ABC CENTRAL VICTORIA
THURSDAY, 19 MAY 2016
SUBJECT/S: Negative gearing; Labor’s plans to save Medicare
FIONA PARKER, PRESENTER: As mentioned, negative gearing is a hot topic in the campaign, as well as at a forum in Bendigo today. Shadow Assistant Treasurer Andrew Leigh will be there and he is in our studio now. Good morning. Welcome.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Good morning, Fiona. How are you?
PARKER: I'm well. So, Labor's policy is to limit negative gearing to new housing from the 1st of July next year, and halve the Capital Gains Tax discount for all assets purchased after that date as well. When Labor announced this policy, the Government announced it wouldn't remove or limit negative gearing at all and was quick to run with the line it would affect average mums and dads who have worked hard to invest in property and thus negatively gear. Labor was quick to call that a scare campaign. Are you winning this argument with the public, do you think?
LEIGH: Fiona, I certainly think for young Australians who've feel locked out of the housing market, Labor's policy is resonating. I was at a community forum on the Sunshine Coast on Monday night, where a man stood up - he told me he had four kids in their 20s. He was worried than none of them might ever be able to buy their own homes. He is troubled, as are many Australians, by the fact that the home ownership rate in Australia is now the lowest it’s been in 60 years. There is a small number of people who have a lot of properties, but there's many Australian families - even some with negatively geared properties - who are increasingly asking 'How do my kids break into this housing market?'.
PARKER: So those are first home buyers. What about those who have invested in property? I know this is not retrospective, but even those who are wanting to invest and to negatively gear? If they are hoping to buy another property and negatively gear it, have you convinced them this is a good policy?
LEIGH: Fiona, it's a great question. As you say, anyone who buys a property up to the 1st of July 2017, will be entirely covered by the existing arrangements. Unlike the Liberals, we are not legislating retrospectively, we won't affect existing investments. After that date, we're simply saying that if you'd like to negatively gear a property, you need to help the community by adding to the housing stock. That's what we do with first home owner grants. All around the country, first home owner grants are more generous if you are buying a new home. It's what we do with our foreign investment laws - we ask foreign investors to buy new-built properties. So we are simply applying that same principle to negative gearing. Making sure we add to housing supply and so more young Australians can be part of that Australian dream of buying a home.
PARKER: So you want people to either build new houses or buy new houses to negatively gear them - that would cost more for them.
LEIGH: We hope they can find homes which are affordable. As we do with the first home owner grant, as we do with foreign investment rules, we're asking those people who want the attractiveness of negative gearing - which is a very generous tax concession when you combine it with the Capital Gains Tax discount. We're saying: help the community, add to the total housing stock. At the same time, this will add to financial stability. I mean, we've had the Financial System Inquiry and the Reserve Bank talking about the dangers of a negative gearing system that encourages people to concentrate too much of their money in a single asset class, and encourages investment in a loss-making asset. It's a bit weird actually, that we would have a Government saying "You should buy homes in order to make a loss on the rental income so you can make a capital gain down the track". Back in the old days, we used to call that speculation. And our tax system has been encouraging too much speculation. At the same time hurting twenty-somethings who are now 10 per cent less likely to have a home than they were a couple of decades back.
PARKER: If Labor wins the election then, as you say this will kick in from the 1st of July 2017. Are you concerned there might be a rush existing housing before then? Thus sending prices up?
LEIGH: I don't expect that would be an issue. We have to have transition arrangement, and you'll remember when we first announced this policy, Fiona, the Liberals' initial criticism was "Oh, look, it doesn't raise very much money in the first few years". We make no apology for that. They are completely right that when you have a policy that is grandfathered - where existing investors aren't affected - then it doesn't raise a lot of money in the first few years. But our budget challenge is a decade-long one, and this makes a significant contribution to fair budget repair while at the same time starting to take steps to addressing housing affordability. Surely one of the biggest challenges Australia faces.
