Matter of Public Importance Debate
Tuesday 1 March
*** CHECK AGAINST DELIVERY ***
I was holding a street stall recently when a young couple came up to chat about their troubles buying a first home. She was a teacher, he was a builder, and they were thinking about having a family but they were worried that they would not be able to meet the mortgage repayments when their two incomes went down to one. Despite being in their late 20s, this couple were looking at moving back in with their in-laws. Changing nappies and juggling sleepless nights under the same roof as their in-laws was not their idea of the Australian dream. But their story is, sadly, typical.
Since the early 1980s the share of 25-34 year olds who own their own home has fallen from about 60 per cent to about 30 per cent. It used to be the case that the top fifth were just as likely to own a home as the bottom fifth but now there is a 15 percentage point gap in home ownership rates between the top and the bottom. In the early 1980s the average home loan for a first home buyer was $81,000. Now, it is $308,000. Over just the last two years we have seen house prices in Australia go up 20 per cent and yet we have got the slowest wage growth in 18 years. As the young Canberra couple said to me, 'It's hard to afford a mortgage when the prices are going up so much faster than your income.'
Those opposite want to pull up the ladder of opportunity on young Australians. The gap in homeownership is another part of the growth in inequality that Australia has seen over the course of the last generation, where earnings have risen three times as fast for the top 10th as for the bottom 10th, and where the wealthiest three Australians now have as much wealth as the poorest one million Australians.
How did we get here? The Ralph review—commissioned by Peter Costello—recommended that we halve the capital gains tax rate on long-held assets and immediately after that we saw net rental income in Australia, which had been about a billion dollars a year until then, immediately go negative and stay negative. In fact, in one year net rental income in Australia was minus $10 billion. The Ralph review did not contemplate that halving the capital gains tax rate on long-held assets would hit real estate. It said it would spur investment in productive companies. But, in fact, that combination of the capitals gains tax discount and negative gearing acted to drive up house prices.
Those opposite would have you believe that negative gearing goes to those of the bottom of the distribution but those in the top 10th have claimed more than half of all negative gearing tax concessions in recent years. Average surgeons get 100 times the tax benefit of negative gearing as the average cleaner and 16 times the benefit of the average nurse.
Over the course of the last week we have had suggestions from the Prime Minister that Labor's policies would drive house prices down, and from the Assistant Treasurer that they would drive them up. Monday Malcolm said it would drive down inequality; Thursday Malcolm said it would drive up inequality.
Today we had the Minister for Social Services telling us that two-thirds of Australians negatively gear—a patently false claim. Right now we have 93 per cent of property investment going towards existing properties, not new ones. If this is a policy aimed at boosting housing supply, it has got a 93 per cent failure rate.
In 2001, when Peter Costello expanded the First Home Owner Grant for new homes, making it twice as large for new homes, Mr Costello said, 'This measure… will stimulate the building sector, including many small businesses.' But that idea that we ought to give more generous support to those buying new-built homes, seems to have been forgotten by those opposite, who will praise Peter Costello whenever it suits them but forget that he provided more assistance to new home buyers.
Before the election we were promised more jobs, more growth, more investment and less debt. But what we have got is rising unemployment, GDP downgraded, CAPEX tanking and debt up. We have got a Prime Minister who, over the last six months, is less agile and more Abbott; less genial and more Godwin. He has promised to change his party, but let's face it: they are changing him. Only a few bites of the onion and we will be back where we were in 2013.