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
The Australian Conservatives can and will support schedule 2 in this bill—that is, the downsizer super scheme for those aged 65 and over—but it cannot support schedule 1, the First Home Super Saver Scheme. The downsizer scheme will likely achieve its goals to some extent. It will likely reduce the barrier to downsizing for those aged 65 and over with a type of lock-in effect and free up family homes for younger people and growing families to buy, enabling better use of our housing stock.
The First Home Super Scheme will achieve little, if anything at all. Its take-up will likely be small and by those quite sophisticated or savvy in finance, tax, super and fine print and who can probably afford a deposit anyway. Extra complexity is great for the elites. It's great for financial advisers and their children but tends to ensure inequity. Complexity is often inequitable in the areas of finance, tax, super and regulation. Keeping rules simple and the number of schemes minimal is often the most equitable path to take.
Whatever the take-up is, it will simply add to the demand and price of housing, eventually, without tackling the real drivers of our tight housing market which, I might add, are largely confined to the highly sought after suburbs in our capital cities, particularly those that are well-established, leafy or chic and with easy commutes. We will need soon to face up to the fact that our universities—or degree mills—are pumping out so many near-unemployable graduates who expect to own their own houses and who have become accustomed to living an inner-city lifestyle, which is well beyond the means of someone without a job. We will need to face up to the fact that we have a net 200,000-plus immigration intake which is applying additional pressures on the demand side.
Firstly, let me speak about schedule 2, the downsizer super scheme. The scheme will to some extent reduce the downsize barriers or lock-in effects for those aged 65 and over whose family homes have become too expensive or unwieldy to maintain. I support that; I think it's a wise thing to do. But those who take up this scheme will often be wealthier retirees—ones who don't comply with or qualify for the aged pension or have a small amount of aged pension to lose but want to downsize nonetheless. I don't think that should prevent the scheme from being introduced.
Self-funded retirees eager to downsize will be attracted by the new ability to effectively swap $300,000, or $600,000 for couples, from tax-exempt housing stock, being the family home, into tax-exempt super without the work test applying and in addition to the non-concessional contribution caps of $100,000 a year and the $1.6 million balance test, both of which such retirees may now already be at the limits of.
Some part-pensioners may also be attracted to the scheme. As super balances are in the aged pension assets test, converting proceeds from a test-exempt asset, the family home, to a test-included asset, super, is likely to reduce one's aged pension. This scheme softens the blow by allowing the proceeds of up to $300,000 per individual to be fast-tracked into tax-exempt super rather than lying around in, say, a term deposit earning a taxable return or held back from entering super more quickly due to the $100,000 a year non-concessional contributions cap.
While I suggest the take-up of this scheme may be dominated by relatively wealthy retirees, the tax costs are relatively small. It's about $20 million per year by 2021, compared with the likely impact of a housing stock better utilised, particularly in our capital cities, by those more appropriately needing the demands of the relinquished assets.
As such, the Australian Conservatives can and will support this scheme if it's split from schedule 1 of the bill. We don't support schedule 1 of the bill. This is the proposed First Home Super Saver Scheme. This is yet another scheme devised by a government that wants to be considered to be listening and doing something about so-called housing unaffordability and its impact on wannabe first-home buyers. But, like other schemes in the past, it would deliver little in the way of real assistance to its target audience. It would slightly divert more funds through voluntary super into the housing market eventually and, therefore, slightly increase the demand for and price of housing stock over the longer term. As such, it's going to impact other buyers in the market whose voluntary super cannot be put to buying a home as it is not their first. When this new scheme's introduction is a distant memory but the unaffordability of housing still remains, there will be a push for yet another scheme, as we've seen before, so the government can be seen to be listening and doing something. It is just rinse and repeat.
The government has tried to sell this to me as a tax cut for young people. I say, if you're serious about tax cuts, why don't you cut taxes for every person? None of us found it easy to buy our first home. Yes, there are elements of first-home buyers for whom it is completely unaffordable. But do you know what? If people are paying less tax and if they can get a job that is appropriate and commensurate with their qualifications, then they've got a real opportunity. If their cost of living is lower, if it's not impacted by the fact that governments continue to meddle in almost every aspect of our lives, including, say, the electricity market, which has seen prices double in the last few years because of government programs, then people will be able to make decisions more appropriately for themselves.
I also make the point that superannuation has always been for retirement. There are any number of worthy causes that superannuation could be applied to. Why not apply it to reducing HECS debt, which is going to cost the government $20 billion in bad loans over the next 10 or so years? It's going to have our balance sheets swell out to $80 billion or something in outstanding loans in that time, as well. Why wouldn't you allow young people to apply their superannuation savings to HECS debt instead of a housing loan? The reason is quite simple: superannuation is for retirement. The problem is that successive governments—most notably in recent times, the Turnbull government—have tinkered with superannuation or made such massive changes to it that no-one trusts the system anymore. It is a tax shelter. But it is a tax shelter that was designed for long-term retirement savings. The great difficulty I have with this is that, if you don't trust it, you're not going to tip extra money into it. They're now saying you can use superannuation for a first home. What's next off the rank? You're undermining the integrity or the reason for being of superannuation in its fullness.