PARKER: Housing prices will fall; I think the Grattan Institute put it at 2 per cent. That does concern home owners as well who want their homes to rise in value if they are not negatively gearing another property. They want their house to rise in value, their existing house they are living in. You don’t think this policy will come back to bite you at the election?
LEIGH: Fiona, we don't believe our policy is going to cause house prices to fall.
PARKER: At all?
LEIGH: No. The Grattan Institute is modelling a policy without grandfathering, in which everything takes immediate effect. In fact, there's been a number of experts in this area who have said you should cut off all the existing investors. We've said "No, we don't believe that's fair". We believe that policies should treat people who have made existing investments as they have been in the past, but in the future that we ought to change the rules. So I think there will be stability in the housing market, I think we'll get a little bit more new housing stock. Frankly it's the kind of reform Malcolm Turnbull, I'm sure, would have supported in 2005 when he wrote about the excesses of negative gearing. Aussie John Symond was on Q&A a couple of years back calling for reform of negative gearing. Many people on both sides of the political spectrum - your former Victorian Premier Jeff Kennett - have praised this policy. Ind ependent experts like Saul Eslake and Chris Richardson. People on the Reserve Bank like Jillian Broadbent and Warwick McKibbin. There's people across the political spectrum who have been saying that Australia's combination of negative gearing and the Capital Gains Tax discount is blowing up the housing market and hurting first home buyers.
PARKER: John Symond has changed his tune though. He's very much in support of the Government not making any changes now.
LEIGH: He has, and he's somebody who has benefited a great deal from the existing arrangements. But our tax system isn't just about benefiting the few. It ought to work for all Australians.
PARKER: Treasurer Scott Morrison says the vast majority of Australians who use negative gearing are middle-income earners.
LEIGH: Scott has been repeating falsehoods right through this campaign. And this is one which the ABC FactCheck unit has referred to as a Zombie Fact. The Liberals keep on dredging it up time after time. What he is doing is saying after you've taken off the tax concessions, then your income goes down towards the middle-income range. But the fact is that we know that half the benefits of negative gearing and the Capital Gains Tax discount go to just the top 10 per cent of Australians. We know that people in occupations like anaesthetists and surgeons are many times more likely to negatively gear than people like teachers and police officers.
PARKER: Sure. So you know that and the ABC Fact Check unit knows that but I guess in terms of perceptions of the policy rather than the policy itself, has Labor explained it well enough for people to support it? For middle-income earners not to be scared by it?
LEIGH: Fiona, it's one of the great things about being able to have a conversation like this that's in paragraphs rather than just trading insults. We've been out there in community forums talking about the benefits of making changes to negative gearing. Here in Bendigo, Lisa Chesters has been a strong champion of first-home buyers, making sure that they're able to get that foothold in the housing market.
We've got organisations like the Australian Council of Social Services calling for reform because they see how hard it is for young Australians to feel as though something that has just been normal for their parents and grandparents - going out and buying their own home - is now being denied to them. And when a generation of young Australians feel that they're not being treated like their parents and grandparents were, no wonder they get a bit angry.
PARKER: So Labor would save money with these negative gearing changes, but Labor is announcing today it's going to lift the freeze on Medicare rebates. That's going to cost the budget $12 billion over a decade. Is that sensible?
LEIGH: The Medicare rebate has been frozen for too long and as you and your listeners well know Fiona, it's increasingly meaning that people are paying more and more out of pocket when they go to visit the GP. The Liberals reckon that what ought to determine whether you get into the GP is your credit card. We believe it should be your Medicare card. We believe that it's important to put money into primary healthcare, because frankly the more people that are able to get in and see GPs, the less likely they are to go to hospitals, and the hospitals are the really expensive part of the healthcare system.
PARKER: But should a potential Labor government spend $12 billion over 10 years to lift this freeze on Medicare rebates?
LEIGH: Put another way, Fiona, should we make it harder and harder for people to get to the doctor? That's the alternative we face here. We've got a Liberal government that has tried to put in a GP tax, and now has a GP tax by stealth, which some experts estimate could cost an additional $20 every time you go to the doctor. Labor will always stand on the side of Medicare.
