Stephen Parry (President) Share this | Link to this | Hansard source

I inform the Senate that at 8:30 am today, Senators Moore and Siewert each submitted a letter in accordance with standing order 75, proposing a matter of public importance, the question of which proposal would be submitted to the Senate was determined by lot. As a result, I inform the Senate that the following 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 crisis of housing affordability in Australia, and the unwillingness of the Abbott Government to consider Negative Gearing and Capital Gains Tax exemptions in its tax review."

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.

Scott Ludlam (WA, Australian Greens) Share this | Link to this | Hansard source

It is really timely that the Australian Senate should be debating housing affordability, because it is a debate that has been submerged—it has been somewhat subliminal. Major party political spokespeople—particularly the coalition—spend a lot of time talking about the cost of living and almost no time talking about the cost of housing.

A couple of weeks ago we introduced an initiative to phase out negative gearing. It would be grandfathered for those who already negatively gear their properties, but it would henceforth be unavailable. Over a period of 10 years or so negative gearing would effectively be wound back and taken out of our tax system. It is one of the largest tax expenditures on the books in Australia. Over a ten year period, if you get the impact of negative gearing having been almost completely unwound from the Australian tax system, the Parliamentary Budget Office estimated that it would be worth roughly $42 billion. To a government that has been cutting taxes and slashing revenue since it arrived, I would have thought that would be something that coalition MPs would be very keen—not necessarily to adopt, I understand that is not how politics works—to at least talk through the merits of it, to at least have the argument and to at least challenge it on the facts. We are seeing no such behaviour from the Australian government.

I want to acknowledge the Australian Labor Party. It was very difficult to get the Labor Party to move or even discuss this subject when they were in government, and that was not for lack of trying. However, I think that they can be commended at least for being willing to entertain the debate. Mr Bowen has been out canvassing a number of different options. We understand that there is a bunch of policy work and a discussion paper going on behind the scenes. At least the Labor Party and some of the crossbenchers are willing to engage in the debate, and that is all that we are asking for.

Why on earth would you not include negative gearing and the way that capital gains are concessionally taxed in your tax review? It was meant to be open to all comers: 'Put everything on the table. Let us have a look at the entirety of the Australian tax system and see if we can have a more intelligent and mature debate than the one that ensued after the Henry tax review.' No such luck, because, while that invitation was made, since then the Treasurer and the Prime Minister have been busy ruling things out as too scary to even talk about, not even wanting to look at the evidence. The arguments that have been put forward serially by senior government spokespeople from the Prime Minister on down—Minister for Finance Cormann was at it again yesterday—are that, if you abolish negative gearing, you push up rents. He even sought to give us a condescending little lecture in the realities of market economics—how wonderful!—that if you abolish negative gearing you will push up rents by somehow restricting supply. Absolutely unbelievable!

If we could come out of this debate with anything at all, the one thing that I would implore is that we set this appalling unsubstantiated myth aside once and for all and just engage the debate on the facts. Instead, we have people as senior as the Treasurer and the Prime Minister just making unsubstantiated, unsupportable stuff up on the fly. Do not come in here and tell us that you have suddenly discovered the plight of renters. A third of the households in this country rent, about a third are owner occupiers and about a third are property investors. The table has been tilted by these extraordinary tax concessions that are paid out to property investors. The largest amount of those benefits accrue to those with the most wealth. Wealth inequality in this country is staggering, and it is growing, and this is one of the key levers. It has been deployed invisibly and subliminally. When we talk about winding it back, removing it or at least opening up a conversation about levelling the playing field, we are told, 'No, let the market sort it out,' when the market is subject to this gargantuan distortion.

A cabinet submission on negative gearing from the coalition in 1987 belied this complete untruth—this myth—that negative gearing keeps rents low. It has manifestly failed to keep rents low, and it has failed as a supply initiative. It has failed on the two criteria on which you would concessionally grant these massive expenditures to property investors. It has failed, and it is time that we dealt with it. ABC Fact Check, this April, comprehensively and quite forensically demolished the arguments that rents would be pushed up if negative gearing went. Successive reports by the Grattan Institute, by ACOSS and recently by the Australia Institute—as well as a MacroBusiness article yesterday—quite elegantly demolished this notion. Negative gearing does nothing to boost housing supply, because 95 per cent of it is going into existing established properties. It has failed as a supply initiative. If investors sold their properties in revolt, guess who they would be selling those properties to? Renters. That frees up one rental dwelling, and the net balance is zero. It will not have an impact on forcing rents up; if anything, it would be precisely the opposite.

The time period of 1985 to 1987 is wheeled out as, 'The last time they tried to lift negative gearing, the earth almost spiralled into the sun'. The rental data and the facts from that period, 1985 to 1987, totally demolish that myth. Rents were going up in Sydney and Perth because rental vacancies were less than 1½ per cent. They stayed flat or declined in Canberra, Melbourne, Brisbane and Adelaide. The myth that negative gearing pushed rents up is a lie. All I ask senators in this debate—if you could maybe talk to your spokespeople about the talking point that they get across—is just not to put fabrications in there. At least can we have this debate on the merits? Abolishing negative gearing will not push rents up. It will level the playing field in favour of first home buyers and renters. Ultimately, that helps the people hardest hit by the housing affordability crisis in Australia, and that means homeless people.

