOs or private sector to deal with Tony.

Tony Davis 17:56

This is where the engineering me comes out. Let's go to the source of the problem, but not what we're seeing. Housing, cost of living, fuel, it drives families income into a cost that that can't be absorbed. So for me, you know, uh Adrian's on a point, but at the end of the day, Nick, you're right, it's all coming back to the way that we're running our economy. And that's a government policy issue. And the the other thing I think is also germane is what happens when government support goes up, the charity input goes down. So the two are inextricably linked. I mean, I'll give you an anecdote because it's you know, I've you know I've just come back from living in New York City, right? The day I got back to Australia a little under a year ago, I went to the supermarket and I my reaction was, oh my god, that much for a head of broccoli? You have to be kidding me. I mean, I'm not hard done by it, but I'm looking at the the price of what you're paying for here in Australia. Relative to New York? Relative to New York, it's like holy moly. Where did you shop in New York?

Nick Hossack 19:05

Were you shopping at supermarkets or delis?

Tony Davis 19:09

Right on the bottom end of Central Park. That is in the guts of New York City, it is expensive, and even looking at that, I'm thinking, exchange rate, I'm still seem to be paying more for some things here.

Adrian Turner 19:21

Gee. Because there's something here too, right? Like if we think about the second order consequences of what we're talking about here, who's the front line? The kids.

unknown 19:31

That's right.

Adrian Turner 19:32

Right? So the kids are going to school hungry. And you know, Salvo's did a survey, and what came back was, you know, of those households that are food insecure, 35% of kids went to school hungry at some point. Now you're not going to be sitting in class concentrating learning. So we're mortg mortgaging our future as well.

Nick Hossack 19:53

Yeah, look, I hate to be cynical about things, but is that realistic? I mean, 35% of Australian kids actually going to school hungry or no, no, no.

Adrian Turner 20:03

Let me let me that that was a salvos, and that would that was of those food insecure households.

Nick Hossack 20:10

Got it, got it. Greg, uh, you've done a little bit of work in this area in the past. What's your Yeah, look, I've been really fortunate.

Greg Robinson 20:16

I got to know uh Ronnie Kant, and Ronnie gave me the probably one of the most impossible assignments of all time, which was to replace her. Uh and Ronnie, for all those out there who don't know who Ronnie is, was the founder of Oz Harvest. Yeah. And Adrian and I got to know her over time. Um, if you can come down and join me sometimes at on Crown Street, Nick, against all your cynical views, you'll see the referrio, which she created, which is a restaurant designed to help people out. And then Wednesday, Thursday, and Friday, I think it is, at lunchtime, the queue is enormous. I'm with Adrian. She was telling us a long, long time ago, one and three people are struggling. Uh, they're not just the kids going to school hungry, it's the parents going to work hungry as well. So it's the fire and the firemen, the fire ladies, the nurses, the doctor, not just the doctors, but the nurses, the teachers, the educated are skipping meals left, right, and centre at the moment, which comes back to what Tony said, unfortunately, cost of living. But the government's getting the notice from the Ronnie and the like, putting it out there. Um, and Mr. James Goff, who took over that role, he's taken with an absolute passion, who's just been bewielded and blown away.

Nick Hossack 21:25

How bad it is. Did you ever discuss with Ronnie how she thought some of the some of the fixes to the problem is?

Greg Robinson 21:31

Well, some of the great stuff she does is, you know, the likes of she partners with some of the largest supermarkets in the country to support it. And they do great work. They do terrific work. Given out given away, given away for zero. Yep. So we bashed them up all day long with some real good.

Adrian Turner 21:45

The bruised fruit, the fruit that's not good enough to put out, still tastes just as good. And there's a lot of that that goes back into uh Oz Harvest, Food Bank.

Greg Robinson 21:54

Yep, it's not the derelict which we hear it used to hear about, it's people walking around. Going wearing suits, going to teach a class with young young kids for their future. That's the worrying point. And it's Australia.

