Senate debates

Wednesday, 18 March 2015

Matters of Public Importance

Superannuation Inequality and Housing Affordability

4:11 pm

Photo of Stephen ParryStephen Parry (President) Share this | | Hansard source

A letter has been received from Senator Siewert:

Pursuant to standing order 75, I propose that the following matter of public importance be submitted to the Senate for discussion:

"The Abbott Government's failure to tackle superannuation inequality and housing affordability."

Is the proposal supported?

More than the number of senators required by the standing orders having risen in their places—

I understand that informal arrangements have been made to allocate specific times to each of the speakers in today's debate. With the concurrence of the Senate, I shall ask the clerks to set the clock accordingly.

4:12 pm

Photo of Christine MilneChristine Milne (Tasmania, Australian Greens) Share this | | Hansard source

I rise today to note the Abbott government's failure to tackle superannuation inequality and housing affordability. No-one could have missed the Treasurer's thought bubble that suddenly superannuation could be a source of funds for people to take out to buy a home. Out it went, spun out on the airwaves, without any backing, consideration, modelling, reports—anything. It was just spun out there as another thought bubble. What it demonstrates is that the coalition does not have a clear idea of what superannuation is intended to do, nor has it got any real grasp of the issue of housing affordability. That was shown here in the Senate a few minutes ago when we had the ridiculous proposition put before us that the principal reason for housing affordability issues is the failure to free up cheap land on the edge of cities. I am distracted, because that is the most ridiculous proposition. Everybody knows that the poorest people are forced to the furthest edges of the cities, where there is no public transport and no services. They drive the oldest and least efficient cars. They end up in hot boxes on the edges of cities and in poverty traps. That is not the way that you are going to change the issues of housing affordability. But I am going to allow my colleague Senator Ludlam to speak more on that.

I want to speak to the issue of the government's failure to tackle inequality in our current superannuation system. Superannuation in Australia is meant to be a way of delivering a comfortable retirement for everyone and taking pressure in the long term off the age pension, enabling people to save for their retirement. It is not meant to be a tax haven for the wealthy, and that is what it has become—a tax haven for the wealthy. That is why the Greens have put forward a more than reasonable proposition that says it is not reasonable that you put money into superannuation and it is taxed at a flat 15 per cent. How is that fair, if people can load up their superannuation at 15 per cent when they would be paying 47c if they were in that tax bracket? They get away with a 32c in every dollar windfall gain, knowing when they turn 60 they can take it out tax-free. It is a way of using the superannuation system as a tax haven. What we have said is: let's get serious about raising revenue. Let's get serious about removing the tax breaks that are skewed very heavily in favour of high-income earners and start caring for lower-income workers.

We had it looked at by the Parliamentary Budget Office and quite clearly you can raise more than $10 billion—$10.16 billion would be raised over four years—if you brought in a progressive superannuation proposal. For people earning up to $100,000 nothing would change, so it affects those on high incomes. It goes back to the principle that superannuation is about saving for your retirement. Yet what have we seen in here? We have seen the government maintain the inefficient and unfair system, and also move to abolish—which is just disgraceful—the low income super contribution. These are people who earn less than $37,000 a year. They have to have money going into superannuation. It goes in and it is taxed. That is just wrong. They are paying disproportionately more and that is why there was a low-income super contribution of $500 which the government put into super accounts so that you do not lose around $27,000 in expected retirement savings—because that is effectively what happens to people who earn less than $37,000 if you take away that low-income supplement. But the government was mean enough to say to people who earn less than $37,000: 'You pay; the rest can use it as a tax haven.'

That is why we should adopt this policy. It is $10.16 billion. It is there for the taking in this year's budget, and I urge the government to do that and ditch this nonsense idea that you can continue to use superannuation as a tax haven and a way of accessing money for housing. That is not what it is designed to do. (Time expired)

4:17 pm

Photo of Arthur SinodinosArthur Sinodinos (NSW, Liberal Party) Share this | | Hansard source

I welcome this debate today. It is a good debate to have because there are issues around both the structure of superannuation and the matter of housing affordability. I do not think it is a matter that can be swept under the carpet.

I come first to superannuation. The important thing about superannuation is that, on all sides of politics now, it is accepted that we have the three pillars of superannuation. We have the compulsory superannuation guarantee; we have voluntary savings; and we have the age pension. Wealthier Australians have a higher capacity to fund their own retirements; less-well-off Australians will rely more—wholly or partly—on the pension. The government asked David Murray and the Financial System Inquiry to look at superannuation, and one of their findings was that superannuation tax concessions were poorly targeted. The government has agreed with the inquiry to refer this issue to the tax white paper process. In other words, there is recognition that change may be necessary and there is a process which is being put in place to look at that. One of the lessons of the recent past is not to put major structural reforms, for example, into a budget context. The Prime Minister has made that very clear in recent times. What we are doing is putting in place a process where in a coherent way, as part of a look at the whole of the taxation system, we can look at issues around these sorts of tax concessions.

