Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 1) Bill 2017


Peter Khalil: I rise to also speak on the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No 1) Bill 2017. As other speakers have outlined and as many of the speakers on this side of the House have mentioned, Labor will be opposing this bill. We know that the dream of owning your own home is pretty much completely out of reach for too many Australians. Working- and middle-class families are being priced out of the housing market. The evidence shows this very clearly. Ownership rates for young people aged between 25 and 34 have tumbled in recent years from 60 per cent to 48 per cent. Just as disturbing is the fact that young people are being forced to take on levels of debt unimaginable just a few decades ago.

You’d be forgiven for finding our opposition to this bill surprising, given the name of the bill—the so-called measures to reduce pressure on housing affordability. That name would lead you to believe that the government had recognised the problem and was taking the appropriate action. Why shouldn’t we support that? But the devil is in the detail. While this bill purports to address the issue of housing affordability, it does nothing more than pay lip service to one of the greatest issues and challenges facing the Australian economy. We had to wait several months to see this legislation and get across the detail. What we got was nothing more than a collection of half-baked ideas and thought bubbles. Make no mistake: the measures contained in this bill are ineffective and will solve nothing. We were told that the government was going to rescue first home buyers—they were going to come in and be rescuing superheroes. The member for Deakin, Super Sukkar, was going to fly in—he’s here today—

The DEPUTY SPEAKER ( Mr Irons ): Order! The member will refer to members by their correct titles.

Peter Khalil: The member for Deakin was going to fly in and rescue first home buyers. But what did we get? We got thought bubbles and half-baked ideas.

The first schedule of this bill, particularly, is one of the most egregious parts of the proposal. It would allow first home savers who make voluntary contributions in the superannuation system to withdraw them up to a certain limit, and an amount of associated earnings, for the purpose of purchasing their first home. The concessional tax treatment would apply to amounts that are withdrawn under the scheme. I understand why this would be tempting to many. But the proposition to undermine the retirement future of Australians not only has the potential to make housing less affordable; it will also compromise the financial security and the dignity in retirement which superannuation has been designed to provide and has been such an effective part of our nation’s policies.

Let me be clear about this: the Treasurer’s superannuation scheme will do nothing to address housing affordability. Superannuation is supposed to be sealed—deposited to generate retirement income—not the plaything of the government of the day to give access to super savings, undermining the very important concept of mandatory accumulation and the promotion of compound earnings. This shouldn’t be touched or tampered with for whatever priority they have on that particular day or to get themselves out of trouble. It was Labor who built that world-class superannuation system all those years so, against opposition from the other side. We won’t stand idly by while this government tries to tear it apart. You can’t trust the Liberal government to protect superannuation. They carped and criticised at its introduction under the Hawke-Keating government and they have been attacking it ever since. It’s in that Liberal-National coalition DNA to attack the great initiatives that Labor has put in place over this nation’s history. Indeed, those opposite loathe Medicare as much as they resent universal superannuation.

So I echo the calls of previous speakers and ask the Senate to reject this measure and send a clear message to the Turnbull government that it’s time to get real on housing affordability. The failure of this government on housing affordability is being felt by so many people across my electorate, where property prices are skyrocketing. According to the CoreLogic report commissioned by the Real Estate Institute of Victoria, the median house price in the suburb of Brunswick in my electorate is $1.1 million—$1,110,000. Until last weekend I lived in that very suburb, in Brunswick.

I have to confess that I have a personal interest in this issue, as so many other millions of Australians have. My family and I were renting our home in Brunswick. Our landlord decided to put the property on the market and we were told we had 60 days to find a new place to live. Life as an MP, as we all know on all sides here, is very difficult with a young family. I thought, rather than going house hunting I will see what they want for this property. It doesn’t really leave us a lot of time for house hunting when we have to fly to Canberra all the time. We tried to buy the house, or rather asked them what they wanted for it. When I was told the asking price, my jaw literally hit the floor. We make a good salary in this place; but they were asking for somewhere around $2 million for a small three-bedroom house in the suburb of Brunswick. There is no way we could afford that. We loved that home and we loved Brunswick as a suburb, but I can assure you that was far from a palatial home that we were living in, that we were renting. We are fortunate enough to earn a good salary, yet we found the prospect of buying an ordinary home in our area obscenely unaffordable. This is the experience of millions of Australians around the country in the struggle that they go through. So I understand better than most on the other side the struggle that many Australians have who are trying to achieve the dream of homeownership. Labor has led on this with its policies to reform negative gearing and the capital gains tax discount. Those policies were immensely well received by the electorate, and for good reason. They are likely to work and are likely to deliver real outcomes for people trying to enter the housing market. They say that no party has a monopoly on good ideas but, make no mistake, this policy lever is available to the government. They can do this; they can adopt the reforms.

The DEPUTY SPEAKER( Mr Coulton ): Order! The debate is interrupted in accordance with standing order 43. The debate may be resumed at a later hour and the member for Wills will be given an opportunity at that time to conclude his contribution.