Nick Hossack 22:07

Yeah, I I don't look as an economist, what's, I suppose, in my mind is that if it's a serious problem, it should be government responsibility. And secondly, I don't like the idea of goods and services moving around at no price. If there's no price, then you just get incredibly inefficient outcomes. Warworth giving giving food over here. Well, what about over there? You know, what about this postcode as opposed to that postcode? How's that distribution going to actually happen in a way which is really efficient, fair for everyone? Um I I I'm just not convinced the struggle.

Greg Robinson 22:39

We want to walk out of here now. We can walk around the corner here and there's a massive warehouse and there's a massive depot full of Oz Harvest people working for just about Zilch. That depot, which has a scale second to nothing, is given to them by people who care.

Tony Davis 22:53

Yep.

Greg Robinson 22:54

So you can go on over there and ask those questions, Nick.

Tony Davis 22:56

Tony. Yeah, just a quick one, because I I'm kind of feeling I'm seeing the tip of the iceberg here on food insecurity. So that's the highly visible component where people are not getting the basics. But what about all the dietary decisions that everyday Australians are making about what they can afford to eat as opposed to what they should be eating? That to me is a sort of a sleeping, ticking potential dietary time bomb that will probably, you know, blow up in our faces in health outcomes in a few years.

Adrian Turner 23:27

100%. And it's shown up in the US numbers too. There's some strong research about that. The other thing I want to call out is this is getting worse, not better. So in the surveys, Oz Harvest surveys, Salvos do, Food Bank does, and what's consistent is about three in ten uh respondents to those surveys saying for the first time I'm going to consider getting some relief uh in the in the next six months. So it's getting worse, not better.

Nick Hossack 23:57

All right, I think we can move on. I know I've been cast as a cynic here, but uh I want everyone to have enough food. Let's just get that straight. Um there's a there's a question about distribution. We've got to do better. We've just got to do better, that's all. That's true. Let's move on to drone technology.

Greg Robinson 24:16

You're listening to the Australia Inc. podcast, brought to you by Blenheim Partners Board and Executive Search. As a trusted advisor, we work with Australian listed groups, multinational corporations, large private companies, and social impact organizations on their most critical people choices to drive change, prepare for growth, and outperform their peers. To learn more about Blenheim Partners and Executive Search, visit our website BlenheimPartners.com. And now back

Drones Are Rewriting the Rules of War, and Australia Is Behind

Greg Robinson 24:43

to the show.

Nick Hossack 24:44

Alright, drone technology. I like I think just about the whole world saw that horrendous footage of that drone chasing this kind of poor uh street vendor in in uh Ukraine. And it was being chased by a Russian drone and then ultimately killed. And I think that just showed everyone you know the the incredible power, surgical power of this sort of drone technology. And we're hearing more generally that Ukraine has really changed the balance of power in the conflict with Russia through its drone technology. And I think uh the US, including Australia, are looking at this and going, well, we've got to get on top of this. And um so we've listed it for discussion. Now, uh I think Tony, you've got quite a background in this.

Tony Davis 25:34

Why don't you just give us a why is it why is it that when you leave the military, everyone tries to drag you back into it?

Nick Hossack 25:40

Um well tell us tell us what's going on and what Australia needs to do, and are we on top of it? Perhaps this is even a bit of a green shoot for us. I understand we've got some we've got some good technology here ourselves.

Tony Davis 25:51

Yeah, we do. But but just a first distinction. I mean, that particular footage, he wasn't actually killed, but he was wounded and injured. But that's not the issue. There are plenty of real live examples of FPV first-person view drones hunting humans on the battlefield. So we saw that when the North Korean troops were open in the field, Ukrainian FPV pilots literally picked them off at will. Human-piloted drones beat the living daylights out of massed infantry. They had nowhere to hide. So what it's done, it's actually broken the, you know, whether you the US Army or the Australian Army's doctrine of what they call combined arms teams. Infantry fighting vehicles, tanks, artillery, close air support. What the Ukrainians did in the war so far, they've knocked out nearly 4,000 Russian tanks, and you can see it on camera, you can YouTube it every day of the week, kill by kill, confirmed, open source. 90% of the vehicle losses in some sectors have been caused by FPV drones, and that's an important distinction. I'm sure Agent's going to tell us why a little later. So, what happens now? The tanks don't lead, the infantry fighting vehicles do not lead, the drones lead and then they follow. Drones are generally genuinely hard to stop. Um, as an ex-naval officer, these things have got the radar cross-section, some of them, of an insect up to a small bird. So if you take the Shaheed that the Iranians launch on a regular basis, it's about the size of a small bird trying to detect it first and foremost. And this is where it gets really interesting. They're mobile, you can't figure out where they're going to pop up. This is what it means for a ship in the Red Sea or approaching the Gulf of Hormuz, very narrow waterways. You are going to have to shoot down one of those drones that costs a few thousand bucks, ten thousand bucks or plot or more. Guess how much it's going to cost you for a standard missile two or standard missile six to take it out? Four million dollars a throw, and you have a limited arsenal on board your ship. The more they throw at you, the more you have to fire, the bigger the cost.

