Do you ever get the feeling around this place that it does not matter what question is before this chamber or what issue we are discussing, the answer that comes back from the Greens, every time, is ‘More taxes; higher taxes’?
That is their answer to pretty much every problem facing the globe today. It does not matter whether it is climate change, royalties in the mining sector or housing affordability, their policy is: more taxes.
Most people expect that the Greens will support higher taxes, bigger government and more control. That is their right, and that is fine. What people do not always expect is that the Labor Party will share their views on this. On this issue, the Labor Party is joining with the Greens to try to hike up taxes on housing in this country, particularly taxes on those who invest in housing. There are around 1.3 million people in Australia who use some form of negative gearing for housing, and all of those people will face a tax increase if a Labor-Greens government gets back in, in the next term. There is no doubt that whatever the Greens say now will become Labor policy later. If the Labor Party were to get back into government they would need the Greens’ preferences and they would have to do their bidding. The Greens want to put up taxes on housing. This removal of negative gearing is a tax increase, plain and simple. It is something that should be opposed by anybody who wants to see more investment in housing. You do not encourage more investment in an asset by taxing it more. If you tax it more you will get less investment in that particular part of our economy, and that will make our affordability issues even starker and worse.
Senator CANAVAN: A little earlier, Senator Ludlam said that we are going to grandfather it. You cannot grandfather this stuff, because it is capital markets and an asset price. When you are pricing assets you look at what the returns will be over time, not just today—certainly not in the past, because that is not matter—and you look at what the returns will be in the future. That is how you determine an asset price.
The price you pay for a house or shares or any assets will be what you expect the income to be for those assets over time. Under the Greens and the Labor Party, potentially, if you buy a housing asset you will receive lower returns, because you will not have access to the same taxation treatment that other assets do. That will mean—surprise, surprise—the price you receive for that asset will be lower. For those 1.3 million Australians who have invested in housing under existing tax laws, who have taken risks under the current treatment that has been around for decades, they face that negative impact, thanks to the uncertainty that has been created by the Labor and Greens parties. That is not a solution to encourage more investment in housing. If you create uncertainty about the returns that might flow to investment in housing, we will not get more housing.
If we want to bring housing prices down and be serious about trying to help Australians afford their own homes, we need more supplies of land and more supplies of housing. We could do one other thing—there are two blades to the scissors, as always. One blade is supply and the other blade is demand. We could try to hurt demand. We could try to reduce demand for housing. But the only way we could do that, to have a serious impact on housing, would be to have some kind of economic slowdown or—God forbid—a recession. I certainly do not want to see that happen in this country.
While ever we have strong economic or even moderate economic growth in Australia, there will always be slightly increasing demand for housing and that will have a slight upward pressure on housing. May that continue, because I want to see an Australia that has a strong economy. The Labor Party seems to want lower house prices, at the moment, and lower house prices are a recipe for a weaker economy.
We can try to moderate the house-price growth by moderately increasing supply for housing. Here in this chamber and at the federal level of government, we do not control the release of land for housing. It is a state government issue. State governments have, at times, been slow to develop land, particularly at the fringes of cities and in urban consolidation. But it is not our area of expertise and we should try to ‘stick to our knitting’ in Australian government. We always seem to have this preference to stick our fingers into other people’s problems. We have enough problems to deal with here, in the federal parliament, without trying to solve the problems of state parliaments.
The former Rudd Labor government tried to do this. They tried to set up a Major Cities Unit. The tried to put through a COAG housing-supply reform. The tried to establish a National Rental Affordability Scheme. All of those proposals came to nought. Indeed, the National Rental Affordability Scheme was massively scammed and had to be shut down.
Senator McLucas: “That is not true, and you know it!”
I did not believe that the intent of this program was to find housing for overseas university students, but that is what it ended up funding. We should not try to trespass into those areas of the state-government responsibility. When we do, that is when mistakes happen—like what happened with the National Rental Affordability Scheme. The Greens made some grand claims that negative gearing has somehow caused this inflation in house prices over the last decade and, more recently, the surges in Sydney and Melbourne.
Senator Ludlam: “It is capital gains tax!”
Senator Ludlam was very keen to look at the data about rents in the late 1980s in Sydney and compare it to other cities, but he does not want to look at the data of house prices over a longer period, because negative gearing has been around for decades. It is something we have had in our tax system for decades and we have only seen rapidly-increasing house prices in Australia for the last 10 or 15 years. So how can negative gearing be responsible for the increase in house prices when we have not changed anything about negative gearing in the last 10 or 15 years?
Senator Ludlam: “It is since capital gains tax exemptions were introduced!”
I will take that interjection from Senator Ludlam.
One thing he never mentions is that when the capital gains tax changed in 1999—I believe it was with the support of the Labor Party—it was a change from a real base for capital gains taxation to a nominal base for capital gains taxation. So before 1999, you could remove the effect of inflation from your capital gains tax calculations; after 1999, it was based on whatever the capital price increase was with inflation.
It is actually not clear that that change, certainly not in theory, is a change that supports investment in housing. It depends on the rate of inflation relative to the rate of real house price growth. In fact, over time those two things tend to be about 2½ per cent each, of about five per cent growth in housing over time, and it actually is neutral whether you have a nominal basis for capital gains tax or a real basis for capital gains tax. No other country in the world taxes capital gains on a nominal basis at the full rate of income tax for those reasons.
Finally, one thing that goes unremarked in this place is something that I want to raise from this corner of the chamber—that is, if we are serious about looking for lower housing prices and more housing affordability, the one area we should be looking at is outside the city limits because there is an abundant supply of affordable housing and affordable land in our regional and remote areas. Indeed, house prices in regional Queensland, where I am from, tend to be about half what they are in our major cities—or even less than half if you are just looking at Sydney. What we can do in this chamber—we cannot release land, but we can create policies that drive growth and opportunities and jobs in those regional areas to attract people to those areas. We cannot force people, and I do not want to force people, to move to Townsville or Cairns or Mackay—although the standard of living in those places is much better than in Sydney, in my humble view—but we can encourage them by creating the jobs and the opportunities that will encourage them to move. That will do two things: it will reduce the demand for housing in our major cities and help relieve the price pressure there, and it will support construction and growth and development in our regional areas. This will improve housing affordability across the board. That is why one of the best solutions to our housing affordability problems is regional development. I believe that the Abbott-Truss government will soon release its Northern Australia white paper, which will try to supercharge development in those areas that I know are dear to Senator McLucas as well—like Cairns, Townsville, Mackay and Rockhampton—and that is one solution to our housing affordability issues.
