Adam Bandt (Melbourne, Australian Greens) Share this | Link to this | Hansard source

Young people are getting screwed and the government does not seem to care. That is especially the case when you look at one of the most basic of human rights, the right to have shelter and a roof over your head. We now have the situation where many young people cannot even afford to rent a place near where they work or study let alone to buy one. When so many people are being locked out of the housing market because of tax rules that privilege the people who are buying their second, third or fourth home and who get a government handout, while people buying their first get nothing except a kick in the teeth and higher prices, and with so many young people across the country screaming and their parents looking at them and thinking, 'It was not like that when I bought my first house,' you would think they might do something about it. The government conducted an inquiry and said, 'Let's hear from the best and brightest about a number of matters facing the economy; let's have people come up to us and tell us about Australia's economic situation and what the problems are, and what we might need to do to fix things.' The government says, 'There is nothing that needs to be done'—no recommendations, not one recommendation to fix the problem.

It is not just anecdotal or that people are feeling something is different. If you look at the numbers, something is actually happening. Back in 1990, an average house was six times a young person's income. By 2013, it had risen to 12 times their annual income. Something is going on in Australia. In 1994, young households had nearly 10 per cent of the country's wealth. By 2014, this had halved, to just over five per cent. Young people are getting screwed. They have less of a share of the national pie, and house prices are further and further out of reach.

Why is this? Well, we have this incredible lurk in Australia—that pretty much exists nowhere else around the world—that means that, if you are a young person going to an auction, trying to buy a house, someone else can come along who has already broken into the property market, or has a bit more money than you, and they can bid the price up and up and up and up, knowing that if they buy that house for more than it might be worth, they can rent it out and write it off as tax loss. So they do not even want to live in the house; they just want to write it off as a tax loss.

Then the sting in the tail comes because, in a few years, they can flip that house and sell it, and get a tax break on that as well. In other words, if you are one of the lucky few in this country who already has wealth and you hold it in the form of assets—as opposed to the rest of us who earn money from working, wage earners—if you hold it in shares or property, when you sell it, you get 50 per cent of your tax back; you get a 50 per cent tax break. For someone who works just as pay-as-you-go income, you get tax taken out; you have no say in it. You have to pay your tax. But if you are at the top and you have a pile of shares or houses and you sell those, you get a tax break from the government. What does that do? It does a couple of things. One is it makes it nigh on impossible for young people, who have done the right thing, finished their degrees or gone to TAFE—who end up with a mountain of debt to show for it—but they do that. They go and look for jobs, many of which just are not there in the way that they used to be. They get a job and they might only be on a short-term contract. We now have the ridiculous situation where people who graduate as teachers get put on one-year contracts, as if we were potentially going to sell off the school tomorrow and there might be a downturn in business. What rubbish! So you have people who have done the right thing and are graduating or leaving school and now finding themselves faced with insecure work, jobs that are not there and then massively high housing prices that are out of reach and, in Australian terms, well out of whack.

It is not just impacting on young people and making their lives incredibly difficult in a way that we have not seen before in this country. We are not just at a tipping point where those people who are in power and those who have wealth are about to leave a world that is worse off for the young people who come after them than the one that they inherited; this is a broader problem as well that threatens the economy.

It is astounding that this report, apart from our standing report that we put in, turns a blind eye to some pretty fundamental facts. Back in 1997 household liability—that is, the debt that households have—in Australia was about the same as their disposable income. Fast forward to 2015 and household debt was about twice a household's disposable income. The government talks about getting rid of debt. You can talk all you like about government debt, but what about the debt that individuals and households have? It is now twice as big as it was in 1996. That is what is happening under this government. We can talk about getting rid of the debt burden, but it is being shoved onto families and young people.

Now, if you as a young person are lucky enough to outbid one of those investors at an auction and get a house, you will end up with a mortgage that is so many times bigger than it would have been 20 or 30 years ago and you will find yourself struggling under a mountain of debt. You can add to that the debt you might have because you have graduated from university or TAFE or done a training course. Perhaps you have been unlucky enough to be suckered into one of those training courses from a private provider that cost you money but which you do not get any qualifications out of. Whatever the situation, people are now finding themselves facing an economic reality they never had to face before in this society. People are increasingly at breaking point. People are at breaking point and saying, 'What is the point? I've done the right thing and now I cannot find a place to rent near where I work or study, and home ownership is something that I think is never even going to happen for me.'

You would think, faced with this, the government might want to take it seriously. You would think that this mountain of household debt that is now much, much bigger in Australia than disposable income would be cause for concern. You would think that the committee that is charged with inquiring into the economy and looking at the banks might have something to say about it. But what we have learnt is that the banks are enjoying record-high profits in this country and, in part, it is because mortgages are getting bigger and bigger. So the banks make a massive amount of money out of the fact that housing is unaffordable for people. Everyone from the government to the banks to the people who already have a lot of money seem to benefit out of this, but the people who lose out are predominantly young people or people who might not have ongoing work but are forced to go from a month contract to a year contract. They are the ones who front up to a bank manager and say, 'I'd like to buy a house,' and the bank manager says to them, 'I'm sorry, but it says here that you have been on a series of short-term contracts for the last few years. I don't think that is secure enough. I'm not going to write you a loan.' That is who is losing out. We have a choice here.

A division having been called in the House of Representatives—

Sitting suspended from 10:39 to 10:53

There is an answer to this, which is to get rid of the tax breaks that cost the budget money, money that could otherwise go into schools, hospitals and building renewable energy. Get rid of those tax breaks that at the moment are going overwhelmingly to people who already have houses and who already have a lot of money and a lot of wealth. Get rid of those, and you do two things. You increase the amount of money that is available for government to spend on the services that people expect, so it means you do not have to try to cut people's paid parental leave to try to balance the budget; instead, you are taking it from the top end of town. Of course, they are the Liberal Party's base. They are the ones who donate to the Liberal Party's campaigns, so the government do not want to do it. But sometimes in government you have to have the guts to stand up and say, 'These tax breaks—we cannot afford them anymore.'

The second thing it would do is help put housing back within the reach of young people because, instead of the government spending money to help people buy their second, third or fourth home, you would have money available to help people buy their first home.

I was very proud to be part of the committee and issue a dissenting report that called out this report for the charade that it is—an attempt to cover up and ignore one of the biggest problems in Australian society. It is staring everyone in the face. If the government want to know why they are in trouble, perhaps they should look at young people being locked out of the housing market.

Craig Kelly (Hughes, Liberal Party) Share this | Link to this | Hansard source

It is very hard to find much to agree with in the member for Melbourne's contribution, but I will agree with him that housing affordability is an issue, particularly in our major cities. There are recent numbers from a report at the end of 2016. In New South Wales, in Sydney, we had a median house price of $880,000. By contrast, in Tasmania the median house price is $320,000.

Let us just assume that the member for Melbourne is correct, and it is negative gearing that is the problem. Why isn't negative gearing a problem in Tasmania? Why is it a problem in one city and not a problem in another city? Why is negative gearing not a problem in our regional and country areas? You can buy a three- or four-bedroom house in many of the regional towns in New South Wales for $200,000, $300,000 or $400,000. Why is negative gearing not a problem there, but it is a problem in Sydney?