Nick Hossack 28:12

So presumably that's going to be confronted with drones themselves, right? It'll be drone on drone warfare, and it'll be drone by the side.

Tony Davis 28:19

So there are plenty of examples of that about to emerge. Now, you know, just coming back to Australia in terms of drone counter technologies, we do have some fantastic companies here. Drone shield listed, procuring or being procured across the world. EOS, electro optic systems, kinetic, kill, whether it be laser or chain gun. Uh aim defense, building drone, counter-drone, laser technologies. So these companies have got contracts in other countries. Australia could probably do more in terms of contracting their own defence industry a little more frequently and a little more at scale, but that's a separate, separate topic. So we are leading in counter-drone technology, and we also have the capability of making drones ourselves, and we have done that because I've actually supported some of those companies over in the United States when I was in uh Yeah, that's interesting.

Nick Hossack 29:14

Adrian, did you see the the seeds of this industry when you're in the US and do you follow it now?

Adrian Turner 29:20

Yeah, and actually back in Australia at Data 61. So I remember the team coming to me and saying, Hey Adrian, uh we we want we want you to approve this million dollar spend because we want to build a cave on on a hillside in Pull and Vale in Queensland. And uh it was basically for them to enter a DARPA challenge to uh and the challenge was take autonomous systems, seven kilometers underground, GPS tonight environment, managed object obstacles and bring it back. So the team was um the only international team that made the finals, and they were the only one of two teams that actually finished, and they lost on time. So we became you know, we came second, but we we finished it. We spun that company out. Uh it's doing really well. Uh company is called Emercent, and uh it's basically you know LIDAR technology uh on drones to operate in GPS tonight environments, and they just won uh competition actually, uh an army competition. So yeah, this is this has been coming for a while, and uh it's it's it's an incredible development because the other thing that really stood out to me in the last week or two is you look at the drones targeting not only military targets, but also civilian targets. So Wildberries is Russian's equivalent of Amazon, right? So Ukraine turns a whole bunch of drones at their warehouses, which does two things. One is that warehouse info infrastructure is highly leveraged, right? So there's there's Russian financial institutions that need uh that company to pay back the loans. But more than that, every Russian now their supply is disrupted to you know their equivalent of Amazon. So a lot of people are taking to social media. There's a lot of unrest here, like it's really hit the Russian population in an unexpected way.

Nick Hossack 31:14

What about you, Greg? How's Blenheim's stock of uh drones as part of your research capability going on?

Greg Robinson 31:20

Well, all I can say is necessity is the mother of invention. So a couple of conversations I've had to what Tony and Adrian has said is that in six weeks the technology you use for drones is done. So, in other words, they're reinventing every six weeks. So Ukraine has broken all rules. So you take take your hat off to Ukraine, something like 5,000 Russians a week are dying in the field. The drones also come in more than one thing, i.e., in the air. They're underwater. They're actually also being used in terms of not infantry and crawling along the landscape to take you out, and then obviously the ones that I can target you and follow you and pursue you and get you. So we've got more than we've got now, we've got land, air, and sea, and to everyone's points here, they hoist just about zilch. Now, the only other thing I'd throw in on top of this, I am talking to uh organizations in the defence sector, and a little bit disappointing. I think we do have some great opportunities by compared to the speed of which the Department of War in the US is coming to to the table and having the conversations with our guys in terms of tech. Red tape again, bureaucracy again in Australia. You sit back and wonder what's going on, but they're they they're going to be shifting and being supported far more quickly than that.