Peter Khalil: I am pleased to be able to resume my contribution to the debate on the so-called reducing pressure on household affordability measures. I was talking about how I as an MP with a good salary was priced out of my own suburb in my electorate. The asking price for the house we were renting was almost $2 million, and we just couldn’t afford that. So you can imagine the difficulty facing millions of Australians: young Australians, first home buyers, working- and middle-class Australians who have worked hard but can’t get anywhere near the dream of home ownership.

No party has a particular monopoly on good ideas. We hear that all the time. But let’s make no mistake here: this government has the policy lever in its hands to reform negative gearing and the capital gains tax discount, but it is unable to do so—unwilling to do so. They can act and deliver relief to so many millions of Australians who are trying to get into the housing market, but they have actually refused to do so. Among all of the advanced economies, Australia has some of the most generous taxation concessions for housing investments. In recent years this has helped fuel an investor-driven property boom, leaving more and more young people—first home buyers and even young families—unable to purchase a home. The interaction of negative gearing and the capital gains tax discount has also encouraged speculative behaviour, exposing the economy to unnecessary levels of financial risk. I would like to quote from a Grattan Institute report on housing policy:

The combination of capital gains tax rule changes in 1999 and negative gearing has strongly increased the demand for investment properties. Investors compete directly with potential homebuyers, particularly for established houses. This makes it harder for first home buyers to secure a property.

From all the anecdotal stories you hear, that is certainly true. When young couples or young couples with a family—their first kid or even two kids—go to an auction, they’re competing with someone who is going for their third, fourth, fifth, sixth, or even seventh investment property, and they are just unable to compete.

On that basis, I unequivocally support the amendments moved by the member for McMahon as they acknowledge that the First Home Super Saver Scheme will do nothing to address housing affordability but will instead work to undermine Australia’s world-class superannuation system. Any housing affordability package that does not include reforms to negative gearing and capital gains tax is a sham.

Fairness is at the heart of this debate—at least on our side. I believe Australia tries to be a fair society. We expect our tax system to align with this value. Most Australians have taxes withheld by their employer in a pay-as-you-go scheme. Of course, the more you earn, the more you pay. The progressive nature of the way most Australians pay tax doesn’t apply to some other aspects of the tax system. Tax subsidies, like negative gearing, disproportionately favour wealthy people who have large amounts of capital at their disposal. And it has to be understood that a dollar of tax avoided in one case is probably an extra dollar of tax paid by everyone else. It’s simply unfair.

I now want to turn to schedule 2 of this bill, which provides for a scheme for profits achieved through downsizing a property to be placed into superannuation to achieve a tax efficiency. As some speakers noted, there is a legitimate debate around this issue. While I do not believe that older Australians should ever be coerced into selling a beloved family home because they fear being financially penalised if they do not, there are many cases in which a large family home is not required later in life, once people’s kids have moved out and retirement is upon them. Labor has looked at the interaction between downsizing and the pension and looked at people on low and middle-class incomes who might consider the need to downsize. The government is concentrating on the superannuation side of things, proposing to allow people aged 65 or over to make a non-concessional contribution of up to $300,000 from the process of selling their home. These contributions would be exempt from the age test, the work test and the $1.6 million balance test for non-concessional contributions. This measure would overwhelmingly impact on people at the highest end of the spectrum when it comes to savings, not those who are concerned about the interaction with the age pension. While there is a debate to be had on that score, it is a flawed premise that this will promote the release of housing stock and thus ease pressures on property values.

I note that the member for McMahon put questions on notice to the Treasurer to provide an estimate of how many people may opt to downsize as a result of this proposal. As we’ve heard, the Treasurer appears to have no idea of how many people would in fact choose to downsize. How on earth can the Treasurer conclusively say that more housing stock will be available in the market without any indicator on this front? It’s blind faith at best. It’s nothing more than guesswork. This debate is an opportunity to highlight the government’s capricious disregard for the budget bottom line, which has grown worse under the weight of this government’s mismanagement. Reckless tax subsidies are unsustainable and unaffordable. Indeed, several tax subsidies, including negative gearing, are growing at a rate that is unsustainable. Quite simply, the budget position today and over the medium term cannot afford both these generous subsidies and the necessary investments required to boost growth and jobs.

It is appropriate that every budget line item that is growing rapidly undergoes close scrutiny to ensure that the subsidy is achieving its stated objectives and that the quantum is appropriate when evaluated against competing policies. Two specific deductions—negative gearing and capital gains subsidies—are both significant calls on the budget and are growing at such a rapid rate that they need to be addressed. It is undeniable that negative gearing and the capital gains discount have not achieved their aim to boost housing supply and encourage the building of more new houses. In fiscal year 2016-17 they cost the budget over $10 billion. As an illustrative comparison, that’s more than the government spends on higher education or child care. The capital gains discount subsidy is growing so rapidly, with revenue forgone doubling from $4.2 billion in 2013 to $8.6 billion by 2018-19. The repeated claims by the government—the justification for the immense cost to the public purse—that the benefits of such tax subsidies go overwhelmingly to low- and middle-income earners are simply incorrect. The government uses income data after deductions have been applied. More reliable data that uses gross income shows that the benefits go overwhelmingly to higher income earners. We see on this side, and it is there for all to see, that this is where the skewed priorities of this government come into sharp focus.