Speech in Parliament on housing affordability
5.30pm | March 22, 2017
Senator McAllister's speech in response to the Matter of Public Importance submitted by Senator Siewert - “How the federal government’s housing affordability policy will fail young Australians unless it ends tax breaks for investors, removes stamp duties, and transitions to a broad-based land tax.”
The motion we are considering this afternoon asks us to debate how the federal government's housing affordability policy will fail young Australians unless it ends tax breaks for investors, removes stamp duties, and transitions to a broad based land tax. Sadly, I think the motion misdescribes the problem, because the Turnbull government's housing affordability policy has already failed young Australians, and it is at risk of failing other generations as well. The real problem is that this government does not have a policy about housing affordability and has not had a policy about it at any point since it was first elected. What we know so far about its newly discovered interest in this problem are some media lines from Scott Morrison about a package of measures that might be in the budget. Perhaps they are related to his trip to the UK to find out how they do it, or perhaps not, because we do not have any detail whatsoever even about what underpins the thinking of this government when it comes to housing affordability.
I say to the government that Rome is burning. Sydney house prices have jumped 70 per cent in the last five years, while average income growth has increased just 13 per cent. This cannot go on. The government has wasted three years of government without dealing with this. The truth is that despite the recent noise about this issue they still do not really know who is in charge of housing affordability. Last week we learnt, through a Senate inquiry, that there is an ongoing and consistent lack of clarity at the ministerial level and the bureaucratic level about who within government is actually responsible for housing.
Since my first days in this place I have been deeply concerned about the complete lack of accountability within the government on this crucial issue. Back in 2015 in an estimates hearing, the Treasury secretary, Mr John Fraser, told the Senate Economics Legislation Committee that the lead agency for housing affordability was the Department of Social Services. I will say that this answer was given after a fair bit of quiet confab between the officers at the table, because, actually, at that point in time, no one in Treasury had it at the top of their mind about who in the government was actually responsible for this issue. At the time the answer that was provided was the Department of Social Services. Earlier this year we saw the appointment of a new Assistant Minister to the Treasurer, the Hon. Michael Sukkar MP. He announced through a media release that he had been given responsibility for housing affordability, amongst other things. But when you dig a little deeper into this you see it is all still pretty murky and it is all still pretty unclear.
From questions during the last couple of weeks through estimates and through the administrative orders inquiry held by the Finance and Public Administration Reference Committee, what did we find out? Everybody has got a different story about who is in charge and who is doing what. The Treasury tells us that they do not lead, that everybody cooperates together, but that Prime Minister and Cabinet chairs an interdepartmental committee on the matter, despite not having portfolio responsibility for housing. Incidentally, this committee was formed back in December, when they discovered, belatedly, that this might be an issue of interest to Australians. Under the published administrative orders the Department of Social Services does have responsibility for housing affordability. That seems to be still in place. Senator Cormann told us in estimates that the Treasurer is described as having responsibility for housing affordability in cabinet, but only to extent that measures are relevant to the economics team, and the truth is that published administrative orders limit the Treasurer's role to housing supply. The Treasury did confirm that its assistant minister is responsible for housing policy. Finally, although the government is very, very keen to talk about housing supply, absolutely nobody is responsible for considering housing demand.
A piecemeal approach—a complete disorganisation—has contributed to total policy paralysis in this area. I have heard many explanations from various bureaucrats about how this is complex, how we need a whole-of-government approach and how, naturally, there are many parts of government that have a contribution to make on this et cetera. Everybody agrees that it is complex, and I do not need to be convinced that this is a complex policy area. But unless it is clear who is in charge and who is leading on this issue, we will see no progress. It is unsurprising to me that after three years this government has produced absolutely nothing of substance in relation to housing policy. At the same time we are hearing a chorus of concerns from all sorts of participants in the market about the rate of growth of investor loans and the level of household debt.
Let us start with debt. Australians carry challenging levels of household debt. The data shows that we are actually leading the world. I know that we Australians like to win things, but this is not the kind of competition that you want to win. Australian household debt makes up 187 per cent of total disposable income and that is one of the highest rates in the world. The effect of this situation on families and households is great insecurity. In this situation people are understandably nervous about small changes in the economy that might impact on their ability to sustain and carry that debt. Some of our regulators are beginning to sound the alarm. The RBA Governor has spoken about it, and the RBA's minutes have noted that borrowing for housing by investors is also picking up. The growth in household debt is faster than growth in household income, and there is now a discussion about another round of macroprudential controls.
Macroprudential controls for the investment market are considered to be a last resort by our regulatory institutions to curb excesses in the property market. They are deployed when the risks associated with exposure to mortgages appear to be too great or possibly are too great. In early 2015, APRA imposed restraints that required banks to achieve growth of less than 10 per cent in annual investor lending, and it is concerning to see the regulators now noting that investor demand for loans has rebounded and is again approaching that threshold.
The Turnbull government needs to take some responsibility for this situation, because the current policy settings are putting intense pressure on the housing market. The Governor of the Reserve Bank noted this month that recent data 'suggests that there had been a build-up of risks associated with the housing market'. The ASIC chairman, Greg Medcraft, said there was little doubt that a real estate bubble existed in Sydney and Melbourne. No-one in that position would use the word 'bubble' lightly.
The housing market is under pressure by continued surges in investment borrowing and prices in Sydney and Melbourne. In January, we saw that loans to investors in property had risen by 28 per cent since last May. There is no ambiguity about why. Tax concessions for investors are significantly contributing to this situation. That is why Labor have been very clear about our intentions. We introduced reform proposals on negative gearing and capital gains tax more than a year ago. These changes limit negative gearing tax concessions to newly built homes. They reduce the capital gains tax concession from 50 per cent to 25 per cent. It produces a budget saving; this is positive for the budget. It would save the budget $565 million over four years. You would think a coalition government that talks endlessly about the imperative for budget repair would embrace these reforms. But, no, that is not the situation. The coalition has doggedly opposed these measured, responsible reforms—reforms that go to system stability, that go to household security and that go to budget repair. These have not even been contemplated by the coalition. We have broader policies that are also important. I know my colleague Senator Cameron will want to talk about housing and homelessness, issues about which he is incredibly passionate.
But the raw facts are these: without an actual plan to intervene in this policy area, to secure a future for Australians, and particularly young Australians, we face a very grave future. And young Australians in particular risk having their lifetime financial security compromised. The current policies on negative gearing and capital gains tax generate great benefits for the wealthy, and it is time for government to take seriously proposals to address this distortion in our housing market.