Nick Hossack 32:35

We can always do better. But on this issue, Tony, do you think broadly we're going the right direction at the right speed?

Tony Davis 32:41

Uh well, no defence industry I've ever worked in or defence department I've ever been associated with, it actually moves at a speed that we'd be comfortable with.

Nick Hossack 32:49

That's true. Is it a bit different on this side? I I gather that there's there's been a fair bit of movement early on to get the investments right, unlike some of the other uh weapon systems that we have.

Tony Davis 33:01

So just just a couple of points. Australia has moved on what they call the advanced strategic capability accelerator. So that is trying to accelerate the adoption of new technologies, and that was brought about because of AUCA's Pillar 2. Now Adrian's shaking his head here will say it's not moving fast enough, and that's fine. But they gave AIM $24 million in contracts to build the laser system that they were describing. Ghost Shark, which is one of these underwater vessels or vehicles that Greg is talking about, is being developed here in Australia with an American company called Andrel. Boeing has developed Ghost Bat, which is an autonomous aircraft, one of the first that we have designed in the country for many, many a time to accompany F-35s and F-A-18s on combat missions.

Nick Hossack 34:02

Interesting. I'm going to give you the last say, Adrian, then we're going to move on.

Adrian Turner 34:05

Yeah, I've got a strong opinion on Asker. So so what you've got a strong opinion on everything. What you really want is a group that's defining the programs and the problems to be solved to be separated from the resources that deliver. And then you can have a true meritocracy, you get the right people involved. The problem here is ASCAR is so tied to DST, uh, our defense science technology group, that that the problem gets defined. And then I saw this up close at D61. You know, the researchers dust off the proposal, put a new cover page on it, and guess what? The research is now relevant that wasn't relevant. So what it means is slower progress than we really need to be having.

Tony Davis 34:47

So for for me, this this is not the real story. It's not missiles versus drones, it's who's actually going to be pulling the trigger in the future. So Kearson, Kursk, human flying the whole way in, Shahad or Shaheeds already fly themselves once launched, GPS, fire and forget, China's Atlas system removes all of that. AI adoption in drone swarm technology is going to be something that every defence business, every defence department, every Navy, Army, Air Force is going to have to seriously consider. Once AI gets into these units, it's a whole different ballgame.

Nick Hossack 35:29

Look, this is something we're going to have to keep on top of. We'll revisit this subject, but let's move on to taxation.

Tony Davis 35:36

I'm Tony Davis, principal at Perseus Management, named for the Greek mortal who beat the unbeatable problem by finding a better angle. Strategy's easy. Execution's the real monster. Just ask Medusa for a reference. Perseus Management, clarity where

The Tax System Is Chasing Entrepreneurs Out the Door

Tony Davis 35:51

it counts.

Nick Hossack 35:51

All right. Look, it's difficult to read a newspaper or have a conversation these days with a businessman, and the topic of taxation doesn't come up. I'm guessing you are hearing a lot of this, Greg, and I'll come to you in a second. But I thought an interesting framework to set our discussion here would be just to go back to the Henry tax review. Can you believe 2009? And there hasn't really been a comprehensive review since then. Now, one of the interesting things about the tax review that Henry did was that he wasn't allowed to look into the GST. So that was part of the terms of reference. You can look at what you want, but just leave the GST off the table. Now, of course, the big business calls is that we need to get taxation lower on income, particularly business income, and perhaps we can compensate with higher uh goods and services taxes. But I wanted to come to you, Greg. Has there been any shift in the discussion on tax? I know we had the really extensive changes announced in the budget, which really upset a lot of people, particularly business and those that take risk. And are you hearing now that look this is getting a little bit too bitsy, uh, we need a comprehensive review, and is that feasible, or are now we're just in a different mode, we're just trying to minimize the kind of the damage that's been done?

Greg Robinson 37:10

I think we've been wanting listening to all the individuals we speak to, probably for over a decade we've been wanting reform. A couple of prime ministers have let the opportunity slip. I guess you're looking at something more simpler, more efficient, you know, from just from an individual who runs a business. I have to do payroll tax. The thrill of hiring someone, I get penalized to do that. So one thing I liked about the Henry idea is what it was an incentivized process.