There has been a lot of debate about the cost of those concessions. Treasury have produced certain estimates. There are others who have produced different estimates. Some claim the estimates are inflated. That tax white paper process is a place where we can have a look at the proper cost of those concessions and how they should be targeted. One point I will make, as a survivor of the 1996 Howard government, is that one of the measures we took in that budget was the superannuation surcharge. It was seen as hitting, in large measure, our own base; but it was part of a series of measures to try to sell cuts across the board. So there is a history within the coalition of looking at the equity of superannuation. Our history says we do that and what we are doing now, through the white paper process, is continuing that inquiry.

The 2010 Australia's Future Tax System Review found that super should continue to receive tax assistance but there is a case for distributing assistance more equitably between high- and low-income individuals. The Rudd government did not adopt the AFTS review's recommendations on this matter; but we are going further and we will have a proper review.

I come to this issue about the low-income superannuation contribution. I take the point that Senator Milne has made. The dilemma for the coalition was this: it was one of a number of spending measures which were tied to the minerals resource rent tax by the former government, a tax which we have since repealed—a tax which was failing to raise revenue it was meant to raise. It was initially, you will all recall, the resources super profits tax. It became over time, as it was further refined, the minerals resource rent tax. It never made the billions of dollars of estimated revenue that was being touted by the former government, yet tied to it was a whole series of spending measures. These measures were tied to it because the idea was: 'We are raising all this revenue. We are taxing'—allegedly—'these foreign multinationals and all that money will go in spending, often recurrent spending, across the broader community.' The fact of the matter was we had to make our decision. If you are getting rid of the tax, what do you do about the spending associated with the tax? That was why we are committed to repealing the low-income superannuation contribution. We are taking a comprehensive look at tax arrangements for super through the tax white paper process.

In recent times there has been debate about the aims and objectives of superannuation. Yes, we all agree: the overriding objective should be to try to provide, as Senator Milne suggested, for a more comfortable income in retirement. There are real challenges in doing that. One of the challenges is that the system needs to be around much longer in order to have that build-up of contributions, and earnings on contributions, to get to the sort of targets which have been discussed in public debate as being equated with having a comfortable retirement.

As has been accentuated in recent times by some other developments, young people who go into the workforce do face a dilemma: if they are university students, they do face HECS debts—and the possibility that once the university fees deregulation proposals go through there may be higher HECS debts—on top of which they would be aiming to save for their retirement as well as have nine to 12 per cent over time of their income going into superannuation. So the Treasurer very rightly said we should have a look at the structure of superannuation and the circumstances under which it is possible to dip into super for some defined purposes.

What I have argued publicly is: if we do that, we need to look at systems where people are able over time to pay back what they take out. The other problem we have got is that the superannuation system is inflexible. We should have a capacity to have higher limits on what you can contribute and the terms on which you can contribute when people have maximum earning power, when, for example, their children may be off their hands. We need more of a life-cycle approach to superannuation. Again, this is something more for the future, for other processes. Ideally, you would look at all of that in the context of what you do with the structure of pensions because there is an interaction between the income and assets testing of pensions and what you do about superannuation.

On the issue of housing affordability more broadly, there are two elements to this debate. The first element is around welfare housing, where we are looking at people who lack the means to buy their own home in the private market because they may be vulnerable for a whole variety of reasons through no fault of their own or, indeed, people who are homeless. The second element of the housing affordability debate is around younger people seeking to get into that market.

In response to this issue more broadly, I think it is sweeping matters under the carpet to say that housing supply is not an important component of the problem. It may not be the be all and end all. You may need targeted assistance, as all governments have provided to the more vulnerable in the community, but you do need to recognise, as has been recognised across the country and in many studies, that supply issues are very important. In Sydney, the Property Council found that Sydney is about 51,000 homes short of what is needed to meet current housing needs. If population growth trends continue, Sydney will face a 190,000-home deficit by 2024.

The National Housing Supply Council estimates Australia had a 228,000 housing shortage as at 30 June 2011. There has been this ongoing imbalance between demand and supply. At the moment, demand is also being pumped up by low interest rates, which are pumping up housing prices. That is true. There is no doubt that is having an impact on demand.

There is an equilibrium in the market that has been there for some time, which Senator Day earlier in his contribution was seeking to draw some attention to. Glenn Byres of the Property Council of Australia said:

A big priority needs to make sure more areas are available for urban renewal – along transport corridors, old industrial lands, town centres and other priority areas.

Make rezonings quicker, increase potential for medium-density buildings in middle-ring suburbs, strata reforms for the redevelopment of old buildings, flexible zonings and a development assessment system that is cheaper and quicker. There is a whole variety of things that can be done.

What is important in this debate is that between the Commonwealth and the states there is more of a compact around addressing these issues in a holistic manner. As I said before, issues of demand for housing for particular groups can be met through targeted assistance, which is essentially an adjunct to what we do through our welfare system. But we must not underrate the importance of the issue of supply in the housing market.