Skyrocketing and unaffordable rents push people into homelessness, and homelessness can kill you. It kills people not just in cities that get below freezing in winter but right across this country. Homelessness can be terminal for people suffering from a myriad of other life difficulties. Homelessness can kill, and it is time that we dealt with it. Senator Waters put it in very stark terms in an article that she put up on Daily Life only a couple of days ago, reminding us that domestic violence is the biggest cause of homelessness in Australia. Domestic violence is the No. 1 cause—that is, women, sometimes with their kids, fleeing violent and unsafe households and finding themselves with nowhere to go.

With this initiative, $3 billion would be put back into consolidated revenue in the first three years—not even in the entire 10 year period. That is $3 billion over the forward estimates that we propose to plough into homelessness. By 2020, with the money that we have estimated, you could basically house every rough sleeper in the country—at least 7½ thousand people—at the same time as cutting 7,000 families from the social housing waiting list. People in acute emergency circumstances can be told that they will be on that emergency waiting list for more than a year. This plan is the kind of supply-side initiative that we need—not this failed injection of cash to property investors, but an actual investment into new supply.

I desperately hope that we will not hear that we are against supply, and that all we need is more supply and more land release. This situation is extremely complex but at least get the elephant in the room out in the open. The recent Senate inquiry into domestic violence showed that housing unaffordability is causing bottlenecks in domestic violence refuges across Australia. Senator Waters writes:

Women are being turned away because there's no affordable, safe, long-term housing for those already living at refuges to move on to.

Effectively, what we confirmed in the budget estimates hearing before last is that 438 women a day are being turned away. They are coming to shelters and to crisis accommodation and being told that there is nowhere for them to go

That is what housing-affordability crisis means. It is not in the real-estate pages, how much capital accumulation is, in investment properties, and how great it is that Tony Abbott's Sydney property has appreciated in value. Good on him. But homelessness kills people and it is time that we unkinked these extraordinary tax expenditures and levelled the playing field for first-home buyers and for the homeless in this country.

Matthew Canavan (Queensland, Liberal National Party) Share this | Link to this | Hansard source

Do you ever get the feeling around this place that it does not matter what question is before this chamber or what issue we are discussing, the answer that comes back from the Greens, every time, is 'More taxes; higher taxes'? That is their answer to pretty much every problem facing the globe today. It does not matter whether it is climate change, royalties in the mining sector or housing affordability, their policy is: more taxes.

Most people expect that the Greens will support higher taxes, bigger government and more control. That is their right, and that is fine. What people do not always expect is that the Labor Party will share their views on this. On this issue, the Labor Party is joining with the Greens to try to hike up taxes on housing in this country, particularly taxes on those who invest in housing. There are around 1.3 million people in Australia who use some form of negative gearing for housing, and all of those people will face a tax increase if a Labor-Greens government gets back in, in the next term. There is no doubt that whatever the Greens say now will become Labor policy later. If the Labor Party were to get back into government they would need the Greens' preferences and they would have to do their bidding. The Greens want to put up taxes on housing. This removal of negative gearing is a tax increase, plain and simple. It is something that should be opposed by anybody who wants to see more investment in housing. You do not encourage more investment in an asset by taxing it more. If you tax it more you will get less investment in that particular part of our economy, and that will make our affordability issues even starker and worse.

A little earlier, Senator Ludlam said that we are going to grandfather it. You cannot grandfather this stuff, because it is capital markets and an asset price. When you are pricing assets you look at what the returns will be over time, not just today—certainly not in the past, because that is not matter—and you look at what the returns will be in the future. That is how you determine an asset price.

The price you pay for a house or shares or any assets will be what you expect the income to be for those assets over time. Under the Greens and the Labor Party, potentially, if you buy a housing asset you will receive lower returns, because you will not have access to the same taxation treatment that other assets do. That will mean—surprise, surprise—the price you receive for that asset will be lower. For those 1.3 million Australians who have invested in housing under existing tax laws, who have taken risks under the current treatment that has been around for decades, they face that negative impact, thanks to the uncertainty that has been created by the Labor and Greens parties. That is not a solution to encourage more investment in housing. If you create uncertainty about the returns that might flow to investment in housing, we will not get more housing.

If we want to bring housing prices down and be serious about trying to help Australians afford their own homes, we need more supplies of land and more supplies of housing. We could do one other thing—there are two blades to the scissors, as always. One blade is supply and the other blade is demand. We could try to hurt demand. We could try to reduce demand for housing. But the only way we could do that, to have a serious impact on housing, would be to have some kind of economic slowdown or—God forbid—a recession. I certainly do not want to see that happen in this country.

While ever we have strong economic or even moderate economic growth in Australia, there will always be slightly increasing demand for housing and that will have a slight upward pressure on housing. May that continue, because I want to see an Australia that has a strong economy. The Labor Party seems to want lower house prices, at the moment, and lower house prices are a recipe for a weaker economy.