It is simple: negative gearing is not the problem. The problem is a simple basis of supply and demand. The member for Melbourne talked about how, back in 1994, housing affordability was not a problem and how, back in 1997, it was so much less costly. If you look at the numbers, it is easy to see why. It is because back in 1994 and 1997 we actually had a surplus of houses in this country, but since then we have had a deficit in the number of houses. We simply have not had constructed the number of houses needed to keep up with demand.

What has actually been driving demand? The member for Melbourne talked about 1994 and 1997. In those years—in fact, from the 1980s up to 2005—we had a net migration rate in this country of a little over 100,000 people. So, if we were having 100,000 new migrants come into this country—and I welcome every single one of them—we had to make sure that we had the housing supply to match that net migration rate, and we were able to do that throughout the 1990s. But when we got to 2006, without going into the reasons, we in this country decided that we would increase our net migration intake. We increased it from an average of a little over 100,000 to, in the last decade, an average of 250,000 people as a net migration rate. If we have a 250,000 net migration rate in this country but we do not have that supply matching up, what does one think will happen, especially when that migration increase is mainly in the cities of Sydney and Melbourne? It is like a game of reverse musical chairs, where you do not have enough chairs out to start with, you have people standing up, you bring more people in to play the game and you only put a few more chairs out. That is what has been happening and that is what has been forcing prices up year after year after year in our major capital cities. The member for Melbourne is so wrong in his analysis. He is putting the cart before the horse. If we are going to address the issue of housing affordability in this country, we must address those issues of demand and supply. If we are going to have net migration rates of a quarter of a million people settling in this country and have our population increasing above our natural increase, we have to make sure that we have the housing supply that not only catches up with the past deficit but actually meets that increase. That is the only way we are going to get housing affordability under control.

As far as the member for Melbourne's misguided attack on negative gearing, I am not even sure he actually understands the principles of what it is. If you are investing in any income-producing asset, the cost of your interest is an expense that you leverage off against the income from that asset to work out what your taxable income is. This is not surprising. This is a fundamental, basic business principle of investing. To suggest that we should wipe out negative gearing in this way will cause many distortions throughout the economy. Investors can invest in commercial property; they can invest in shares; they come invest in residential housing; they can invest in industrial property—there are so many areas that they can invest in—and the cost of the interest must be a deductible expense.

This is not some tax rort, as the member for Melbourne talked about. I would hope that the members of the opposition and also the Greens would understand the fundamental drivers of what is causing our problem with housing affordability in this nation. It has nothing to do with negative gearing. It is all about supply and demand factors. So we need to look at our migration rates, and, whatever those migration rates are, we need to make sure that our housing supply stocks are increasing by the same proportional rate. According to the ANZ analysis, we still have a shortage of over 200,000 dwellings in this country. We are 200,000 dwellings short that we need to catch up on. We are planning to have an net migration intake next year of a quarter of a million people. We must increase the supply—and that comes back to what our state governments and our local councils do.

But there are also some things that we can do federally. We need to have another look at what we can do in this country about decentralisation. In the state of New South Wales, which has about 7½ million people, it is ridiculous to try to cram five million people into Sydney. We need an active program to make it viable for young people to relocate to country areas. One place that can start is with government. There are very few reasons why many government departments should be located in the Sydney CBD. We should go through every single government department and ask them what the basis is for them needing to be in the Sydney CBD. If there is no good reason for that, the federal government should lead the way and relocate those government departments to our regional areas and country areas.

I am sure that someone who lives in the Sydney suburbs may have an hour's trip in and out of the Sydney CBD every day. They could spend over two hours commuting. They could still have an average house in the suburbs that is worth $1.2 million. If those people were given the option to relocate somewhere like Nowra, Ulladulla or Batemans Bay, where they could buy a house with a tennis court and a swimming pool five minutes from their office and five minutes from the beach, and put half a million dollars in their pocket, I think there would be a stampede. So that is one of the main things that we can do in the federal government.

I would call on Labor and the Greens to get off this ridiculous hobbyhorse that they have of attacking the fundamental principle that an interest cost of an income-bearing investment is somehow a tax rort. It is not. If that policy is enacted, we have seen it before; we have seen exactly what happened before. We know exactly what happened when Paul Keating thought it was a wonderful idea to get rid of negative gearing. It caused distortions. It caused a disaster. It caused rents to go through the roof. And what happened? Paul Keating then realised he had made a mistake, and he reversed it. And yet we have people on the other side, ignorant of history, unable to understand the fundamental problem, who want to repeat the same mistake without actually doing anything to tackle the fundamental problem. Talking like that and rabbiting about negative gearing takes our eye off the fundamental problem, and that is fixing the imbalances between supply and demand. (Time expired)

Sharon Claydon (Newcastle, Australian Labor Party) Share this | Link to this | Hansard source

It gives me great pleasure to rise today to speak on the Report on the inquiry into home ownership, by the Standing Committee on Economics, albeit that it is somewhat challenging to listen to some arguments from members opposite. I think this is an important opportunity for me and indeed many of my colleagues to correct the record, because, if ever there was a report that proves just how desperately out of touch this government is, it is the one before us today. This is the report of a committee that looked into one of the most pressing social problems and issues facing our country: the declining rate of home ownership. It came up with precisely no recommendations to redress that situation. What a complete waste of government time, resources, committee members and indeed those people who took time and acted in good faith to make submissions and appear before the committee with well-considered arguments and proposals for a way forward but were completely dismissed. It would be comic if it were not so tragic.

The committee heard, for example, that the median house price in Sydney now is well over $1 million. Of course, that is no surprise to anybody living within the Sydney CBD and the surrounding Greater Sydney region. The committee also heard, of course, that the home ownership rates for people under 55 years of age now and for Australians on low incomes are dropping dramatically. These figures are on a trajectory that should be deeply worrying to this government. Indeed, the committee was told time and time again that a generation of young Australians is now facing a life of renting after being effectively locked out of the market entirely. And yet the committee found no reason to propose a single recommendation on how to redress this situation.

I have seen firsthand the impacts of these skyrocketing prices in my home city of Newcastle. In the past year, house prices in the inner city areas of Newcastle have climbed 7.7 per cent to nearly $700,000. That is not the median price of $1 million of Sydney but is rapidly climbing in an area that was always a much more affordable option than Sydney. To see those prices ramping up quickly over time is a really worrying trend. This means that prospective home buyers in Newcastle have to cobble together now an extra $40,000 just to get a foot in the market. And there is no sign of respite for 2017. In fact, the NAB predicts that Newcastle property prices will again outperform the broader market as vast numbers of people get priced out and indeed pushed out of Sydney and Melbourne. Many Novocastrians have watched in dismay as month by month, year by year, the long-held dream of home ownership slips away, further out of their grasp.

Too often, young Novocastrians tell me about the anxiety and, indeed, deep sense of hopelessness that they feel as they try desperately to compete with investors to secure a home. And they are not alone. The situation is being replicated in capital cities and large towns right across the country. The complete lack of recommendations in this report is not just shoddy work; it is a slap in the face to many thousands of Australians who are resigning themselves to the possibility that they will never own their own home. As it is so often the case, the Liberals will prefer to blame the victim instead. Joe Hockey's advice to young people desperately wanting to own their own home was that they needed to get a good job. Never mind that those jobs simply are not there for many young people, and even the high-income earners are struggling to pay off the average mortgage in many cities these days. Deputy Prime Minister Barnaby Joyce told would-be home buyers that they do not deserve or, indeed, should not really expect to be living in capital cities. They should just give up on that notion of living in a capital city and instead move to regional Australia with little regard, of course, to people whose families, work and lives are based there in Sydney or Melbourne. But it was perhaps the advice of the Prime Minister himself that really showed just how out of touch those opposite are when he suggested that young people just needed to get themselves some rich parents to subsidise their purchase. Unbelievable!

