Brace yourself for this premium increase + How not to be a 'Kevin'

Hi everyone,

December! Hopefully, everyone is getting into the Christmas spirit. As many of you would know, the Kochs are right into Christmas and this year we have the added bonus of grandchild #10 due any day, which is very exciting.

I’m finishing this newsletter in Casablanca, Morocco and fulfilling a dream that started with reading James A Michener’s novel The Drifters when I was a teenager. So, Libby and I are visiting here before meeting up with most of our kids and grandkids for Christmas. They are all pretty spread out now with family in Perth, Dubai and London … It's the way of the world these days but a very exciting experience for everyone.

There’s a lot of get through in this newsletter:

• The economy is chugging along.

• Government spending is still keeping interest rates high.

• Property values keep rising.

• Get ready now for increases in private health insurance premiums.

• The cost today of Kevin McCallister’s Home Alone bill.

• Data centres becoming the world’s big energy guzzler.

But before we get into the nitty gritty, I just wanted to share this message sent to me from a reader that shows, once again, why it is so important to keep on top of your finances and keep your financial providers honest. If you don’t, they will take advantage of you … and it will cost you big time.

Have a look at this.

A subscriber of this newsletter banks with NAB - but I’d suggest any bank would try this on - and has a personal overdraft which, thankfully, he doesn’t use … just keeps it for emergencies.

Out of the blue he gets a notice that the interest rate on the overdraft has risen nearly 5 per cent to a whopping 20 per cent. No warning, just boom - a 30 per cent rise in interest rates. That’s the same level as the most expensive credit card.

The note to the customer finishes with “let me know if you have further concerns about this.” Just a few, I reckon.

Economy chugging along

The economy is picking up pace with the September quarter economic growth figures coming in at 0.4 per cent for an annual rate of 2.1 per cent - that’s a lot healthier than the 0.8 per cent annual growth this time last year.

Households are spending again because unemployment is low, consumer confidence is up, businesses are investing, residential construction is taking place and government spending is still at high levels.

The downside of this stronger economy is that demand is creating inflation. It is such a balancing act between a healthy economy and fighting inflation.

There is also a big psychological impact at play here as well. Aussies were told for so long to tighten their belts to fight inflation. They did. But governments kept spending, which effectively undid all that good work. It’s one of the reasons why there are no more rate cuts.

In these latest quarterly figures, business investment lifted 3.2 per cent, driven by data-centre investment across NSW and Victoria.

Household consumption increased by 0.5 per cent and is up 2.5 per cent over the year, supported by a 1 per cent rise in real disposable income for the quarter.

This also helped lift the savings rate to 6.4 per cent. Dwelling investment was solid as well, rising 1.8 per cent for the quarter and 6.5 per cent over the year.

It’s not just just me criticising the level of government spending

You’ll know for the last 18 months I’ve been banging on about the huge amount of government spending and that governments have to rein it in to fight inflation and bring down interest rates.

Last week, the Department of Finance revealed the federal budget deficit for the first four months of this new financial year (July to October). It stands at $32.9 billion, that’s triple the deficit for the last entire financial year of $10 billion.

To add even more perspective, Treasury is forecasting a deficit of $42.1 billion for the whole of the current financial year. So after just four months, we’ve already racked up 75 per cent of that amount.

The OECD this week warned Australian governments to curb their spending, noting it is adding to government debt levels and undermining the economy.

Reserve Bank of Australia Governor Michele Bullock also told a parliamentary committee that larger budget deficits contribute to higher interest rates.

“All other things equal, if there is less savings in the economy and that includes by the government as well as by the private sector, and at the same time investment doesn’t come down, so all other things equal, then that will put a bit of upward pressure on the neutral rate,” she told a Senate estimates hearing on Wednesday morning.

It is so annoying that the reason interest rate cuts aren’t being made is because governments are spending way more than they should be.

Being her usual diplomatic self, Bullock said a smaller deficit could “possibly” mean lower interest rates.

Property values up again

Cotality’s national Home Value Index rose another 1 per cent in November. This marks the third month in a row where Australian home values have increased by one per cent or more (down slightly from the 1.1 per cent in October).

Sydney and Melbourne were the laggards with values rising 0.5 per cent and 0.3 per cent respectively.

Every other capital city rose at least 1 per cent in November, with Perth up a massive 2.4 per cent. Perth is in a property squeeze that’s fuelling the surge: listings are more than 40 per cent below the historic average, buyer demand is strong, and dwelling values jumped by just over $21,000 in November - roughly $5,000 a week.

