Andrew Laming (Bowman, Liberal Party) Share this | Link to this | Hansard source

I congratulate the member for Fremantle on an excellent speech in a 20-minute grievance debate that she managed to deliver eloquently in 10. Congratulations.

I want to turn to a more domestic concern for many Australians, and that is the issue of homeownership, which has been thrust into the limelight by debate around negative gearing. Every nation should encourage the major political parties to debate changes to existing tax systems. Most of us would also understand that there are no simple solutions, that there is no low-hanging fruit anymore as far as tax reform goes and that every step is a difficult and challenging step, both technically and from the point of view of selling those changes to the people. But I think there was a real sense of undue haste from the opposition when the Leader of the Opposition, Bill Shorten, announced changes to negative gearing. It did shock everyone, I think, when that announcement came. While it suddenly meant that the opposition had some realistic tax propositions on the table, the effort to release that policy when they thought the timing was right politically has now been exposed as probably being a world of pain for the opposition, as they endeavour to defend what I think is quite a coarse policy which will have far more losers than winners.

It is probably worth starting, though, with a bit of Australian history. As a nation of settlers, we found distant plains and plenty of land, something that our forefathers in Europe did not necessarily enjoy, and the sense of homeownership was really pre-eminent and central to being Australians. Even to this day, there is a high level of homeownership and extraordinary effort to go into quite a lot of leverage in order to do so. You could say that, on an OECD comparison, we are extraordinarily focused on owning our own homes. This raises the second issue: as a nation, where do we invest our surpluses? As you know, right across the investment horizon, you have the option of putting your money into a business, putting your money into the share market and buying a range of financial products, or, of course, putting your money, as another form of saving, into property—or, obviously, you can be engaged in consumption. I think the job of the government is to have a relatively flat horizon that does not pick winners or unnecessarily distort investment choices into particular sectors, but, over time, politically in Australia we have been very favourable towards investment in property and residential property in general. That, combined with a new phenomenon, which is the lack of release of satisfactory amounts of land around the fringes of our extremely dispersed and sparsely populated cities, means that we have had extraordinarily high property prices compared to income. This has occurred because of the lack of release of peripheral land, a failure to move into high-rise for a range of reasons, our absolute love of having our own plot of dirt, and political encouragement to invest in property.

What does that all mean? It means that, if we are going to be transitioning Australia's economy, we will need to think very hard about whether we want to continue to encourage the investment. I will be a little generalist by saying that, if we are going to invest in GDP-growing and growth sectors, we need Australians to be more sophisticated about their investments. We need Australians to be saying, 'I want to put my money and my capital behind businesses having a go at growing the economy.' We need to look with equanimity across property, business and the share market, but at the moment that is not happening. We want Australians to be saying, 'I want to have a go and take a risk. I want to have a look at higher returns, and that might mean some risk.' Those risks of putting money where we are going to have a go and grow our GDP are actually what moves us, among a pack of wealthy nations, from the middle to the front.

Everyone buying property does not do that. Everyone buying property parks their resources and we simply move along an escalator and sell, take the dividend and, basically, pass it on to our children or consume it. If we are going to build the economy, we need investment in those high-growth sectors that have a much more significant return that value-add to our commodities or create something that other people want. At the moment that is true—people want to invest in our property, and we are managing international demand for that. But we have foreign capital that wants to come in and invest in our industry, and if we wish to expropriate that completely we can have foreign entities running most of Australia's economy. Of course, Australians do not want that—so one of the first steps that we have to address is the still tax-favoured status of significant investment in property.

Before this sounds too controversial and I get figuratively stoned in this chamber, I encourage every Australian to invest in property—absolutely—but we need to be looking at the more sophisticated investors who are putting huge amounts of money into property and ask ourselves a very simple question: is that in the nation's public interest? Once they own 10 properties, would I rather see a sophisticated investor feeling like they can be treated equally if they go and invest in a start-up, or invest in existing industry to make it larger, or invest in some part of the share market that is going to grow our economy? I think the answer is yes. To get those sophisticated investors who have this range of options, we need to be encouraging that where possible.