The Reserve Bank and others have made it very clear that foreign demand for housing in Australia has not been a major mover of changes in house prices. This is a furphy. What we have tried to do through the Foreign Investment Review Board and through the recent changes the Treasurer announced was essentially make sure we are enforcing the conditions on previous foreign investment approvals so that the capital from overseas, rightly, is going into new development, into financing, into buying off-the-plan and the rest, which actually stimulates the housing sector, stimulates housing construction.

It is very important for us to get this right. There should be no more xenophobia about the Chinese or others having an impact on prices. That is not the focus of the debate. The focus of the debate is how you improve supply and how you have a better structure of incentives when it comes to demand. When people talk about negative gearing and the rest, you have to look at both demand and supply effects. You cannot do it in isolation.

4:27 pm

Photo of Jan McLucasJan McLucas (Queensland, Australian Labor Party, Shadow Minister for Mental Health) Share this | | Hansard source

I am also pleased to rise to speak to this matter of public importance about the Abbott government's failure to tackle superannuation inequality and housing affordability. I will focus my remarks this afternoon on the issue of housing affordability and my colleague Senator Ketter will focus on the superannuation question.

The provision of affordable housing is a complex policy matter with many factors that determine affordability that must be considered in the policy response. According to the Australian Housing and Urban Research Institute, AHURI, in order to determine housing affordability stress, you need to look at local housing and labour markets as well as larger economic, environmental and social issues. AHURI has carried out some very important research in this space. I had the opportunity to hear from a number of experts last week at AHURI's event entitled: Housing the secret to urban productivity growth.

It is important to understand the links between housing and productivity growth because housing can impact economies in very different but very real ways. High housing costs can push people out of communities who otherwise might have provided other valuable resources to that community, most importantly, their labour and their skills. Similarly, the differential between regional housing prices can inhibit labour mobility—that is, people are restricted from moving to areas of workforce need if they cannot afford to move there because of high housing costs.

AHURI's researchers have done some internationally recognised research looking at whether the supply of affordable housing for low-income earners in job-rich cities is impacting on the businesses in these city centres and, indeed, the overall productivity of the city. It is extremely interesting work, one of the many projects that people are working on.

Understanding the characteristics of Australia's housing affordability problem is critical to the future of our economy. If we do not attend to it we will be faced with a generation of people unable to enter the housing market. We do not want a generation of people pushed to the suburban fringe as their only option, or to fragile tenancies like boarding houses and long-term caravan parks. This will simply widen the already unsustainable inequalities. We must develop strategies to increase housing affordability and availability for people with low and middle incomes in a way that is sustainable into the future, meaning that we have to address both the supply-side and the demand-side issues.

In government, Labor had a proud record of helping to deliver affordable housing for Australians and their families. We invested a record $26 billion in a broad-ranging and innovative affordable housing agenda. It was the single largest investment in housing affordability in Australian history. We helped low-income earners by providing rent assistance to around 1.2 million individuals and families, reducing the proportion of recipients in housing stress from 68.2 per cent to 40.8 per cent. This is still a job not done, but it is a big reduction.

Labor contributed directly to the construction of one in every 20 new homes. And then there was the $4.5 billion National Rental Affordability Scheme, to add more than 37,000 new, affordable rental homes across Australia. The Residential Development Council of Australia has lauded our NRAS as:

… an important driver in increasing housing supply across Australia.

And it warned the Abbott government that getting rid of the NRAS would leave the government out of the housing affordability and supply issue:

… a national issue that needs a national response.

But the Abbott government went ahead and scrapped the NRAS program anyway.

On top of that, they delivered a $44 million cut to homelessness services in their first budget. They axed the Housing Help for Seniors program, which was to deliver support for pensioners over the aged pension age who right-sized their homes. They scrapped the first home owner saver accounts, they abolished the Prime Minister's Council on Homelessness and disbanded the COAG Select Council on Housing and Homelessness, and the advisory group that advised that council. Then they withdrew the Commonwealth's role from the community housing sector's National Regulatory Council. It is quite a quite shameful record.

Early in the piece, the Abbott government announced an internal review of all housing and homelessness programs for which, in the end, no terms of reference, reporting dates or details were ever released. It was to report by the end of last year. That review never went ahead, appearing to have been scrapped in favour of a discussion on housing and homelessness as part of the Reform of Federation white paper. We do hope that this process will lead to some proper housing policy from the Abbott government because, until now, some 18 months in, we have seen nothing in terms of public policy around housing, homelessness and affordability.

I am not confident, though, that this will happen, and my lack of confidence is shared. National Shelter's Adrian Pisarski attended a consultation in Canberra recently on the Reform of Federation white paper. He came away concerned that the outcome is 'a foregone conclusion' and that there is limited focus on understanding the problem and determining how to resolve it.

Mr Pisarski, writing for Pro Bono Australia, suggested that pushing a review of housing and homelessness into the Reform of Federation white paper is more about the Abbott government abrogating their role in housing and passing it off to the states and territories. To be blunt, it is about removing any pressures on the budget bottom line.

