Property prices to rise, Forrest’s donate $5b, Qantas ranking falls from 5th to 17th

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Michael Thompson: A leading property group says there will be a steady

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Michael Thompson: improvement in the housing market over the next year, as

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Michael Thompson: the country’s biggest lender changes its rules on how it

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Michael Thompson: lends. Andrew and Nicola Forrest donate $ 5 billion to their

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Michael Thompson: own charity and Qantas falls from fifth to 17th in

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Michael Thompson: the latest rankings of World Airlines. It’s Thursday, the 22nd

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Michael Thompson: of June, 2023. Welcome to Fear and Greed, Australia’s most

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Michael Thompson: popular business podcast. I’m Michael Thompson and good morning, Sean Aylmer.

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Sean Aylmer: Good morning, Michael.

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Michael Thompson: You know what today is, don’t you, Sean?

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Sean Aylmer: It’s Thursday. It’s the 22nd of June. We’re past the winter

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Sean Aylmer: solstice. How do they afford that, came out yesterday. What else?

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Michael Thompson: It was the winter solstice. Technically, it was early this

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Michael Thompson: morning, I believe.

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Sean Aylmer: Oh, is that right? I didn’t know that.

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Michael Thompson: Yeah. That’s right. It was at about 2: 00 AM or so

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Michael Thompson: this morning, I think but anyway, it just means that

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Michael Thompson: from now on-

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Sean Aylmer: Days get longer.

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Michael Thompson: Yep. The days get longer and everything gets a little

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Michael Thompson: bit brighter. Speaking of bright, Sean, we’ve got a great

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Michael Thompson: interview, very, very positive interview with Dr. Nicola Powell, Chief

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Michael Thompson: of Research and Economics at Domain coming up after the show.

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Sean Aylmer: Yes. It’s all about the main story, so I don’t

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Sean Aylmer: want to say too much, but she’s definitely upbeat about

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Sean Aylmer: prospects for house prices and unit prices in many of

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Sean Aylmer: the capital cities across the country.

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Michael Thompson: Well, as you say, that is the main story this

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Michael Thompson: morning, the Australian property market is headed for a steady

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Michael Thompson: recovery over the next year with house prices. I find

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Michael Thompson: this remarkable in some cities, they are tipped to be

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Michael Thompson: back to record levels by the middle of next year.

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Sean Aylmer: That’s according to the Domain Forecast Report, which is released

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Sean Aylmer: today. It says House prices in Sydney, Adelaide, and Hobart

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Sean Aylmer: will achieve the biggest gains. Sydney, Adelaide and Perth homes

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Sean Aylmer: could be trading around record levels within 12 months. In

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Sean Aylmer: the unit market prices in Brisbane, Adelaide and Hobart are

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Sean Aylmer: forecast to reach new highs. That’s pretty remarkable given we

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Sean Aylmer: are still in a rising interest rate environment. Overall, the

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Sean Aylmer: report says that houses will do a bit better than

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Sean Aylmer: units. Regional Australia is expected to return to a more

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Sean Aylmer: traditional price pattern with a slower pace of growth anticipated

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Sean Aylmer: compared to the capital cities of the capital cities Domain

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Sean Aylmer: forecasts that Melbourne’s recovery will be most sluggish for house

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Sean Aylmer: prices up just zero to 2% over the next 12

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Sean Aylmer: months, while unit prices in that city may still fall.

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Sean Aylmer: A ways to go there, Canberra is also expected to

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Sean Aylmer: underperform most other capital cities.

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Michael Thompson: Sean, it’s good news obviously for homeowners, the prices have

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Michael Thompson: bottomed and are now rising. Is this all because of immigration?

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Sean Aylmer: It’s partly because of immigration. Population pressure is definitely the

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Sean Aylmer: main consideration, reckons Domain’s Chief of Research and Economics, Nicola

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Sean Aylmer: Powell, who we will be talking to straight after the

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Sean Aylmer: show, the push to lift temporary and permanent visa grants

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Sean Aylmer: to alleviate skills shortages as well as international students is

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Sean Aylmer: pretty much behind the jump in migration. There’s also a

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Sean Aylmer: lack of new supply in many areas of the country.