And it would not be overstating the situation to say that we have indeed reached crisis point. Both state and federal Liberal leaders have finally conceded that we now have an issue. This has only happened, somewhat belatedly, indeed the last month for the Prime Minister, but it is a welcome revelation. Yet, sadly, the Prime Minister is still belligerently refusing to admit that the problem is, in part, due to the excessive federal government tax concessions for property investors and understanding that that is driving the problem in the first place. The federal government spends as much as $10 billion a year on negative gearing and capital gains tax concessions for property investors. Jaw-droppingly, that is more than it spends on child care and higher education combined. It is an astonishing fact and I think most Australians would be horrified to understand the size of these tax concessions. Less than 10 per cent of Australians are benefitting from those tax concessions—I might add—and the 90 per cent that do not get the benefit are being forced to pay through ballooning property prices and to withstand insecure housing and mounting federal debt.

These expensive tax breaks create a perverse incentive for property investors to drive up house prices by chasing loss-making deals, safe in the knowledge that they will be underwritten by the Commonwealth. Not only is this unfair and a phenomenal waste of public money, but it goes nowhere near achieving its stated aim of increasing the housing supply. In fact, only seven per cent of negative gearing goes toward new properties—a stark example of a policy that has gone terribly wrong and is no longer fit for purpose. While those with the vested interest in retaining those taxpayer-funded rivers of gold like to talk about the mum and dad investors that will be hurt if the tax concessions are removed, the reality, of course, is that half the benefits of these excessive tax breaks go to the richest 10 per cent of the population. And people on taxable incomes of over $100,000 a year account for 80 per cent of the total debt for investor housing.

Another myth that gets rolled out to justify retaining negative gearing is that removing it will drive rents up. We heard that from the member just preceding me. In fact, after accounting for inflation we know that rents actually fell or flatlined in a number of cities when it was removed for a short period of time in the 1980s. As is often the case, the Turnbull government has chosen to dedicate precious taxpayers' money to those who do not need it at the expense of those who cannot afford it. They have chosen to back the landlords to buy their fifth or sixth investment property at the expense of would-be home owners desperate to secure their first home. Last week, the Commonwealth Bank warned that investors will continue to be a significant influence on house prices in 2017 and onwards until federal tax laws favouring leveraged housing investment are reformed.

It is a welcome sign that the government have admitted there is a problem, but we desperately need them to get on board and reform these outrageous tax concessions that are rendering many Australians into insecure, unaffordable housing for the rest of their lives.

John Alexander (Bennelong, Liberal Party) Share this | Link to this | Hansard source

Firstly, I would like to say that I agree with much of what my friend the member for Newcastle has said—not all, but much. As Chair of the Standing Committee on Economics when this inquiry began, I know that it was called out of concern for two issues: the volatility in the housing market, which is our biggest asset class; and opportunities for home owners to get into the market. There was much evidence put forward and certain conclusions have been drawn. I, like the member for Newcastle, regret that there was not a stronger set of recommendations, but maybe the recommendations will come in the form of policy.

Home ownership is now one of the most pressing issues facing communities today and, potentially, future generations. In the last 40 years, Australia has been moving from a country that celebrated the highest rate of home ownership to a country of lords: landlords. While both investors and home owners fill vital niches in this market, investors currently have an unfair advantage when buying a property, and that advantage is maintained throughout their period of ownership. If this trend is allowed to continue, fewer people will own more property, funded by those who with every year will become less able ever to have a stake in Australia. This group of aspirational home owners and their parents are rightly becoming more disenchanted at the inequity of the current tax system that so advantages the investor over those forced to rent. We need to develop a strategy of transition that transfers some of the advantages of the investor to the first home buyer.

As the chair of this committee when this inquiry was instated, I was very pleased that the Treasurer of the day agreed that these were pressing issues and set out an inquiry with such wide parameters, which allowed us to look at every nook and cranny of this complex policy area. There were many insights that this inquiry uncovered. Most telling of all is the intricate nature of Australian housing policy. We know there are no easy answers to the questions that this inquiry produced. Anybody who says it is simply a matter of cutting a tax break or building more homes does not fully grasp the details of the area. Of great concern is the level of volatility that has developed. Imprudent action could burst the bubble, with disastrous results. The transition to sounder policy must be managed so as to protect government revenues both during the period of transition and post-transition.

I took the following eight points from the inquiry: (1) that record low interest rates had a profound impact on the housing market; (2) that there is a dominance of investors over owner-occupiers; (3) opportunistic speculative investment is driving prices and volatility; (4) new, low-wage investors are entering the market with little capacity to fund interest rate rises or survive a weakening rental market; (5) there are investors with highly geared multiple properties also vulnerable to the same market factors; (6) supply is not the only factor in providing housing opportunities for first home buyers; (7) APRA's recommendation to restrict investor borrowing to 80 per cent had an immediate effect on the market; and (8) the RBA's justification for the previous interest rate was out of concern for an overcorrection and to assist homebuyers.

Much has been made about the final report presented by this committee. Many people are disappointed that no recommendations came from the large amounts of evidence that was provided to the inquiry. However, this evidence can now provide a perfect platform for all parties to go away and develop a suite of policies to even the playing field between home buyers and investors. Certainly listening in to the evidence presented has formulated a suite of policies in my mind and how we can fix this market. Firstly, we heard evidence from APRA during this inquiry that they shared concerns about the volatility of the market. The inquiry heard that when APRA pressured the banks in 2015 to reduce their loan to value ratio requirements and cap lending growth for investment loans—a measure to manage lender risk in an overheated market—investor appetite immediately cooled. This measure should be investigated for further development and refinement. As the RBA's charter obligates a responsibility to maintain the economic prosperity for the Australian people, it now appears a logical step would be for these two regulators to work cooperatively to stabilise the market. Through consultation with RBA and APRA, there could be a pre-emptive calibration to the levels of lending to investors that could add a powerful control mechanism to housing inflation. Regulators should be mandated to maintain housing inflation within a prescribed range. This would allow for predictable and timely moderation of the housing sector through macro prudential tools.

There is a lot of discussion about supply in this market. While I would contest that it is not the panacea to the problem, it will certainly have an impact on house prices. It is critical that owner-occupiers are given advantages before the new supply goes on to the market. As the system stands at the moment, new dwellings will simply be snapped up by the investor as they have in recent years. As I have said before, it is a little like, Madam Deputy Speaker, if you were to play Roger Federer you would lose and if you were to play him 1,000 times, you would lose 1,000 times. That is what it is like for the home buyer when he or she is forced to play against an investor with these rules.

Following this debate, this chamber will host the debate on the inquiry that I chaired after leaving the Economics Committee. I would recommend anyone interested in the supply question to observe it or read my speech from yesterday. On the surface, it discusses the value capture funding model and the great opportunities that this has for funding high-speed rail on the eastern seaboard. However, the key purpose of this is the opening up of regions and the potential for housing supply presented by a strategic decentralisation. New cities on a fast line, 30 minutes or so out of a Sydney or a Melbourne could provide homes for millions of people. Contrary to popular belief, high-speed rail's prime purpose is not an alternate mode of transport between capitals; rather it is a tool to effect dynamic regional growth, to rebalance our settlement as land near regional stations will then compete with the most expensive land in the world—Sydney, the second most expensive city and Melbourne, the sixth most expensive city in the world. High-speed rail has the capability to provide an abundant supply of affordable housing for many generations to come. It will open up our regions and provide the space for this housing stock with the interconnections with other towns and economic hubs that is currently lacking in our suburbs.

