CNBC SQUAWK BOX
WEDNESDAY, 10 MAY 2017
SUBJECT/S: 2017 Federal Budget.
MATT TAYLOR: Andrew Leigh, thank you very much for chatting with us. What did you make of the budget that was revealed last night? By some it has been called a Labor lite budget, is that how you see the budget?
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: I think if you're assessing any budget you need to do it based on the challenges that Australia faces. We've got rising inequality, declining home ownership and sluggish productivity. My worry is that the budget has a huge tax hand out for millionaires, some $16,400. But the budget doesn't do anything to improve housing affordability by tackling negative gearing and capital gains tax discount which have acted together to blow up the housing market and drive home ownership to it's lowest level in 60 years. We don't have the infrastructure spend on things like the National Broadband Network or the education spend that we need in order to build prosperity for the future.
TAYLOR: Okay let's deal with infrastructure first because it's about $75 billion over a ten year period for essential infrastructure. For rail lines, for another airport in the Sydney basin, surely this is a step in the right direction, though?
LEIGH: The figure you just quoted there, Matt includes Labor spending in our last budget. They packaged up an awful lot of things but when you look at the largest on-budget infrastructure spend it's the Far North Collector Road in Nowra. They are making big claims on infrastructure but not delivering what Australia needs in terms of more rigorous cost benefit analysis and a National Broadband Network that delivers fibre right to the premises rather than stopping in the box on the street. We've fallen well down the broadband rankings since this Coalition Government came to office. That's a drag on productivity as well as being just frustrating as households sit there buffering.
TAYLOR: Yeah, talk to us about the housing plan. We did get some measures out towards easing affordability you said that the Government needs to go further. They're probably not going to touch negative gearing and they've been quite vocal about that but what other measures would have you liked to have seen in the budget and what's your side of the aisle proposing seeing as there will be an election in two years about how you would handle housing affordability in places like Sydney and Melbourne if you were elected?
LEIGH: Well it's worth your viewers understanding the unusual nature of our housing tax concessions. Australia has got a 50 per cent capital gains tax discount, on top of that it has got negative gearing so you can deduct against wage earnings your investment losses. That means the typical landlord in Australia makes a loss. It wasn't true in the 1990s but with these two policies together most Australian landlords now make recurrent losses in the hope of a future capital gain. People are willing to do that to reduce their tax bill. In the process, investors are crowding out first home buyers across the nation. We should be a nation where young families can buy a home of their own and raise a family. Yet some couples tell me they have to make a choice: they're worried that if one of them wants to take a bit of time out of the labour market to raise a family they won't be able to buy into the market. A market where last year house prices rose 10 times as fast in Melbourne and Sydney as wages did.
TAYLOR: Okay let's talk about tax which is one of your specialities, we know the Government is cracking down on multinational tax avoidance but you've said the measures that we announced last night are merely cosmetic, what do you mean by that?
LEIGH: Well they're more Revlon than revolution. The Government talk a lot about multinational tax, but when you look at the numbers they say their budget estimates are 'unquantifiable'. By contrast, Labor leader Bill Shorten last week announced that a $5.4 billion multinational tax package which would close debt deduction loopholes. We've seen Labor's laws being used to secure a judgement against Chevron in the debt deduction case. That was based on amendments which the Liberals and Nationals voted against. They talk a big game on multinational tax, clearly their focus groups tell them it's a concern to the community. But when you look at the hard numbers they're just not willing to close the loopholes.
TAYLOR: Okay just finally on the banks, you obviously welcome the levy that has been imposed on the five biggest banks in the nation?
LEIGH: We will be supporting it, but we note the fact that when Chris Bowen as Labor Treasurer announced a measure which raises a tenth as much, with the revenue dedicated to a financial stability fund, the Coalition were claiming that this would be the end of western civilisation. So yes, we'll support the measure.
TAYLOR: Andrew Leigh, thank you very much.
LEIGH: Thanks, Matt.