Monday, 4 December 2017
Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 1) Bill 2017, First Home Super Saver Tax Bill 2017; Second Reading
This government is like a toddler with a bowl of peas. They'll do almost anything and everything to avoid what's in front of them. What's in front of them is a hard decision that needs to be made. If we're going to tackle the housing affordability crisis in this country, if we're going to try to increase the supply of housing onto the market, and especially help first-home owners and lower-income Australians, we need to remove the perverse incentives that are rigging the system and making it harder for young Australians and low-income Australians to compete with the wealthy investors in the property market. Those two perverse incentives are negative gearing and capital gains tax concessions. We know that if we were to remove those we'd be able to raise tens of billions of dollars over the forward estimates to help pay for schools, hospitals and our social security net, and to allocate money towards infrastructure projects. There's a lot we could do with those funds.
We also know we could remove an anomaly in our system. It's an anomaly that's decades old and was set up by a previous Liberal government. At that time, there was probably some momentum and some real desire to give Australians the ability to grow their wealth by leveraging several homes, but it has created a monster. For those of us who have been following this issue closely, we have been repeatedly asking the Treasury secretary these questions, especially at every estimates: what's the government actually doing about housing affordability and how we are going to tackle that? But what we have in front of us is what we get. At best, this is rats and mice. Not only will it not impact housing affordability; the schemes themselves could also have perverse incentives. While the Greens look at the two separate parts of this bill in isolation for the sake of this debate, while we don't necessarily have any issues with the First Home Super Saver Scheme—and in my contribution I will get to some of the many problems that we have with that, but overall we see it as a fairly weak policy—
Sitting suspended from 18:30 to 19:30
So, I now go to a little bit on the legislation that we're debating here tonight. Firstly, on the First Home Super Saver Scheme, this measure would allow first home buyers, defined in certain categories and under certain definitions, to save up to $30,000 by making voluntary contributions to their superannuation fund. Those using this scheme would then be able to take advantage of superannuation tax concessions. The money put towards this scheme will be quarantined so that the scheme does not directly affect the principal accumulated through compulsory superannuation contributions. It's designed to be a voluntary scheme—essentially a side scheme—to complement and go along with your compulsory superannuation contributions.
The scheme has received muted support—that's probably the best way to describe it—for providing first home buyers with tax arrangements that are closer to the tax-free status enjoyed by existing home owners on the capital appreciation of their home. But that's about the best thing that I could find that people have said about this scheme. More often, the scheme has been criticised on a number of different grounds. It undermines the government's own Superannuation (Objective) Bill 2016, which states the superannuation system is to:
… provide income in retirement to substitute or supplement the age pension.
It's yet another measure that will only work to inflate house prices, by allowing people to spend more money on housing than they otherwise would. This is a really important one, because, as I opened with in this contribution, we have a housing affordability crisis in this country, especially in Sydney, Melbourne, Brisbane and, to some extent, Perth. That crisis is because we have investors buying multiple properties and competing with first home owners, low-income Australians and young Australians that are trying to get into a home, and this measure won't do anything to fix that. If anything, it's just going to add more people to go along to the auction on a Saturday morning to bid for the house. It's not going to increase supply of housing, and it's just going to add to the demand-side pressures that are pushing up housing prices.
Another very pertinent point, and probably the biggest criticism that I've received of this—and I sat down and had a very good chat with John Daley from the Grattan Institute about this only a couple of weeks ago—is that it's unlikely to be widely utilised and even less likely to be used by those on low incomes in this country. And, at the end of the day, that's where we have a housing affordability crisis. If you don't believe me, Acting Deputy President Williams—and I went through this in some detail when we last debated the issue around vacancy tax and deductions for home owners—look at the recent Household, Income and Labour Dynamics in Australia survey, commonly called HILDA. The data that was released was quite chilling. This was only three or four months ago. The 2016 edition of this report showed—and this is done every five years—that home ownership has been declining in Australia for some years now. The decline has been particularly concentrated among young Australians, especially in the individual category of 18 to 39. Women tend to be more affected, and their numbers are quite startling. In the 2014 survey, approximately 25 per cent of men and women aged 18 to 39 were homeowners. That's down from 36 per cent in 2002. Let's compare that: in 12 years, 36 per cent of Australians has fallen to 25 per cent. With a quick bit of maths, starting at 36 and down by about 12, that's about a third. Home ownership has declined amongst young Australians by nearly one-third over that period, and that includes during the GFC.
