10 March 2017
Transcript - #2017033, 2017

Interview with Fran Kelly, RN Breakfast

SUBJECTS: Turnbull Government Establishes Affordable Housing Taskforce; housing affordability; energy prices; the economy

FRAN KELLY:

Treasurer Scott Morrison, thanks very much for joining us.

TREASURER:

G'day, Fran. Good to be with you.

KELLY:

Treasurer, how would a housing affordability finance corporation work – what is the big idea?

TREASURER:

What has been done overseas and has been working overseas for some time is community housing associations, and indeed, potentially those in the private sector, can gain access to more affordable finance over a much longer period of time and it can fill a missing gap for a lot of these housing associations, which are providing that affordable housing, that key worker housing and indeed, the social housing, to ensure that new developments can get away and that finance can be in place to support those and to make them more commercially viable. It's not the whole solution but it has certainly been parts of the solution in many parts of the world. I know in the housing debate, we rightly focus a lot on first home-buyers and the real challenges that they have in getting into the market. But one of the things that has been concerning me now for some time is the growing number of people on low incomes who are facing rental stress. Now, particularly for those on very low incomes who might be facing many other life challenges, if they can't be in sustainable, reliable accommodation, then all of the other problems get harder. The problems of joblessness, the problems of other ailments that they have to deal with, the problems of disabilities – all of these things get harder to deal with if you don't have secure, sustainable accommodation.

KELLY:

So that's what this would build? What you might call social housing?

TREASURER:

Social housing, affordable housing, key worker housing.

KELLY:

As rental?

TREASURER:

It's all rental. That's all true. But potentially in those areas, there are models where those who are in social or affordable housing, there are models that enable them to eventually buy the houses in those circumstances. So, it is one part of a much bigger picture here and the reason we're getting on with this is because it is not just about the first home-buyer market because that is very important. You have got to work right across the scheme and this is work we've been doing now with the states and territories for some time and it's got to the next level and I'm pleased about that.

KELLY:

And just because I do struggle with the notion of a bond aggregator and how that works. This is not Government money, this is a vehicle to attract financing and what is the attraction for the investors?

TREASURER:

The Government can actually issue the bonds. The Government can actually aggregate the finance and they can provide that finance at a much cheaper level to community housing organisations who would never be able to access it at those sorts of rates.

KELLY:

So is it to attract investment money, say, from superannuation funds as well?

TREASURER:

Both. These bonds can be, obviously, purchased by industry funds and private investors but the Government is in a position to be a stand-in-the-middle operator here to provide a link to not just better cost finance, but more long-term finance as well for these projects. So, it is not the whole solution, it's one part of the solution but it is focusing on part of the problem in housing which I don't think gets enough attention. It is the other reason why, frankly, I'm very disappointed in the way that we've spent $9 billion on the National Affordability Housing Agreement.

KELLY:

I was going to ask you about that, is this what the National Affordability Housing Scheme is supposed to do?

TREASURER:

I'm very frustrated with it because we've spent all of that money and the number of people on housing waiting lists have gone up and the number of houses owned in public housing has gone down and the number of people in rental stress on low incomes has gone up. So $9 billion very badly spent.

KELLY:

So, if this idea gets up, would you see the $1.3 billion a year going to the states under the National Affordability Housing Scheme. Could some of that be redirected to this kind of finance corporation?

TREASURER:

These are off balance sheet type arrangements at the end of the day what we are talking about here. But what I want to see here under what has been the affordable housing programs; it is not about necessarily reducing that. That's not really the issue. The issue is we must spend it better and it is not just the case on housing. Whether it is on schools or hospitals or all of these sorts of things, we must make the money go further, Fran. Every time you have a debate about a particular issue, particularly social issues, the answer always seems to be from Labor and others – just spend more and more and more. Frankly, I'd like to spend what we're spending a hell of a lot better.

KELLY:

I think that a lot of people like to hear that. So, is that a pledge that in the Budget you are not going to take the money away? The money will still be there, but with more incentives or regulation around how to spend it?

TREASURER:

It is a pledge that I am obviously focusing on spending the money we're spending a lot better. The ultimate decisions of the Budget will have to be taken in the context of the challenges that we have more broadly in the Budget. But whatever dollar is spent by the Government on housing and we spend almost $11 billion a year on this housing issue.

KELLY:

It's a lot of money.

TREASURER:

Together with state governments as well. That's Commonwealth rental assistance, it's what the state governments spend, and we've got to do a much better job collectively altogether.

KELLY:

And what about incentives? We have talked before here about in the context of the housing affordability, we talked about changes to negative gearing or capital gains tax. Can I quote to you today, Chris Cuffe, the former Colonial First State Chief Executive, current chair of Uni Super, is saying in one of the papers, 'There's no justification that someone can flip a property after a year and can be taxed on only half the realised capital gain. Let's remove this investor tax incentive and give our children a chance'. Now, he is just the latest voice into that. Are you looking at some kind of changes to capital tax concessions?

TREASURER:

The average holding for an investment property in residential real estate is eight-and-a-half years. It is not 12 months.

KELLY:

It doesn't mean that some aren't doing it after one or two years though does it?