Nick Hossack 37:39

Yeah, he wanted to get rid of that.

Greg Robinson 37:40

Absolutely, right? He wanted he wants to encourage investment, he wants to encourage uh businesses growing as opposed to the disincentive that we have and the bureaucracy that we have to undertake to do this taxation system that we have. I also had the opportunity to live in Hong Kong and at 15%, and I had to go and see my tax official who said, look, I can I can deduct a little bit more for you. No way. And at 15%, I'm really happy to pay that because the government's going to do the right thing. You speak to every business in this country, you're looking for every option you can to reduce tax. And Kerry Pack has said you've got to have rocks in your head, quite frankly, as an individual, if you are looking to minimize your tax. Too complex, too hard, too arduous, backwards and forwards, wasting so much time, and then you've got the machine to collect it all. No, it's got to be simpler. So is there a different way, Nick? Over a drink, you and I had not that long ago, we talked about consumption tax. Why don't we think why don't we flip the model on its head? I think it's a really interesting idea to think through, like Mr. Henry did a little bit. Argument against it, Nick. I'm sure you've been the economist, would be around the whole idea around regression. Is it a regressive tax? I think there should be greater debate on the whole tax schedule.

Tony Davis 38:54

Tony. You're going to correct me if I'm wrong, so please do, right? So I can see you sitting there on the edge of your chair waiting to jump all over us for running off a fact that it's not quite correct. But I thought what Henry had said, we had 125 different taxes, but only 10 raised 90% of the revenue or thereabout, right? So to Greg's point, concentrate on the on the four efficient bases: income, business, consumption, and resource, you know, the resources, tax and land rents. And the other thing I think he said was GST and super for over 60. So that was kind of walled off and kind of like the untouchable. Yeah. So so why do we not core pair it back? If this was a business, you'd be pairing it back to your revenue stream, right? And you'd be stopping things that were bureau bureaucratic, occupying a lot of cost just to try to collect collect the rent. Yeah, and try and minimize it. Minimize it. But but we seem to be incapable of touching the sacred cow of GST.

Greg Robinson 39:59

I don't I don't understand why we don't. Is it is it an easier way to process?

Nick Hossack 40:04

Yeah, there's a couple of reasons. I think one is it is regressive.

Greg Robinson 40:07

So should we add something underneath that to support that somewhat more?

Nick Hossack 40:12

If the jar of peanut butter goes up by a dollar because there's an increase in the GST, then that's paid regardless of your income, right? Yeah, whoever buys it. So it's seen as kind of regressive, yeah. Which is one of the reasons. The other reason is the way it's sort of set up, and that is it's all the revenue supposedly goes straight to the states. Um, and so you need the states to agree, and therefore you've got it's difficult to line up six six governments, uh including the federal, all in agreement.

Tony Davis 40:38

And and the Prime Minister just did a sweetheart deal with WA that the rest of the states hate with the GST allocation.

Adrian Turner 40:44

What's your perspective on it, Adrian? Oh, look, I I I just look at small business. Uh so if you look at the structure of our economy and 97% of it is small business, and we're crushing them. So the debt owed to the ATO has roughly doubled since COVID, right? So the collectible debts hit about $54 billion, total debt book, is about 105. And then um, including amounts on hold. And then small businesses are carrying the lion's share of that. 66% of collectible debt. And the kicker is that only 15% of net tax collections comes from those small businesses, so they're disproportionately behind. So you kind of put all that together and you say 97% of our businesses are small, right? We ask a cafe on a 5% margin to be a tax collector, a payroll clerk, an award lawyer, and if they get it wrong, it's a crime. That's who we're taxing. And small businesses that owes two-thirds of the ATO's debt but pay a seventh of the tax, and we're chasing them into insolvency over GST and super that they're they were holding in trust. There's no incentives.

Nick Hossack 41:56

Yeah. Point, Tony.

Tony Davis 41:58

Um, there was a guy, Charlie Munger, right? Wasn't he uh wasn't he Warren Buffett's right-hand man? Sure. He had a really great saying that said, Show me the incentive and I'll show you the outcome. Yeah. I'd like to change that. Show me the disincentive and I'll show you the departure. Right? So, what did we do this year? Capital gains tax? We changed it. We have disincentivized small businesses from making a start, the entrepreneurs and founders who are going to take a risk, they're gonna be taxed on a zero cost base. It's absolutely a disincentive, and it's going to lead to departures from the entrepreneurial innovation.

