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

I seek leave to move amendments (1) and (2) on sheet 7714 together. Presumably I will need to move amendment (3) separately.

Zed Seselja (ACT, Liberal Party) Share this | Link to this | Hansard source

Senator Ludlam, I think it would be better to deal with amendment (3) first. If that is not successful then there will be no need for amendments (1) and (2).

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

That breaks my heart a little. I will speak to all three of the amendments and then we can move through the votes at a later time.

I thank Senator Cormann for directly addressing some of the questions that I put to him. I think there are obviously bigger debates in play. I was curious to hear Senator Cormann insisting that we had a supply problem and that demand, if anything, is not only not a problem but perhaps had been over incentivised. He was very careful not to mention negative gearing and capital gains tax exemption, which is obviously a very live debate, not just in this place at this time but around the country. One of the biggest unspoken incentives on the demand side at the moment are these huge tax expenditures which incentivise and directly drive demand for property investors to compete against first-time buyers and owner occupiers. I would be more than happy to engage very broadly on all elements of the debate.

If there is one thing that we can maybe all agree on, it is that our housing market is inordinately complex when you consider all the factors that are colliding around issues like land supply, whether it be on the periphery of our great cities or with respect to developers who are attempting infill, either along public transport corridors or in areas where they might come into conflict with existing residents; supply is clearly a problem. There are huge possibilities for innovation in building and construction costs and techniques. Yes, costs are high, although they certainly have not escalated anywhere near as rapidly as the cost of land.

The Australian Greens believe there is enormous potential, for example, in the modular or prefabricated housing industry. Here is an opportunity to kick-start a new manufacturing sector. When you get prefab housing and construction technologies to scale, you are looking at plants that are very similar and that employ people with very similar degrees of expertise to those in the auto industry. They are effectively production lines, whereby boxes of components go in at one end and fully formed dwelling units come out at the other end that are then basically assembled very rapidly on site. There is plenty to talk about on the supply side and on the construction side.

What bugs me is the unwillingness of the government to engage in the debate. Thank goodness that at least the Labor Party is willing to have the conversation and to engage in the debate on these other demand drivers that, as Senator Cormann quite correctly points out, are there in the system, but he refuses to engage in the debate around these huge tax expenditures and concessions to investors, which drive demand and drive competition. It is the first homebuyers and the owner-occupiers who are being priced out of the market—particularly an entire generation of younger people, but I am very well aware that it is not just young people who are priced out of the housing market.

If this is the case and if this is the status quo, whether we agree with negative gearing or the deal with these tax concessions, because dealing with those two on their own—I tend to agree with the comments of Senator Day, and it may be the first time I have said that in this place, or Senator Sinodinos when he addressed these questions directly yesterday—they are not a magic bullet. Addressing those concessions by themselves will not fix housing affordability; we need to look at the entire picture. That is why I think it is so wrong that this concession is being pulled out from under people, not necessarily because it succeeded too well or because it was costing too much but because the take-up is not high enough. Why can we not have an intelligent and mature conversation without one side focusing on the demand side and without the other side obsessing on the supply side? There are many complexities around the issue of housing affordability. As I indicated and as many others have indicated during the course of this debate, we need to engage with all of it, rather than have people obsessing on different components. For those people who are being priced out of the market at the moment, the first homebuyers, this is an incentive that would directly make it easier for them. It is my understanding, Senator Cormann, that you have voted for this initiative when it was first put in, as did your colleague Senator Bernardi. Senator Bernardi had some extremely forthright and quite perceptive things to say—

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

He quite often does.

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

but he has gone the off the rails since then. I will withdraw that because he is not here to defend himself, but here is what he said in September 2008 when this bill was being debated:

Any government initiative designed to tackle the current decline in housing affordability is certainly most welcome.

This was in 2008, before the market went completely berserk. He also said:

There can be no doubt that many Australian families are dismayed over rising housing costs. One of the goals for every parent is to see their children being able to afford their own home.

I pause in the quote here, because the fact is I think we have seen a generation of people who will never be able to afford their own home—a generation of people who will probably rent for life.

We can have an argument about whether that is an ideal state of affairs or not, but the fact is that we need to be dealing with security of tenancy and tenure for those people and not assume that it is (a) that everyone's aspiration or (b) that everybody will eventually, one way or another, find their way into their own home. Senator Bernardi went on to say:

Families and young people really do need every help that the government can give them so they can continue to save and afford their own home. This was recognised by the former coalition government last year when it committed to a similar scheme.