We can try to moderate the house-price growth by moderately increasing supply for housing. Here in this chamber and at the federal level of government, we do not control the release of land for housing. It is a state government issue. State governments have, at times, been slow to develop land, particularly at the fringes of cities and in urban consolidation. But it is not our area of expertise and we should try to 'stick to our knitting' in Australian government. We always seem to have this preference to stick our fingers into other people's problems. We have enough problems to deal with here, in the federal parliament, without trying to solve the problems of state parliaments.

The former Rudd Labor government tried to do this. They tried to set up a Major Cities Unit. The tried to put through a COAG housing-supply reform. The tried to establish a National Rental Affordability Scheme. All of those proposals came to nought. Indeed, the National Rental Affordability Scheme was massively scammed and had to be shut down.

Jan McLucas (Queensland, Australian Labor Party, Shadow Minister for Mental Health) Share this | Link to this | Hansard source

That is not true, and you know it!

Matthew Canavan (Queensland, Liberal National Party) Share this | Link to this | Hansard source

I did not believe that the intent of this program was to find housing for overseas university students, but that is what it ended up funding. We should not try to trespass into those areas of the state-government responsibility. When we do, that is when mistakes happen—like what happened with the National Rental Affordability Scheme. The Greens made some grand claims that negative gearing has somehow caused this inflation in house prices over the last decade and, more recently, the surges in Sydney and Melbourne.

Scott Ludlam (WA, Australian Greens) Share this | Link to this | Hansard source

It is capital gains tax!

Matthew Canavan (Queensland, Liberal National Party) Share this | Link to this | Hansard source

Senator Ludlam was very keen to look at the data about rents in the late 1980s in Sydney and compare it to other cities, but he does not want to look at the data of house prices over a longer period, because negative gearing has been around for decades. It is something we have had in our tax system for decades and we have only seen rapidly-increasing house prices in Australia for the last 10 or 15 years. So how can negative gearing be responsible for the increase in house prices when we have not changed anything about negative gearing in the last 10 or 15 years?

Scott Ludlam (WA, Australian Greens) Share this | Link to this | Hansard source

It is since capital gains tax exemptions were introduced!

Matthew Canavan (Queensland, Liberal National Party) Share this | Link to this | Hansard source

I will take that interjection from Senator Ludlam. One thing he never mentions is that when the capital gains tax changed in 1999—I believe it was with the support of the Labor Party—it was a change from a real base for capital gains taxation to a nominal base for capital gains taxation. So before 1999, you could remove the effect of inflation from your capital gains tax calculations; after 1999, it was based on whatever the capital price increase was with inflation.

It is actually not clear that that change, certainly not in theory, is a change that supports investment in housing. It depends on the rate of inflation relative to the rate of real house price growth. In fact, over time those two things tend to be about 2½ per cent each, of about five per cent growth in housing over time, and it actually is neutral whether you have a nominal basis for capital gains tax or a real basis for capital gains tax. No other country in the world taxes capital gains on a nominal basis at the full rate of income tax for those reasons.

Finally, one thing that goes unremarked in this place is something that I want to raise from this corner of the chamber—that is, if we are serious about looking for lower housing prices and more housing affordability, the one area we should be looking at is outside the city limits because there is an abundant supply of affordable housing and affordable land in our regional and remote areas. Indeed, house prices in regional Queensland, where I am from, tend to be about half what they are in our major cities—or even less than half if you are just looking at Sydney. What we can do in this chamber—we cannot release land, but we can create policies that drive growth and opportunities and jobs in those regional areas to attract people to those areas. We cannot force people, and I do not want to force people, to move to Townsville or Cairns or Mackay—although the standard of living in those places is much better than in Sydney, in my humble view—but we can encourage them by creating the jobs and the opportunities that will encourage them to move. That will do two things: it will reduce the demand for housing in our major cities and help relieve the price pressure there, and it will support construction and growth and development in our regional areas. This will improve housing affordability across the board. That is why one of the best solutions to our housing affordability problems is regional development. I believe that the Abbott-Truss government will soon release its Northern Australia white paper, which will try to supercharge development in those areas that I know are dear to Senator McLucas as well—like Cairns, Townsville, Mackay and Rockhampton—and that is one solution to our housing affordability issues.

Jan McLucas (Queensland, Australian Labor Party, Shadow Minister for Mental Health) Share this | Link to this | Hansard source

I am very pleased to join this discussion about affordable housing in this chamber. Labor know that people are facing significant problems around affordable housing in Australia, particularly in the Sydney market, as we have seen particularly over the last two weekends, as well as in other hotspots around the country, including parts of Melbourne.

The contrast between the Labor approach to dealing with affordable housing and the approach of the current government is so different. Labor know that we need to work with the community and we need to work with the housing sector—from the development sector through to the representative organisations that speak on behalf of people with housing needs—to be able to resolve affordable housing questions into the future and that is why I asked those questions at question time today of the Acting Leader of the Government in the Senate. I was somewhat surprised at his response. I think we actually touched a nerve of the Acting Leader of the Government in the Senate with those questions today.