He rightly identifies that any deliberations around housing affordability must include considerations of the Commonwealth's taxing powers. He points to the fact that:

… this must now be considered by another major review of taxation.

So, two reviews. It is my view that the referral of all decision making to the two white paper processes will mean that by the end of this government's term there will have been no decisions made about future policy to support more affordable housing in our country.

The philosophical position of Liberal governments, which is not new, to withdraw from the leadership role that a Commonwealth government can have and to avoid the debate about supply and housing affordability is just not tenable. Hiding behind section 51 of the Constitution is, in my view, a smokescreen. In his article, Mr Pisarski rightly says:

… we have now had the Commonwealth involved for 70 out of 114 years.

According to the role that the Commonwealth took in providing housing for returned soldiers after World War II.

The Abbott government is putting the bottom line above the lives and welfare of Australians, particularly those Australians who are the most vulnerable or marginalised in our society. The Abbott government has no plan to address the issue of housing affordability because they do not see it as their responsibility. Mr Abbott said today that his second budget will be frugal but responsible, because it is it a budget in repair.

This will give no heart to people who need help in keeping a roof over their heads, nor to the organisations that support them. He cut funding for them too. Just days before last Christmas, he took away funding from the Community Housing Federation of Australia, from Homelessness Australia and from National Shelter. He shut down the voices of people who otherwise do not have a voice, and I am fearful that this next budget will be as unkind as the first.

Mr Abbott and his government have attempted to fool the Australian people, but the Australian people are not foolish. This government cannot be trusted on anything when it comes to housing policy and policy for the homeless in our country.

4:37 pm

Photo of Scott LudlamScott Ludlam (WA, Australian Greens) Share this | | Hansard source

Senator Milne has just put some comments on the record about superannuation and that wider picture. Personally I would like to welcome Mr Hockey to this debate. I would like to thank Mr Hockey for noticing the existence of the housing affordability crisis in Australia, particularly as it pertains to young people. He is pretty late to the party, but his arrival is nonetheless very welcome. In the brief time he has left as Treasurer, we can confirm that, from our point of view, there would be widespread support for any meaningful attempt to ease the chronic housing stress suffered by millions of Australians—the Labor Party, crossbenchers, Greens, no problem.

But, first, we need to talk about this thing he said about superannuation. Appearing to believe that young people, who have been priced out of one of the most severely unaffordable housing markets in the world, should deplete their retirement savings in order to further bid up housing prices and go massively into debt for an overpriced home comes from the cigar-chomping thinking of someone who has never actually had to worry about these sorts of things for himself.

The idea was immediately condemned by people as diverse as former Prime Minister Paul Keating and Peter Costello. Mr Keating, who is never one to pull his punches, pointed out that the Liberal Party is always trying to 'pull the plug out of the bath of Australia's universal superannuation pool'. Peter Collins, formerly Joe Hockey's boss and former Treasurer of New South Wales, said it is 'time the Abbott government told the public that this is not a proposal they will be adopting'. A little bit more on the diplomatic side, Mr Costello said, 'I think there is a bit of a conflicting narrative there'. It was described by Mr Turnbull—although I guess Mr Hockey is used to being contradicted by the member for Wentworth—as a 'thoroughly bad idea'.

It may be that Mr Hockey is not aware of this, but from the day this government was elected it has done everything within its power to dismantle Commonwealth support for housing affordability. Senator McLucas touched on some of those issues—ironically enough, so did Senator Sinodinos, although I am not sure if he was aware of it at the time. The government abolished the National Rental Affordability Scheme. They sacked the National Housing Supply Council—

Photo of Sean EdwardsSean Edwards (SA, Liberal Party) Share this | | Hansard source

Why? Why?

Photo of Scott LudlamScott Ludlam (WA, Australian Greens) Share this | | Hansard source

Why? Because you did not have the faintest idea how it was working. That is why. They cut $44 million from the capital budget of the nation's homelessness service providers. They refused to guarantee funding for the National Partnership Agreement on Homelessness beyond June 30 of this year. And that places funding for every shelter and refuge in this country under threat.

Senator Edwards interjecting

Senator McLucas interjecting

Photo of Gavin MarshallGavin Marshall (Victoria, Deputy-President) Share this | | Hansard source


Photo of Scott LudlamScott Ludlam (WA, Australian Greens) Share this | | Hansard source

Mr Acting Deputy President, there is a lot of noise in here, from people who should know better.

Looking around on Christmas Eve for more things to shut down, the government cut all funding for Homelessness Australia, National Shelter and the Community Housing Federation of Australia. That is kind of ironic, because these are the very people who could have helped Mr Hockey come up with something intelligent to say about housing affordability, but they cannot take his call because he closed them down.

So, if Mr Hockey actually cares about helping young people into affordable housing, rather than ransacking their retirement savings, there are many better ways of going about it.