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Sean Aylmer: That part of the equation is having different effect in

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Sean Aylmer: different geographies. One factor that will keep a lid on

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Sean Aylmer: prices though is affordability, Powell says, and another factor to

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Sean Aylmer: keep a watch on is serviceability buffers, how much extra

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Sean Aylmer: a borrower insists a lender has and is able to

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Sean Aylmer: pay before giving them a loan. It’s been very controversial,

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Sean Aylmer: that one.

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Michael Thompson: Yeah, and on that issue, Commonwealth Bank yesterday said it’s

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Michael Thompson: going to reduce the serviceability buffer on some loans from

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Michael Thompson: 3% to 1%.

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Sean Aylmer: Interesting, because regulators really don’t want lenders to do that.

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Sean Aylmer: The lower buffer will apply to refinancing applications only. It

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Sean Aylmer: will only apply to borrowers who have not missed repayments

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Sean Aylmer: in the past year and where the loan is less

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Sean Aylmer: than 80% of the property’s value. In that instance, that would

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Sean Aylmer: be the majority of loans that the Commonwealth Bank has. The

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Sean Aylmer: change has been made to help borrowers who have found

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Sean Aylmer: themselves unable to refinance because they no longer meet the

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Sean Aylmer: higher buffer hurdle following the jump in rates. That issue

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Sean Aylmer: has become known as the mortgage prison, and of course,

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Sean Aylmer: it’s all about coming off those low fixed rate loans

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Sean Aylmer: onto much, much more expensive variable rate loans, and because

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Sean Aylmer: of that serviceability buffer not being able to afford them.

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Sean Aylmer: Anyway, Commonwealth Bank’s doing something about that.

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Michael Thompson: Is it odd that the Commonwealth Bank would go against

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Michael Thompson: the wishes of the regulators and is it just because

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Michael Thompson: Commonwealth is just so big and they have the ability

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Michael Thompson: to do it?

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Sean Aylmer: Yes, so what I probably didn’t realize until this story

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Sean Aylmer: was that the regulators say that’s what they want, but

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Sean Aylmer: the banks obviously don’t have to do it, and what

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Sean Aylmer: this does mean is that it’s kind of a smart competition play

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Sean Aylmer: by Commonwealth Bank because they can say, ” Hey, don’t go

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Sean Aylmer: somewhere else because we’ll actually put a lower serviceability buffer

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Sean Aylmer: on you so you will be able to get a

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Sean Aylmer: home loan from us.’ So it’s good. I wouldn’t be

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Sean Aylmer: surprised if the other banks follow suit, but it is

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Sean Aylmer: somewhat unusual to go against the regulators.

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Michael Thompson: Yeah, it feels like now that one has defied the

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Michael Thompson: regulators, then it may well have set a precedent, so

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Michael Thompson: standby, we may see some others follow.

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Sean Aylmer: Yes, to be honest, I’m not quite sure technically what

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Sean Aylmer: the regulators can do in terms of enforcing that serviceability

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Sean Aylmer: buffer. My homework, Michael, my homework.

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Michael Thompson: Oh, excellent. I like the sound of that. What happened

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Michael Thompson: in local markets yesterday, Sean?

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Sean Aylmer: S& P ASX 200 closed down 0.6% to 7, 315 points ending a

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Sean Aylmer: seven session run there. Now that followed a week lead

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Sean Aylmer: in from Wall Street among the large caps. Macquarie Group

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Sean Aylmer: was one of the worst off 2. 6%. Woodside Energy

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Sean Aylmer: in Fortescu Metals were both off close to 2%. Bunch of

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Sean Aylmer: companies off 1% or more. BHP, Westpac, West Farmers, Transurban,

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Sean Aylmer: Rio, Goodman Group. I would say that’s a widespread fall,

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Sean Aylmer: Michael.
The consumer stocks were very much out of favor

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Sean Aylmer: on the back of fears about the declining consumer spending.

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Sean Aylmer: Premier investments, think Smiggles and Peter Alexander and places like

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Sean Aylmer: that, each share price fell 4. 6%. JB HiFi was

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Sean Aylmer: down 2. 3%. Super retail was off 2.6%, but worse

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Sean Aylmer: on the day was Flight Center. It dropped nearly 7%.