He made a few criticisms then about the Rudd scheme but, nonetheless, the coalition voted for it; the Labor Party obviously brought it forward and today the axe is coming down on it with no real explanation.

So, Senator Cormann, before we commit these amendments to vote, I would like to know when the coalition—the ERC or whoever it was—decided to axe this incentive, was any discussion undertaken with people in the housing affordability sector or people trying to get into their own homes? Was there any discussion about advertising, for example, or going out and encouraging people to take up this concession? Or was the decision made rather more arbitrarily than that?

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

Firstly, I can confirm for Senator Ludlam that the decision to proceed with this measure, as with all relevant measures in budgets, was the decision of the Expenditure Review Committee and ultimately endorsed by the cabinet. Consistent with appropriate conventions, I will not disclose the nature of the discussions in the Expenditure Review Committee or in cabinet. Having said that, there has, of course, been a Senate Economics Legislation Committee inquiry into this bill and all relevant stakeholders have had ample opportunity to express their view. I will give Senator Ludlam this assurance, though: as our government always does, we have very carefully considered all of the relevant information. We have very carefully considered the various options in front of us on how best to proceed and we made a judgement, having considered the relevant expert advice along the way. That obviously is how good government operates in an orderly and methodical process but, beyond that, I cannot assist Senator Ludlam much further.

Jacinta Collins (Victoria, Australian Labor Party, Shadow Cabinet Secretary) Share this | Link to this | Hansard source

Labor is supporting abolition of the First Home Saver Accounts and therefore opposes these Greens amendments. While this is not necessarily a saving that we would have made ourselves in government, Labor is willing to work constructively with the government on sensible savings measures. Unfortunately, the take-up for First Home Saver Accounts has not been as high as we had expected. Approximately 50,000 accounts have been opened, containing a total combined savings of only $540 million. This was reflected in the report of the Senate Economics Legislation Committee on this bill. At the time, as they were moving these amendments, I note that the Greens are supporting the government's unfair pension changes, which will have a far more significant impact. The Leader of the Greens Party, Senator Di Natale, and his colleagues have been duped into accepting a $2.4 billion pension cut in exchange for a six-week extension to the deadline for submissions to the tax inquiry.

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

Senator Collins, you cannot help yourself, can you? I am not going to take the bait; I am going to keep the debate on topic. We are talking about housing affordability, Senator Collins, but, believe me, the Labor Party—

Senator Jacinta Collins interjecting—

You really have not got the hang of being the opposition, have you? Senator Cormann, you indicated, I think, in your second reading contribution that banks—

Senator Jacinta Collins interjecting—

You are really not very good at it. Senator Cormann, you indicated in your second reading speech that banks had stopped opening these accounts. My understanding is that only two of the big four had ceased offering First Home Saver Accounts. Could you just clarify whether that is the case or whether in fact there are no financial institutions that offer these anymore.

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

Senator Ludlam is right. That is consistent with what I have said before—that there are banks that have stopped providing them. In the Australian Bankers Association's submission to the Senate Economics Legislation Committee inquiry into this bill they noted that complex product rules and the availability of better savings products within the market have limited consumer interest in the scheme. That is one of the reasons why the First Home Saver Account scheme has been particularly unsuccessful.

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

Senator Cormann, I put to you that the amount of money, the $135 million, that you are saving over five years in abolishing the last housing affordability mechanism in the policy toolbox that you had not yet obliterated—it is almost as though you had swept aside and wiped out everything to do with housing affordability and homelessness and this one particular instrument escaped your attention and so you are coming back to squash it—is what we concede to property investors through negative gearing and capital gains tax discount arrangements every six days. Minister, have you considered that you might actually be looking in completely the wrong place for savings? Will you take another look at what these two huge tax concessions to property investors are costing regular taxpayers?

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

The coalition and the Greens obviously have to agree to disagree. The First Home Saver Account scheme having been in place for seven years has proven to be unsuccessful. The evidence is in. It has not had a material beneficial effect on housing affordability. The take-up has been extremely low. The level of savings is extremely low. To the extent that it has had any impact at all and further boost demand, the demand is for housing. But first home buyers are not the problem when it comes to housing affordability. The government very clearly understands that in those markets where there is upward pressure on housing prices that is as a result of supply not meeting the demand in the market. So if we want to improve housing affordability we have to boost supply.

