Arthur Sinodinos (NSW, Liberal Party) Share this | Hansard source

I welcome this debate today. It is a good debate to have because there are issues around both the structure of superannuation and the matter of housing affordability. I do not think it is a matter that can be swept under the carpet.

I come first to superannuation. The important thing about superannuation is that, on all sides of politics now, it is accepted that we have the three pillars of superannuation. We have the compulsory superannuation guarantee; we have voluntary savings; and we have the age pension. Wealthier Australians have a higher capacity to fund their own retirements; less-well-off Australians will rely more—wholly or partly—on the pension. The government asked David Murray and the Financial System Inquiry to look at superannuation, and one of their findings was that superannuation tax concessions were poorly targeted. The government has agreed with the inquiry to refer this issue to the tax white paper process. In other words, there is recognition that change may be necessary and there is a process which is being put in place to look at that. One of the lessons of the recent past is not to put major structural reforms, for example, into a budget context. The Prime Minister has made that very clear in recent times. What we are doing is putting in place a process where in a coherent way, as part of a look at the whole of the taxation system, we can look at issues around these sorts of tax concessions.

There has been a lot of debate about the cost of those concessions. Treasury have produced certain estimates. There are others who have produced different estimates. Some claim the estimates are inflated. That tax white paper process is a place where we can have a look at the proper cost of those concessions and how they should be targeted. One point I will make, as a survivor of the 1996 Howard government, is that one of the measures we took in that budget was the superannuation surcharge. It was seen as hitting, in large measure, our own base; but it was part of a series of measures to try to sell cuts across the board. So there is a history within the coalition of looking at the equity of superannuation. Our history says we do that and what we are doing now, through the white paper process, is continuing that inquiry.

The 2010 Australia's Future Tax System Review found that super should continue to receive tax assistance but there is a case for distributing assistance more equitably between high- and low-income individuals. The Rudd government did not adopt the AFTS review's recommendations on this matter; but we are going further and we will have a proper review.

I come to this issue about the low-income superannuation contribution. I take the point that Senator Milne has made. The dilemma for the coalition was this: it was one of a number of spending measures which were tied to the minerals resource rent tax by the former government, a tax which we have since repealed—a tax which was failing to raise revenue it was meant to raise. It was initially, you will all recall, the resources super profits tax. It became over time, as it was further refined, the minerals resource rent tax. It never made the billions of dollars of estimated revenue that was being touted by the former government, yet tied to it was a whole series of spending measures. These measures were tied to it because the idea was: 'We are raising all this revenue. We are taxing'—allegedly—'these foreign multinationals and all that money will go in spending, often recurrent spending, across the broader community.' The fact of the matter was we had to make our decision. If you are getting rid of the tax, what do you do about the spending associated with the tax? That was why we are committed to repealing the low-income superannuation contribution. We are taking a comprehensive look at tax arrangements for super through the tax white paper process.

In recent times there has been debate about the aims and objectives of superannuation. Yes, we all agree: the overriding objective should be to try to provide, as Senator Milne suggested, for a more comfortable income in retirement. There are real challenges in doing that. One of the challenges is that the system needs to be around much longer in order to have that build-up of contributions, and earnings on contributions, to get to the sort of targets which have been discussed in public debate as being equated with having a comfortable retirement.

As has been accentuated in recent times by some other developments, young people who go into the workforce do face a dilemma: if they are university students, they do face HECS debts—and the possibility that once the university fees deregulation proposals go through there may be higher HECS debts—on top of which they would be aiming to save for their retirement as well as have nine to 12 per cent over time of their income going into superannuation. So the Treasurer very rightly said we should have a look at the structure of superannuation and the circumstances under which it is possible to dip into super for some defined purposes.

What I have argued publicly is: if we do that, we need to look at systems where people are able over time to pay back what they take out. The other problem we have got is that the superannuation system is inflexible. We should have a capacity to have higher limits on what you can contribute and the terms on which you can contribute when people have maximum earning power, when, for example, their children may be off their hands. We need more of a life-cycle approach to superannuation. Again, this is something more for the future, for other processes. Ideally, you would look at all of that in the context of what you do with the structure of pensions because there is an interaction between the income and assets testing of pensions and what you do about superannuation.

On the issue of housing affordability more broadly, there are two elements to this debate. The first element is around welfare housing, where we are looking at people who lack the means to buy their own home in the private market because they may be vulnerable for a whole variety of reasons through no fault of their own or, indeed, people who are homeless. The second element of the housing affordability debate is around younger people seeking to get into that market.

In response to this issue more broadly, I think it is sweeping matters under the carpet to say that housing supply is not an important component of the problem. It may not be the be all and end all. You may need targeted assistance, as all governments have provided to the more vulnerable in the community, but you do need to recognise, as has been recognised across the country and in many studies, that supply issues are very important. In Sydney, the Property Council found that Sydney is about 51,000 homes short of what is needed to meet current housing needs. If population growth trends continue, Sydney will face a 190,000-home deficit by 2024.

The National Housing Supply Council estimates Australia had a 228,000 housing shortage as at 30 June 2011. There has been this ongoing imbalance between demand and supply. At the moment, demand is also being pumped up by low interest rates, which are pumping up housing prices. That is true. There is no doubt that is having an impact on demand.

There is an equilibrium in the market that has been there for some time, which Senator Day earlier in his contribution was seeking to draw some attention to. Glenn Byres of the Property Council of Australia said:

A big priority needs to make sure more areas are available for urban renewal – along transport corridors, old industrial lands, town centres and other priority areas.

Make rezonings quicker, increase potential for medium-density buildings in middle-ring suburbs, strata reforms for the redevelopment of old buildings, flexible zonings and a development assessment system that is cheaper and quicker. There is a whole variety of things that can be done.

What is important in this debate is that between the Commonwealth and the states there is more of a compact around addressing these issues in a holistic manner. As I said before, issues of demand for housing for particular groups can be met through targeted assistance, which is essentially an adjunct to what we do through our welfare system. But we must not underrate the importance of the issue of supply in the housing market.

The Reserve Bank and others have made it very clear that foreign demand for housing in Australia has not been a major mover of changes in house prices. This is a furphy. What we have tried to do through the Foreign Investment Review Board and through the recent changes the Treasurer announced was essentially make sure we are enforcing the conditions on previous foreign investment approvals so that the capital from overseas, rightly, is going into new development, into financing, into buying off-the-plan and the rest, which actually stimulates the housing sector, stimulates housing construction.

It is very important for us to get this right. There should be no more xenophobia about the Chinese or others having an impact on prices. That is not the focus of the debate. The focus of the debate is how you improve supply and how you have a better structure of incentives when it comes to demand. When people talk about negative gearing and the rest, you have to look at both demand and supply effects. You cannot do it in isolation.