By contrast, Sydney is a different story. Cotality’s property guru, Tim Lawless points to the fact that Sydney has a smaller supply deficit, with listings tracking just 2.2 per cent below the five-year average for this time of the year. The average for all capital cities is about 16 per cent below average. As a result, Sydney’s monthly growth rate looks to have peaked at 0.9 per cent in August.

Once again, residential property markets are driven by supply and demand.

Affordability also has a big impact in Sydney and Melbourne which is why clearance rates are currently in the low 60 per cent range.

The national dwelling value-to-household income ratio is at a record high - the median dwelling value is now 8.2 times annual pre-tax household income - and the share of income required to service a mortgage at the median value is near record levels at 45 per cent.

This is why there is so much disappointment that there appear to be no further interest rate cuts on the horizon to ease affordability pressures.

Get ready for more private health insurance premium rises

Millions of Australians with health insurance will likely pay even more for cover from April 2026, as the federal government is already in the process of reviewing proposed price changes from health insurers for the New Year.

It comes as the 12.5 million Australians with hospital cover and 15.2 million with extras cover saw premiums rise by an industry average 3.73 per cent last April.

Health insurance price changes take effect every year and catch many off guard. As consumers, we usually see the letter in the mail or a message in our email inbox from our insurer telling us that they’re hiking prices. It may feel like a bit of a cash grab, but there’s actually a strict process that health funds go through to get those price changes over the line.

Insurers can apply to increase their rates only once a year, between September and 12 November. This year,, health funds have once again been submitting proposed premium adjustments to the Minister for Health and Aged Care for consideration.

These applications aren’t a sure thing, though. As we’ve seen in the past, the health minister has rejected proposals deemed unreasonable. Importantly, each application is assessed on its individual merits and approved only if the Minister believes the increase is justified.

While we should have further clarity around 2026 increases by 31 January, this date can blow out if insurers are told to go back to the drawing board with their pricing proposals.

Aussies deserve answers sooner rather than later so they can make some informed decisions, without having to scramble at the last minute.

While insurers use terms like ‘premium changes’ or ‘pricing adjustments’, it is safe to assume that prices would be increased in most cases.

The Health Minister has admitted that the private hospital sector is facing ‘a number of temporary and systemic challenges’, citing shrinking profit margins and growing costs which are compounded by a lack of investment in the sector.

We also know that doctor fees are going up, medical equipment and procedures are costing more and in turn, it’s costing insurers more to pay out claims. Those added costs are usually passed on to consumers.

While it’s too soon to know how much the industry average increase will be, Aussies should keep a close eye on correspondence from their health insurer for any pricing changes.

But, not all premiums rise by the same amount. Let’s take the 2025 industry average as an example. The headline figure was 3.73 per cent but the actual amount varied significantly between funds.

One fund increased premiums by an average of 9.56 per cent, but another was as low as 1.91 per cent. So, the big industry average we all wait for is a bit bogus if you ask me.

Look for the premium adjustment in your bill and if the hike is too high, be prepared to switch.

Courtesy of Compare the Market, here are some tips when it comes to saving money on health insurance.

• Shop around – even if you think you’re on a good deal, if you’re hit with a premium hike, compare your options and never accept the increase without doing your research first. You may be able to track down a similar level of cover for less.

• Look out for perks and promotions - Insurers want your business and will try to lure people over with a range of perks, including waived waiting periods on extras, free coverage for a few weeks, access to reward programs and more. These deals can add real value, so use them to your advantage. The kicker is that they’re often reserved for new customers only which can lend well to switching.

• If you don’t use it, lose it - Rather than ditching cover completely if your premiums increase, cherry-pick what you do use or need and get rid of everything else. A lower-level policy might still cover your essentials without the extra cost.

• Similar names don’t always mean a similar product - Just because two policies have similar names, it doesn’t mean they’ll always offer the same benefits. Pay close attention to any inclusions, exclusions, waiting periods, benefit limits and excess amounts. It’s all in the policy brochure or available by calling your health fund directly.

Kevin McCallister’s Home Alone 2 bill today

The Koch family started watching Christmas movies a couple of weeks ago … I told you we are very much into the Christmas spirit. My all-time favourite is ELF but we’ve also been watching the Home Alone trilogy. So when I read this, it gave me a good chuckle:

New analysis by travel insurance comparison service, iSelect, reveals just how much Kevin McCallister’s iconic New York adventure would cost in 2025 compared to 1992 - that’s 32 years on, and the price jump is staggering.