Nothing is more important than having a place to call home. Getting over the idea that homeownership is the be-all and end-all. I think that is quite an important psychological thing for us to get through, for Australians to get through and for policymakers to get through. One-third of the nation's householders are renters. Many of them, young people, are priced permanently out of the housing market. They may well be renters for life, and that is something we have to get across.

Renters have to be seen not as second-class citizens. And that is going to be difficult for those on the other side of the chamber to accommodate, because many of them, we know, are investors. You might own six houses, but you have priced first home owners out of the market. There are people in that one-third of Australian householders who are renters and will probably be renters for their entire lives, whether they want to buy a property or not. We have to provide tenure stability and tenure security for people who are renters, because the prospect of ever buying a home is well and truly out of reach for so many people.

The most urgent thing we need to deal with is homelessness: 100,000 Australians are homeless and 10,000 are sleeping rough tonight—and that is probably an underestimation, so don't you dare abolish the census. Nonetheless, at least 10,000 Australians will sleep out tonight, when the rest of us have all gone home.

The Australian Greens have a homelessness action plan, which I put forward to Mr Hockey and all to members of this chamber on the basis that we are willing to negotiate on any of these proposals. Senator Day knows a fair bit about this sector. The Labor Party initiated some pretty smart stuff when they were in government. We are calling for the coalition to come to the table to talk. (Time expired)

4:42 pm

Photo of Sean EdwardsSean Edwards (SA, Liberal Party) Share this | | Hansard source

I rise to speak about the important work that the government is undertaking in this space. I acknowledge Senator Day's foundation platform on this issue in coming to this Senate last July, and I agree with him wholeheartedly that there are levers within the economy that should be released to make housing more affordable. Certainly, it does become a regional issue, as areas like Sydney and Adelaide have quite different economic fundamentals. It is a challenge for government; it is a challenge for state government; it is a challenge for this federal government. But, unlike past governments, one size does not fit all. This government is taking a very careful look at housing affordability, and we are quite active in that space.

I will speak firstly about housing affordability. The government recognises that housing affordability is a very real issue, and that is why we are having the debate. It is particularly a sensitive issue for young people and families, and one of the underlying causes of the decline of housing affordability is lack of supply. As Senator Day and I know, in South Australia most of the vast tracts of land of the next development of land, the urban sprawl as we know it, is locked up by the state government. So that is a state government issue; they have the ability to unlock that.

Supply has not kept pace with the strong growth in demand in recent years. And, whilst housing supply is for the most part a state government responsibility, the federal government has committed to produce a white paper on the reform of the federation, working with those same states and territories. Importantly, the white paper is the primary vehicle through which the government will consider housing and homelessness issues.

In July 2012, the states and territories agreed on the recommendations of the Housing supply and affordability reform report with the aim of increasing Australian housing supply and affordability. The government's policy in relation to foreign investment in residential real estate aims to increase Australia's housing stock by limiting foreign investment in established dwellings. Let us be clear: we limit foreign investment in established dwellings. That means that if you come here you have to build something, you have to create jobs and you have to provide for the economy. That is the stimulation we want with foreign investment. The government responded in February to the findings of the House Economics Committee's report on Australia's residential real estate foreign investment network by releasing a consultation paper on options to strengthen Australia's framework. The options include a new compliance and enforcement area in the Australian Taxation Office. We have seen that—it was across the front pages of the New South Wales dailies only last week or the week before. The options also include increased penalties, and an application fee for foreign investment applications came in on 1 March so that the taxpayer does not have to pay for the cost of administering the foreign investment process. The government will move quickly following consultation to ensure that our foreign investment rules continue to support Australia's national interest.

Integral to encouraging housing construction is the provision of adequate infrastructure. You cannot have housing without adequate infrastructure and planning, and this government is a planning government. Investment in infrastructure, through the Infrastructure Growth Package, is a core element of the government's Economic Action Strategy and it comprises no less than $11.6 billion of additional spending on infrastructure. To purport that this government is not interested in housing affordability is a nonsense. The government is working closely with states and territories to get rid of red tape. It is fitting that today we have the Omnibus Repeal Day (Autumn 2014) Bill 2014 going through the other house to get rid of all the red tape and unnecessary legislation and regulation. Red tape holds up the supply of housing and construction. As Senator Day knows, in South Australia, dealing with an approval process for subdivision and planning approval is an arduous and costly task, and its seeming impermeability is a complete disincentive to investment in that state. The state Labor government would do well to reform that as soon as they possibly can.

This all means that we supply more land. It is basic economics: increased land releases will improve affordability for both renters and home buyers. With that in mind, the government has established a red and green tape reduction target of a billion dollars a year in Commonwealth compliance costs for business, individuals and community organisations. The Commonwealth is also involved in housing affordability for low-income households through national partnership agreements with the states and territories. In 2014-15, the Commonwealth will contribute a further $1.3 billion to the states and territories through the National Affordable Housing Agreement to improve housing affordability and homelessness outcomes for Australians and, despite what the previous speaker said about the NAHA, there is a further contribution of $1.3 billion in the budget. The Commonwealth also extended the National Partnership Agreement on Homelessness for one year, providing $115 million in 2014-15. Why did we do that? Because the previous government had not funded it in its forward estimates and it would have fallen off a cliff. We heard that in an inquiry, but we did not hear it in the contributions from the other side.