It is true that in a recent Senate inquiry John Fraser, Secretary of the Treasury, answered questions that were asked of him about the Sydney housing market by saying that Sydney is 'unequivocally', to use his word, in a housing bubble. He said:

When you look at the housing price bubble evidence, it's unequivocally the case in Sydney. Unequivocally.

Frankly—

he went on to say—

whatever the data says, just casual observation can tell you it's the case.

Glenn Stevens, the head of the Reserve Bank agrees with the Treasury secretary. He said:

I am very concerned about Sydney, I think some of what's happening is crazy—

these are the words of the Reserve Bank chair; these are not the words of some idle bystander—

but we've got a national focus to manage as well - that just increases the complexity.

Contrast that with the words of the Treasurer. The Treasurer, when asked about the problems with housing affordability in his home town, where he has a house, where he lives, said:

Look, if housing were unaffordable in Sydney, no one would be buying it. People are purchasing housing in Sydney, it's expensive. As a multiple of average weekly earnings it is expensive, it's an expensive city to live in …

Talk about stating the obvious! But what are you going to do about it, Treasurer? What are you going to do about the fact that the number of young families forming in Sydney is reducing. The age at which young families are forming in Sydney is getting older. People in Sydney in particular, but also in Melbourne and other parts of the country—Perth, for example—are having difficulty entering the housing market. And as the Acting Leader of the Government in the Senate said in question time today, it is the biggest investment that anyone ever makes. For most families that is the case, but if you cannot get in, then how do you get in on that investment in the future?

Mr Hockey then went on to say, with incredible perspicacity:

The starting point for a first home buyer is to get a good job that pays good money. If you've got a good job and it pays good money and you have security in relation to that job, then you can go to the bank and you can borrow money and that's readily affordable.

How offensive is that—that the job you have got, because it does not pay enough money, means you are not trying hard enough. Just go and get a better one, get one that gives you more money. This man is so out of touch with the reality of life for young families trying to get into home ownership in Sydney; he is so patronising to say that.

Labor is different. Labor knows we have to do something about housing affordability. That is why Bill Shorten has asked Chris Bowen, as our shadow Treasurer, and me, as the shadow minister for housing, to undertake a consultation so that we can have a conversation about where the answers might lie. That sits on top of the work that I, and others on the crossbench, asked the Senate Economics Committee to inquire into. This report is a good contribution to the conversation we need to have about tackling housing affordability. But let me make it absolutely clear: Labor has not come to a view around negative gearing or capital gains tax at this time. We are prepared to have a conversation. We are not going to shy away or hide behind any sort of countenancing of negative gearing by, frankly, telling untruths.

What the leader said today in this chamber was factually incorrect. ABC Fact Check will tell you that—I am sorry, but I will believe ABC Fact Check over any answer given to a question I ask in this chamber at any time. We know that first home buyers now make up around 14 per cent of all home purchases, which is well down on the historical average of 20 per cent. The median value of a Sydney property is now nearly 10 times median income in that city. By this measure, that makes Sydney the third most expensive city in the world to live in. Melbourne is not far behind, ranked sixth most expensive in the world with the median value of a property costing nearly nine times the median income in that city. So our leader has asked Chris Bowen and me to start a conversation. We had a round table earlier this year. We put out a discussion paper and we have had quite a number of considered responses to that discussion paper. Labor's next steps are to work together and work across a number of portfolios to develop our policy that will take us to the next election. The contrast could not be more stark: head in the sand, do not have the expertise, and do not want to talk about housing. Compare this to a party that is prepared to get in and do the job.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Good on the Labor Party for at least wanting to have a national debate on this. I respect the fact that they have not ruled out policy options on negative gearing or on capital gains tax concessions. They at least want to consider them and they at least want to have a full debate on this issue. It is disappointing that while we go through this white paper process the government is already ruling out significant areas of tax reform that we know we need to have a close look at. I was the one who actually asked Treasury Secretary John Fraser the question that has now led to the infamous comment on a bubble in the Sydney house market. I was dismayed to watch up-close the Treasurer of our country show how out of touch he is with the Australian people with his 'let them eat cake' moment: get a good job.

He wants to see housing prices go up. That is fine if you own a house, especially if you own an investment property. But as we have pointed out countless times, there is a housing affordability crisis in this nation. A lot of young people and low-income people cannot afford to buy property, especially in places like Sydney and Melbourne. Unlike what Senator Canavan said, this is not about increasing taxes. It is about reviewing incentives in place—perverse incentives, potentially—that lead to undesirable outcomes. We are talking about removing a concession on capital gains in a very sensible way by using grandfathering so that no-one who currently negatively gears a house will lose out. We are talking about a policy that over time will make housing more affordable in this country.

Who could not want that? I will tell you who does not want that: the Liberal Party and the National Party do not want that. Let me tell you why. The benefits of 60 per cent of all negative gearing go to the top 10 per cent of income earners in this country. Guess where most of those people live? They live in safe Liberal electorates. These are their bread and butter voters and they do not want to take on this issue.