PARKER: But could this be seen as another big spending promise?
LEIGH: It's important that we invest in our healthcare system. If you don't put the money into primary prevention, then people's illnesses get into all kinds of strife. Think of somebody who has got diabetes. If their diabetes management plan isn't looked after, then they find themselves in a hospital bed, and that is costing hundreds of dollars a day for somebody with serious illness. So we do need to make sure that Aussies are getting the check-ups that we know people need. We need to make sure that the Medicare system, which Labor championed, which Labor has defended, continues to work for all Australians.
PARKER: But it was the Labor government back in 2013 that froze the indexation of the Medicare rebate in the first place.
LEIGH: Well it was frozen temporarily at that period, but now it has gone into the deep freeze over the last three years. We believe it is important that the Medicare rebate does increase, alongside other prices in the economy.
PARKER: Does Labor regret freezing it in the first place then, if we have seen a Coalition government keep it and deep freeze it, as you say? Was it a mistake to do that in the first place?
LEIGH: Well it was a period of months there, it has been a period of years now. People are really starting to feel the pinch. GPs are unavoidably having to put in these co-payments. It is getting harder and harder to see a bulk-billing doctor than ever before. Labor believes that one of the great things about our system is that it keeps people healthy. There is what economists call a 'public good' aspect to this. When you go to the GP and make sure that your sickness is looked after, you are less likely to infect me the next day. So we are healthier, more productive, and happier as a result of being able to get in to see the GP when we need to.
PARKER: Shadow Assistant Treasurer Andrew Leigh is with us, if you are just tuning in here on ABC Central Victoria. Andrew Leigh is in Bendigo today - he will be speaking at a forum on negative gearing, which is taking place later on this morning. It is a free event at the La Trobe Visual Arts Centre from 8:45am for a 9:00am start. Andrew Leigh, just before you go, I can't help but note you were on the panel on Q&A last Monday night, when the infamous question came from low-income earner Duncan Storrar about the government's budget decision on income tax cuts. I don't really want to go into that policy area, but I am just wondering - you were there, you were on live television, listening to this question, hearing the answers from the panel. At that moment, did you have any inkling that it would become as big as it did within the media, and have such resonance?
LEIGH: Well I did have a little hint of it I guess, Fiona, from how crisply Duncan put the critique of the budget. Duncan has been personally attacked in the media over recent days, his personal background has been brought up. But the fact was he articulated what so many Australians have been saying. That Malcolm Turnbull wants to give a tax cut to people earning over $180,000, nine-tenths of which will go to the richest 1 per cent of Australians. And then at the same time, if you are a mum with a couple of teenage kids earning an average wage, Malcolm Turnbull wants to take $4,700 away from you. I don’t think that is fair. Lisa Chesters, the Member for Bendigo, does not think that is fair and certainly Duncan didn’t think it was fair when he asked his question.
PARKER: Sure, he asked this question and often there is a question asked on Q&A once in a while it goes big and remains in the media for days. Was there a feeling that evening, you were sitting there on television so I guess you couldn’t check your phone to see what was happening on twitter at the time…
LEIGH: "Phone a friend" turns out to be frowned on at Q&A!
PARKER: That’s right. Did you have an inkling that it was going to go big?
LEIGH: Something of it, yes. But I didn't think that people would dredge up his past. I think it is appropriate to be able to walk into a forum like Q&A and ask a question without your past being trawled through.
PARKER: And finally, how are your pecuniary interests going? I think I’ve used the right word there. Have you discovered any $2.3 million properties in your portfolio lately that you’ve forgotten to declare?
LEIGH: I have not.
PARKER: Are you sure? You can declare them now.
LEIGH: That’s very kind of you, I appreciate it! No, I’m pretty confident of that.
PARKER: Thanks for joining us this morning.
LEIGH: Thanks Fiona.