But the question is, how much of Kevin’s runaway escapade would travel insurance actually cover?

Using data from The Plaza Hotel, historic records, and modern menu pricing, the study reveals Kevin’s one-night New York stay would have soared from $2,109 in 1992 to a massive $8,511 in 2025, a 303 per cent increase.

*This data does not include taxis and Kevin’s donation to Duncan’s toy store at the end of the film

While Kevin managed to check into The Plaza using his father’s stolen credit card, a real-life runaway child running up thousands of dollars in charges would raise more than a few red flags with insurers.

Here’s what might have been covered - and what wouldn’t have been.

What travel insurance might have covered

• Lost luggage:

Kevin famously ends up in New York with only his dad’s bag. Most policies cover mishandled or lost luggage, typically up to $1,000–$3,000, depending on the policy and excess.

What would not be covered 

• The $6,244 Plaza Hotel suite:

Insurers only cover necessary accommodation. Would a luxury suite at The Plaza be deemed “reasonable alternative accommodation”? Absolutely not. Kevin, and his family would be liable for the full cost.

Insurers can cover emergency accommodation, which is when a traveller is genuinely stranded due to circumstances outside their control, for example, an airline cancellation or severe weather event.

In Kevin’s case, he wasn’t stranded - he boarded the wrong flight and checked himself into a luxury suite without his parents’ knowledge. Under travel insurance policies, that wouldn’t classify his stay at The Plaza as ‘emergency accommodation,’ and the nightly rate of $6,244 would not be reimbursed.

• $2,233 worth of room service:

Travel insurance doesn’t cover voluntarily racking up room service and food charges, especially lobster, ice cream sundaes, and a cheese pizza delivered on a silver platter.

• Fraudulent use of a parent’s credit card:

Kevin uses his dad’s credit card without his permission. Insurers will not pay out for costs incurred through unauthorised spending.

• Donations and souvenirs (including Duncan’s Toy Chest):

Gifts, charity donations, and shopping are classed as personal discretionary spending and are also not covered.

How much would travel insurance cover?

In reality, almost nothing from Kevin’s $8,511 New York adventure would be reimbursed through a travel insurance policy.

The only plausible covered costs would be:

• Lost luggage reimbursement.

• Possibly emergency accommodation if he was genuinely stranded due to airline error.

• Necessary meals (not luxury room service). Reasonable meal expenses can be expensed if there are travel delays or cancellations.

So, Kevin’s real out-of-pocket bill in 2025 would still sit at around $8,000.

Now, if you don’t want to “do a Kevin,” so to speak, and end up without your travel insurance paying out, read on.

Travel insurance tips for families

With thousands of families flying over the festive period, the travel insurance experts at iSelect have shared simple steps families can take to avoid unexpected costs if travel plans go wrong. They are:

1. Make sure children are correctly listed on your policy - Some policies may not cover minors who aren’t properly added, to ensure they are covered you would need a group or family policy, provided you’re all travelling together.

2. Keep track of boarding passes, receipts, and baggage tags - These are often required when making claims for delays, lost items, or missed connections.

3. Check the coverage for luggage, electronics, and accommodation - Travel insurance does cover these but there will be limits and exclusions. So, if you’re travelling with expensive gadgets, it’s wise to add them to your policy. Accommodation is covered mainly under cancellation or delay benefits, while luggage is covered for loss, theft, or damage.

4. Understand what counts as “reasonable” expenses - Insurers won’t reimburse luxury hotels or high-end meals. Emergency cover only applies to practical and reasonable expenses.

5. Contact the insurer before booking any new accommodation - If you’re stranded due to delays or cancellations, calling the insurer first helps avoid disputes or rejected claims later. 

6. Allow for plenty for of time - Allow plenty of time when travelling during the festive season. Airports and transport hubs can be especially busy, and moving with a group often takes longer than expected. If you’re flying overseas, give yourself extra time at those busier airports to make the journey stress‑free.

Data centres are becoming the world’s energy guzzlers

I mentioned earlier that the strong business investment figure in the latest economic growth data was driven by the construction of new data centres.

This is part of a global phenomenon and is powering the electrification of the world. When people talk about the explosion in the use of AI, it’s important to remember that you need data centres to handle all the behind-the-scenes work. It’s an interesting dilemma: trying to bring down global carbon emissions while technology is driving ever-greater energy use.

Look at this chart below for some startling perspective. In 2023, data centres used more energy than the entire country of France. Currently, data centres use as much energy as Japan, and by 2030 they are expected to consume as much energy as India.