TREASURER:

My point is the vast majority of cases here, just like two-thirds of people who are actually involved in negative gearing have taxable incomes of $80,000 or less and 70 per cent of them only own one property. I think they are just some of the facts on this debate which I think are very relevant. The other point about Capital Gains Tax you'll remember is when that discount was introduced, and Chris has made this point as well, he was actually talking more about the role that the discount was intended to play, and that was to simplify tax arrangements in what was a much higher interest rate, higher inflation environment. He was also saying that today, there is more opportunity to better account for what would be happening with the capital side of this and making the relevant deductions with that on a case by case basis. I don't think I'd necessarily agree with that. A simple capital gains tax discount is much easier to administer both for the tax payers and the tax office, then lots of paper.

KELLY:

So no change?

TREASURER:

Well the Budget is in May, Fran.

KELLY:

You're listening to RN Breakfast our guest is the Federal Treasurer Scott Morrison. The energy market operator said yesterday, Treasurer, that we're heading for shortfalls in gas and electricity by as early as next summer. This problem has hardly crept up on us, I think it's fair to say. It's a failure of Governments past and present that we're facing this now, isn't it?

TREASURER:

It's a failure of planning over a long period of time. It's an energy debate that's been driven by ideology and not engineering. I think these are the points that the Prime Minister, Josh and myself and others are making. We can't have this ideological approach to securing our energy future, the sustainability, the certainty, right across the board whether it's wind, solar, pumped hydro, storage, all of these things, but as I and others have said, it's coal as well. We've got five coal-fired power stations which will realise their economic life in the next ten years, and they account for the equivalent of half of New South Wales' peak capacity. You've got to be working all of these angles, whether it's gas, or solar or wind or anything else…

KELLY:

But if we're talking about gas for now, let's talk about gas because the Prime Minister is going to pull together the CEOs of the energy companies, the gas companies, to look at resolving this, but is the Federal Government open to the option of pulling the ultimate lever on that which is some kind of reservation of gas? Because I notice that Josh Freedenberg, the minister yesterday was attracted to the Queensland Government notion of quarantining some new gas development sites for…

TREASURER:

That wasn't a gas reservation. That's not a gas reservation.

KELLY:

Well it's reserving a site…

TREASURER:

A gas reservation policy would impact every single gas project in the country today. The move to enable them to actually access the international markets on gas has actually led to gas exploration and development in this country which has produced thousands and thousands of jobs. That's an important thing that we must bear in mind. When you get into these issues, I mean these investments on gas, or other forms of energy are made over a long period of time, and you must be very, very careful that you don't disrupt the investment viability of these projects…

KELLY:

Don't you need to be more careful that people don't run out of gas?

TREASURER:

You can't get gas into a gas-fired power station that doesn't exist because no one will build it…

KELLY:

We've got plenty of gas, Minister.

TREASURER:

There are moratoriums on gas all over the east coast.

KELLY:

We do have plenty of it.

TREASURER:

That's the point that the AEMO was making as well, and that is, if you're going to restrict your access to this resource, then that is obviously going to have an impact on price. These are the points that Josh is making, because unless you're able to get it out of the ground, and you're getting it to the market and to those who are using it at an affordable price, well, it itself doesn't become part of the solution. So, these are the very complex and challenging issues we're working through, and that's what we're working towards.

KELLY:

On another issue, Treasurer, we head into the all-important pre and post Budget sell. The Budget is in May. 7:30 Report reported last night…

TREASURER:

It's speculation season, Fran, it's a media frenzy.

KELLY:

Amongst that speculation a report that the Prime Minister was going to take over as chief economic salesman basically, because some of your colleagues reportedly don't think you're doing a strong enough job. Are you being sidelined in the Budget sell?

TREASURER:

The Prime Minister is always the chief economic spokesperson for the Government. Always has been. Always should be. The Prime Minister is leading the country and there is no greater challenge that we face to ensure that we continue the prosperity that we've known for the last 26 years, this year inclusive.

KELLY:

So you're not being sidelined?

TREASURER:

Fran, no, I don't believe so at all and why would I be? The Prime Minister and I work together as a team on these things. We work on Budgets together as we are now. The good news is this, Fran, for a long time we've been looking at world forecasts on growth trending down now for some many years, and you know what things are starting to pick up. Things are starting to pick up, Fran, and you don't want to get too far ahead of the game on this, but the good news for Australians is, is that for many years we've dealt with a very flat world environment when it comes to the economy and trade, and these issues. We're seeing inflation picking up in places like Europe, we're seeing very strong confidence now coming out of the U.S., speculation of another rate rise by the Fed this month. The world situation which has been in a funk for many years now, we're starting to see some real positive signs there, what that says to me, this Budget will say to Australians, we want to see these opportunities realised. There are real opportunities there, you can see that light, and we've got to keep working to ensure we can move towards that growth that is there for us, there for the taking, which means higher wages, better jobs, better pay, more hours and more secure employment.

KELLY:

Treasurer, we look forward to the May Budget, perhaps we'll speak to you before then.

TREASURER:

Sure, Fran.

KELLY:

Thank you very much for joining us.

TREASURER:

Thank you.