Finally, here is a novel proposal to help people into the property ladder and save our superannuation system. If we extended superannuation to be used for purchase of an owner-occupier home rather than the existing limitation to the purchase of investment properties through self-managed funds, we would enable first-home buyers greater access into the marketplace. The proportion of the house purchased through superannuation must remain the property of the superannuation fund. In this way, using superannuation to purchase a home changes the components of the superannuation fund without reducing its net balance. Individuals should have the ability to borrow as much from the superannuation fund as possible, conditional on the home being retained as part of the superannuation fund. Selling the superannuation funded home before the superannuation fund matures will require proceeds from that sale to pay off the original super borrower. This policy is in place to ensure the superannuation fund is preserved as much as possible for retirement and does not become another source of credit. This policy does not compromise the superannuation's sole objective of providing a reasonable standard of living in retirement, as the value of the property is retained as part of the fund. This will enable first home buyers significant assistance in accessing the property market without compromising retirement savings.

These are my thoughts on how to remedy the housing affordability crisis, but I would welcome a thoughtful, nuanced discussion in this country to form a broad policy to help people get into the market, a policy that gives— (Time expired)

Pat Conroy (Shortland, Australian Labor Party) Share this | Link to this | Hansard source

I want to compliment the member for Bennelong for his passion on this issue. The member for Bennelong was the chair of the House of Representatives Standing Committee on Economics while this committee was being undertaken, and I was a member, and I thought that it was a great pity that the government chose not to continue with the member for Bennelong's chairmanship of that committee. He did a great job and, while I do not agree with all his solutions, I admire his passion and his commitment to solving what is one of the greatest challenges in our society. Thank you, Member for Bennelong.

There can be no doubt that there is a massively increasing level of unaffordability in our housing market. The ratio of housing prices to average household disposable income has moved from around three in the 1990s to over five. This shift has coincided with a very significant change to our taxation system that I will canvass a bit later in the speech.

The increase in unaffordability of housing has been much higher in the large capital cities. I regret to say that Sydney, Melbourne, Adelaide, Brisbane and Perth are now in the top 20 most unaffordable housing markets in the world, with Sydney the second most unaffordable and Melbourne the fifth. We have seen in the same period a big shift to an investor share in the housing market. In 1985, just nine per cent of home loans by total value were held by investors. It is now 43 per cent. At the same time, we have seen a big decline in first home ownership. In the second half of the 1990s, the average share of first home buyers in the share of total home buyers was 22 per cent. Now it is under 14 per cent. And we have seen a significant fall in those aged under 34 being able to buy a home. So we have seen declining first home ownership and younger people being shut out of the market.

At the same time, we have seen low- and middle-income earners also being shut out. Between 2002 and 2012, we saw the share of middle-income earners able to buy their home decline by 19 per cent, and for low-income earners there has been a 15 per cent fall. This has been associated with increasing inequality in our society and the rise of insecure work making it much harder for low- and middle-income Australians to buy their first home. At the same time, we have seen a very significant fall in the share of housing loans going to new housing stock. In 1992, 18 per cent of home loans were for new housing. It is now around six per cent. This is despite a very big increase in the investor share of home loans, as I alluded to before.

So we have seen increasing housing unaffordability and young people, poor people and first home buyers being shut out of the market at the same time as we have seen a very big increase in investor home loans. These trends, which are very worrying, principally have been driven by two factors. The first is the normalisation of low inflation and hence low interest rates and the decision of Peter Costello and John Howard, some of the laziest economic managers we have ever seen in this country, to introduce a massive 50 per cent discount on the capital gains tax.

The interaction of negative gearing and the 1999 capital gains tax discount has driven the rise in housing unaffordability and has shut generations out of the housing market. Before 1999, on average rental income in this country was positive—that is, housing investors paid tax because they made a profit on their rental properties. In 1999-2000, there was about $150 million of rental income that was positive and paid tax.

Since that change in capital gains tax, we have seen a massive collapse in net rental income. Each year recently, rental losses have run between $5 billion and $8 billion—that is, landlords in this country have claimed, in net terms, between $5 billion and $8 billion of rental losses that then reduce their taxable income against other income. Expenses claimed as a percentage of gross rental yield have increased from 98 per cent in 1999 to 123 per cent. Each landlord, on average, is claiming $5 in expenses for every $4 of gross rental income they are receiving, and that is a very worrying trend.

And why is this occurring? It is because of the negative gearing for taxation treatment interacting with the capital gains. So what we see now is a very large number of landlords happy to lose money on their annual returns from their rental property; they are speculating that they will get a significant capital gain that they will then receive a 50 per cent discount on when they sell that property. The Reserve Bank, in its testimony at our hearings in Sydney, has said that there is no doubt this is a factor in the massive price explosion post-1999 and that there was a case for reviewing the treatment of negative gearing and interaction with capital gains tax. Most experts in this sector not in the pay of the property sector agree with this analysis. You just have to look at the fact that rental yields, on average, are well below share yields. If a rational investor saw a gap between how much they would make off their rental property and how much off investing in shares, they would flow to shares as the better asset class. They are not doing that because of the capital gains tax discount and their long-term speculation.

There is no economic justification to privilege capital gains over other income streams. There is no economic justification. They are all forms of income. They should all be treated equally. It demonstrates the in-built class bias of the conservatives in this country. This is the real class war, where they reward the owners of capital over workers who receive income, in general, for their labour, rather than as a capital gain. And who benefits from this? The discount on capital gains tax costs taxpayers $4 billion a year, and 75 per cent of that benefit goes to the top 10 per cent of income earners—75 per cent to the top 10 per cent of income earners. Negative gearing costs $3.7 billion a year, and 50 per cent of that goes to the top 20 per cent of income earners. This is clearly unaffordable and massively inequitable.

By contrast, Labor has developed a sensible policy to tackle housing unaffordability, principally by limiting negative gearing to new housing stock. Investors should be welcome to negatively gear if it increases the housing supply by investing in new housing. And we will reduce the capital gains tax discount to 25 per cent, which effectively deals with real capital gains, rather than nominal capital gains through inflation. Importantly, we will grandfather existing investments so we do not change the tax treatment for people who have made decisions already. This is a sensible policy directed at tackling housing unaffordability, unlike the view of the Liberal coalition government.

I would like to deal with a few myths that have been perpetuated in this debate—firstly, that the negative gearing and capital gains tax concessions are driving new housing supply. This is patently wrong. As we have seen, new housing has fallen from 18 per cent of home loans to six per cent. Secondly, the myth that the experience of the mid-1980s, when negative gearing was abolished, somehow lead to massive rent rises is absolutely wrong. Treasury, in their evidence to our committee, confirmed that there was no case for someone to make that conclusion. Rents went up in Sydney and Perth because of the finance and mining boom; rents fell in Brisbane, Melbourne and Adelaide. Rental price increases roughly tracked the general price increase. Thirdly, the myth that the benefits of negatively gearing disproportionately go to low-income earners is patently wrong. I have already outlined the distributional benefit, and the RBA testified in our hearings that most of the people, if not all of the people, with very low taxable income who claim negative gearing and capital gains tax discounts are actually wealthy retirees who have most of their income exempt due to another decision from Peter Costello.

