Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Hansard source

I refer back to the evidence that was given at estimates on this. The evidence that I recall from sitting there listening to the Treasury advice is that the reforms in the budget, taken as a whole, support their confidence about their productivity forecasts, which are outlined in the budget. If I recall Macroeconomic Group's appearance—it was a long appearance—I think that essentially encapsulated all of the evidence provided that day.

We have this every estimates hearing about modelling and what constitutes modelling. I think the way the officials dealt with that when they considered—because macro has a certain way of viewing modelling, they don't do, necessarily, individual specific reforms; what leads them to support the productivity numbers in the budget is the amalgamation of all of the decisions taken in the budget. I'm sure someone will correct me if I'm wrong on that, but no-one's looking particularly worried in the box.

But I think the other argument made, or the evidence given, was that by removing some of the distortions that exist now in the tax system—and we've seen that—and it's very clear when you look at the tables in budget statement 4 of BP 1, which, again, I don't have with me, and look at the evidence or what those tables show, there has been a significant attraction in investing in established properties away from other types of asset classes. We are essentially rebalancing that and making the system neutral to that and changing negative gearing so that things can't be separated, really. By making those decisions we've made on negative gearing, we are supporting a system that allows investors to make decisions in a more efficient way by making decisions based on real returns. 'What is the best and most productive use of my investment dollars into what asset class?' rather than 'Established property delivers the best in terms of tax concessions and returns.' That's what we are seeking to do here.

Some information just passed to me is that Treasury Deputy Secretary, Macroeconomic Group, Dr Grant, stated in estimates, 'The proposed reforms provide us with greater confidence in achieving the medium term,' sorry, it was the productivity assumption not forecast, 'productivity assumption of 1.2 per cent per year, which is outlined in the budget papers.' In testimony to the Senate inquiry, former Productivity Commission Chair Michael Brennan, and independent economist, Saul Eslake discussed possible productivity benefits of the reforms, and their views are consistent with the department's assessment. Mr Eslake said, 'The reforms are expected to improve economic efficiency and housing affordability by reducing tax distortions that favour property speculation,' and Mr Brennan noted, 'The productivity effects come from improving the allocation of capital, but the overall change to Australia's investment environment is relatively modest.'