As I have said, the restricted supply of housing is a significant contributor to high price levels and is largely controlled by state and local governments. Through COAG, they agreed to a range of reforms in 2012 to remove impediments to supply. Sadly, I do not think their endeavour is as profound as it should be. Measures of housing affordability have improved in line with declining mortgage interest rates since November 2011. According to the CBA-HIA housing affordability index, that improvement has been 30 per cent. More recently, measures of housing affordability have started to deteriorate given strong house price growth and subdued growth in household income. Measures to aid first home buyer entry into the market have been found to increase prices at the lower end of the market without inducing significant increases in supply. So you have to be careful what macroeconomic reform you provide to the housing sector and be careful of the effect. I have always found that the more government gets involved in markets the more things go up in price and the more unobtainable they become to the people that most need them. For this reason, governments at both the state and federal levels have reduced or removed purchaser subsidies or similar policies. As part of the 2014-15 budget, the government is abolishing the first home saver accounts because that has had limited effectiveness. In June 2014 there were 49,400 accounts with a total combined balance of $616.8 million. The government also announced in the budget that it will not proceed with the final round of Labor's National Rental Affordability Scheme, as the scheme was poorly designed and has failed to deliver outcomes for low- and moderate-income Australians. I am sure it was well intended, and I know we will hear about it during the contributions remaining, but like everything else—cash for clunkers, GroceryWatch, Fuelwatch, pink batts—it was chaotic at the time. The aim of the white paper is to improve the way our federal system works by being clear about who is responsible for what.

Late last year, I was fortunate to be in Singapore on parliamentary business. They have a scheme which operates to leverage people's superannuation into home ownership—and Singapore is one of the most expensive cities in the world to live. Contesting ideas is what we should be doing in this place, not demonising fresh ideas put up for discussion. I urge all Australians, and certainly all of those people elected to this place, to take everything into consideration. (Time expired)

4:52 pm

Photo of Chris KetterChris Ketter (Queensland, Australian Labor Party) Share this | | Hansard source

I am very pleased to make a contribution in this debate in connection with a government which is based on broken promises and twisted priorities. When it comes to inequality and unfairness, this is a government which takes the cake. We know that the Abbott government has a very poor record on the issue of equality. In respect of the government's budget, we are talking about the fact that this is a government that wished to—

Senator Edwards interjecting

Photo of Glenn SterleGlenn Sterle (WA, Australian Labor Party) Share this | | Hansard source

Senator Edwards, the Senate sat here in silence and listened to your contribution. I would urge that you show the same courtesies to your colleagues, Senator Edwards.

Photo of Chris KetterChris Ketter (Queensland, Australian Labor Party) Share this | | Hansard source

On the issue of equality: we saw a government seeking to legislate for a paid maternity leave scheme involving full payment for those earning $150,000 per year. We saw a government proposing to reinstate the novated lease tax minimisation scheme for vehicles. These are things that were being done for the wealthy. We saw them seeking to protect the financial planning industry from Labor's reforms on financial advice, at the expense of industry clients. And then we saw the government seeking to maintain the tax privileges on superannuation, which overwhelmingly benefit the wealthy and which cost the Treasury $32 billion per annum in the previous year, rising to $45 billion over a three-year period.

But what was this government seeking to do for the poor people in our community? This government was seeking to abolish the schoolkids bonus. It was seeking to impose a tax of 15 per cent on employer contributions to superannuation for those earning up to $37,000 per annum, which impacts 3.6 million low-income workers. It sought, and it went to the election with the proposition, to defer the increase in the superannuation guarantee for two years, and we know that that has now blown out. And of course we know about the application of a co-payment for consultation with a doctor. To cap it all off, the government was proposing to help employers get rid of penalty rates in awards.

That is the track record of this government. It has a very, very clear agenda of seeking to advantage those who are already well advantaged and to attack those of us who are at the lower end of the socioeconomic scale.

When it comes to superannuation, we know that Labor is the party of superannuation. Mr Acting Deputy President, I do not need to tell you about that. It was actually the labour movement which campaigned in the 1970s and 1980s to establish a system of savings for ordinary workers who had not, up to that point in time, had the privilege of having a secure retirement savings system. As we know, our system is the envy of the world. It was the initiative of the ACTU to pursue occupational superannuation as an industrial matter, and it then fell to the unions to argue for the awards to be varied to provide superannuation. I think the default status of industry superannuation funds is another element of our current system which aids retirement incomes, and this is another area where the government is seeking to attack the system.