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Sean Aylmer: Mind you, there was some good news. A bunch of

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Sean Aylmer: stocks hit new highs or multi- year highs yesterday. The

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Sean Aylmer: insurers QBE, IAG and Suncorp all fit into that category.
Remember, they’ve been

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Sean Aylmer: able to push through higher premiums, they payout good dividends,

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Sean Aylmer: kind of a good core for some investors at the

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Sean Aylmer: moment. Woolworths was another with its share price reaching $ 40 and 42

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Sean Aylmer: cents at its highest in nearly two years. Woolly’s share

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Sean Aylmer: price is up more than 20% this year. Telstra hit

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Sean Aylmer: a multi- year high of $4 and 46 and cloud accounting software

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Sean Aylmer: Group zero hit a 52 week high. So certainly wasn’t

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Sean Aylmer: all bad news yesterday.

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Michael Thompson: No, it’s a bit happening. What about international markets?

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Sean Aylmer: The Aussie dollar has had a tougher time of it

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Sean Aylmer: in recent sessions. Expectations that China will provide significantly more

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Sean Aylmer: stimulus just haven’t been met yet, and that’s weighed on

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Sean Aylmer: the Aussie dollar. Of course, Australia does well when China

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Sean Aylmer: does well because we sell so much stuff to them

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Sean Aylmer: when people aren’t paying as much for our stuff, the

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Sean Aylmer: Aussie dollar depreciates. Also, the Reserve Bank Board’s minutes released

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Sean Aylmer: this week suggests the Central Bank is a little less

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Sean Aylmer: gung ho on lifting rates that also worked against the

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Sean Aylmer: Aussie is trading under 68 US cents in commodity prices.

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Sean Aylmer: Oil is up, gold is down, and coal fell yet

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Sean Aylmer: again. It’s hit another two year low.

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Michael Thompson: All right, plenty going on. We’ll be back in a

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Michael Thompson: moment with the rest of the day’s business news. Sean,

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Michael Thompson: Telstra and TPG Telecom will not be able to share

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Michael Thompson: infrastructure in regional Australia after the Competition Tribunal upheld the

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Michael Thompson: decision to block a deal between the two.

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Sean Aylmer: It’s a victory for the Australian Competition and Consumer Commission

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Sean Aylmer: that had argued the $ 1. 8 billion agreement between the

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Sean Aylmer: two would entrench Telstra’s dominance and hurt mobile services. Yesterday,

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Sean Aylmer: the Australian Competition Tribunal concluded that the deal would increase

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Sean Aylmer: Telstra’s strength relative to Optus. The agreement would have allowed TPG to use

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Sean Aylmer: Telstra’s mobile towers in regional areas while Telstra would get

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Sean Aylmer: access to TPG’s spectrum, which is used to transmit call

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Sean Aylmer: and internet signals. Michael O’Brien, the chair of the tribunal,

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Sean Aylmer: said the market was already highly concentrated and the partnership

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Sean Aylmer: would likely increase Telstra’s strength in regional areas, but Telstra

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Sean Aylmer: Chief Executive, Vicky Brady said it was actually uneconomic at

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Sean Aylmer: times to build transmission lines in some areas of the

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Sean Aylmer: nation. Yesterday’s announcement will impede the use of 5G in

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Sean Aylmer: the upcoming 6G spectrum, she said potentially the biggest loser

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Sean Aylmer: in all this is TPG, it’s share price fell 6% yesterday.

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Michael Thompson: Sean, the biggest shareholder in AGL Energy billionaire, Mike Cannon-

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Michael Thompson: Brookes, has sold down his stake to free up money

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Michael Thompson: for investments in clean energy.

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Sean Aylmer: Yeah, he freed up almost $ 50 million as you do. Cannon-

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Sean Aylmer: Brookes, who is co- founder of Atlassian, said the power company

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Sean Aylmer: remains his largest investment. He’s also the largest shareholder in

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Sean Aylmer: AGL. His company, Grok Ventures said it remains supportive of

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Sean Aylmer: the energy group adding that AGL should accelerate its exit

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Sean Aylmer: from coal fired power generation. Canon- Brookes, of course, surprised

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Sean Aylmer: everyone in May last year, he bought into the company,

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Sean Aylmer: he eventually owned almost 11.3% of AGL. It allowed him

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Sean Aylmer: to lead a campaign to stop management’s plan to split

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Sean Aylmer: the company in two. Ultimately, his success led to an

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Sean Aylmer: implosion in the top management and board of the company and

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Sean Aylmer: an accelerated plan for closing coal power stations. Grok now

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Sean Aylmer: owns 10.4% of AGL according to a statement released yesterday.