Adrian Turner 42:36

It already is already in droves. And you know what the concession was? You you're clear until you hit $10 million of revenue. Who starts a business and takes all that risk to aspire to be a sub-10 million dollar a year business? Not me. Right? So I know of two entrepreneurs that have left in the last week. They've left the country. So we're here talking about, you know, we started this talking about Calgoolie and Gold and You know, but but the future industries, the you know, the drones, the defense industries, they're all leaving. And uh I just I just don't understand it, Nick. It's incredibly frustrating to me to see this talent guy. And having spent 18 years over there and been on the other side and come back to be a part of the solution for the country, it's just wrong.

Nick Hossack 43:22

Business just giving up, Greg?

Greg Robinson 43:24

No, not giving up. Frustrated to the extreme. When you're running your head into a brick wall all day long, and as as everyone has said here, you've got your shirt on your back being taken off, and you're taking all the risk, and then at one o'clock in the morning you then got to look at your tax and plan for that. I mean, it's it's just so difficult to do business. I mean, why are we making it so difficult to do business? Remember, business provides jobs. Jobs give income. Income gives hope and better lifestyle.

Nick Hossack 43:56

That a bit naive there, Tony. What do you think?

Tony Davis 43:58

Oh look, I mean I think You know, at the end of the day, the tax base funds our quality of life in this country. But there's a lot that we need to change. But and again, you're going to jump all over me here. In terms of the OECD on tax competitiveness, we're ranked number seven. So there are challenges and we should simplify it. And for heaven's sake, it'd be great if we had a government that would actually tackle it, but no government has actually tackled the taxation to the extent that they should.

Adrian Turner 44:31

So we we haven't had serious reform since the 2000s. So you you you could argue that.

Greg Robinson 44:37

Well, Chernobyl was going to bring it in.

Adrian Turner 44:40

The machinery of government to drive structural and policy change when the operating environment around us, right, that the country is operating in is changing so quickly is not keeping pace.

Nick Hossack 44:51

Wouldn't it be great if we could just do something like just get rid of income tax, you know, do what Dubai does, or you're just doing something really big. Yeah. Yeah. So you come to Australia, you're not going to pay income tax. You generate it, you you keep it. Now, you might have a very high consumption tax, yeah, and that's how we're going to fund government. Um, but that's people say, and and I argue before it's aggressive, but who buys jets? Who buys really expensive cars? Typically high income earners, right? So you would get a lot of that money back through consumption um if you had big consumption tax. But I just just don't see an appetite for something that bold, something that's that significant. But you know, that's the sort of thing I think that we need to do to really move forward. Let's find a leader. All right, fellas, let's get on to something a little bit more fun and positive. Australia's best athlete, lots of candidates. I'll be fascinated to hear who you come up with. I'm thinking Heather Mackay, maybe Walter Lindram, Greg, what do you reckon?

Greg Robinson 45:53

Well, the top four for me, I had four to start with, was Don Bradman,

Bradman, Cadel Evans and the Best Sailing Comeback in History

Greg Robinson 45:56

obviously, average of 99.94, no one's gone anywhere near him. Dawn Fraser, who you just can't help but admire. Rod Laver, Rocket Rod, won everything as an amateur and as a professional. And with you, the dark horse of the lot, Walter Lindram, who changed the game, and he actually had to change his hands. Had to go from right hand to left hand because he was so damn good. So he is the Don Brabman of the sport. And but Don didn't bat with the other hand. So Walter, I've got to say, is right up there.

Nick Hossack 46:27

They used to call Don Bradman uh the Walton Lindrum of cricket. Is that right? Yeah, they did. Tony.