When you have increasing prices, there is, to a degree, a response in the market. We see that now in our national accounts. You would have seen that there is increased investment in dwelling construction, which on the face of it appears to be a direct response to the increasing prices in some markets across Australia. But, beyond that, if we want to boost affordability and improve housing affordability on a sustainable basis we have to increase the supply of land and we have to bring down the cost of building a home in Australia. Building a home in Australia is significantly more expensive than in other comparable jurisdictions around the world. These are the sorts of areas we should focus on, because we need to improve the supply of housing in the context of very strong demand.

In relation to the other measures that Senator Ludlam raised—and he asked me a question about this in question time the other day—let me confirm for him again that the government has absolutely no plans to revisit negative gearing. I remind him there is actually no such thing as 'negative gearing' as a term or methodology within our tax laws. What is reflected in our tax laws is the concept that tax applies to net income. When you incur relevant costs in generating an assessable income, there are allowable deductions against that assessable income to determine the taxable income. That is a general principle in our tax laws which we believe is appropriate. We understand that the Greens have a different view. We let the Greens argue for higher taxes, and we will continue to argue that the current arrangements remain appropriate.

Just to close on this, Senator Ludlam seemed to indicate that the Labor Party had a position to pursue changes to negative gearing. I am very pleased that he has been able to ascertain and discern what Labor's position on negative gearing actually is, because I have struggled to do so. I know there are some people who are trying to increase their profiles who jump up at various times and express some views, but whenever the Labor leader, Mr Shorten, is asked a question on negative gearing I have struggled to understand his position. I know I am just a humble immigrant of non-English-speaking background and perhaps I do not understand the English language all that well, but I have listened very carefully to what Mr Shorten has had to say and, quite frankly, I cannot figure out what Mr Shorten's position on negative gearing is. Is he in favour of the status quo or is he in favour of change? He gave a press conference last week. I sat in my office in Perth and genuinely listened very carefully. I have an interest in this topic. He was giving a press conference and he was asked a question about negative gearing. I thought I would listen very carefully to see whether I could find out the position of the Labor opposition under the leadership of Bill Shorten on negative gearing. I was none the wiser at the end of his answer. If somebody in this chamber on the Labor side wants to clarify Labor's position on negative gearing I would be all ears. I would be really interested.

Senator Ludlam, this is where we come back together. I am sure that both of us would be very interested in Labor's position on negative gearing. But obviously that is not the subject of this bill, so you have invited me here to stride beyond the measures that are in front of us. It was probably remiss of me to have been taken that way by you but, as always, I was trying to be helpful.

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

It is always helpful when the minister is helpful. It feels as though we have just spent the last half-hour effectively talking past each other. Minister, you pointed out that there is no such thing as negative gearing. The Parliamentary Budget Office must have just imagined the $42 billion in savings over—

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

In our tax laws.

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

I think perhaps we are now arguing about a technicality. Where we have a substantial disagreement—maybe it is not a term of art in our tax laws, but it is commonly known as 'negative gearing'—is on the idea of people acquiring an asset for the purpose of making a loss on it with the expectation that other taxpayers, the vast majority of them locked out of the property market, should pick up that loss. I find that utterly objectionable. And this is one other area where we are in agreement. Demand is a huge factor in housing affordability. One of the major drivers of demand are these massive tax concessions, paid for by people on low and medium incomes, many of them themselves locked out of the property market, that incentivise bidding up the price of property and pricing first home buyers and owner-occupiers out of the market. Until the two of us can make eye contact on that, I suspect we are wasting our time. I do not want to verbal the Labor Party; you are absolutely right. I have no idea what their position is on many things. But, on this issue of negative gearing, what I want to acknowledge is that, unlike yourselves, they have not slammed the door shut on debate. They are at least willing to take on the taboo. I think it is to your great discredit that you are not. I move Greens amendment (3) on sheet 7714:

(3) Schedule 1, page 5 (line 1) to page 32 (line 22), to be opposed.

I hope, in the few seconds remaining in this debate, that somebody up that end of the chamber has a change of heart on behalf of first home buyers.

The CHAIRMAN: The question is that schedule 1 stand as printed.

Question agreed to.

Bill agreed to.

Bill reported without amendments; report adopted.