Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Hansard source

Thanks, Mr President, and I thank Senator Humphries for that question. As is well known, the government has a number of initiatives which assist renters. We spend about $2 billion a year on rent assistance for individuals and a further $1 billion a year on the Commonwealth-State Housing Agreement. Of course, the tax system provides benefits to investors in housing, including the 50 per cent capital gains tax deduction and the ability to negatively gear through deductions on interest payments and capital deductions. But the most important benefit to renters comes from running a strong economy, where unemployment is at 4.3 per cent, real wages continue to rise, taxes have been cut and family payments increased.

Yesterday the opposition leader and shadow Treasurer released a new policy which they claimed would cut the costs of renting by 20 per cent. This opposition policy would provide $6,000 per annum in federal funded tax breaks and $2,000 per annum in state tax breaks to super funds and property developers if they provide new rental accommodation at a 20 per cent discount to the prevailing market rent.

This policy was said to benefit some 50,000 renters, but it was claimed to cost only $600 million over five years, or an average of $120 million a year. But simple arithmetic says that a $6,000 annual tax break for 50,000 properties is going to cost $300 million a year, or $1.5 billion over five years, not the $600 million claimed by the Labor Party. So clearly the Labor Party has been less than honest about the number of people who would benefit under its scheme.

Secondly, this scheme would only be attractive to investors to the extent that this $8,000 tax break is more than the revenue they are going to lose through the 20 per cent rental discount. In other words, by definition the scheme must involve a subsidy to developers and investors not fully passed on to renters. So, if you take a rent of $300 a week, a 20 per cent discount would amount to $60 a week, or $3,120 a year. So the federal government, funded by taxpayers, would be giving a $6,000 break to investors to get about a $3,000 rental reduction. It is an absurd idea.

Then, of course, there is the administrative complexity of quantifying this 20 per cent discount for any given rental property. You would have to keep a means test on the renters as a condition of the tax break for the investor. It is a bureaucratic nightmare. But the crowning fallacy of this policy came out yesterday, when Mr Rudd and Mr Swan visited a renter named Rosanna Harris in the suburbs of Canberra to sell this policy. Mr Rudd asked Ms Harris what she paid in rent, to which the answer was ‘$260 a week’. Mr Rudd then responded: ‘$260—so you are effectively going to get $50-plus off each week.’ That is completely incorrect, completely untrue and completely misleading. Ms Harris is already in existing rental accommodation; she could not possibly benefit from Labor’s scheme. It would only benefit a relatively small number of renters in new rental accommodation. Ms Harris would receive nothing under Mr Rudd’s scheme, and nor would anyone else who is already renting established housing. Most low-income earners do not rent brand-new houses. They rent older accommodation and would receive nothing under Mr Rudd’s policy.

This is another gaffe by Mr Rudd. As we know, he is superficial and shallow. He knows nothing about the details of his policy. This is a completely dishonest approach by the Labor Party. They cynically overstate the benefits of what is in fact a modest and very poorly designed policy. They are out there creating the impression that every low renter will get a 20 per cent discount. Wrong, wrong, wrong. This is a shallow, deceptive and sloppy policy—another illustration of why Labor and Mr Rudd should never be allowed to run this trillion dollar economy.