The other startling thing in this HILDA survey is that those who have been most affected tend to be in the lowest income quartiles. The HILDA survey tells us that it's not just about income inequality in this country; it's also about wealth inequality, and that's the point we're debating here today. We've got significant wealth inequality, and it's getting worse. Like I said before, this government is like a toddler with a bowl of peas: they'll do anything and everything to avoid it. The bowl of peas—the hard decision—is tackling what we know are the perverse incentives that are helping to create this catastrophe for young and low-income Australians where they can't buy their own home. So, it's not just the housing affordability crisis and how that affects individuals and everyone's right to have safe, affordable housing; it is also about inequality. And it is not just income inequality but wealth inequality.
Acting Deputy President Williams, your generation and mine, to some extent, grew up in a country where everybody did aspire to own their own home, and although there were ups and downs—there were high interest rates at different periods—there was the hope that you could always get a reliable, stable job. That's gone now. There's no job security anymore. You could afford your own home then, but to many young Australians now that literally is just a dream that they can never aspire to. Some would even say it's a nightmare.
The best I can say for this super home saver is that it does level the playing field at some point, if you know how to use it. As John Daley from the Grattan Institute told me, it will tend to appeal to a certain kind of demographic. Generally, young, well-educated Australians on certain income levels will know about it. Accountants and others may push it for their clients. But it's really going to advantage those who are already doing reasonably well and are on their way to having a career, and it's just going to add to housing demand pressure.
We can compare it with the Rudd government's similar First Home Saver Account scheme, which this government closed down in 2015. This is virtually a replacement for that. Of course the mechanism is different, but why did this government close down Mr Kevin Rudd's First Home Saver Account scheme? It was a dud. It was hardly used. There was almost no take-up. If, as the experts are saying, we are expecting a similar take-up with this scheme in the legislation in front of us then we can hardly put our hands on our hearts and say that this is going to do something about the housing affordability crisis in this country or give young or low-income Australians a leg up.
The second part of this bill is about putting the proceeds of downsizing into super. This measure would allow people over 65 years old to make a contribution of up to $300,000 from the proceeds of selling their home into their superannuation accounts. This contribution would be exempt from the lifetime transfer cap of $1.6 million on superannuation contributions. Here's the catch: this scheme has been heavily criticised, including by economists, as being a scheme that will only advantage the wealthy. What do the statistics tell us? It's estimated that only 35,000 people in this country have a superannuation account in excess of $1.6 million. Not many Australians have a superannuation balance of their savings over their life of $1.6 million. The average superannuation balance for a 60-year-old Australian is $240,000. So, do you think they're going to get benefits out of this scheme? No.
It undermines the government's own $1.6 million transfer cap that was passed in this place about a year ago, in November 2016. The government received a significant backlash from their political base as a result of this measure. But one wonders, and I'll ponder on it here tonight, if this might actually be a fillip for the coalition's voters, the voters that weren't happy that the government actually changed super to try and streamline it a little and make it fairer. The Greens supported many of those measures. If you're a wealthy Australian over 65, this measure will allow you to sell your home that is probably too big for you anyway, and you're thinking about downsizing. Depending on where you are, your home's probably going to be worth, looking at median or average house prices, a million dollars or more, or certainly in the high hundreds of thousands, and you'll get a $300,000 tax benefit. Australians who aren't in that situation, who aren't as fortunate as the millions of pensioners across this country that have a low superannuation balance, are not going to be able to get the same benefit.
