25 November 2016
Transcript - #2016169, 2016

Doorstop Interview, Sydney

SUBJECTS: White Ribbon Day 2016; housing affordability; working holiday maker tax arrangements; Labor forcing Australians to pay for foreign worker tax cut.

TREASURER:

Thank you for coming down here to our beautiful Shire today. Today we've got our White Ribbon Walk Day here in the Shire which brings together our local school students and various community organisations, our local police, to walk together to support the very important cause of White Ribbon Day. It is an important issue here in our local community, as it is right across the country, and it has been a good opportunity to share the important work we've been able to do as a Federal Government in standing up for respect for all Australians, but particularly ensuring a culture of respect towards women and children because it's disrespect of women and children which ultimately leads to the terrible violence we see in our communities.

I know there are other issues around today and one of the things that the Government is very keen to facilitate are the great economic aspirations of Australians, and those aspirations are to have a job so you can support yourself and your family and those around you. That you can own your own home and provide for your own accommodation. And thirdly that you can be independent in your retirement. As a government we are very committed to pursuing and supporting Australians in all of these endeavours through the policies that we are pursuing, particularly on the issue of housing affordability. Some weeks ago I highlighted the need for us to take a comprehensive policy response to this issue. I highlighted the significant issues of ensuring there is appropriate housing supply, not just on the fringes of the city, it's not just about land release on the fringe, it is ensuring that there is supply right across our cities and supply that is appropriate to the needs of Australians in the various stages of life they have. Older Australians, families, younger people starting out. Some of those accommodation shortages are in inner city areas, middle-ring suburbs, also on the fringe, and I highlighted the need to ensure that across the country we had a supply policy framework, states working together with the Commonwealth to facilitate those outcomes. But there are also demand issues which have already been acknowledge, and those demand issues were particularly acknowledged by APRA when they introduced the changes in the end of 2014 that has seen the growth in investor credit; that is investors borrowing money to participate in the housing market more than halve. This was a significant change that got the result it was looking for and really did address the issue of overheated investor demand in the housing market. So, housing is a complicated issue.

I understand, as does the Government, the great frustration that there is, whether it's young people trying to buy their first house, whether it's people on very low incomes trying to afford rent in expensive cities like Sydney, or I understand the challenges faced by older Australians who might be on fixed incomes and being able to have the accommodation that they need, and indeed there are those who are worst off, of all, who are the victims of homelessness which could be the result of any number of circumstances. Our housing policies have to deal with all of this. There is no-one solution that fixes this issue, and it requires cooperation and that's what I'm committed to doing.

The NSW Government, I think, is actually leading the way when it comes to the supply side reforms that are necessary, and particularly in the innovative way that they are addressing social housing needs in this state, and I commend them for it, and I think they provide a good guide on the road ahead and the sort of initiatives that, as a Commonwealth government, we want to support. So we're all in this together. It's not about one level of government and another level of government not being able to come to agreement. It is about the things we can agree on and make work. Next Friday, at this time, I will be meeting with the state treasurers and we will be receiving a report on affordable housing financing options, work that has been in progress for some time. I see that as just another iteration of the important work and cooperation that needs to happen between the states and the Commonwealth and indeed local government.

Here in the shire itself, our own local government here has been taking good steps forward in terms of the supply of housing here, but the appropriate supply of housing that fits with the residential character and amenity of what I shamelessly say is the best part of the country to live in. So, it’s a big challenge, we look forward to working with everyone, but most importantly, we all need to do it on behalf of those Australians who need to get that roof over their head, and for those who are able to afford to buy one, we want to support you, and for those who won't find themselves in those positions, we want to be there for them, too.

QUESTION:

Rob Stokes is saying though that the State Government is doing its part but he is saying the Federal Government needs to do their part by amending tax breaks to create more affordable housing, particularly negative gearing.

TREASURER:

Well, I commend what the NSW Government is doing on the supply side. The comments that I made some months ago were actually designed to be more of an encouragement for states to keep going down the path that I think NSW has been demonstrating, and there are other states doing different things and we need to encourage that. What I'm not sure Mr Stokes is aware of is the impact of the measures from APRA, that were put in place, have had and the Reserve Bank Governor, both of them, former and current, have acknowledged that the measures put in by APRA, which were designed to take the heat out of the investor market, have had significant impact. The rate of growth in investor loans in this country for real estate fell by more than half as a result of what APRA did. Now, you have to get the balance very careful on these issues. There is no-one single housing market and I understand that Mr Stokes in Sydney, up there in the other peninsula in Sydney will have a view which is very focused on Sydney. As Commonwealth Treasurer, I need to look at policies and how they impact right across the country. So what might help in Pittwater may not help in Tasmania. In fact, it could actually have a negative impact because there is no-one single housing market. But I welcome the debate with the states and territories. I welcome the suggestions. I think we have to work through them collectively, but I think we have to be careful that in going down this path, we don't embrace policies that do harm. Issues on negative gearing have been demonstrated in the past to drive up rents. Now, if you're waiting to buy a home and you're in the rental market, the last thing you want to see is your rents go up, and so it's important to look at issues and their impacts right across the board. The Labor Party's proposal on this issue was not modelled, they had no contemplation of what the compounding impacts would be, not just on the rental market, but also what it would mean to broader consumer confidence and how housing values being undermined could lead to reduction in consumption which would slow growth, would affect people's wages and their jobs.

QUESTION:

Do you still think there are some excessive elements to the negative gearing policy and perhaps giving tax breaks to people who are buying multimillion-dollar properties is not the way to go to address housing affordability?