What we do not want to be doing is the opposite. That seems to be Labor's approach—to basically take two-thirds of the property market and say you cannot negatively gear in it, because that will create massive distortions, some of which I want to address today. The case for Labor's ending of negative gearing to existing residential property is quite simple: they want to make it easier for first home owners in particular to be able to get their foothold in the property market. I need to dispel this right from the start: whether or not this makes much difference to residential property prices, any change has a winner and a loser. Let's not forget that. But, secondly, and with the greatest of respect, when first home owners go out to buy a property they are not looking at the price of the home. They have gone to a bank and have been financed, and then they go out and shop to within their limit. They buy the property that the bank allows them to buy. First home owners are way more worried about accruing a deposit, because they want to get into the market now, not in two years time, when it is too late. For them, having a first home owners' grant that contributes to their deposit and gets them into the market two years earlier, while they already have an income, is a far more profitable idea than some very vague promise that property prices might fall by a few per cent. Those that are way more sensitive to the value of their existing properties are home sellers—they are way more concerned about the value of their property. First home buyers just know that it is incredibly expensive. From where they are sitting in their first few years of work, they cannot possibly imagine owning that much money and they just want to get their foothold in a place that they can own. The rest of it takes care of itself over a long-term loan period with their financier.

Those who worry about prices are the sellers. They are the retirees who know they need to sell for a certain price to be able to pay out their loan; to be able to move from Sydney, where they are living, to near their children in Brisbane, where they want to retire; and to have enough money to get into their aged-care facility. These people are exquisitely sensitive to selling price. Saying, 'Property prices will all go down by about five per cent, making it a little easier,' can have a crushing impact on a retiring couple who are hoping to move into an aged-care facility and fund a bond. These sorts of elements are critical for them because they do not have many options to change their income settings over a life cycle. So these impacts are far worse. I talk about there being equal numbers of winners and losers—the losers are hurt so much more.

In talking about this notion of a new or an existing property, to say that we will exclude existing properties is like saying that the minute you drive a car out of the car yard its value plummets because you can no longer negatively gear once you have put the keys in the ignition and driven it out of the driveway. This will have extraordinary distortions that are incredibly hard to model. These changes have been made before in Australia and have been made occasionally around the world, and the results are mixed. Paradoxically, in Australia we saw rent increases in, I think, Sydney and Perth. It is very, very hard to explain, but let me start by saying that, if you limit investors, who are about one-third of the market, and tell them they can only move into the 10 per cent of new dwellings that are on sale at any one time, because the rest of the properties on sale are existing, what you will have is a crush for inner-city apartments. There is no doubt about that. Surpluses will be captured by inner-city developers who will be faced with wonderful demand from investors who will say, 'The only way I can get a tax deduction is by buying one of those up there.' That has its problems because people will pay much larger sums for far less in apartments, and they are trapped in that position then because they cannot negative gear it to the next buyer. The next buyer is the one who will not come along, because that is now an asset that they do not want to buy, so you are left holding that stock for a long time.

Anyone who is a grandfathered investor—and that seems like a nice political solution; you do not offended anyone right now—will never sell their properties. They will sit on them forever. Why would they sell them? So suddenly you have all of those investors saying, 'There's no point in buying anything else because anything else I have will cost me tens of thousands of dollars in non-recognised deductions.' These distortions are yet to be fully understood.

There are those who wish to get onto greenfield estates. Most of us that I recognise, apart from the Deputy Speaker, live in outer metropolitan major cities, and you know that release of land out there is in many ways significantly rationed. We do not have enough opportunities to release land to meet that demand for new housing. So, whether you are buying or selling, whether it is new or existing, and whether you are hoping to get rent or not, there are massive concerns if you slice out one part of property and make it ineligible for negative gearing. I urge the opposition to reconsider or they will be in a world of pain over the next few months. And I urge the coalition to do something far more sensitive and sensible to look after homeowners and investors.