There was a time when, I have to say, I argued at a Liberal Party meeting many years ago: 'Why couldn't we use our superannuation contributions to buy a home?' I was struggling to buy a home, like everyone else. Now, in the fullness of time, I recognise that the immediate demands and wants of the individual are often not best served by dealing with this stuff. It might mean that, in the future, if you want to seriously address these sorts of things and the cost-of-living issues, you should start to think about the level of superannuation contributions or when they actually kick in. Maybe they should kick in at the age of 30. Maybe they should be first applied to repaying the debts that have been accrued by the degree mills that don't really equip the younger generation to do stuff. Then, once the debts have been paid off to the Commonwealth, you could then say, 'Now you can start saving for your retirement.' As it sits currently, there's not a 20-year-old that I know that says, 'I'm going to put more money into superannuation because it's going to work better for me in the long term.' I don't think they're going to trust the government enough to tip money into superannuation in order then to get it out to help buy their first home. It's not really a tax cut at all; it's an increase in bureaucracy. It will advantage the elites who can access it.
If you're fair dinkum about housing affordability, you've got to look at a whole bunch of other elephants in the room. Firstly, you've got to look at the supply side, which is not in the purview of the Commonwealth. Housing affordability is directly related to the supply of housing, and it's almost entirely a state or local government issue. In South Australia they've taken the prevailing Land Management Corporation from a not-for-profit corporation to, basically, a for-profit corporation. They land-bank and they withhold things until land prices escalate and they can make some money on it. That's government working against their citizens for their own purposes.
You've also got to look at the demand side. This is where one of the great robberies of the Australian people is occurring. Our migration intake is beloved of both sides of politics, principally because, the more people that are in this country, the more demand there is for individual widgets or burgers or anything else, and, the more demand there is for any economic activity, the greater the GDP grows. Governments love to talk about GDP as this great benefit. They say, 'Look, our economy is growing.' Indeed, that's why Australia has managed to avoid a recession over the last 25 years. It's nothing to do with the Rudd government spending or anything else. Principally, it's because we've been adding 200,000-plus people to our national economy every year through migration, and that's growing our GDP.
But what might be in the national interest or what might be in government's political interest is not working for the individual Australian. That's borne out by the economic reality of the Commonwealth Bank's research which says that, when you look at per capita income and per capita returns, this migration is far too great. It is far too large, because per capita incomes are going back. Governments cannot afford to keep up with the infrastructure demands that are going on. The quality and the composition of our migration intake are acting against us, because there are too many people that are languishing on welfare for too long a period of time. We're all expected to suck it up and say, 'This is working in our interest.' Well, the everyday Australian knows that it's not working in their interest. They are dealing with the congestion, the increased taxes and the increased costs of living. They are dealing with the lower quality of life and the greater struggles they have. They are dealing with the demands it places on housing stock—you cannot get away from that.
If you want to reform, make housing more affordable and make housing more accessible for the next generation of Australians, there are things that you need to do which are eminently sensible. A lot of them are on the demand side. That's why we can't afford to continue to add a city the size of Adelaide every seven years. I regret they're not coming to Adelaide. They're all moving to Sydney and making Sydney increasingly unlivable for the people there. It's very difficult for them. We need to think about the impact that this is having on our health system, our hospital system, our roads, our public transport and our schools. The only conclusion that you can come to is that immigration is far too high. We need to at least halve immigration, to 100,000, maybe even less.
We need to make sure that immigration is acting in our national interest until it's acting to the benefit of every individual Australian rather than just to the benefit of governments. I think we can do that in a myriad of ways. Our visa system is being abused and misused—I have no doubt about that—particularly in relation to temporary workers and international students. We've got to recognise that, if someone applies to come to this country under one particular visa category, it shouldn't necessarily be a shortcut to getting permanent residency or staying here. The average Australian knows this. They know that, if someone applies to come here as a student, once they complete their studies and their degree, they should go back. If they want to come back to Australia, let them apply to come back as a permanent resident or in a particular worker category. We need to take the sugar off the table. We need to take away the easy permanent residency through the back door. If you want to address foreign ownership issues, one of the great ways to do it is by using the ethic of reciprocity. I continue to struggle with why it's okay for residents of another country to come here and purchase houses or land, or any other infrastructure, when we're not allowed to do the same in their country. I just find that extraordinary. We need foreign investment—I understand that and recognise it—but Australians want to invest in other nations as well. I struggle with this, that we are allowing a group of individuals to come to Australia, or to purchase property here without residency, when no Australian is entitled to the reciprocal right in their country. That's a meaningful difference. It would change the game and it would make house prices and apartment prices fall, which would have enormous consequences as well. That's what housing affordability is about.
If you're not going to address the elephant in the room, you're tinkering around the edges. I'm reminded about a senior Liberal many years ago who rang me when I wrote that the first home buyers grant should be abolished and he admonished me for speaking out against party policy. I posed the question and said, 'If we abolish the first home buyers grant, what will happen to house prices?' He said, 'They would fall.' I said, 'Will they fall by the same amount, or less or more than the first home buyers grant?' He said, 'They'd probably fall by more.' I said, 'Do you really want more affordable housing? If you do, you would remove the first home buyers grant.' He didn't like that because the government wanted to give something to people for free that they thought was going to benefit them. I remember even now senior government ministers saying we should be doubling and tripling the first home buyers grant—completely ignorant of economics. These people, unfortunately, are running the economic policies of the government. It's extraordinary that you can be so naive and wilfully ignorant of the realities of demand and supply.
If you want to make housing more affordable and you want to cut taxes for first home buyers or people just getting started in life, let's cut taxes for everybody. Don't cook up a scheme that's not going to work. It will be another reincarnation of the Rudd government scheme, which promised that 750,000 people would get into a first home buyers scheme and it delivered a fraction of that. You've got to deal in reality rather than aspiration. I regret that the person from the government selling this to me said my vote didn't matter anyway, that they had the numbers and they were going to get it through. I truly hope that's not the case. If they decide they want my vote then they'll split this and they'll ask me to vote for schedule 2, which I will. But I will not be voting for schedule 1. If they insist upon presenting them as a package, I'll be voting against this bill.