Andrew Leigh

Unlocking the Australian dream of owning a home

One of the great things about an election campaign is the chance to chat with people all over the nation; from far north Queensland to Tasmania, from Perth to Melbourne. It’s a true privilege to be able to listen to the lived experiences of so many Australians.

One story that lodged in my mind was told at a town hall meeting in Maleny, in Queensland. It came from Tony, a burly tradesman, who stood up and told the room about his fear that none of his four children, now in their 20s, will ever be able to afford a home. Tony is worried that they won’t have a chance to share that part of the Australian dream.

Our nation faces significant challenges. Since the last election, living standards – as measured by real net national disposable income per person – have fallen by 4 per cent. Under the Liberals, net government debt has risen by more than $5,000 per person. Wage growth is at a 30-year low. The home ownership rate is at a 60-year low. Inequality is at a 75-year high. In the past generation, the top 1 per cent has doubled their share of income. And yet the Liberals want to deliver a tax cut to those earning over $180,000, 94 per cent of which will go to the top 1 per cent.

Nowhere is inequality more stark than in the housing market. When John Howard and Peter Costello halved the capital gains tax rate in 1999, they expected it would lead to a surge of investment in innovative companies. Instead, we saw a flood of investment in property speculation.

Back in the 1990s, the value of loans for first home owners exceeded the value of loans for investors. Today, investor loans are worth four times as much as first home owner loans.

The result was a massive divergence between house prices and wages. Previously, between 1970 and 1996, median house prices had grown at 0.8 per cent a year. But from 1995 to 2012, median house prices grew at an annual rate of 4.3 per cent.

According to the latest Australian Bureau of Statistics figures, house prices over the past twelve months grew at 9.7 per cent in Sydney, 9.8 percent in Melbourne, and 6.8 per cent nationally. I’m guessing Tony’s children aren’t getting wage rises that large. Last year, wage growth averaged just 2 per cent.

In defending negative gearing and the current capital gains tax arrangements, the Liberals are hurting young Australians, and those with low and middle incomes. Since the 1980s, the home ownership rates for 25-34 year olds has fallen from 62 per cent to 48 per cent. We risk becoming a nation unable to house our young.

The benefits of negative gearing and the capital gains tax discount go disproportionately to the most affluent. Half of all benefits go to the top 10 per cent of income earners. For example, surgeons are 100 times more likely to negatively gear than cleaners.

Decades ago, home ownership rates didn’t differ across the income spectrum. Today, low-income households are 15 per cent less likely to own their home.

Labor’s plan will “grandfather” negative gearing – allowing it to remain on investments made before 1 July 2017, but restricting negative gearing to new housing on and after that date.

The same goes for our changes to Capital Gains Tax. The existing treatment will remain for assets purchased prior to 1 July 2017, but assets bought on or after that date will receive a 25 per cent discount instead of 50 per cent. Existing capital gains tax arrangements for small businesses will remain in place.

The story of Tony’s children reminded me of why I am in politics: to help spread prosperity to everyone, not just the lucky few. Labor’s housing affordability policies will phase out tax breaks that benefit property speculators and drive up prices. We will raise living standards across the board, not just for the top 1 per cent.

If you want to live like a Liberal, vote Labor.

Andrew Leigh is the Shadow Assistant Treasurer and Fraser Labor MP.