Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Hansard source

I thank Senator Collins and Senator Ludlam for their contributions to this debate. This bill will modernise our tax and superannuation laws and remove laws that are no longer working or appropriate. Indeed, our laws need to be relevant and need to provide for effective and targeted rules to ensure that our laws are current and adapt to rapidly changing global economic conditions. The updating of our tax rules is very much at the forefront of this government's agenda. This is why we are having a dialogue with the Australian public through the tax white paper process to explore opportunities to reform and improve our tax system.

In responding directly to the issue raised by Senator Ludlam in relation to the First Home Saver Accounts, the First Home Saver Accounts initiative was essentially another one of these 2007 Labor policy failures. As policy failures go, it is right up there with the Swan mining tax policy failure. When Labor initiated this particular measure, they had grand objectives and they thought it was going to be incredibly successful in encouraging people wanting to buy their first home to take advantage of the First Home Saver Accounts. Back in 2008, they told us that there would be 730,000 accounts with about $6.5 billion in them. The truth is: seven years later, when they thought we would have 730,000 accounts within four years, there is fewer than 50,000 accounts with average account balance of less than $12,000 in them. First home buyers across Australia have voted with their feet by not taking up this particular measure. Indeed, the banks have stopped providing new accounts to new first home savers—aspirants, candidates—for these accounts.

The more fundamental and strategic policy issue that the government has is this: we all want to make judgements and decisions that will help improve housing affordability but we have to then be very clear on what the actual problem is. If you have a challenge where prices go up, making the purchase of a particular good or a house less affordable, what is actually causing that development? Of course, the price for anything is set by what is happening in the market, what is happening to supply and what is happening to demand. When demand exceeds supply, prices will go up. In a free market, that will mean that you are likely to get additional investment and additional supply over time, which hopefully will bring the market back into balance, and prices will stabilise. When supply exceeds demand, prices will go down. And there will be responses in the market which, over time, will stabilise prices in that market.

The problem with this policy initiative and the problem with a number of policy initiatives taken by the previous government, and other governments around Australia over time, is that they seek to further boost demand. When it comes to housing, we do not have a demand problem. Demand is strong. We have a supply problem. When you pursue initiatives and take policy steps to further boost demand in a market that is potentially already overheated or where there is upward pressure on prices, you actually make the problem worse, to the extent that there is a problem.

If we as a parliament, as a Senate, genuinely want to do something about housing affordability, we will all work very hard on two key things. We will seek to convince our colleagues in the states and territories to boost the supply of land and make sure there is a larger supply of land, and we will all work together on measures to bring down the cost of constructing a home. By international standards, the cost of building a home in Australia is extremely high. The other day people in the House of Representatives laughed at the Treasurer making an absolutely accurate assertion—that is, the current government getting rid of the carbon tax has actually brought down the cost of building a home in Australia. That is a fact. It brings down the cost of doing business and it helps to bring down the cost of building a home. It actually does help in a small way to make housing more affordable. Obviously, that is not going to be the single measure that is going to address affordability challenges when it comes to housing, but every bit helps. So, if we want to improve housing affordability we have to, firstly, boost the supply of land and, secondly, consider what measures would help to reduce the cost of building a home in Australia, which is too high.

As a direct policy response to your question, 'Why does the government believe that this measure should be removed?', firstly, it has been extraordinarily unsuccessful. The take-up is less than 10 per cent of what the government at the time thought it would be within four years. After seven years the take-up is still less than 10 per cent of what the previous government thought it would be. We have fewer than 50,000 accounts with less than $12,000 on average in those accounts. So people have expressed very clearly their lack of confidence in this measure. The previous government thought there would be $6.5 billion in 730,000 accounts after four years, and we know what the actual number is now.

The second point is that, to the extent we have a housing affordability challenge in different parts of Australia at present, this is not the way to fix it, because it attacks the problem from the wrong end. In Australia we do not have a demand problem; we have a supply problem. By boosting demand, to the extent that there is a challenge, you actually make that challenging situation worse. That is why, as part of this package of measures in this bill, the government has put forward the proposal that we have.

Question agreed to.

Bill read a second time.