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
Earlier today, we heard all the reasons why young people in Australia are being screwed over. We know that's happening in so many areas. It's not just happening in the housing market; it's happening when it comes to education. Young people are lumbered with huge debt when they complete their tertiary education. Young people are finding it hard to access health care because of rising out-of-pocket costs. There is the cost of global warming, and the burden of action will fall heavily on young people. Of course, we know just how badly young people are being screwed over when it comes to being able to afford to put a roof over their heads.
In the First Home Super Saver Tax Bill 2017 what we have is an encapsulation of the quite pathetic response to an overinflated housing market where young people simply have no chance of ever affording their own home. Effectively, it introduces another tax break into an already overinflated housing market. It makes a bad problem worse. There is no question that we have a housing bubble at the moment. There's always speculation about how long that will last and whether we'll see an abrupt end to the housing bubble through a crash or whether there'll be just a stagnant period of capital appreciation for properties. But, whatever the outcome, we know that the current situation can't continue. We're seeing massive capital gains that are out of keeping with gains in other asset classes and that are completely out of keeping with growth in wages. One of the problems is that it creates a massive intergenerational divide, this divergent path between people who don't have property as an asset and are relying on wage growth versus people who are fortunate enough to have been able to afford a property when it was relatively cheaper or investors who benefit from huge tax breaks within the system. That means that there's a gap. It's big and it's growing and it will continue to grow and continue to widen.
At some point, though, we do need to recognise that this bubble can't continue and that the unsustainable tax breaks in the system need to be addressed. This goes in the opposite direction. This makes a bad problem worse. It's inadequate to confront the multiple challenges facing young people in the housing market. As I said, we know that these tax breaks are already stacked well in favour of investors and those who already own property. To quote Saul Eslake, a well-known economist, his view about the problem that this bill reinforces is: 'Anything that allows people to spend more buying a home than they otherwise would has one effect and one effect only: people spend more money on housing than they otherwise would.' Makes sense, doesn’t it? That means that you're going to see a housing bubble made worse and you're going to see another inflationary measure.
Of course, when you've got problems on the demand side, you don't want to continue to fuel that, and that's what this measure does. It will push up house prices for those people who are already locked out of the market. It provides another fig leaf for action when what we should be doing is taking those tax breaks out of the market, not adding new ones. If you want to make housing affordable for young people, you have to recognise that at the root of the problem are a series of tax breaks that mean that you artificially prop up demand. By giving incentives to investors to reduce their income tax by running a loss on rent and to get a boost to their profits when they sell the house—because they get a big discount on their capital gains tax—you are artificially propping up the market, and this seeks to add another incentive to an already overinflated housing market. If the government really cared about young people being able to afford their first home, they would start to do something about the incentives that already exist within the system. They would tackle negative gearing and they would tackle capital gains tax.
We're very proud of our record on this. The Greens have campaigned for many, many years on abolishing negative gearing for anyone who buys a future property. We've also campaigned very hard on the abolition of the capital gains tax discount. We think that needs to happen. We think it needs to be phased out—and phased out very, very quickly. Unfortunately, the Liberal Party is much more concerned about protecting its donors, protecting wealthy investors, than it is about looking after young people. The government is saying to young people, 'We're going to provide you with the fig leaf of actually doing something when the reality is that our existing policies in this market are making housing unaffordable for you.'
It doesn't matter how much supply we create—this isn't a supply side problem; it's always going to make more economic sense to buy a house for someone else to live in than to buy your first home. It makes sense based on the current tax settings. If we build more houses, our tax settings mean that those new houses will be swallowed up by investors. They have a head start. There is a big and growing gap between investors and wage-earners. Unless that is addressed, the reality is that you simply are not going to make any headway. Giving people a tax break by saving for their first home is not going to change that. It won't change the dynamics that operate within an already overinflated housing market.
The other element to this housing package is that it allows retirees to pocket even more money from selling their house by putting that money in tax-sheltered superannuation. So it creates an incentive for retirees—and remember, these are the people who benefited from cheap and affordable housing—another tax break through super: as if the intergenerational divide wasn't bad enough. You've now got a response at the other end of the system that will make the problem even worse. So retirees will sell their house to downsize, but, under the government's policy, these homes are going to be snatched up by investors. So it's pretty good if you're somebody who is in the position where kids have moved out of home, or you've got a big house, and you're a retiree who wants to downsize and to minimise the amount of tax you pay on the capital gains. Well, park that money in super, get a huge tax break for that—and yet there's the situation where a young person is still going to have to compete with a property investor who gets a big tax break and for whom it is cheaper to buy their second, third, fourth or fifth property than it is for a young homebuyer to buy their first.
