Andrew Leigh (Fenner, Australian Labor Party, Assistant Minister for Productivity, Competition, Charities and Treasury) Share this | Hansard source

My maternal grandfather, Roly Stebbins, was born in a tent in 1922. His dad was a veteran who'd fought in World War I, and his dad could never afford a home of his own; he never owned a home. During the Great Depression, my grandfather left school at age 14 to support the family and then worked as a boilermaker. It was only after World War II that he was able to afford to buy a home of his own. He got a block of land in Seaholme, near Williamstown, and he and mates worked together to fire the bricks. He and my grandmother, Jean Stebbins, raised four kids in a home they built themselves.

My grandparent's story was the story of Australia in that period. In the interwar era, about half of Australians owned a home, but, by the time you got to 1966, thanks to the Curtin, the Chifley and, yes, the Menzies government, the homeownership rate had gone up to two-thirds. Yet, what we've seen over recent years is the reversal of that great Australian dream. We've seen the Australian homeownership rate falling now to a 60-year low. We've seen the abandonment of what used to be a great principle of the Liberal Party, just as the Liberal Party members in this House have abandoned so many principles of their party.

At street stalls and town hall meetings, teachers, tradies, nurses talk to me about their sense that it's become too hard to buy a home in Australia, that the statistics out there in the community are what they're feeling in their own lives, as homeownership soars out of reach. They keep on saving for a deposit, but house prices are soaring out of reach. And it's not just young Australians; it's their parents and their grandparents that are repeatedly getting in touch with me and so many members on this side of the House, saying we need to do something to boost homeownership.

We have the most ambitious plan on housing supply of any government in recent decades, but we're also, through this budget, tackling the challenges in the tax system. How did we get here? Well, it's the combination of two policies. In 1936, Australia moved to allow taxpayers to deduct interest losses against their salary. You can't do that in Britain. You can't do that in the United States. And then, in 1999, the Ralph review was handed to the Howard government. With not a word on real estate, it was a report that suggested that putting in place a 50 per cent capital gains tax discount would turbocharge investment in innovative firms, and we immediately saw the result of that. The impact was principally felt in the housing investment sector. Previous to that, net tax paid by landlords was positive, but it very quickly turned negative, and, in most of the period since those changes, we've seen landlords lose on net some $4 billion to $10 billion a year. Landlords in Australia have become among the biggest recipients of tax handouts.

It has disordered investment decisions. The incentive now is to overinvest in loss-making assets and to invest largely in existing properties. Four out of five investor loans are for existing homes. This budget changes that. It responds to calls that experts have been making for decades for reform on capital gains and negative gearing. You will still be able to negatively gear a new home, but you won't be able to negatively gear an existing home if you buy it after these measures take effect.

That approach, of course, is the approach that we take with foreign investors. Those on the other side of the House support it when it comes to foreign investors. They will happily argue why foreign investors should only be able to buy new built homes—because we're asking them to add to housing supply. But somehow they walk away from that principle when it comes to negative gearing, and the idea is exactly the same: if you want to benefit from negative gearing, we want you to benefit the whole community by adding to the housing supply. We're seeing very clearly this week who the coalition is fighting for. We know from analysis from the Parliamentary Budget Office that the top 10 per cent get three-quarters of the benefits of the capital gains tax discount and about 40 per cent of the benefits of negative gearing.

The Grattan Institute has crunched the numbers to ask the question: what has been the benefit of these policies to the typical income earner since the year 2000? They estimate that the typical income earner has benefited to the tune of about $12,000, cumulatively, over the last quarter century. What about the top one per cent, though—those now earning over $800,000? Well, the benefit to the top one per cent cumulatively has been around $700,000, so these are policies whose benefits are more than 50 times larger to the top one per cent than they are to the median income earner.

What these tax reforms do is fund a working Australian tax offset for everyone—not just for the fortunate few but for every working Australian who earns a salary. That's why the Grattan Institute has referred to this as 'the budget we've been waiting for'. It's a set of reforms which respond to the Economic Reform Roundtable last year, and it's a set of reforms that respond to calls that have been issued across the political spectrum.

I remember sitting here in this House when Joe Hockey gave his valedictory speech, and he said in that valedictory speech:

… 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.

Well, Joe, we're doing exactly that. We've heard calls from the member for Canning, who, in response to the question, 'Is this why you're also open to negative gearing and capital gains tax changes?' said:

This is a new era … I just think we need to overhaul the whole system.

And we've heard from the member for Goldstein, who has said:

… the tax system is screwing over young Australians. Instead, it favours well-off, established interests against those trying to get ahead.

He went on to say:

In short: if you work hard to get ahead, you get hit hard; if you live off assets, you don't.

Senator Kovacic has said:

We should not be afraid to consider tax changes, whether they be capping the number of properties that can be negatively geared …

We've heard from the member for Groom, who said:

I think there are some real issues we need to address. I'm open to a discussion on CGT

The former member for Menzies, who held it when Menzies was a seat held by the Liberal Party, said this year:

Current tax settings tilt incentives toward investors, particularly in existing stock. They reward bidding rather than building … The Liberal Party should lead with this: cap negative gearing for established dwellings at one property per investor, while allowing the deduction for up to five newly constructed homes.

Even Scott Morrison, former Liberal Treasurer, when asked, 'Does negative gearing need to be reformed?' replied, 'There are excesses.' Dom Perrottet and Rob Stokes, sensible Liberals from New South Wales, have made exactly the same case.

What we are doing is responding to a huge run-up in house prices relative to incomes. Unlike the shadow treasurer, I'm not afraid to have written a book or two and to be able to quote from those books. In Battlers and Billionaires, I crunched the numbers, looking at how house prices have moved relative to the earnings of the average worker. If you go back to the 1980s, the typical house cost four years of average earnings. It then ran up to five or six during the nineties and then to seven in the 2010s. In the 2020s, buying the typical house took the typical worker 11 years of earnings. We had more than a doubling in the house-price-to-income ratio. No wonder young Australians are mad that they can't break into the property market.

It has taken a Labor government to act on boosting supply, working with states and territories to overcome unnecessary regulation on an abundance agenda but also working to ensure that we have the right tax settings—fair tax settings that fund a tax cut for every working Australian and ensure that our tax system is fairer and the incentives are there for people who want to take advantage of negative gearing to invest in new-build homes. This is a budget for all Australians and a budget that tackles the central issue of housing affordability in Australia.

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