Meanwhile, around the country, we have a housing affordability crisis. We have a price bubble in real estate that all the experts in this country and all our key bureaucrats have pointed out is unsustainable. It is not just first-time home owners—those who have taken advantage of low interest rates and bought a property—who are going to lose out if that bubble bursts. It is also investors in these properties, including middle-income and high-income investors.

We need to have a serious debate in this place. That is why we were elected to parliament. We were elected to parliament to have open and frank debate—fearless debate—about something as important as tax reform in this country. I am proud to say that my party, the Greens, have lead on this issue and we, along with the Labor Party, look forward going to the next election with strong policies. (Time expired)

Arthur Sinodinos (NSW, Liberal Party) Share this | Link to this | Hansard source

In answer to Senator Whish-Wilson, we should have a debate and we are having a debate—not just today, as there is an ongoing debate. There will be a debate through the rest of this year, and there will be a debate in the context of the tax white paper and in various other contexts. I will come to some of those in a minute.

The fact that the market is strong does not in itself mean that we have a generalised crisis in the housing sector. A lot of speakers are focusing on the situation in particular segments of housing demand, and I will come back to that, because at the moment we are having very high rates of clearance, which shows that demand across the board is quite high. It is not just restricted to Sydney or Melbourne, but I concede that there have been particular price pressures in Sydney and Melbourne, particularly in Sydney. I will come back to that. But housing construction, housing supply, is starting to respond. It was up 4.7 per cent in the March quarter of this year, the highest since 2009. So demand is up, but supply is up.

I want to go to some of the issues that perhaps are constraining supply, and to make the general point that this discussion needs to be a comprehensive one on all the factors that potentially impact on the affordability of housing. I also want to make the point that this debate is too narrow if it focuses on a subset of particular taxes.

There is no doubt that there has been a big contribution to demand in the housing market in recent times by investors taking advantage of low interest rates. That is what lower interest rates do: they tend to stoke demand for loans, and there is no doubt that investors have been in the market in a big way. How are the official family, if you like, including the Reserve Bank and others, addressing this? The Prudential Regulatory Authority, which has the main responsibility in this sector, has actually provided guidance to the banks on restraining the growth in lending to investors. That is important. It is not saying the banks should constrain lending to first home owners; it is saying they should constrain the growth in lending to investors, holding over the banks the prospects of them having to raise or hold additional capital against loans to investors for that part of the market. Now, that is important because it frees up the monetary policy of the Reserve Bank to focus on economic growth across the country. The whole point is to use the prudential regulator to focus, in this case, on investor demand and free up monetary policy so that we can focus on the overall level of demand and growth in the economy.

Foreign investment policy is also being enforced so that overseas investors are targeting new housing. We are getting rid of the situation where it was possible for people to buy existing housing and bid up the cost of that housing. There is a wall of capital coming towards Australia from overseas. Through better administration and foreign investment policy, we are seeking to encourage that wall of capital into new residential construction as well as commercial real estate.

But let us keep it in perspective. Low interest rates mean that repayments for many people are below pre-GFC levels. The change is that the amount of debt people have taken on has gone up. There is no doubt that that is an issue, and the Reserve Bank is keeping an eye on that. But that is focusing on the demand side—and I will come to tax a bit later on.

The point is that we are now acknowledging the role of supply constraints in housing, particularly in markets like Sydney and Melbourne. The latest minutes of the Reserve Bank of Australia—and Senator McLucas was talking before about the role of the Reserve Bank—explicitly focus on this:

Noting that housing price growth in other cities—

that is, other than Sydney or Melbourne—

and regional areas had declined over recent months, members discussed the strength and composition of underlying supply and demand conditions in different parts of the housing market. They also observed that there was a relatively low stock of dwellings for sale in Sydney and Melbourne and that dwellings took only a short time to sell.

So, we have a supply issue that we have to continue to address.

What is the government doing about that? At the recent meeting of state and federal treasurers, the federal Treasurer instigated a COAG or Council of Australian Governments review of supply issues, to be led by Tim Pallas, the Victorian state Treasurer—because many of these issues are local and state government issues. They go to restraints on land and planning controls, zone regulations and the like. We need to be more flexible in that regard. There was a report done for the Menzies Research Centre about a decade ago, when Malcolm Turnbull was the chairman of the centre, by Christopher Joye, who now writes for The Australian Financial Review. That report isolated the relative reduction in the supply of land relative to demand over the last three decades as being an important factor in raising the price of housing in major markets, particularly in markets like Sydney.

Today's editorial in TheFin Review, which I do not often quote in this place, made the point that there are also structural issues at play. It says:

… in the 2000s, the resources boom crowded out housing and infrastructure investment. Now a big wave of apartment, road and rail development is trying to catch up, often in the face of anti-development activism.

All of us on each side have our prejudices, we have our ideologies and we have our views. In coming to this debate, we have to ask ourselves: are we doing things, particularly in the inner city, that constrain our capacity to augment the housing supply? What is happening is that many people do not want to live on the ever-increasing fringe of large metropolitan cities; they want more affordable housing closer to the city. This is an issue for subgroups in the economy with particular roles, like essential services workers and others, who are never going to be investment bankers, so they are never going to be able to afford to live in Mosman and other areas like that in my home town of Sydney—not unless there is that capacity to target more affordable housing. It is not necessarily a case of more subsidies for housing per se. It is also a case of accepting some of the restraints on development, in a balanced way. We have to have regard to the environment and think about conservation goals, but we have to have the capacity to do that in a balanced way, particularly in these inner city areas. That is going to be very important, going forward.

