Monday, 2 May 2016
When in opposition I spoke in this place about the stark contrast between the commitment to the development of policy that we were involved in and the policies of the then Labor government. We heard legendary stories of the opposite side writing up policy on drink coasters on VIP flights and asking members to come with butcher's paper and a pencil, the day before a sitting week. During my time in politics I have developed a strong perspective of the danger of political considerations when trying to build the best possible suite of policies to govern our country to the very best of our abilities. Many in this place would be dismissive of such a position that would approach our greatest challenges, our greatest mistakes of the past, without the baggage, the encumbrance, of considering any issue that impairs or corrupts the process of forging the best policy path to pursue. They wish to play a game called politics.
Government is a serious business and decisions made in this place impact on our health, our education, our housing, our national security, our quality of life and our prosperity. Has the game of politics impeded our capacity to effectively plan, to have the courage of vision and direction? Have we been reduced at every hurdle to opt for the short-term pleasure at the expense of forfeiting our long-term goals?
With no planning, settlement in Australia has a most extraordinary imbalance that sees an overly congested Melbourne and Sydney amongst the most expensive cities in the world and with no master planning of infrastructure or urban renewal and densification, restricting growth, productivity and competitiveness.
The Prime Minister has established the House Standing Committee on Infrastructure, Transport and Cities, which I am proud to chair and which has commenced an inquiry into the impact of infrastructure on land values and value capture as a way to sustainably fund infrastructure—a serious approach to master plan and master fund our infrastructure needs tied to the purpose of that infrastructure.
It is interesting to note that earlier today Anthony Albanese introduced a private member's bill to set up a high-speed rail authority and yet, when he was in government, he chose not to and also projected that such infrastructure would not be built for a very long time. At that time, he made no reference to the rebalancing of our settlement through regional development or value capture to fund this essential infrastructure. The key benefit of high-speed rail is not as an alternative to air travel between Sydney and Melbourne, although, as that is the third busiest air corridor in the world and CBD-to-CBD travel time by high-speed rail is comparable, this is a worthwhile aspiration. The key benefit, however, is the development of our regions and the rebalancing of our nation's settlement to take the pressure off the suburbs of Sydney and Melbourne. High-speed rail can create connectivity and build competitiveness for regional centres to flourish as genuine alternatives to Sydney and Melbourne. These new centres will provide affordable housing, career opportunities and facilities at significantly lower costs. Their growth will help rebalance our nation's settlement and economy and act as a pressure-release valve for our overly congested major cities, and, as quality housing can be bought at a fraction of the cost, there will ultimately be downward pressure on costs of living in the major cities.
My electorate of Bennelong possesses some of the most congested roads in New South Wales. Too little has been done for too long by governments at all levels to address this and continual densification will only worsen the problem. Australia's population is expected to reach 70 million by the end of this century. Major cities simply do not have the capacity to shoulder all of this growth. High-speed rail is the infrastructure that creates a sustainable national wealth, and it is this wealth creation that pays for the infrastructure. When you develop a rural village into a self-sufficient city, you facilitate a sharp rise in property prices, which leads to an increase in government revenues—capital gains taxes, stamp duties, land taxes and council rates. Every time a regional property is sold, subdivided, developed and sold again, the government receives an increased return. The uplift occurs immediately, as the announcement of the project leads to an instant speculation-driven increase in property values. Value capture removes the obstacles of up-front costs to government and instead allows us to ask the question: can we afford not to build high-speed rail? Our nation's growth is currently restricted by the capacity of our major cities. How can we lift that restriction if not by decentralisation and regional development through high-speed rail connectivity? It is time to take this opportunity to plan the growth of our new cities strategically located along this high-speed rail corridor.
This debate goes hand in hand with questions on housing policy and how we can create affordable housing for the next generation whilst protecting the most valuable asset of many Australians. This plan of strategic decentralisation will provide affordable housing supply for the indefinite future. Vital to this growth is a sustainable housing market. Negative gearing has been a key element of the property tax system, which at its best provides affordable rental accommodation. As with many policy areas, there may be minor policy improvements that can be made to this system, but Labor's irresponsible proposal to abolish access to negative gearing on existing homes will devastate the housing market. The lowest interest rates in our history have empowered investor behaviour, causing concerns for volatility in our housing market. This led the House Standing Committee on Economics, of which I was chair, to commence a parliamentary inquiry into homeownership in May 2015, which examined the proportion of investment housing relative to owner-occupied housing, the impact of current tax policy and opportunities for reform.
The inquiry has highlighted the extraordinary amount of wealth held by Australians in property and therefore the absolute need for any policy reforms to be implemented in a careful incremental manner to avoid causing any destabilisation to the market. Throughout this process I have stated my personal opinion that a new lever to incrementally adjust the rates of tax deductibility for new investors may be worthy of further consideration. Administered by the RBA in direct response to market conditions, this lever would maximise our ability to balance optimum owner-occupier access with an affordable rental market. I have spoken of this lever several times in this place and in public committee meetings over the past two years.
In this climate of low interest rates, negative gearing has given greater advantages to investors, but in recent months we have seen changes implemented by APRA to slow down investment lending. This has had the desired effect of increasing owner-occupier participation in the market. The positive impacts of these changes must be patiently observed as we receive further data from this market. The market is our largest asset class. Labor's promise to abolish tax incentives for investments in existing homes after 1 July 2017 is reckless policy. Investors currently account for around one-third of new lending for houses. Under the basic economic principles of supply and demand, Labor's policy will encourage these investors to withdraw from the existing housing market, removing overnight one-third of the foundation of the market. This will devastate existing home prices. And, as the vast majority of rental accommodation is in existing houses, this will impact supply and therefore directly increase rental rates.
This policy represents Labor in full flight with its most comprehensive policy ever. Nobody escapes. If you own your home, if you have invested in property or if you rent, you will pay. The property market requires a stable policy environment in which to operate. Any changes must be finely calibrated and implemented incrementally to avoid destabilising our nation's biggest asset class. Labor have shown an absolute lack of understanding of market economics, proving time and again the great threat they pose to our nation should they return to the Treasury benches.
The government I am proud to be a part of respects the deep consideration of our regulators and recognises the action taken by APRA has effectively addressed negative gearing issues that impact the housing market that have now seen investor appetite reduced and homebuyers again in the market. Our largest asset class must be treated with respect, maturity and consideration of the many factors at work. Labor's rashness and willingness to play politics on such an important issue demonstrates comprehensively that they are not fit to govern.