We have to get to the root of the problem here, and the root of the problem is this tax system that stacks the odds in favour of the wealthy and investors, and against people who seek to buy their first home. The response should be that the government needs to go back to the drawing board. It needs to listen to young people and it needs to listen to the economists who have been critical of this package and who say, 'Well, it's good that you finally recognise that it's become increasingly difficult for a younger person to buy their own home, but you need to come up with a policy that helps them to get into the market, rather than one that continues to protect investors and a system where the imbalance is all wrong.'
Those of us who were fortunate to buy property when it was affordable also had the benefit of free education. Those of my vintage and older also had the benefit of being able to consume and pollute the planet with almost no cost associated with that. Yet we're handing over to those generations who follow us a legacy which means that, for the first time in human history, it might be that they will be lumbered with tougher living conditions than those we experienced. They face job uncertainty and a jobs market, where—even though many young people will be lumbered with huge fees—they don't even know if they are going to get a job at the end of their period of tertiary education, sometimes for a decade or more. They don't know whether the jobs they're training for will exist in the future. And yet we have a token response from a government that is really just protecting its mates and is not prepared to take the tough decisions which are necessary to get rid of the massive incentives that favour the wealthy.
Unless we start to rebalance the system—and until we recognise that people who own property, and have owned it now for many years, need to understand that that growth can't continue, that it should plateau out and that one of the ways of minimising a crash in the market is to try and stabilise property prices at current levels and allow, over time, young people to enter that market—then what we face is the potential for a significant and serious downturn in the market, which will cause much more disruption than if we act now and act rationally. That is why we need to get rid of negative gearing; that is why we need to abolish the capital gains tax discount; and that is why we need to ensure that we start to put in place measures that are much more rational.
If we care about downsizing and property mobility, then we have to look to more innovative solutions. The Greens have already put forward a revenue-neutral proposal where we abolish stamp duty and we replace it with a land tax. It can be done in a way in which people who have already paid stamp duty aren't subject to a land tax, and it will assist individuals who buy new properties because they won't face the huge up-front barrier that exists as a disincentive for people to move to ensure that their life circumstances are matched by the house that they live in. When you have stamp duty, you realise that there is a big barrier to moving and you reduce mobility. When you have a proposal where, rather than allowing individuals to shelter the profits of their home through super, you replace stamp duty with a land tax and you do it in a revenue-neutral way and in cooperation with the states—and we have a proposal for how to do that—you encourage mobility and you give more opportunities for people to enter the housing market.
The reality is that the government has dragged its heels for so long. We know that the constituency that the government represents includes property investors who often own three, four, five or six properties, and the government knows that it's that constituency that might be impacted by a change to negative gearing and capital gains tax. But that shouldn't stop us from making the change, because it is unfair that we have a big and growing gap and this generation is preventing future generations from enjoying the same opportunities that it has experienced. The government's got it very wrong on this one, as it does on so many issues. The reality is that most Australians want to see change and they want a better future for young Australians. They want a better future for their kids and their grandkids.
We have to start by recognising that housing is a different asset class to other assets—that it is, first and foremost, a human right; that it is, and should be, the right of every Australian to have a roof over their head; and that we need to start to tackle the tax incentives that skew the system in favour of the rich and powerful and away from ordinary Australians. That's why the Greens will support measures that help us get there; that's why we have led the debate on negative gearing and capital gains tax; that's why we've put forward innovative proposals like the replacement of stamp duty with a broad based land tax, done in conjunction with and cooperation from the states; that's why we support a significant investment in public housing; and that's why we support more funding for social housing. That's why we will not support a measure that simply overinflates an already overheated housing market; that's why we won't support a measure that says to young people, 'We're going to treat your super in the same way as we treat your ability to save for your house'; and that's why we won't support measures that allow wealthier retirees to simply park their profits in super as a tax dodge. This at least identifies a problem that everybody knows exists—that is, young people are being priced out of the housing market—but it does not do anywhere near enough to get to the root of the problem: our tax system favours the rich and powerful and it does over ordinary people. It's about time that changed.