The Australian Way

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The Australian Way

These stats from the UK are normally a good leading indicator. “Money numbers” from the Inland Revenue about what has been paid in payroll tax. Overall it's a very sharp drop in employment and trending sharply down. One of the major causes has been an increase in what is known as Employers National Insurance. The recent increase was big enough (13.8% - 15%) but the level of earnings to which it applied dropped from £9,100 to £5,000 per year. Effectively capturing most casual workers across the UK economy. 

Ostensibly, this tax is designed to pay for state pensions. There is no savings pot though. There is no “state pension scheme”. It's not as though the 15% does anything but go on current expenditure so it's just another tax with a name that perhaps makes it sound more tolerable. In this case a tax on those earning the least.

It has taken the UK government by surprise because its effect on employment has been significant. Perhaps a Laffer Curve moment for employer based taxes. The most impacted were small businesses, it would appear that having no other option they have simply let many staff go. Almost anything is now better than employing someone. It’s not just the cost of it, it's the legal minefield of other regulations.  

All economies are a trade off between capital and labour. If you get capital to do something (a machine perhaps), you have to repair and insure it but that's it. To employ labour is to subject yourself to all manner of regulations, which it is a full time job to comply with. 

Not just the UK of course. Australian requirements are equally onerous. The compliance list for daring to employ someone is long. 

Legal & Regulatory Considerations

1. Fair Work Act 2009

• Covers: Minimum employment conditions, unfair dismissal, workplace rights.
  

• Must provide employees with the National Employment Standards (NES), which include things like:
  

  • Minimum wage
    

  • Leave entitlements (annual, personal, parental)
    

  • Maximum weekly hours (38 + reasonable overtime)
    

  • Notice and redundancy pay
    

2. Modern Awards or Enterprise Agreements

• Check if your industry or role is covered by a Modern Award or Enterprise Agreement (they define minimum pay, penalty rates, allowances, etc.).
  

3. Employment Contracts

• Must issue written contracts outlining:
  

  • Role and responsibilities
    

  • Remuneration
    

  • Work hours
    

  • Leave entitlements
    

  • Termination conditions
    

4. Workplace Health and Safety (WHS)

• Must comply with Safe Work Australia or state equivalents (e.g., WorkSafe Victoria).
  

• Duty of care to provide a safe workplace.
  

5. Anti-discrimination Laws

• Must avoid discrimination based on gender, age, race, religion, disability, etc.
  

• Governed by federal and state laws (e.g. Australian Human Rights Commission Act).
  

6. Working Rights and Visas

• Must ensure employees have the legal right to work in Australia.
  

• Use the VEVO system (Visa Entitlement Verification Online).
  

Tax & Financial Obligations

1. Register for an ABN and TFN

• You must have an Australian Business Number (ABN).
  

• If withholding tax from employees, you also need a Tax File Number (TFN) withholding number.
  

2. Register for PAYG Withholding

• Withhold income tax from employee wages and remit to the ATO.
  

• You must issue payslips, keep records, and provide payment summaries (now STP-based).
  

3. Single Touch Payroll (STP)

• Mandatory for all employers.
  

• Real-time payroll reporting to the ATO, including wages, PAYG tax, and superannuation.
  

4. Superannuation Guarantee

• Pay at least 11% (as of July 2025) of ordinary time earnings into each eligible employee’s super fund.
  

• Paid quarterly via the SuperStream system.
  

5. Payroll Tax (State-Based)

• Payable by employers once total wages exceed a state-specific threshold (e.g., NSW: $1.2 million annually).
  

• Varies by state and territory.
  

6. Workers’ Compensation Insurance

• Mandatory in all states.
  

• Must be obtained through the appropriate state provider (e.g. icare NSW, WorkSafe VIC).
  

7. Administrative Requirements

• Keep employee records for 7 years (wages, leave, hours, super).
  

• Provide Fair Work Information Statement to new employees.
  

• If employing casuals, also provide the Casual Employment Information Statement.
  

You could look at each one of those and say, yes, fair enough. The problem with them is they encumber labour with a terrible administrative overhead. The discrimination legislation alone is 1,200 pages across state and Federal statute books. Who can read that? Your best hope is to behave like a vaguely normal person and hope it's sufficient. No wonder nobody wants to employ people other than the state. The state loves doing it because it creates employment and they can comply with their own compliance by employing more people in compliance.

The unintended consequences of all the regulations around labour are one of the primary reasons wages are collapsing. It's become a massive thing to employ someone. Most people would rather not unless you are running a business with 10,000+ staff. It represents a significant legal and regulatory risk. Every new regulation, every new tax just makes capital more attractive. In addition, capital is getting cheaper much more quickly than labour is. 

How does this encumbered asset class compete with the new technologies that have precisely zero of the overhead? Almost certainly the prescription from the government will be the wrong one, more rules to protect labour. 

