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

On behalf of the Standing Committee on Economics, I present the committee's report entitled Review of the Reserve Bank of Australia annual report 2016 (First report) together with the minutes of proceedings.

Report made a parliamentary paper in accordance with standing order 39(e).

by leave—On 7 February this year the Reserve Bank decided to leave official interest rates on hold at 1.5 per cent. In making this decision, the Governor of the Reserve Bank commented that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

At the public hearing held on 24 February this year the governor noted that, given headline inflation has risen in most countries and is much closer to target than it has been for some years, the forecast for global growth has been revised upwards over the recent months, and that is the first time that that has happened for quite a few years. After a weaker than expected September quarter last year, Australia's GDP growth is expected to pick up, sustained by a combination of monetary policy, a lower Australian dollar and other measures. The RBA forecasts that GDP growth will increase to between 2½ per cent and 3½ per cent during 2017, which will place it at the top end of international growth rates.

While inflation remains low, it is expected to move closer to target with the CPI forecast to rise to around two per cent by the middle of 2017. During the hearings it was also noted that, since its low point in January 2016, the Australian dollar has appreciated by over 10 per cent against both the US dollar and on a trade-weighted basis. However, the governor noted that the historical depreciation of the Australian dollar continues to support growth in a range of Australian industries, particularly those exposed to export markets, and has remained largely unchanged since the US election.

The governor's testimony suggests that consumption growth is moderating and that wages growth continues to be restrained. Unemployment remains stable, with employment growth being driven by increases in part-time employment. Housing markets across Australia have been mixed. While the Sydney and Melbourne markets continue to record strong growth, other markets, such as Perth, have experienced much weaker conditions. There was a substantial improvement in the number of building approvals in the past two years, mainly driven by strong growth in new apartments being built.

Australia's economic growth is more optimistic than it was in March of 2016, with evidence showing that the headwinds of the declining mining investment and low commodity prices have eased. The RBA expects GDP growth in Australia of between two and three per cent by the end of 2017, and that will be supported by increases in the production of LNG and improving terms of trade. On behalf of the committee, I thank the Governor of the Reserve Bank, Dr Lowe, and other representatives of the RBA for appearing at the hearing on 24 February. I commend the report to the House.

Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Parliamentary Secretary for Foreign Affairs) Share this | Link to this | Hansard source

by leave—I concur with the member for Banks in respect of the tabling of this report. I would also like to congratulate the Reserve Bank because, when they did appear before the committee, Dr Luci Ellis, an Assistant Governor of the Reserve Bank, appeared. The governor made the point that this was the first time that a female had appeared before the House of Representatives Standing Committee on Economics in the capacity of an Assistant Governor of the Reserve Bank. I think that is an important advance for economics and for women in the study of economics. It was great to see Dr Ellis in Parliament House only last week for the launch of a group associated with encouraging more women to get involved in economics.

In respect of the hearing, there was a broad discussion about the outlook for the international economy and the Australian economy. But, like all discussions with the Reserve Bank in recent times, the focus quickly turned to housing affordability. I thought it was instructive that the Reserve Bank governor, Dr Lowe, pointed to the fact that the bank was concerned about the low level of wages growth in Australia coupled with household debt at the moment.

The major factor contributing to household debt is the cost of housing, particularly in the Sydney, Melbourne and Brisbane markets, where house prices have gone through the roof. That, the governor pointed out, is having an effect on disposable income households. That, in turn, is having an effect on demand in our economy. The governor quite rightly made the point that, if we are going to increase and encourage long-term growth in the Australian economy, we need to get that level of demand and consumption in the economy up again.

In Labor's view, that means we need to tackle this issue of housing affordability and the fact that buying a house, for many, is becoming out of reach in Australia at the moment. That involves looking at the government incentives that exist around housing affordability. At the moment, if you are an investor, you get an unfair advantage compared to owner-occupiers in Australia if you go to buy a property. I provided some data to the Reserve Bank governor which indicated that the level of housing finance over the course of the last 30 years has basically reversed. It used to be 60 to 40 in favour of owner-occupiers. It is now heading the other way and going towards 60 to 40 in favour of investors compared to owner-occupiers. That data alone says that we have a problem in the incentives we are providing to people to buy investment properties. If someone goes along to an auction and they are seeking to negatively gear their eighth investment property, they get more support from the government at the moment than an owner-occupier seeking to buy their first property to live in. That is wrong. That is contributing to house-price growth in this country, which is making it unaffordable and leading to the household debt issue that is constraining demand. So, in Labor's view, unless you are tackling negative gearing, you are not fair dinkum about housing affordability.

These notions looking at how we increase supply are all very well, but you need to be tackling the two big issues of negative gearing and capital gains tax discounts. When the capital gains tax discount was introduced into the federal budget by former Treasurer Peter Costello it was unfunded. There was no measure to fund that over the longer term, and we are now paying the cost of that in terms of budget sustainability. They are the two issues that you need to look at if you are fair dinkum about housing affordability.

I thank the Reserve Bank governor and the deputy and assistant governors for once again appearing before the committee.

Ian Goodenough (Moore, Liberal Party) Share this | Link to this | Hansard source

Does the member for Banks wish to move a motion in connection with the report to enable it to be debated on a future occasion?

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

I move:

That the House take note of the report.

Ian Goodenough (Moore, Liberal Party) Share this | Link to this | Hansard source

The debate is adjourned. The resumption of the debate will be made an order of the day for the next sitting.