The Liberals' response to housing unaffordability has been a joke. Except for some voices in the wilderness, like the member for Bennelong, they have been silent or have come up with ridiculous propositions. We saw the Treasurer highlight excesses in negative gearing but then get rolled in cabinet by the Prime Minister, in a vain attempt to gain a petty political advantage from this. Their solutions have ranged from telling workers to get a good job to having wealthy parents, or the most ridiculous of all, the Deputy Prime Minister saying people should move to Tamworth to own a new home. This is wrong. It demonstrates how economically illiterate the coalition is on this matter. Just imagine saying to a nurse or a police person in the outer suburbs of our capital cities, 'The only way you can own a new home is either by a stroke of luck of having rich parents, by giving up your job providing a vital service to our community or by moving to Tamworth.' I am sure Tamworth deserves a few more policemen and nurses but not at the expense of Sydney or Brisbane.

This is a deeply important issue. It goes to what sort of society we have: whether it is a just society that is equitable that gives average workers a chance of having the economic security of owning their own homes. It is a serious debate. Labor is taking it seriously by putting forward concrete solutions that have strong support in the general community. I only wish the government would come on board, take the politics out of this and try and help achieve a solution to this vital economic issue.

Mike Freelander (Macarthur, Australian Labor Party) Share this | Link to this | Hansard source

This report was timely and important in 2015; it is now critical. The report we have before us today is a history almost as colourful as one of those fabled, colourful Sydney racing identities of yesteryear. It is a textbook or comic book study in what happens when a government feels the urge to do the right thing by the community at large but cannot quite find the perfect moment to break the bad news to those who might not see things quite its way so prefers to do nothing.

This saga begins on 24 April 2015 with the former Treasurer Joe Hockey handing the House Economics Committee a fairly broad reference on home ownership. The inquiry chaired by the excellent member for Bennelong, Mr John Alexander, began work in May 2015 with public hearings starting on 26 June. Treasurer Hockey resigned from parliament in October 2015, observing in his last speech to the House of Representatives that negative gearing should be skewed towards new housing so that there is an incentive to add to the housing stock rather than an incentive to speculate on existing property. It soon becomes clear that the member for Bennelong and other members of the Economics Committee are thinking along similar lines to the former Treasurer. The member for Bennelong is even reported as saying that Australia was turning from a Commonwealth with huge home ownership into a kingdom made up of landlords and serfs. Those comments notwithstanding, the member for Bennelong remains a proponent of incremental reform. For his troubles, the member for Bennelong finds himself no longer chair of the housing inquiry in September 2015 and the relevant committee fails to report for the prorogation of the parliament for the July 2016 election.

For four months after that election, inexplicably, the inquiry remains incomplete because the Treasurer will not renew the committee's reference. Whether it was to appease the member for Bennelong or simply blunt almost universal criticism of the shelving of the inquiry, the Treasurer belatedly reactivated the inquiry on 22 November under a new chair with a short reporting time of 16 December. In the interim, the Labor Party in February 2016 has announced the core elements of a policy in terms of former Treasurer Hockey to skew negative gearing and capital gains tax concessions so that they promote the construction of new dwellings instead of further amping up speculative and investor demand for existing housing.

Post election, the Turnbull gamble, an increasingly prescient title, reveals that the Prime Minister and the Treasurer and, presumably, their departmental advisers were once in favour of winding back the excesses of negative gearing and had taken a proposal to cabinet before the 2016 election but could not get it adopted. A re-elected Turnbull government mostly continues to duck and weave on the issue. The government's rhetoric veers from the sublime to the completely absurd, sometimes constructive and hopeful but mostly evasive. When all else fails, others, including Liberal states, get the blame. Some have had enough obfuscation—for example, the comments by Minister Rob Stokes, the former New South Wales Minister for Planning, regarding negative gearing: 'Exotic supply-side solutions are floated as the best way forward, even though the RBA is on record in evidence to the committee as pointing to their limitations. The latest variant on such contradictory themes accuses those for pressing for stronger action of favouring silver bullet solutions.' This does not, though, prevent the Deputy Prime Minister telling the nation to stop pining for an affordable house in Sydney with water views and go bush—go way bush, even to Charleville. This in turn provokes a certain amount of uncharitable eye-rolling amongst anyone who has recently scanned situations vacant columns in rural Australia. Many soon conclude that this is the Mad Hatter's variant on instant solutions to affordable housing.

The dust has barely settled and yet another fresh start was promised by the PM in his Press Club address on 1 February. Even so, the government, publicly at least, has not changed course but continues to leak some rather bizarre solutions. They continue to favour incremental measures to increase housing supply. These are universally recognised as having a role, but few believe they can readily plug an $11 billion hole in the federal budget or instantly put first-home buyers on a level playing field with highly geared investors. A fresh burst of incrementalism now would only be truly useful if we could turn the clock back to 1999 and tell the Howard government not to link negative gearing with a 50 per cent capital gains tax concession. Those measures changed a nation of 1.3 million tax-paying landlords, who made a collective profit of almost $700 million in 1998-99, into a country of 1.8 million landlords making, astoundingly, a $7.8 billion tax loss in 2010-11. That is shameful.

I have spoken previously about the ills and weaknesses of the housing market, the misallocation of resources, the drain on the federal budget, the inequity in excluding ever increasing numbers of the under-45s and the over-65s from the housing market and the lack of affordable and suitable rental accommodation. These are all major public policy failures, but this government's manipulation of the Standing Committee on Economics' inquiry into housing ownership can only be described as shameful and negligent, as is its treatment of the committee's former chair. It is insulting too to all those who put a lot of effort into preparing and making detailed submissions to the committee. Much of that work is really extremely valuable.

In the late 1960s, Senator Lionel Murphy and others encountered massive scepticism when trying to establish the Senate's extensive system of standing and investigative committees. It is my belief that one reason people are very sceptical and dismissive of politicians is parliament's inability to respond to committee findings in a meaningful way. Could the parliament rise above itself and conduct fair-minded inquiries into complex matters and report on them in a clear-headed and sensible way? Would partisan politics render the whole exercise as an expensive farce? That is what the housing inquiry is.

The majority of the report we are noting today, and its lamentable backstory, raises too many questions about House of Representatives committees. How can House committees ever do good work or be taken seriously when they are subject to such overt and ham-fisted levels of executive government control? Any government members who report on one of the great issues of the day and make no recommendations to speak of should get a fail any day. Who would really seriously sign off on a report on the complex and difficult issues associated with home ownership and affordability without some reference to the budgetary impact of negative gearing and capital gains tax concessions? You have to wonder too how much time the committee's majority members were really given to weigh up what was put before them, and there are several examples in the report of this. Paragraph 2.55 of the majority report, in what has to be one of the great understatements of all time, observes:

There are clearly some pockets of the market, particularly in Sydney and Melbourne, where prices may be inflated. However, this is not a reflection of the Australian housing market as a whole and does not therefore affect the majority of Australians.

What a joke! Large swathes of Sydney and Melbourne are 'pockets'? Forty per cent of our population is being ignored by this inquiry—such small beer that they can be ignored! If the highly leveraged Sydney market ever suffered a bust, that would not affect the national economy. I really do not believe it.