I was glad to see Senator Ayres taking a positive stance on AI. I did browse through his career history and concluded that he would almost certainly know what he's talking about. 

I look forward to his “Australian approach to AI”. What will it be? Almost certainly he will make things worse for the labour component of the economy. Not because he is ill-intentioned, simply because that is the nature of things. A huge assumption is made that there are no second order effects to these regulations. Just like in the UK, if we put tax up for employers and not employees it will protect them. It worked, it did protect the ones that kept their jobs and destroyed the ones that didn’t. 

I expect the same thing in Australia, aggressive regulation to protect labour at precisely the wrong moment.  

Michael Saylor

A three minute Saylor snippet in this short interview. 

Fascinating on a number of levels. MicroStrategy (now Strategy) might well be one of the riskiest public companies out there. They are highly geared to a single asset, you can own the equity or you can own the preferred stock (MSTR, STRK, STRF). You can use options to 20x long or short. If you want risk you will find it here. Arguably, the casino stock of the US exchange. 

Saylor explains it differently. “You know exactly what we are going to do”.....which of course is to borrow money and buy bitcoin. If you like what we do you have options, equity, preference shares, debt. If you don’t like what they do you can short it 20x. As he says, “take billion dollar positions for or against the company”. 

His value proposition is exactly that. Simple, transparent, leveraged bitcoin plays. It is actually straightforward from the perspective of what the company actually does. This is also true when compared to many other public companies. We all think we know what they do but we have no real idea what’s going on.  

His entire company is just Bitcoin will go up, fiat will go down. He is using every instrument on Wall Street to prove it. The main risk is none of it happens in a straight line, so there will be moments of extreme discomfort on the Strategy journey.

All told, I watched him for three minutes. I understood the strategy completely and that is true of almost no other company I know of or follow. By way of example, here is the CBA strategy statement

Our strategy, to build tomorrow's bank today for our customers, reflects our commitment to use the strength of CBA to support our customers, invest in our communities and provide strength and stability for the broader economy. 

I am not being facetious when I say I don't actually know what that means. 

“We think Bitcoin will go up and fiat will go down”. Maybe it’s nonsense, maybe it’s wrong and it’s definitely risky. But I do understand it. 

Global adoption

Notice something about the global adoption rankings for cryptocurrency. They directly correlate with countries that have growing populations. Nigeria, Indonesia, Philippines and Vietnam all with a trend entirely different from the Western one. Other countries on the list, Russia and Ukraine have a different set of issues that make the asset class popular. 

If you believe in backing the demographic trend, then the stats are quite compelling. This sector skews towards youth. 

What’s more, the people with the least resources and the least technological accessibility are the first adopters here. Why? 

It’s solving a problem for them. It works. It gives them access to the global economy where they didn’t have it before. No forms to fill in, no id required. If you are Pakistani and want to transact with a Filipino you have never met and never will, you can. In the end the Western ETFs are bringing the capital, but the everyday usage and the everyday difference to people’s lives is much more profound in countries we rarely hear from. 

Well resourced Westerners can invest a bit in this sector and not worry. Across the poorest parts of the world they don’t have that luxury and yet they are here in their millions. It speaks volumes to the investment case. 

Euro-Trash

Christine was in China this week for the first PBOC-ECB Governors’ meeting. The Chinese side put out a lovely  press release. They signed an MOU that they would meet more often and share information, a nothingburger then.

Christine also made a speech, it was about cooperation and trade. A timely and sensible ‘please can we be friends’ because America doesn’t like us anymore. 

Her press releases in Europe were very different though. They did not allude to the trade issue so much as to the usual tropes the ECB insists on shoving down everyone's throats. 

‘I spoke about the importance of “digital currencies and green financing”’? You met the head of the PBOC and the Chinese Premier Li Qiang and you didn’t mention either of those things. You gave a speech to the PBOC and did not mention them at all. Not green-anything because you know it's a joke and not the role of the Central Bank. It is a joke that has destroyed the European (particularly German) economy and made Europe relatively poorer. Everyone in China knows it’s a joke too, so why embarrass yourself by mentioning such a terribly failed policy. 

It is proof that the ECB does not believe in it. If you really believed you would advocate for why it is better, why it works. You would travel the world and make the change happen. You would showcase your success; but there is none to show.

The interview with Xinhua was reproduced here on the ECB website. Obviously these things are scripted well in advance….make sure to ask her about ‘green financing’. So the interviewer did, right at the very end:

And what about green financing?

Green financing is an activity that is conducted by commercial banks or international institutions. The European Investment Bank, which is a public institution, also has a role. And as you know, Europe has approved a green bond framework that is available, which I think China has observed very carefully in order to issue its own framework. But it's a matter for commercial banks.

Nothing to do with me Guv; it’s a matter for commercial banks. She’s too good, Christine. Too good. 

Further Information

Our May 2025 report to investors can be found here.