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Michael Thompson: Rio Tinto will invest more than $ 900 million to increase copper

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Michael Thompson: production and processing at its operations in Utah in an

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Michael Thompson: effort to take advantage of the expected jump in prices of

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Michael Thompson: the metal.

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Sean Aylmer: Sorry, can you just say that state name again?

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Michael Thompson: I get very excited when I do, US states, in Utah.

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Sean Aylmer: Utah.

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Michael Thompson: Okay. Trivia question for you, Sean. Three US states that

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Michael Thompson: all have four letter names? Utah is obviously one of

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Michael Thompson: them. What are the other two?

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Sean Aylmer: I’m going Utah, Iowa, Ohio.

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Michael Thompson: Well done. You nailed it. Congratulations. You may now proceed.

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Sean Aylmer: Excellent. Rio Set aside around $ 730 million to expand the

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Sean Aylmer: Kennecott underground mine and will spend another $ 175 million to

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Sean Aylmer: upgrade processing. Kennecott is the second largest copper producer in

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Sean Aylmer: the US. In May, Rio approved a $ 300 million US

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Sean Aylmer: dollar rebuild on a smelter at the site near Salt

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Sean Aylmer: Lake City in Utah. Copper of course, is a key commodity

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Sean Aylmer: for the transition away from fossil fuels toward renewable energy, and

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Sean Aylmer: some market analysts expect demand to soar without a matching

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Sean Aylmer: increase in supply, at least in the short term. Hence,

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Sean Aylmer: prices will go up. Rio says the increase investment will

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Sean Aylmer: lead to an expected 250, 000 tons of additional mined copper

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Sean Aylmer: over the next 10 years. Now, Michael, can you give

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Sean Aylmer: me six or seven countries starting with letter I?

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Michael Thompson: Ireland, India, Indonesia.

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Sean Aylmer: Yep.

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Michael Thompson: Iraq and Iran. Ooh, I’m going to have to come

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Michael Thompson: back to you on some others. That’s a great trivia

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Michael Thompson: question though.

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Sean Aylmer: Yeah, it is. Iceland.

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Michael Thompson: Oh, good one, but you’re not allowed to nominate them.

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Michael Thompson: You’ve got the answers in front of you, I’m assuming.

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Sean Aylmer: No, I don’t. I don’t.

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Michael Thompson: Oh, okay. The PWC saga, Sean continues. It feels like it’s been

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Michael Thompson: going on for some time now. We’ve got Parliament demanding

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Michael Thompson: that PWC name the 63 partners and staff caught up

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Michael Thompson: in the firm’s tax leak scandal.

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Sean Aylmer: The Senate’s Finance and Public Administration Committee’s interim report released

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Sean Aylmer: yesterday reportedly calls for the firm to make the list

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Sean Aylmer: of names public. It includes the list of current and

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Sean Aylmer: former partners and staff who received at least one email

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Sean Aylmer: based on confidential information from the Federal Treasury, including advice

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Sean Aylmer: to clients on how to sidestep new multinational tax avoidance

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Sean Aylmer: laws relying on leaked intelligence from disgraced tax partner Peter

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Sean Aylmer: Collins. PWC argues that the group of partners and staff

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Sean Aylmer: were not aware the emails were based on confidential information

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Sean Aylmer: and should not be publicly identified.

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Michael Thompson: Australians support the resumption of contact between Australian and Chinese

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Michael Thompson: leaders as a positive step, Sean, according to Lowy Institute,

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Michael Thompson: polling and research.

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Sean Aylmer: But that doesn’t mean Australians trust President Xi Jinping with

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Sean Aylmer: the Chinese leader and his country near the bottom of

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Sean Aylmer: Australian’s lists of trusted leaders and superpowers. Lowy Institute director

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Sean Aylmer: Michael Foley, said Australians sharply declining perceptions of China have

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Sean Aylmer: leveled out as a relationship between the two countries stabilizers,

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Sean Aylmer: a slight majority still perceive China as a security threat

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Sean Aylmer: compared to an economic partner, although the threat perception has

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Sean Aylmer: dropped markedly from a year ago but three in four

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Sean Aylmer: Australians believe it’s very or somewhat likely that China will

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Sean Aylmer: become a military threat to Australia in the next 20

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Sean Aylmer: years. While wholly supportive of the United States Alliance, Australians

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Sean Aylmer: are wary that being part of the pact could draw

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Sean Aylmer: the nation into war in Asia. Overall, 83% of Australians

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Sean Aylmer: approve of Prime Minister Anthony Albanese’s handling of foreign policy.