TREASURER:

Well, let's not forget that the overwhelming majority, some eight out of 10 people who actually engage in buying an investment property, are not millionaires or wealthy property investors – they are mums and dads. And what they are doing is saving for their retirement, they are saving to support their kids. They are actually, in some cases, it is their first property they’re purchasing to help them actually get into a tough market like Sydney. So, that's what that is enabling them to do. So it has a very important role and has for 100 years in supporting people in those situations. The point I make about APRA is that they have already taken measures to curb the growth in investor credit for housing. Now, if the problem that is being identified is that we need to curb the overheated growth in investor credit for housing, well, APRA have already taken that step, we've seen that drop by more than a half, and that has been acknowledged by Reserve Bank Governors past and present, and was one of the key reasons why they felt confident about their last rate cut. So, when you look at these proposals you've got to match them against the evidence. There are demand issues that play into this, but the APRA response has been calibrated, it’s been effective and I think it’s been very warranted.

QUESTION:

So is NSW Planning Minister Rob Stokes misguided or misinformed?

TREASURER:

Well, I'm not aware of Mr Stokes' knowledge of the APRA measures and their impact on the investor market, you would have to ask him about that. What I think is necessary is that on the demand side you have a calibrated response. One of the things Mr Stokes referred to, I understand, and will be making comment about today, which I think he makes a good point about, that is how tax treatment of affordable housing, in particular, can deal with those at the social housing end and those in the rental market. There are very good examples to follow in United Kingdom and in other parts of the world and he is right to draw attention to that and I think they are the very issues that we will continue to look at with the state treasurers and as we work towards next year's Budget. I'm very interested in those measures. We spend about $1.4 billion providing untied grants to the states in the area of housing, for social housing and across the country in net terms with barely, if at all, adding one extra dwelling unit. Now, that can't continue. If you are going to invest $1.4 billion alone, overall the states and territories put more than $10 billion a year – $10 billion a year – in direct grants, support and assistance on this issue of housing, and I can't tell you that that is having the best effect.

QUESTION:

Mr Stokes says why should we get a tax deduction on the ownership of a multimillion-dollar holiday home that does nothing to improve supply where it is needed. Why should we?

TREASURER:

Well, you don't. You actually don't.

QUESTION:

So is he misguided or misinformed?

TREASURER:

A holiday home does not attract any negative gearing if it's not being rented.

QUESTION:

So is he misguided or misinformed?

TREASURER:

Commercial property or rental properties or residential properties only attract negative gearing if it's earning an income and that there is a rental loss against the mortgage cost. So it has to actually be a business, it actually has to actually be an investment. Just because you own a holiday home which you may visit from time to time, you don't get negative gearing on that if it's not a rental property.

QUESTION:

“We should not be content to live in a society where it is easy for one person to reduce their taxable contribution to schools, hospitals and other critical government services through generous federal tax exemptions and the ownership of multiple properties while the generation of working Australians find it increasingly difficult to buy one property as a home.”

TREASURER:

This is why APRA took the measures they did to ensure the investor heat in the market does not have the impact that Mr Stokes has been referring to. Now…

QUESTION:

It has been described as a split in the Liberal Party.

TREASURER:

Well, I wouldn't agree with that and I've spoken with the Treasurer today in NSW as well as the Premier about this issue as we were dealing with some other matters involving our relationship between NSW and the Commonwealth today. Negative gearing is not a tax concession. What negative gearing is, is the ability for you to deduct what is a business expense against a business income. The business being the rental of a property. Now, that is not a concession, that is the same thing that every other business, every other taxpayer in the country does, whether it's to claim a deduction on the work boots that they have to work on a site, I don't know, journalists may even be able to claim their fancy ties – I doubt it, but you may wish that. But a cost incurred in the acquiring of income which is taxable can be deducted. And that is what this is and policemen, nurses, school teachers, ambulance officers, Defence Force personnel, those are the people who are out there negatively gearing properties to provide for their future. I think we should back those people in, I think we should, and I think we should address the issue of housing affordability comprehensively right across the board. There is no-one issue that address this. Anyone who pretends that, I think, really hasn't gotten across the full set of issues, and I think it's important that we work together.

QUESTION:

On another issue, the opposition says that George Brandis acted inappropriately over a High Court challenge involving the Bell Group. What's your take on that issue, given [inaudible]?

TREASURER:

Well, I don't agree with them.

QUESTION:

Just one more question on the backpacker's tax, do you support a 15 per cent backpacker’s tax given One Nation might support it? Better to have 80 per cent if you can't get 100 per cent?

TREASURER:

We've made a compromise on this to 19 per cent and on the backpacker tax we're ensuring that a backpacker in Australia has as much money in their pocket after picking fruit as they would working in a similar type arrangement in New Zealand or Canada or the United Kingdom. We think that's a fair outcome. We don't think Australian taxpayers should have to pay for a tax subsidy for foreign workers, and that's basically what those who haven't supported the Government's measure are arguing for. To reduce it to 15 per cent would cost $120 million, and we think to ask Australian workers to pay $120 million extra in taxes so foreign workers can have a tax cut is not a fair deal. So we've put, I think, a very fair proposition on the table, and we urge the crossbench – but frankly the Labor Party. Bill Shorten is a complete phony on this issue. He goes out there and he lambasts people coming out on 457 visas and says, "I'm all for the Australian worker" but what he is doing today is he wants to give a tax cut to foreign workers coming out on backpacker visas, and he wants small businesses like the small businesses you see around here, to pay a higher corporate tax rate. Chris Bowen says they want the tax rates to be competitive. Well I would like small businesses to have a competitive tax rate. The UK are going to take tax rates down to 17 per cent, they may even go further to 15 per cent, but they pay higher rates of tax than they do in Singapore, Korea and so many other countries. If Bill Shorten wants Australians to pay less tax, then he should be supporting our measures to reduce tax for Australian businesses and drop his proposal to give foreign workers a tax cut at the cost of Australian taxpayers.

Thanks.