There are several other things that are really very unusual about this report. The government members of the committee also seem inclined to believe that even tailored cuts to existing tax concessions would produce either a landlord strike or a sharp rise in rents. That is notwithstanding strong contradictory arguments from some of the experts, such as independent people like Saul Eslake. Lastly, there is a claim in paragraph 2.58 that says:

… rates of home ownership … have remained broadly steady for many decades …

That is not true. What has happened is that home ownership peaked in the sixties and there has been gentle decline since then, which has been more rapid recently. Where we were once a world leader, we are now closer to the middle range of developed countries in terms of homeownership, and we are slipping further behind. That ignores also the changes in the composition of home ownership, where there has been a steady decline in home ownership for those aged 25 to 45.

What was Honest Joe's parting attempt to set things right has become a saga of false starts and damage control from a government that are desperately hoping that younger and disadvantaged voters will not get any angrier with them than they already are. People that I saw as a paediatrician, hardworking families, now tell me they will no longer ever be able to afford a home. That is shameful in Australia. If you want a case study about why the public has just about given up on politicians, you would not have to look further than this inquiry. We need to act now to bring first-home buyers back into the market and reduce the huge financial advantage that investors have over the first-home buyers, who are mostly young families. It is time.

Luke Howarth (Petrie, Liberal Party) Share this | Link to this | Hansard source

I rise to talk on the Report on the inquiry into homeownership, by the Standing Committee on Economics, as well. It is disappointing that there were no recommendations that came from that committee. I would like to put on the record for those in the parliament and for those people in my electorate that Australians love property. Australians love investing in property. I think you would find that, regardless of some of the concessions for investors that are currently in place, Australians invest in property because they understand it. They know that bricks and mortar are generally a safe investment, because in this country over the years property investment has continued to go up and up and up. Not as many people understand the share market or have had experience in the share market, so naturally property investment is a safe investment.

I do not think it is just investors who are causing property prices to go up. If you look at self-managed super funds and so forth, more people are investing in property, not because they get a tax deduction—because they do not in that case—and not because they can negatively gear it, because they cannot that case. It is because it is a safe investment. It is because they understand that bricks and mortar are something that continues to go up, and they are confident in investing in that area.

My concern is that those opposite make out that scrapping negative gearing and tax concessions will all of a sudden make it so much more affordable for people trying to enter the market. I want to say to people in my electorate: if only it were that simple. If only I could stand here and say, 'Yes, let's do what they want to do and scrap negative gearing, scrap those incentives for investors, and all of a sudden you'll be able to own your own house.' They make it sound so simple, but the fact is that some of the comments from my senior coalition colleagues are very true and are also open to young people in my electorate.

I bought my first home when I was about 23. It cost me $93,000, I think, at the time, and I was earning about $27,000 a year working full time in retail. That was quite a lot of money, and it was hard for me to buy it back then. But my father obviously taught me. He said: 'Luke, this is a good thing to do. Invest younger'—

Opposition Member:

An opposition member interjecting—

Luke Howarth (Petrie, Liberal Party) Share this | Link to this | Hansard source

Sorry, what was that?

An opposition member: Why did you leave retail?

That was off topic, but thanks for your interruption! Please listen. He said, 'Look, it's a good thing to invest in and get involved in,' so I took the plunge. He encouraged me to save from a young age.

To say to young people that there is some sort of easier path than saving for a deposit, working hard and trying to put away money to invest is simply going to leave people disappointed. In years to come, if this policy or incentive that is currently in place is abolished, I think you will find a decade later that those opposite advocating for this might just look silly, because it is not as simple as, 'Let's scrap those procedures, and then all of a sudden young people will be able to invest.'

Let us not forget, as well, that the state governments also have massive increases in state stamp duty for investors, so to say that there is no barrier for investors is not altogether true. In most cases stamp duty is double the cost for investors compared to owner-occupiers. It certainly is in Queensland. So to say that there are no disincentives is not true.

For those opposite to say, 'If we get rid of negative gearing and we get rid of incentives for investors, rents will not go up,' I think is also not true. If investors cannot negatively gear then of course they will need to positively gear. Of course they will need to make more in rent than what interest payments to hold that property are going to cost them. It is just common sense. I know that the Labor Party scrapped this policy before, years ago. Then it was quickly reimplemented.

The other thing you have to look at, too, is some of the comments by the Deputy Prime Minister on first home buyers. I think one was, 'Go bush. Move out to Tamworth or to the electorate of New England.' Right now in my electorate you can buy a house for $300,000 in some suburbs. Part of my electorate is in Brisbane. Thirty per cent of my electorate is in Brisbane. Seventy per cent is in Moreton Bay. In the suburbs in Moreton Bay you can pick up a house for $300,000. There is a rail line into the heart of Brisbane city. It takes about an hour. So there are places you can buy for around that in my electorate. Other places in the southern end of my electorate, closer to Brisbane city, are much more expensive. They are probably up around the $600,000 or $700,000 mark. That is not like Sydney, though, which is well over the top. In Brisbane City Council in Bald Hills you can also buy houses in my electorate for around $400,000. So to say that capital cities everywhere are unaffordable is not true.

I will say for the benefit of those opposite and other people in my party that I am finding that there are younger people now who are becoming a bit more savvy. I will just pick up the Deputy Prime Minister's comment again that, 'You can move bush and have a bit of a lifestyle change.' Sure. But also more and more young people now want to live in the city in units. They want to live where the entertainment is. They want to live where the shopping centre is. They want to live where the night-life is. Often they will buy a property for $300,000 or $400,000 and live in that property for six to 12 months. They might get a couple of their mates to move in with them. Then sometimes they will rent it out after that and go rent themselves at a unit in the city. So they are also able to take advantage of the incentives that are in place for investors. Not everyone wants to nest and live in their own home. Some are quite happy to buy a property in a different area, rent somewhere else, pay that off, use those investments and then make a bit of a capital gain so they can buy a bit closer in.

I raise these issues in particular because I do not want people to think that it is all so simple. We need to be educating young people about money. We need to be encouraging young people to save, just like my dad did with me. He encouraged me to save. He encouraged me to invest. My dad left school when he was 10. He only went to year 5. He has done very well for himself. Something I try to do when I talk to the young people in Petrie is encourage them to set goals. I ask, 'What is it that you want to achieve in 2017?' If they listen to those opposite they will tell them that home ownership is never going to happen and that young people are incapable of it. I say, 'That is not true.' I say, 'Set yourself some goals.'

One of the things that the former Treasurer said is, 'Get a better paying job.' Perhaps he could have used a bit more tact and not said it so bluntly, I agree, but there is truth in what he said, isn't there? There is truth in the fact that we all want to work our way up and get a better paying job. That happens over time. The older you get the more experienced you get, the more education you get and the more opportunities you get. We are finding now that fewer people are in the same job for 20, 30 or 40 years. We are finding that more people have three or four careers in their lifetime.

The Prime Minister mentioned that parents may help out with loans. In some cases they are able to do that—that is true—but it is not in all cases. Not in all cases in my electorate are parents in a position to help out. But in some cases that may be true. That is a good thing. But we should not discount all of that advice as though it is crazy. Let's look at this thing in context and let's not promise the world to people as though one little change that we make in this place around investment is all of a sudden going to make it so that they are able to own their own home. Everyone has that opportunity. I say to every young person in my electorate: you can do what you want to do. It does not matter if you are uneducated and you left school in year 10. You are able to go back and get an education and do what you are able to do. So let's not limit ourselves and, to those opposite, let's not make promises that this one little change will all of a sudden make a difference where everyone will be able to achieve home ownership and that the way things are now no-one will. In my experience there are some places in the electorate that are still affordable. Yes, house prices have gone up, but that is not such a bad thing. We would not want prices to come down and for people to be left with mortgages and a lot of outstanding debt.