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Sean Aylmer: What I find amazing about that, it’s the highest score

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Sean Aylmer: out of any of the past five leaders.

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Michael Thompson: Wow. That’s actually quite remarkable considering he wasn’t someone who

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Michael Thompson: was expected to really excel on the international stage, more

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Michael Thompson: of a domestic politician.

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Sean Aylmer: Yeah, real surprise

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Michael Thompson: Italy, Sean. I completely missed it.

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Sean Aylmer: Italy.

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Michael Thompson: Yep.

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Sean Aylmer: I’m trying to remember what we said now. So we’ve

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Sean Aylmer: got Italy, India Island, Iraq,

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Michael Thompson: Iran.

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Sean Aylmer: Iran, Iceland,

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Michael Thompson: Indonesia.

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Sean Aylmer: Indonesia,

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Michael Thompson: India. Did I say that? Yes.

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Sean Aylmer: Yeah. Might as well say it again though.

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Michael Thompson: I think we’re pretty well, pretty well there aren’t we?

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Sean Aylmer: Surely.

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Michael Thompson: Israel?

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Sean Aylmer: Israel, excellent. Well done.

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Michael Thompson: There can’t be many more. I’m going to have to

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Michael Thompson: Google it now. Sean Australia’s richest man, Andrew Forrest and

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Michael Thompson: his wife Nicola, have donated almost $ 5 billion worth of

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Michael Thompson: Fortescue Metals Group shares to their own charity, the Minderoo Foundation.

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Sean Aylmer: The couple confirmed they would donate one fifth of their

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Sean Aylmer: shareholding in Fortescue, 220 million shares to Minderoo to create

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Sean Aylmer: what they called lasting change and the greatest possible good,

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Sean Aylmer: according to a story in the financial review. The Minderoo

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Sean Aylmer: Foundation supports marine and medical research, indigenous programs, as well

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Sean Aylmer: as the anti- slavery project Walk Free, which is run

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Sean Aylmer: by their daughter Grace. The donation takes Minderoo’s endowment to

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Sean Aylmer: about $ 7. 6 billion, up from $ 2. 6 billion with

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Sean Aylmer: a foundation expected to release a long- term strategy in

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Sean Aylmer: coming months. Now, the funding is expected to increase money

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Sean Aylmer: available in these work streams rather than Minderoo necessarily branching

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Sean Aylmer: into new areas. Forrest said, this is Andrew Forrest said, ”

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Sean Aylmer: Charities and foundations to whom the family had given Fortescue

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Sean Aylmer: stock in the past had always done better if they

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Sean Aylmer: had held the shares and grown on the dividends rather

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Sean Aylmer: than selling stock.” The point there is that we’re not

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Sean Aylmer: going to see a wholesale bunch of Fortescue shares on

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Sean Aylmer: the market because basically Forrest is saying Minderoo is going

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Sean Aylmer: to keep them and live off the dividends.

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Michael Thompson: All right. Turning to international news now, and former US

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Michael Thompson: President Donald Trump said he did not turn over presidential

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Michael Thompson: records to the National Archives because he was busy and

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Michael Thompson: had not yet had time to remove personal items from

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Michael Thompson: boxes packed at the White House.

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Sean Aylmer: Trump was charged earlier this month and pleaded not guilty

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Sean Aylmer: on 37 felony counts related to his retention of classified

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Sean Aylmer: documents in obstruction of justice. The federal government recovered more

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Sean Aylmer: than 300 documents with classified markings from Trump after he

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Sean Aylmer: left the White House, including from an FBI search of

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Sean Aylmer: his Mar- A- Lago Resort in August, 2022. This is where

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Sean Aylmer: it gets interesting, Michael. During an interview with Fox News,

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Sean Aylmer: Trump was asked about a portion of the indictment that

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Sean Aylmer: alleges he ordered an aid to move documents after they

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Sean Aylmer: were requested by the government. He responded saying he wanted

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Sean Aylmer: to take his things out of the boxes first, and

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Sean Aylmer: I quote, ” These boxes were interspersed with all sorts of

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Sean Aylmer: things, golf shirts, clothing, pants, shoes. There were many things.”

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Michael Thompson: So hang on, in this box there are government documents,

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Michael Thompson: then maybe a pair of pants, then some more government

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Michael Thompson: documents, and then a pair of shoes. It’s a very

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Michael Thompson: odd packing style, isn’t it?

