24 October 2016
Transcript - #2016149, 2016

Doorstop Interview, Sydney

SUBJECTS: Address to the UDIA – ‘Keeping home ownership within reach’

QUESTION:

You said this morning on Ray Hadley’s show that housing affordability’s not just a one-issue solution. Other than additional land releases by the states, what other policies are you thinking at this stage to progress this?

TREASURER:

Well, what I’ve done today is set out what our diagnosis of the problem is, particularly in relation to purchasing. So while with lower mortgage rates, the affordability for those who are already in the market and already own a house has been easy, those who are facing the biggest challenge are those who are trying to get into the market. In my speech, I touched on three areas that were necessary and of course it is supply of it – not just the supply of land on city fringes, which is often the misconception people put around that term – it is composition, it is flexibility, it is its responsiveness. One of the problems you have is that you have supply responding too long after the event and almost be counter-cyclical. So you need to be able to tighten these things up. So that goes down to simple administrative processes as well as the policies. I talked about the measures that APRA have already undertaken which have tempered investor heat in the market quite dramatically actually from such a modest and calibrated measure. There is also the need to look at ways in which we can help young Australians save more quickly so they can actually keep up with the market. But the one thing you don’t do is crash the market to make housing more affordable. I also said on radio this morning, there’s plenty of cheap housing in Detroit but that’s not the model I propose we should take.

QUESTION:

Treasurer, wouldn’t the cost of housing come down if you did away with negative gearing?

TREASURER:

I haven’t seen any modelling from the Labor Party who’s put that policy forward to back that up. They are yet to produce any economic modelling on the policy they took to the last election. They refer to some unrelated studies that had nothing to do with their actual proposal. The closest work that has been done on their arrangements show that it would have a fairly catastrophic effect on property markets which undermines the value of existing homeowners’ homes which is not good for consumer confidence. You need to be careful in how you apply macro measures to a housing market that is not homogenous. There is no single housing market. So when you use those types of measures, it arguably has an influence in one area but can have the complete reverse impact somewhere else. The point I’m making today is that the Australian housing market is made up of many, many markets and our responses have to be calibrated to deliver on the ground at that level. The most significant thing you can do there is address the supply/demand imbalance. Population growth, economic growth, people getting jobs, dual income families – all of this is supporting rising demand and it’s important that the supply is able to keep up with that demand. Now that means one bedroom units in inner-city areas as much as it means three bedroom, four bedroom homes in the city fringe. But the other thing I mentioned today is the City Deals initiatives that we’re engaging in which is not just about infrastructure but it’s about connecting infrastructure to employment, to housing and all these issues working in partnership with state governments. So there’s a lot to work on, we’ve got to work on it together. This is not about putting anyone on notice, it’s about a call to work together to solve these problems.

QUESTION:

Is there any way to make the states to move on these issues? They are state responsibilities.

TREASURER:

They are. Many states are already taking some action in this area. Some more than others and in the past that has been true as well. If you go back many years ago, when I talked about Bob Carr’s ‘Sydney’s full’, at the same time Victoria’s approvals were actually increasing. That would explain in part why Victoria’s movements at that time were not as significant as they were in NSW. So it just reinforces the point that Chris Bowen and Bill Shorten can jump out there and say it’s all about one thing. But it’s not about one thing. It’s much more complicated than that. It’s not about having any solution, it’s about having the right package of solutions and that’s certainly what the Government will be working on as we move forward in this term.

QUESTION:

Could you tell us a little bit about the reward payments that might be on the table for the states?

TREASURER:

It’s very early on in the process. The Harper Report sets out what is effectively a new Hilmer process for dealing with not just these types of regulations but cutting back on regulation and improving the efficiency of government practices right across the board. That’s the start of the discussion I’m having with the States. We commenced it when I first became Treasurer when we had received the Harper Report and I’ll be working with them to see how that can actually work in practice. As I said, there’s $11 billion being spent between the States and Commonwealth already. The issue isn’t that there’s not enough money being spent, the issue is the money is not being spent well and hasn’t been spent well for a long time. I’m not making any criticism frankly of really any side of politics on that. I think all governments have really failed to get this investment we’re making in these critical areas right, so it is really an invitation to see if we can do it a hell of a lot better than we’re doing now.

REPORTER:

Treasury says that immigration has pushed up the demand for housing by 50,000 dwellings a year. Should you be slowing down the immigration intake to take pressure off the housing market?

TREASURER:

Our population growth has also been one of the critical factors that has underpinned our economic growth for the last 25 years. The way to deal with the housing market is not to slow your economy, and so many of Labor’s policies are about doing that. It’s about increasing taxes on investment. That doesn’t support your economy growing, that doesn’t support actually increasing job growth. Our policies work in tandem, so our national economic plan is designed to drive economic growth – 25 years of economic growth didn’t happen by accident. The next 25 won’t happen by accident either, and it won’t happen by stymying investment through higher taxes.

QUESTION:

A lot of this new demand for new immigration coming in, all want to come and live around the city, eastern suburbs [inaudible]. What are you doing to push them out or to make the outer suburbs more attractive to them?

TREASURER:

It’s a question of supply, it’s a question of having the available housing products. For centuries, let alone decades, when immigrants have come to major cities all around the world they have tended to congregate around inner city areas. That has been one of the most established settlement practices for a millennia.

REPORTER: But that pushes up housing prices.

TREASURER:

The response is to ensure good planning and infrastructure and employment that creates opportunities across the cities, which is what our City Deals are all about and ensuing that supply is responding to demand, and this is a big problem - it’s not just about more supply, it’s about the timeliness of supply. Getting the right answer too late is also not a good thing, and so you need to get these things [inaudible].

QUESTION:

Are some states worse than others?

TREASURER:

States are different and they are dealing with different challenges. I set out how in Western Australia for many years they had net migration going to Western Australia, now they have the reverse. In Melbourne and Sydney, and in New South Wales and Victoria more generally, we now have some of the highest population growth rates we’ve had for a long period of time. The point about that is that not only is there no single housing market which enables you to suggest that there is one issue that solves the problem, as Labor I think rather cruelly suggests. If you’re out there trying to buy a house at the moment, and someone comes along to you and tries to sell you the snake oil and says, ‘well do this with negative gearing and guess, what your house will be cheaper’, I think that’s a cruel hoax. What the important point is, is that markets are diverse, they’re very dynamic, they change all the time and our policies need to be as responsive as they need to be calibrated in order to actually get the result.

QUESTION:

Do you think that young people eat too much avocado on toast though?

TREASURER:

I’m not in the business of lecturing anybody on how much avocado they eat, how much toast they eat or on any of those sorts of things. They can make their own choices about their own eating habits. My job is to do whatever I can to work with the State and Territory Treasurers, and my federal colleagues and local government – which is critical on this – to ensure that those young people, and as I said in my presentation people are still paying off their mortgages into their sixties, are in a much better position to realise their aspiration, to get a job that helps them support and care for their family, to be independent in their retirement and to be able to own their own home. Great aspirations, ones we share and celebrate.

Thank you.