Tony Davis 46:35

Okay, I'm gonna start an argument. I probably can't win here, but as a cyclist, I'm gonna say Cadell Evans. So every July I'm up late at night watching these guys crucify themselves in the Alps or in the Pyrenees. And my my criteria is pretty simple. Degree of difficulty and how long you've sustained it at the top. So this guy has been 20 years as a professional, the world number one in two completely different disciplines, mountain biking and road racing. He was runner up in the tour twice before he actually won it. He was 34, the oldest tour winner in almost 90 years, and he did it in an era where there were some very questionable competitors and doping.

Nick Hossack 47:25

There's never been a shadow over him, has there?

Tony Davis 47:27

No, never. Genuinely nice guy, right? But yeah, he he kind of uh does it for me, but I'm biased.

Nick Hossack 47:33

Was he ever accused of provenance Europe at no merit? No. Interesting. Oh well, that's good, Adrian.

Adrian Turner 47:40

So mine's actually John Bertrand. Um Gregor Gregor introduced me to John, and it's been a blast. Being up close to John around this Sports Australia Hall of Fame work that he does. Yeah, so I remember him sharing the story, right? They're down on 3-1, race to four, they had to win all the races, and you know, the Americans had held on to it so long, and the pride was so high that they changed the rules part way through and uh turned their uh defence industrial base uh to help help the American boat because if you think about it, it's you know basically a torpedo um m moving the boat through water fast. So uh and you remember we had the wing keel, you know, and innovation in there as well.

Nick Hossack 48:28

And that was a great moment, wasn't it?

Adrian Turner 48:29

It was, and and and John talked about uh how he got the team ready and he you know he had them lay down on the ground and visualise, and in the moment when they're really behind in the last race, he took them all down below deck and uh gave them a gave him a talking to and back up on deck. And um the way John described it to me was you know he kind of got in this flow state where he almost sensed where the wind was coming. And and you look at the water and where the wind is, it's darker. And you know, the other team goes left, we go right, and you know, we win. I I think it's an amazing story, he's an amazing guy, and he still gives back to the country too.

Nick Hossack 49:02

Yeah, it's interesting. If you had a couple of hours spare on Saturday afternoon, you could watch one game, what would it be?

Greg Robinson 49:10

Greg, AFL, rugby union, rugby league, soccer, netball, soccer world cup's pretty hard to beat. Although I'm looking forward to this year's rugby league grand final. Yeah, that'll be good. I reckon it's gonna be an unbelievable, cracking way to finish some great teams playing. No one's been able to predict a game all year, so yeah. Tony, you missed the Swan's game this year?

Tony Davis 49:30

Nope. Um, and I hope to see a final at home. Uh maybe two, two or more. Uh yeah, I'm a I'm a Swanny. I was down there at the ground on Saturday.

Nick Hossack 49:40

Yeah, I was at uh Adrian, what was the last game you saw, mate? Oh no, for me it's Formula One.

Adrian Turner 49:44

So that's a game. Uh story in the random selection. No, no, it turned out like in the when I was in the US, I actually sponsored these two cars in the Ferrari Challenge. One of them was Zach Brown, who's running McLaren now. But you you you look at that sport, right? And it's microseconds. And it's and and there's 800 people sitting and looking at screenplay.

Nick Hossack 50:06

Apparently you've got to be there to really appreciate it. Yeah. Thanks for that, Adrian. Look, we've had a really good discussion and uh covered some important topics, including the economic wrap-up. Any movement in your views, buy, hold, or sell, Greg?

Greg Robinson 50:18

It's the lost potential, Nick, which frustrates me. So I've still got to stick with my original. I'm a sell.

Nick Hossack 50:24

Yeah, Tony, summarise for us.

Tony Davis 50:25

Yeah, no,

Final Verdicts: Two Sells and a Hold

Tony Davis 50:26

I'm a hold. Whilst we've got uh pretty good outlook on the commodity sector, there's some really serious talent issues there, which concerns me. Defense, that is always a concern. Um, and then we've got the taxation environment, so lots of opportunity, but right now I'm girding my loins and I'm a hold.

Adrian Turner 50:44

All right, Adrian. So I don't think we're doing enough around the future industries for the country that represent the next 10, 20, 30, 50 years. So I'm still a sell.

Nick Hossack 50:56

All right, thanks, guys, and thanks very much to all the listeners. That was a really good conversation. We hope you enjoyed it as much as we did, and see you next time on Australia Podcast.