My other concern about the narrowness of this matter of public importance today is that it focuses on a couple of taxes and, without really canvassing the pros and cons of removing those taxes, says that they must go because we predict there may be a particular effect on the housing market. But this is quite complex. In the case of negative gearing, there is quite a debate that goes on about the impact of removing negative gearing in the 1980s. There are a number of views that can be tested on all of that, and there are contrary views. The Greens and others, in the context of the tax white paper and other processes that are afoot at the moment, do have the opportunity to canvass those and demonstrate their propositions in more detail, and they should do that, because this needs to be backed up by the facts, not by an assertion that 'because I don't like a particular tax or because I think it goes to particular individuals, that tax should just go'.

In the case of capital gains tax, we also have to be careful at a time when people, including Labor, are promoting the concept of greater entrepreneurship and more innovation, and focusing on start-ups. Capital gains tax issues are important in that context as well. It is not just a matter of looking at a tax narrowly, in the context of one particular market. We need a comprehensive approach to tax reform. We cannot do tax reform on the basis of looking at just one or two taxes, because balanced tax reform involves looking at direct and indirect taxes, what we do about income tax, what we do about taxes on capital, what we do about taxes on land—and taxes on land is one of the taxes left out of this MPI, something that has been recognised in the past as another potential revenue raiser.

What do we do about stamp duty? It is a major factor. How do you pay for things if you remove stamp duty? These are the issues. It is not just a matter of saying that certain concessions have to be removed and it is all very fine. What do we do about the balance, as I said before, between direct taxation and indirect taxation? My plea is to look at these issues in the context of more comprehensive tax reform and to isolate issues around affordability, particularly for certain social groups, like issues of social housing, and put them in the context of how we also marshal more private capital to provide social housing, as the Baird government in Sydney is seeking to do through opening up more land for housing, both private and social.

Deborah O'Neill (NSW, Australian Labor Party) Share this | Link to this | Hansard source

For all the tonal modulation of Senator Sinodinos's comments, and the eminent reasonableness of those who might be listening to the words and glossing over them, the reality is that this is a government that simply does not acknowledge that affordable housing has become a myth in our capital cities. The reality is that, if you speak to any young person, the top of their list of worries is how they will ever afford their own home. They are the others, as I think Senator Sinodinos called them—the ones who cannot live in Mosman. That makes pretty well most of us the others.

This community knows that housing affordability is nearing a crisis level. The Labor Party knows that housing affordability is certainly in the crisis zone. It is only Labor, if you look at our history, that has attended to the reality of housing as a need for this community. It seems that it is only the coalition that just do not get it. The Treasurer made that very clear just last week with his ignorant and out-of-touch statement. For someone no less than the Treasurer of this nation to suggest that owning a home in Sydney is as simple as 'getting a good job that pays good money' shows how remarkably removed the Liberal-National government of this country are from the community.

This is from the man who said that poor people do not drive cars. Now he thinks they do not own homes. This is from the man who sat in Parliament House smoking a cigar on the day he was about to slash $80 billion from health and education budgets. This is from the man who is trying to increase university fees to add a further $100,000 debt to the burden of our young people before they even begin to think about entering the market for a house. An extra $100,000 might not seem like a big expense for the Treasurer—the cigar-smoking Treasurer of this nation—but it will certainly hit our young people hard. Will they attend university and try to get a good job to earn good money, as he directs, but end up with a $100,000 debt at the end? Or will they avoid uni and avoid the debt but still not be able to get job to earn enough money to buy a house? That is the catch-22 that the member for North Sydney, the Treasurer of this nation, is putting young Australians in. It is a terrible bind.

Sydney's median house price could crash through $1 million before the end of this year. It is a crisis. That amount of money is out of reach of the vast majority of Australians. It is an astronomical amount for the nation's teachers, nurses, police officers, truck drivers and ordinary working people with ordinary good, decent jobs making their contribution to this nation. Thirty years ago the median house price in Sydney was $88,000. We see now a 1,036 per cent increase in that median price over 30 years. Wages, by comparison, have increased by 215 per cent in the same period. There are really very few jobs that are good enough, to use the Treasurer's terrible language, to make up that sort of shortfall.

While the Liberal Party's response to the housing crisis is to tell people to get better jobs, Labor is putting housing affordability front and centre. We believe that housing is vitally important in social terms. It provides shelter, security, connection and a source of pride to every Australian. We all deserve to have a place we can call home. While in economic terms construction and housing finance are important indicators of Australia's economic performance, for some Australians housing affordability is about trying to meet rental payments on a place in the city. For others, it might be about being able to purchase a home in an area that allows them to be close to family and friends. For many people who have moved to the Central Coast, it means looking further than Sydney and making decisions to move away from family and networks of support to the north, where the prices have not reached such huge levels yet. Commuting to a job in the city is, sadly, a reality for too many of our population up there. Lack of housing affordability has the potential to exacerbate inequality between those who already own homes and those who cannot even get into the market. This leaves first home buyers in the unenviable situation of renting from those already established in the market and never being able to break in themselves.