I am also proud of my very small involvement in the case in Queensland to introduce superannuation into the retail award in my home state—a case needed to be taken to the Queensland Industrial Relations Commission to do that—so I do feel something of a personal attachment to this whole issue of superannuation. I have a fundamental understanding of the importance of this issue to people on low incomes because I know that, in the retail industry, for example, for shopfloor employees—if I can call them that—who did not have access to superannuation, pension funds were very rare and were used by employers largely as a device to encourage or to trap employees with their employer, because they did not receive the benefits of their pension fund unless they stayed with their employer till retirement.

To highlight the differences here, I think it is important to highlight what the Labor government did in 2013 to make the superannuation system fairer for Australians. The government looked at a range of issues. They had already taken the decision to increase the superannuation guarantee from nine per cent to 12 per cent, which was to provide a better standard of living in retirement for 8.4 million Australians. That meant that a person aged 30 on average full-time earnings would retire with an extra $118,000 in superannuation savings.

The government also moved in 2013 to increase the fairness of the concessions provided for superannuation. The low-income superannuation contribution was introduced and benefited 3.6 million Australians on low and modest incomes, including 2.1 million women. It would benefit 30 per cent of workers. The superannuation concession reduction reduced the tax concession that people with incomes above $300,000 per annum received on their contributions from 30 per cent down to 15 per cent. It affected about 128,000 Australians. It was an attempt to address the inequity of the system. There were further reforms that were announced back then, simplifying the design and the administration of the higher concessional contributions cap and a number of other factors. So Labor in government had a very, very proud record of seeking to increase the equity in the system.

Unfortunately, the Abbott government has abolished the low-income superannuation contribution. As Senator Sinodinos has indicated, that was unfortunately collateral damage with the abolition of the MRRT. But that was something which very much impacted on low-income workers and was felt as a very, very great loss there. This shambolic and dysfunctional government has forced through superannuation guarantee changes that could cost Australians billions of dollars. I think I have seen figures to suggest that some of the modelling that was introduced on 16 March this year indicated that the abolition of the low-income earners superannuation contribution, together with some of the other modest measures at the upper end of the income spectrum, combined with freezing the rate of compulsory superannuation contributions, will leave Australians $983 billion worse off by 2055. That, of course, means that more Australians will be reliant on the age pension in retirement, a disgraceful outcome and one over which this government should hold its head in shame.

We know that this is a government which is seriously damaging Australia's superannuation. On average, women will retire with $92,000 less superannuation than men, and Joe Hockey's plan to undermine Australia's world-class superannuation scheme will negatively affect retirement savings, especially for women, and put, as I say, greater pressure on the age pension.

I want to just touch on the comments by Mr Hockey in relation to the utilisation of superannuation for housing. Not content with the cuts to superannuation in the budget, the Treasurer recently had a disastrous thought bubble: that superannuation would be able to be accessed to pay for a deposit on a first home loan. This is a double whammy of stupidity, damaging retirement incomes. First, if a person takes out $25,000 to put towards a home deposit, they would probably have $54,000 less in their superannuation account by the time they retire. Second, the policy does nothing for housing affordability. Everyone at the auction now has their superannuation in their pockets, leading to price rises, and the only beneficiary is the vendor.

If Joe Hockey wants the best policy advice on why early access to superannuation for a deposit on a first home is a bad idea, there are a range of Liberal Party luminaries that can lend him a hand. The finance minister, Mathias Cormann, has weighed in on that issue, as well as former Treasurer Peter Costello. Also, the chair of the financial system inquiry, David Murray, has said the idea is 'inconsistent' with bolstering retirement incomes and that it would need very careful thought. This is a government which cannot be trusted on important national issues such as superannuation and housing affordability.

5:02 pm

Photo of Nick XenophonNick Xenophon (SA, Independent) Share this | | Hansard source

In the three minutes I have available to cover these two vast topics, I will at least give an indication of where I stand on these issues. Firstly, the issue of superannuation being used for a first home is something that I raised following evidence given by HomeStart Finance in South Australia, a state government authority that has done terrific work. It was a Labor government initiative in South Australia. It has been a tremendous success. It has made money and got people into homes—people who otherwise would not have been able to deal with the conventional lending market. Sixty-four thousand households have been able to purchase a home. It has generated more than $380 million for the South Australian government. It shows that there is always room, where there is market failure in the commercial lending market, for a socially equitable method of lending money to people. HomeStart Finance raised it because it has a very strong social justice basis for what it does. I think that we should at least consider it in the context of some very strict safeguards.

But we also need to look at issues of negative gearing. We need to tweak negative gearing in respect of that, but we need to do this very carefully so it does not have an inflationary impact on the housing market to make housing less affordable. The fact is that house prices have increased faster than household incomes for the past 40 years. The fact is we have seen that the deposit gap index has increased more than the house-prices-to-income index for the past 30 years. Back 1970, the Australian median house price was $13,000 and the deposit gap was zero; there was no deposit gap. In 2007, the deposit gap had increased to $224,700 on a median house price of $404,000. So we are doing something wrong when it comes to affordable housing. There must be reforms in respect of that.