This scheme directly adds to inequality in this country. Unless there's a really good reason for it, and something important to offset it, the Greens won't support legislation that adds to inequality in Australia, or anywhere. We've always had a clean record in that regard. We're fairly neutral to negative on the First Home Super Saver Scheme, but we don't support the downsizing measure into super. To be honest, I haven't really read any commentary that does. I'll be interested to hear a little bit more on the debate from those who support the measure.
If we really wanted to make a difference, we would tackle unfair tax breaks that rig the system in this country in favour of investors. Many of those investors own multiple properties and are the same investors who go to auctions and bid on properties that we know young and low-income Australians, especially first home buyers, are wanting to buy. This is no accident. This is a deliberate policy, a tax system that encourages speculation on housing and encourages investors who are buying to rent to spend more money than owner-occupiers. In the Greens' view, this has been a key factor in driving up the price of homes across the country and has put home ownership out of reach for many young Australians.
Young people who have saved for a deposit are being outbid by wealthy investors, who are getting a leg-up from the taxpayer, and that's what perverse about it. I called it a perverse incentive earlier because it has had perverse outcomes. I also mentioned that, if we got rid of these schemes, we could raise billions of dollars in revenue and we could fix what I see as a structural problem in this country on a key issue like housing affordability and inequality, and we could raise revenue that we could spend on our schools and hospitals.
These young people are left to pay more rent to these same investor landlords under outdated and unfair tenancy laws. That's another debate for another time. Because homes are so expensive, especially in many of the capital cities, the level of household debt in Australia is the highest in the world. That is another incredibly important debate that we have to have, because these things are all tied together. If we look at this holistically, it is policies like negative gearing and capital gains tax concessions that also contribute to problems with our financial system in terms of system stability and the inherent systemic risks.
Instead of this debt being used to build much-needed infrastructure that would create jobs and set us up for the future, we are funnelling it into mostly speculative investment in private housing that does little to improve employment or productivity in this country. They are perverse incentives. The Australian Greens have a plan to end the rigged system that benefits the already wealthy at the expense of those less well off, especially younger Australians. We've been up front leading on the issue, going back to my colleague Senator Ludlam. Senator Rhiannon has been leading on this issue for years, and when Adam Bandt in the lower house was Treasury spokesperson he argued for the removal of negative gearing and capital gains tax concessions. We are glad that Labor came out before the last election and supported a similar policy. We hope that in the future we'll actually get this done.
The Greens' plan to dismantle the rigged system that privileges investors and landlords over the rest of us, and to fix housing, is to end negative gearing for all future investment properties; to phase out negative gearing for investors with two or more properties by 20 per cent each over five years—investors with a single property would be exempt; to phase out the capital gains tax concession over five years; and to support state governments to replace stamp duty with a broad-based land tax. I know my colleagues will be talking in more detail about our broader housing plan, and about how housing is a right and everyone has a right to safe and affordable housing in this country, but I want to talk a bit more about the idea from the Greens for fixing the structural issue—a plan that has been well received by economists. The Greens' plan is about fixing the structural issue—not playing around the edges, like this policy that we are debating tonight, but helping to fix the major structural issue. Our plan is to get rid of one of the worst taxes in this country, which is stamp duty, and swap it with arguably one of the best and most efficient taxes, and that is land tax.
Swapping land tax for stamp duty would boost the economy by a massive 82c for each dollar swapped. We've had this costed by the PBO. And I notice that Mr Peter Martin in The Sydney Morning Herald recently talked about there being 'no bigger benefit imaginable for rejigging any taxes'. It also helps fix a problem that we have in the housing market, in that it frees up more supply and it helps adjust housing prices across different areas. That's a debate for another time, but I must say that I was surprised at the last estimates when the Productivity Commission said:
We see, from time to time, a lot of fiddling at the margin—
which is exactly what we're doing tonight—
with propositions around how to make first home buyers' lives easier, which appear substantially to just drive up the price of property rather than deal directly with the issue.
That was their answer in response to a question of mine about why they supported swapping a broad-based land tax for stamp duty, which they came out and said we should all be talking more about. So there's a good solution from the Greens tonight. This legislation is about fiddling around the edges, and we won't be supporting the bills. (Time expired)