David Coleman (Banks, Liberal Party) Share this | Link to this | Hansard source

I want to speak about something that is very important in my electorate and that is the security of the housing market. Housing is the most important asset held in my community, by far, and no doubt in most communities around Australia. It is really, really important to understand what those opposite are proposing. I want to go through it very slowly and very clearly, because it is a very important thing to understand.

Those opposite propose that in the future, from the middle of next year, people who invest in an existing home cannot deduct the cost of interest from that investment. Basically, whereas previously they could reduce their tax based on the cost of interest, in the future they will not be able to do that. That is a tax increase for people who would otherwise be seeking to invest in housing. We know that that is about one-third of all investment in housing, based on ABS data which is very clear on this point.

It is not possible to assert that you can increase a tax and have no impact on investor behaviour. That is just an absurd proposition. To say that you can take away a fundamental principle of Australian taxation law that has been in place for 100 years and it will have absolutely no impact on investor behaviour is plainly absurd. It must have an impact on investor behaviour. So investors will, as investors do, look elsewhere to invest where they are able to deduct those costs of investment—basically in any other category of investment other than existing residential housing. The problem is that every single house in Australia that exists today is, by definition, an existing home. It cannot be a new home if it exists today. So, from the middle of next year, every single home in Australia today would be captured by this rule for any new investment.

Investors will say, 'I don't want to invest in an existing home, because I can't claim interest deductions, but I will look at areas where I can claim interest in other elements of the market.' Obviously that reduces investor demand, and that must result in a reduction in prices. You cannot go from a situation where you have three people showing up to participate in an auction to a situation where you have only two and say that it will not have a negative impact on prices. That is just not possible economically. This is not some small issue. This is not some small asset class that affects a few wealthy investors, as those opposite seem to assert in a sort of fuzzy logic from time to time. This is something that affects anyone in Australia who owns a house—which is about two-thirds of all Australian households.

If you look at the ABS data on the wealth of Australian households, it is incredibly powerful in demonstrating how important this issue is. If you look at the 40th to 60th percentile wealth bracket—the middle 20 per cent of Australian homes—and you look at what the ABS says is their average net wealth, and then you look at the proportion of that that is housing, it is 92 per cent. It is 92 per cent for the middle two deciles of Australian households' wealth. Let us be clear: this is a policy that will have a clear negative impact on an asset class which represents 92 per cent of the net wealth of middle wealth Australians. That is an extraordinary proposition. If you live in Panania in my electorate, where the median house price is $901,000, that is a very significant issue. If you live in Mortdale, where it is just over $1 million, that is a very significant issue, as it is in Revesby at $900,000 or Riverwood at just over $920,000. This is a very significant problem.

It is not possible for those opposite to assert, on the one hand, 'There is a problem with the existing tax system and distortions, therefore we propose to change it', and then on the other hand say, 'and it will have no impact whatsoever on the market.' Those two statements are entirely inconsistent. This is a very dangerous proposal which would have a very significant impact on our most valuable assets, and it is very important that it is well understood and rejected.