Meryl Swanson (Paterson, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on the report of the Standing Committee on Economics on the inquiry into home ownership. I note that the dissenting report from Labor MPs describes this report as a remarkable document in that it offers no recommendations to government—none, zip, zero. There has been an inquiry and a 55-page report, and the committee has no recommendations, no suggestions on how this government can improve home ownership and make it easier for young people, particularly, to own their own home.

I note with interest the contribution of the member for Bennelong, who was formerly the chair of this committee before being removed from that position. He made some good points. But he said that he wanted a sophisticated and nuanced debate and a suite of policies. I am here to say that Labor has those policies. We have thought about the nuances revolving around homeownership.

As noted in the Labor MPs' dissenting report, the difficulty for first home buyers entering the market is of prime concern to the Labor members of the committee. As Labor has publicly stated time and time again, home ownership rates for young people aged between 25 and 34 have fallen from 60 to 48 per cent. These are big numbers in anyone's terms. Young people are being forced to take on levels of debt unimaginable just a few decades ago.

With all respect to the member for Petrie's father, who taught him to save and to be sensible with money, that is a thing that all parents hope to hand on to their children. But I have to say to you, sir, that, while we are having this debate, most of us are here in this parliament have clearly no clue what some people are going through and the angst that they are having in that desperate plight to scrape together a huge deposit for even a modest home. We have seen the increases, and it is no longer just a case of, 'Work hard and save your money and you'll be okay.' That is clearly not the reality anymore.

Herein lies the important policy recommendations made to the government by Labor. Negative gearing has increased the number of investors and levels of investment in housing, and this has meant housing has become more expensive. I note there is talk about us wanting to scrap negative gearing carte blanche. That is just not the case. We are grandfathering. We are saying to investors: if you currently have a property that is negatively geared, it will not change. We are not silly. We realise that there are people out there who have made investments. We respect those investment choices, and that needs to be more clearly stated. If you have a property that is currently negatively geared, it will remain negatively geared. So, contrary to what the government is pedalling, we are not talking about scrapping all negative gearing. Of course we are not.

Negative gearing and the capital gains tax discount have driven record numbers of investors into the property market. As my colleague the member for Shortland mentioned just a few moments ago, it is the interaction between these two taxes that is driving people to invest in residential property in record numbers. Loans for rental properties have been rapidly increasing. They have grown from 16 per cent of loans to 40 per cent of loans in the last 23 years. It is that direct interplay between capital gains tax discounts and negative gearing that has caused that increase—it is basic economics, really—and the influx of investors into the market has increased demand for and put upward pressure on house prices. There is no mention made of this in the report and there is no mention made of homelessness. I just want to touch on that because that is also a direct impact of this.

Homelessness still remains unacceptably high in our developed Australia. According to the 2011 census—and who would know, based on the current one—105,000 people, or one in 200 Australians, are experiencing homelessness on any given night, and this is a direct reason for it. Little is made in this report of housing stress, as well, and that is a disgrace. ABS data reports that there were 657,000 low-income households across Australia living in rental stress, and 318,000 low-income households in mortgage stress in 2013-14. That stress is unbearable and the amount of pressure it places on families is—until you have lived in that stress you do not know. For young families in Australia, the dream of purchasing and owning their own home is almost completely out of reach.

Our plan—that is, Labor's plan—will ensure first home buyers are not forced to compete with property speculators, who may be buying their seventh, eighth or ninth property to negatively gear it. The Labor members from the committee recommended reforming negative gearing and capital gains tax discounts to ensure that our tax system is fair, sustainable and that it targets jobs and growth. The government should limit negative gearing to new housing from 1 July this year. All investments made before this date, as I mentioned earlier, will not be affected and the change will be grandfathered, and that is such an important point. This will mean that taxpayers will continue to be able to deduct net rental losses against their income, providing the losses come from newly constructed housing. This policy will see a boost in new housing and will provide young families with the chance to find a home, and that is what most young families want to do. Not every young family; some young families are happy to rent, but everyone wants a home. It will take pressure off inner-city housing markets that are predominantly made up of existing dwellings. This will also lead to new jobs for construction industry people, with independent analysis from the McKell Institute estimating that these policy settings would result in an additional 25,000 jobs. The independent Parliamentary Budget Office has indicated Labor's policy will also raise an additional $565 million over the forward estimates and $32.1 billion over the decade.

What the government needs to do is listen to Labor's recommendations. Recommendation 1: the government limit negative gearing to new housing from 1 July this year. All investments made before this date will not be affected by this change and will be fully grandfathered. Recommendation 2: the government halve the capital gains discount for all assets purchased after 1 July this year. This will reduce the capital gains discount for assets that are held for longer than 12 months from the current 50 per cent to 25 per cent. All investments made before this date will not be affected by this change and will be fully grandfathered. We have the nuance. This is a sophisticated recommendation. The committee supports the maintenance of existing negative gearing arrangements, incidentally, but if this inquiry is really about uncovering policy settings that will give Australians a fair chance of becoming home owners, the government must listen. Home ownership rates in Australia are amongst the highest in developed nations. They have been declining, though, across age groups other than the oldest cohort for over a decade.

With regard to home ownership rates, the Australian Bureau of Statistics informed the committee that their survey of income and housing has indicated a decline from 71 per cent to 67 per cent between 1994 and the 2011-12 survey. The Reserve Bank has said that, although the tax system does not discriminate against asset classes in terms of the ability of an investor to negatively gear them, there is a far higher capacity to leverage property than any other type of asset. The Reserve Bank has also said that negative gearing has increased the number of investors and levels of investment in housing, and thereby made house prices higher than they would otherwise have been. And it has said that negative gearing and capital gains tax discounts have driven record numbers of investors into the property markets.

The interaction between these two treatments is driving people to invest in residential property in record numbers. This has put upward pressure on housing prices, making it unaffordable for an increasing number of Australians. That is the Reserve Bank saying that; that is not anyone with a political bias. Although negative gearing is more commonly used by modest-income earners than other mechanisms to reduce tax, such as superannuation tax concessions or family trusts, the claims for benefits of negative gearing are five times as prevalent among people in the top tax bracket. As my fellow colleagues have said, with capital gains, 75 per cent of the benefits are going to the top 10 per cent. The greatest housing stress is currently faced by the very low income renters. Particularly vulnerable are older people, those relying on government benefits and others with a fixed income.

The member for Petrie said before that we cannot stand here and make a simple change. I think that we must make these changes. Some of our fellow Australians do not have a place to call home at all and others, desperate to own their own home, are being priced out of the market. How dare any of us be in this place and take up a seat without doing something about it? It is a great shame.

Julian Hill (Bruce, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak and make some comments on the Report on the inquiry into home ownership. I was not planning to do so—I was here on chamber duty—but I have actually had a cathartic moment. I have listened to the debate—and there have been some sensible points made—and was inspired to add a few words. I want to record my thanks, in particular, for the sensible and very measured contribution and tone of the member for Bennelong and, indeed, also some of the comments from the member for Petrie—I say 'some'.