Labor is proud of our record in government when it comes to housing policy. Labor is the only party that has a consistent record of pursuing innovative and effective policy that has improved housing affordability for Australians. Labor created the very post of minister for housing after John Howard cut back the affordable housing stock by more than 24,000 premises in his time in government. There is a difference. We are committed to improving housing affordability and we have created opportunities. Given the opportunity to come to government, these guys have cut and cut. Under Labor, we introduced the Social Housing Initiative, which provided funding of $5.6 billion over three years for the construction of new social housing; the A Place to Call Home initiative, which provided $150 million to make 600 homes and units across Australia available for families and individuals who are homeless; the National Affordable Housing Agreement, which provided $6.2 billion in housing assistance; $400 million under the National Partnership Agreement on Social Housing over two financial years for capital investment in social housing and homelessness; the National Partnership Agreement on Remote Indigenous Housing, with an investment of $5.5 billion over 10 years; and a more than doubling of the $557 million of funding committed under the Howard government in relation to the memorandum of understanding on Indigenous housing.

What record does this government have to stand on? Already, in just 18 months, the National Housing Supply Council and the National Rental Affordability Scheme have been abolished. In addition, the First Home Saver Accounts scheme, set up under the Rudd government, providing assistance for saving, is about to be abolished—hardly actions that show any sympathy or understanding for young Australians struggling to purchase a home. They have constant thought bubbles and make disparaging comments that are an insult to the intelligence of young people who just want to get out there and create a home for themselves and their families. Joe Hockey says to use super to buy a home, and tells people to get a better job—that is what this government does. It is thought bubbles, it is platitudes, it is gentle conversation—all the while ripping away the vital investment that is part of building genuine affordable housing for Australians.

Bob Day (SA, Family First Party) Share this | Link to this | Hansard source

This motion correctly describes the housing affordability problem in Australia as a crisis. It does not, however, correctly diagnose the cause of the crisis. For more than 100 years the average Australian family was able to buy its first home on one wage. The median house price was around three times the median income, allowing young home buyers easy entry into the housing market. The median house prices now in real terms—that is, relative to income—are more than nine times what it was for 100 years between 1900 and 2000. That equates to approximately $600,000 more spent on mortgage payments than would have been the case had house prices remained at three times the median income. That is $600,000 lost to the economy in consumption and spending on other things.

The economic consequences of this change have been devastating. The capital structure of our economy has been distorted to the tune of hundreds of billions of dollars and, for those on middle and low incomes, the prospect of ever becoming homeowners has now all but vanished. The real culprit for the slump in business conditions over the past years has been the massive redirection of capital into high mortgages. The distortion in the housing market, this misallocation of resources resulting from the supply-demand imbalance is enormous by any measure and affects every other area of the economy. A terrible policy mistake has been made and it needs to be corrected.

Let's be clear here as well: the problem is not the affordability of constructing a home. The previous speaker, Senator O'Neill, should make a note of this fact. The cost of building a home has been approximately the same for decades due to efficiencies gained over the years. The cost of building a house has not even risen with indexation. In fact, I have said in my home state of South Australia as we lose the automotive manufacturing, why can't we build cars as cost-effectively as we build houses?

The affordability problem is with the land on which the house is built. Land prices have gone through the roof. The Demographia international housing affordability survey, which ranks 378 cities worldwide, list all Australian cities as seriously unaffordable. So the Greens are right: this is a crisis. The solution, though, is not to target the demand drivers of housing like capital gains tax discounts, negative gearing, low interest rates, first home buyer grants or immigration.

Take negative gearing for a moment. The Housing Industry Association said last September, with the backing of research by Independent Economics, that restricting access to negative gearing would reduce housing investment, erode affordability and put upward pressure on rents.

As anyone with even the basic understanding of how markets work would know, increases in demand do not cause prices to rise. What causes prices to rise is lack of supply. Let me give a good example: when demand for technology like flat-screen televisions and mobile phones increased markedly a few years ago, prices did not rise; they fell. Why? Because supply increased. That is how markets work. The majority of the Senate acknowledged this wisdom and reality in supporting my motion on 13 May this year—co-sponsored by no less than five other senators—confirming that the lack of supply—the restriction of available land for housing—was the problem.

I was elected to this place on the platform, 'Every family, a job and a house'. I have built the odd house or two in my time. The Australian Dream remains, to this day, to have a big house on as big as a block as possible. Those who live in tiny housing only do so because they have no other choice. In my home state, the South Australian government wants to lock those young people out of affordable housing by legislating an urban growth boundary, virtually legislating urban densification.

This urban densification has been advanced on the back of a number of arguments: that it is good for the environment, that it stems the loss of agricultural land, that it encourages people onto public transport, that it saves water, that it leads to a reduction in motor vehicle use and that it saves on infrastructure. None of these claims are true. Whatever you want to call it, urban densification—urban consolidation, urban infill—has been a disaster wherever it has been tried.