My position on superannuation is well known. I support superannuation. I believed it was wrong to defer the superannuation increases, but I do believe there is plenty of scope to have greater accountability and transparency in the way super funds operate. That is why I have proposed that there ought to be an AGM type set-up every year so that those who have their life savings in a super fund can ask questions of the director of the super fund in a cost-effective way. That is very important.

In the remaining 40 seconds, I just want to make this point. We have got it wrong when it comes to housing affordability. Fewer and fewer Australians can afford to buy their first home. This needs to involve some bold visions in terms of planning and dealing with access to deposits. It involves dealing with making houses more affordable through a whole range of measures that involve local, state and federal governments. But it is important that the Commonwealth have a leadership role in this. The sooner we tackle this problem and treat it seriously, the better off we will be as a community.

5:05 pm

Photo of Bob DayBob Day (SA, Family First Party) Share this | | Hansard source

The question implicit in this motion is whether young people should be able to access their superannuation savings in order to buy their first home. The answer is yes, but not yet. Allowing access to superannuation now to buy a home will undoubtedly add to the demand drivers associated with the housing affordability crisis. These demand drivers include record low interest rates, negative gearing, capital gains tax discounts, immigration, foreign investors et cetera.

Some have argued that it has been these increased demand drivers that have caused the housing affordability crisis in Australia, when anyone with a modicum of understanding of how markets work knows that it is not increased demand that drives up prices but lack of supply. Senators Leyonhjelm and Lambie and I co-sponsored a motion about this very issue a short time ago. Economics commentator Alan Kohler, writing in the Business Spectator, said recently:

All governments must address the supply of housing, not simply put a band-aid on the ability to pay the inflated price of it.

One only needs to recall the massive increase in the demand for flat screen TVs, mobile phones, laptop computers and tablets—the greatest increase in demand for products the world has ever seen—and yet prices fell. Why? Because supply was able to meet—in fact, more than meet; it was able to exceed—demand.

When it comes to housing, various pundits target the demand drivers, yet they ignore the deliberate restriction of the supply by state and territory land management agencies. This restriction of the supply of land on which to build new houses has led to skyrocketing increases in entry-level house prices, which then pushed up prices everywhere else. But don't for a second think this was an unintended consequence. It was just the opposite. Rising house prices were an intended consequence, a very deliberate strategy by state and territory land management agencies to produce windfall profits.

And who paid for these windfall profits? First home buyers, that's who. Young South Australians like newlyweds Charlie and Libby Densley come to me all the time telling me they cannot afford to buy a house. Talk about intergenerational equity! We all own a house; why can't they?

Once these supply side factors have been addressed, then by all means allow people—young people in particular—to use whatever resources and savings they have, including superannuation, to buy a home. As we all know, the best asset in retirement is to own your home. Most retirees these days own their homes and their cost of living is a fraction of what it will be for Libby, Charlie and those of their generation who will hit retirement with either a mortgage or a rent burden.

Restrictions on housing supply have made home ownership the privilege of a few rather than the rightful expectation of the many. Not only is this economically foolish, as former modest member Bert Kelly used to say; but it is also morally wrong.

5:09 pm

Photo of David LeyonhjelmDavid Leyonhjelm (NSW, Liberal Democratic Party) Share this | | Hansard source

I rise today to briefly speak on the issue of superannuation laws. Some libertarians think we should not be forced to send 9½ per cent of our remuneration into a particular saving vehicle to be accessed only when we are 60 years old. Other libertarians think the greater problem is forcing people to pay tax that funds age pensions for those who could have saved the money. They are willing to accept laws that force saving in order to reduce the numbers eligible for age pensions. I am one of these libertarians.

But we must remember the original bargain struck between the Keating government and the people of Australia. That bargain was that people would be forced to save in superannuation but that those savings would be taxed less harshly than other savings under our crushing income tax system. Retrospectively withdrawing that bargain would be unjust. Those who saved because of their understanding of the tax consequences should not then be deprived of the resulting asset through fundamental changes to the architecture of superannuation taxation. Reconsidering the bargain in a prospective way is different, although obviously tax increases that only apply to new saving decisions would not significantly increase revenue.

The debate needs to be well informed. Any proposal should be costed and published. We have a Parliamentary Budget Office eager to help. We do not need endless references to the value of superannuation tax concessions when nobody is proposing to get rid of those concessions in their entirety. We also should not hear endless references to the value of superannuation concessions when, if those concessions were removed, people would change what they do and the revenue gained would be much less. Many who now benefit from superannuation concessions would save less money in superannuation if the concessions were abolished.

Finally, it would be refreshing if there were some acknowledgement that reducing tax rates on saving is a good idea. Taxes on saving mean that two people who earn the same salary over their lifetimes get taxed differently. The person who spends most of their salary as soon as they earn it largely avoids taxes on saving, while the person who saves more of their salary because they want to do most of their spending later in life pays more tax. This is inequitable. As such, I believe that we should be seeking to reduce rather than increase tax rates on saving, including superannuation.

Photo of Sue LinesSue Lines (WA, Australian Labor Party) Share this | | Hansard source

The time for discussion has now expired.