I shared a meal last night, by accident, with the member for Bennelong. I think that, with problems like this that are complex, we would do a better job if we spent some time actually talking around where we can agree and find common solutions. It is a critical issue, and there are different ways you can measure or think about making public policy. Unfortunately, the member for Petrie seems to rely more on anecdotes than data. It is lovely, I am sure, that there are a few affordable houses still left in his electorate, as he recounted to us, but, as has been said, we have to look at the data. On any reasonable measure, whether it is average prices to incomes, median prices to median incomes or repayment ability, housing affordability in this country is stuffed.

The point that the member for Petrie made, in one sense, is fine: of course we want rising prices in housing—but modestly rising prices. I cannot understand how anyone could say that the price rises that we have seen on the average or the median in the last 10 to 20 years are in any way desirable or sustainable. No society would want house prices to continue to outstrip the growth in incomes in the way we have seen. If you were drawing it as a curve—I am not sure how the Hansard records finger gestures; I do not think it does—the steepness of the curve is completely unsustainable.

Another way that we as elected representatives gauge sentiment and where we need to put our efforts and thinking is, of course, through community feedback. I, like others, have been bombarded in the last few months. The despair at their sense that they would never be able to afford their own home was certainly one of those barbecue stoppers over the summer break amongst young people—my daughter, who is 20, and her friends. But it is not just young people, of course; it is parents and grandparents worried about their children's and grandchildren's ability to have what they have taken for granted.

Sledging will not help. I will make a few critical remarks, but I will try to do them in a way which echoes and follows the tone of the member for Bennelong, and perhaps we may get somewhere. I do agree with the member for Petrie: there is no simple solution. Equally, I think he was profoundly wrong to suggest or assert that we on this side would claim that negative-gearing and capital gains tax reform was going to solve the problem. Manifestly, that is not the case. We would never claim that that will suddenly make housing affordable for everyone, but we do, with a lot of evidence behind us, put forward the proposition that this is absolutely essential as one part of the puzzle to, at the very least, stop the problem continuing to get vastly worse.

I had a hallelujah moment. I just record that the member for Bennelong's point 6 in his propositions sounded a lot to me, frankly, like the recommendations that he thought of before he was sacked by the government as chair of the committee—the kinds of recommendations that he would like to make—and they are a sensible set of propositions. Point 6 was a recognition that supply is not the only factor. Who knew! We have demand as well! I thought those who were the greatest proponents of free markets might remember that there is demand and supply, but apparently it is all the state and local governments' fault—head in the sand!

Of course, we have seen with the election of this government that we have no minister for housing, no national housing plan, stalling on the Commonwealth-State Housing Agreement and, indeed, moves to abolish one of the few Commonwealth mechanisms to keep an eye on supply, which was the National Housing Supply Council.

It is true to say that the majority of supply issues are within the province of state and local governments. As someone who, almost 20 years ago, was the mayor of a major inner metropolitan council and then served as executive director of metropolitan planning in the public service for Melbourne and Victoria, I know quite a lot about the difficulties and the challenges. But I do know that critical evidence—updated, market-based information about supply—is absolutely essential for governments to make good policy and release supply.

If you look across Australia, not all of the states have that data in the right form. I think there is a legitimate Commonwealth role, if you like, to shine the mirror back at the states and to have a basic, common set of data as to how we are going and which cities need to improve. Melbourne, of course, is leading the pack in that regard, I think—and not just because some very wise people helped to establish the program many years ago.

With regard to demand, I do have to make a couple of comments on negative gearing and capital gains tax, and they have to be bundled together. There is a political objective, I understand, by those opposite, through the heat of an election campaign, to send out the myth—the untruth—that Labor is trying to abolish negative gearing. That is completely untrue—completely untrue. What we have said is for an evidence based, sensible proposition to refocus negative gearing and to put it to work to add to supply: there is a supply initiative that the Commonwealth could think about. I think now that only in the order of seven per cent of negatively geared properties are new properties. That was never the intention when that tax concession was introduced. It was not intended to be the vehicle by which if you were someone with a few spare dollars—let's say, people in this room; we are well paid so let's say we had a few spare dollars—then the most rational thing to do now is perverse. It is to go to an auction and bid up the cost of an existing house. That is nonsensical. We cannot maintain and seriously defend the situation where the most rational thing to do and which the tax system rewards is to keep pushing up the cost of housing.

I might note also that we hear a lot in the House of Reps in a sort of automated and repetitive fashion about the importance of growing investment. Despite the lack of evidence, apparently if we give tax cuts to multinationals to take offshore somehow that is going to grow domestic investment. But anyway, putting aside magic pudding economics for a moment: we could have a veritable golden shower of investment, we might argue, if we rebalanced the current tax arrangements to encourage people that rather than putting their spare money into an unproductive use in the economy—to bid up the cost of existing housing and therefore have to force up of the cost of rents to recoup repayments for unsustainably rising prices—we could encourage them to put their spare capital into the real economy, to invest in businesses and to grow jobs. There is an idea for you! I think that other people like the World Bank, the IMF, the Reserve Bank and respected economic commentators have already passed that little gem onto the government.

Fundamentally, I think we have both a political and a policy problem. We do have—notwithstanding the member for Hughes, who tends to know more than the experts, be it on energy policy or anything else—a broad consensus amongst the experts. Respected economic commentators and independent economic agencies all say that we should refocus negative gearing and capital gains tax concessions. This is one, but by no means a sufficient, solution to start to deal with the problem of housing affordability. As has been well recorded, the government's Treasurer, Treasurer Hockey, when he was leaving the parliament, pointed this out in no uncertain terms. Unfortunately, the current Prime Minister and Treasurer got rolled in cabinet.

But in the spirit of responding to the member for Bennelong and some of his ideas, the tax reforms do stop the problem getting worse. But there are other ideas to add. He outlined some which I had not thought about in relation to superannuation and some of the changes there. Perhaps they are things that we could consider. There was a 2015 report by the Senate Economics Committee, I think, which I am part-way through reading, actually. It is still a pretty good report. It is only a couple of years old and it has a very comprehensive look. It has a couple of hundred pages about all of the supply-and-demand factors, and the member for Bennelong and others interested in this would be well advised to have a look at that as opposed to the ridiculous report we are considering now, which has no recommendations. I also commend the work of AHURI, particularly in relation to looking at how we can increase the supply of affordable rental accommodation for those not in a position to or not interested in seeking home ownership.

The other thing I would say in the time remaining is that we do seem to have lost our way in this debate, with the overfocus on tax arrangements. Housing is for living. This is a truism; I could write this in a fortune cookie, you might think. Housing is for people to live in. That has to be the public policy purpose of us thinking and talking about housing. It should not be a conversation solely about how we get investments and investment arrangements right. In that regard, the inquiry's scope was, I think, too narrow. It was just focused on home ownership. When we are thinking about how to deal with the housing affordability problem—do people have somewhere affordable, reliable and secure to live and call home?—we have to pay the same amount of regard to the whole spectrum of issues, which includes rental ownership.

I for one think Labor's policy is worth pursuing and it is a platform on which we can build, but no-one has ever said it is sufficient, and we can propose more. There are things like co-ownership models, of which Western Australia has some experience and there is international experience, and how we get rental accommodation at scale. If the Treasurer ever returns from England with some ideas, we should listen to them; perhaps they will be good.

In closing, I commend the member for Bennelong and those opposite prepared to engage in some sensible, moderate debate, because we cannot do this with one party or one level of government alone. It is a problem that can only be addressed through cooperation amongst levels of government.

Debate adjourned.