The answer to solve the housing affordability crisis is to increase supply of housing.

Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

I am pleased to be able to make a contribution to this debate. I think it is a good thing that the Greens have raised this issue, as the Labor Party has been over a period of time now consulting with state governments, the building industry, economists and welfare groups to try to develop a more sophisticated response to this issue than we have seen from the coalition in government.

There are a number of barbecue stoppers around the place—the unfair budget, the broken promises, the government incompetence—but housing affordability is the guaranteed barbecue stopper in the Sydney region, where I live. For Treasurer Hockey to say what you have to do is get a good job that pays good money, I think, really simplifies and misunderstands the problems that we have with housing in Sydney. The argument that the Treasurer made that if housing were unaffordable in Sydney, then no-one would be buying again demonstrates a lack of understanding of the issues that are the problem in Sydney. This ranks with the Treasurer's analysis that poor people do not drive cars. It is completely out of touch with the issues we face.

I keep my eye on what is happening in Sydney because people keep coming to me and saying, 'Look, it's almost impossible for a first homebuyer to get into the market in Sydney.' One person told me recently about a tarted-up, refurbished fibro, three-bedroom house, ex-Housing Commission in Northmead, just outside Parramatta in Sydney that went for $960,000 at auction. I think there is a madness at play in Sydney. Who would have thought that an ex-Housing Commission house, a fibro house, tarted up, many kilometres from the CBD, outside Parramatta, would cost nearly a million dollars. That is what is happening in the Sydney market at the moment.

This is a complex issue, and Senator Sinodinos has raised a number of the issues: low-interest rates, for example. Negative gearing is an issue and to have people in this place to dismiss it does not do any good for the debate. Capital-gains tax exemptions are an issue; housing supply is an issue; land supply; the planning systems; infrastructure; employment; and international capital flooding into Sydney—these are some of the issues that we face. Senator Sinodinos has made a thoughtful contribution, much more so than Senator Canavan's contribution, because Senator Sinodinos does raise some of the issues, but I disagree with Senator Sinodinos that the Prudential Regulation Authority can fix this problem. That is rubbish; it is not going to happen. Having the Reserve Bank monitoring interest rates will not solve the problem either. What has been argued by Senator Sinodinos is that there has to be a comprehensive and balanced tax reform agenda, but the government is not going to have a comprehensive tax reform agenda in place, and so that is not the solution either.

I disagree with the position that Senator Sinodinos adopts when he talks about Sydney's fringe. I have always lived on the so-called fringe of Sydney, because it is all that I have been able to afford. As a blue-collar worker and as a union official with my wages tied to the blue-collar workers that I represented, I could never afford to be in the Inner City or the Inner West; I was always in the Western Suburbs of Sydney. That fringe needs a number of things. It needs more employment, where we can build the jobs; it needs more employment, where the people live; it needs more public transport. These are all the issues that we need to deal with. To simply do what the government has done in cutting homeless services, getting rid of the National Rental Affordability Scheme, getting rid of housing help for seniors, getting rid of the first homeowners savings accounts, getting rid of the Prime Minister's Council on Homelessness—these are all negatives. We actually do need a position that is much more sophisticated than Senator Canavan's argument that, on the one hand, we cannot have big government and we must have small taxes and then, on the other hand, that we must supercharge development in the Northern Territory to fix our housing problem. How dumb, how dopey is that? I always thought there was a problem with having an economist as a member of the National Party. It just shows that you can be an economist as long as you are a bad one in the National Party. This is a real problem and there is no simple fix. (Time expired)

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

In the two minutes I have available, I want to raise some issues. This is a barbecue stopper, as Senator Cameron has pointed out, and this is an issue that affects all of us. We are concerned about our children being able to afford a home; we are concerned about people who have had a divorce or have had other change in their life circumstances and who cannot afford to get back into the housing market. It is now less affordable to get into a home. If you look at demographic surveys over a number of decades, we now know that it is something like six, seven or more times average weekly earnings to get an average home, and in Sydney it is much more. A number of years ago, a generation ago, it was about three times average weekly earnings—much more affordable.

These are big issues and they need bipartisan support; they need all parties to work together. It is not just about the quarter-acre block, which is important; but some people do want to have inner-city living. Other issues that are fundamentally important include planning controls and urban design. We face a real issue in this country in having a generation of Australians who cannot afford to get into the housing market unless they are fortunate enough to have their parents support them. That is not a just outcome or a fair outcome. There is a whole range of issues that need to be dealt with. We do need to look at stamp duty; we do need to look at negative gearing but in a considered way. There should be some real scope for negative gearing to be altered so that there is a greater emphasis on affordable new rental accommodation—so that you still drive the housing market, because the housing industry is a key driver of jobs in this country. The housing industry needs to take up jobs growth as a result of the collapse of the mining boom and the collapse of manufacturing in this country. Above all, Australians need to have good, reliable jobs in order to afford a house in the first place. I can tell you, Mr Acting Deputy President, in South Australia and Victoria with the looming collapse in manufacturing jobs, that is a real problem that we must also address.