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Sean Aylmer: Very odd.

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Michael Thompson: Now, Sean, we’ve mentioned this next one at the top

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Michael Thompson: of the show, the Annual Sky Tracks Awards have been

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Michael Thompson: announced, and these are obviously global ratings of airlines. Always

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Michael Thompson: a pub trivia favorite for me, these ones, because you

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Michael Thompson: get some good questions out of this, but Singapore Airlines

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Michael Thompson: has been named number one that a big mover in

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Michael Thompson: the wrong direction, mind you, was Qantas, which went from

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Michael Thompson: the fifth best Air airline in the world to number 17.

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Sean Aylmer: You got to work hard to do that. You can’t

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Sean Aylmer: just go from five to 17 without trying, surely

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Michael Thompson: It’s taken a bit of effort, hasn’t it?

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Sean Aylmer: Now, these awards are pretty well regarded because they’re based

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Sean Aylmer: on thousands of passenger satisfaction surveys. Singapore came in at

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Sean Aylmer: number one leapfrogging, Qatar Airways. Fiji Air was named the

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Sean Aylmer: best carrier for the Asia Pacific region, relegating Qantas to second.

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Sean Aylmer: I’ve flown Fiji Air, they were fantastic.

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Michael Thompson: Well, I will be flying Fiji Air in November, and

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Michael Thompson: I’m very much looking forward to it now.

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Sean Aylmer: Yeah.

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Michael Thompson: I mean, I was before as well, but now I’m

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Michael Thompson: even more so.

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Sean Aylmer: Qatar Airways claimed the best business class airline while Singapore

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Sean Aylmer: Airlines won the best first class and Eva Air, it’s

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Sean Aylmer: a Taiwanese airliner, it was the best premium economy cabin.

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Sean Aylmer: Best economy class cabin, went to JAL, Japan Airlines. That

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Sean Aylmer: was the head of Qatar Airways, followed by Singapore Airlines,

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Sean Aylmer: Emirates, and Virgin Atlantic. I thought I’d better give the

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Sean Aylmer: economy top five because let’s face it, that’s how you

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Sean Aylmer: and I fly Qatar, Singapore, Emirates, Virgin Atlantic, not as

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Sean Aylmer: good as Japan Airlines. Anyway, Qantas was 13th in the business

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Sean Aylmer: class category sixth in the premium economy, 11th in first

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Sean Aylmer: class and where I sit, economy class came in 13th.

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Sean Aylmer: The other big mover in the wrong direction was British

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Sean Aylmer: Airways while low climbing, the ladder included Cafe Pacific, Eva

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Sean Aylmer: Air we mentioned, and Fiji Air.
Finally, also, because this

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Sean Aylmer: one’s for you, Michael, most family friendly airline went to

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Sean Aylmer: Air Canada. Garuda Indonesia won Best Cabin Crew. I like

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Sean Aylmer: that one, and Air Asia again, won the world’s best

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Sean Aylmer: low cost carrier award.

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Michael Thompson: That’s a fantastic story, and I’ll give you a full

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Michael Thompson: report in November on what I thought of Fiji Airways.

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Sean Aylmer: Excellent.

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Michael Thompson: Now up next is the Fear and Greed Daily interview

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Michael Thompson: with Nicola Powell from Domain.

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Sean Aylmer: Yes, all about what’s going to happen to house prices

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Sean Aylmer: and unit prices across the country.

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Michael Thompson: Yeah, it’s a really good chat. It’s coming up next

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Michael Thompson: in the Fear and Greed playlist on your podcast platform

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Michael Thompson: or at fearandgreed. com. au. Thank you, Sean.

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Sean Aylmer: Thank you, Michael.

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Michael Thompson: It’s Thursday, the 22nd of June, 2023. Make sure you’re

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Michael Thompson: following the podcast. Join us on online, on LinkedIn and

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Michael Thompson: Instagram, Twitter and Facebook, and stay up to date on

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Michael Thompson: all the business news with Alexa and your Amazon Echo

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Michael Thompson: Smart speaker. Simply say, ” Alexa, play the Fear and Greed

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Michael Thompson: podcast,” to catch the latest episode. You can get yours

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Michael Thompson: now at amazon. com. au. I’m Michael Thompson and that

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Michael Thompson: was Fear and Greed. Have a great day.