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Thursday, 16 October 2008
Page: 9452

Mr TUCKEY (11:05 AM) —The National Rental Affordability Scheme Bill 2008 and related bill are important bills, legislation that, with some quite clear concerns, the opposition is prepared to support. Quite clearly, those concerns have been listed in the Hansard by the member for Cook, and I will not waste the time of this place in repeating them, but I must add that I endorse them entirely because they are sensible and they raise issues that I think have been overlooked by the government, particularly in the administration of this proposal. I note that in the second reading speech the Minister for Housing says:

We may need to make improvements to the scheme before it is expanded.

Of course, maybe some of those improvements need to be applied before the scheme is commenced. Notwithstanding that, we are also advised that the timetable that the government has set for itself is primarily being maintained.

Fundamentally, it is a proposal to provide a $6,000 per annum tax offset or grant—in the case of the grant, to non-profit organisations. I note this, although it is not very clear. I quote from the second reading speech:

Unless a participant is an endorsed charitable institution, the incentive is to be made available in the form of the refundable tax offset.

If the business has made no money—and I note the present circumstances—it appears it gets no help. Maybe that tax offset is in fact a rebate, where the ATO can send that person a cheque by that means of delivery, but that is unclear to me. I thought, coming to this debate, that an investor, not being a not-for-profit institution, could receive $6,000 cash a year to assist them in providing rental, as it will be at a suggested 20 per cent below the market at any point in time. That in itself also raises some difficulties I would like to draw to the attention of the House.

The reality is that, in administrative terms, if the cash is not available for someone or some industry that has, for instance, negatively geared the arrangement—in other words, borrowed money, as is frequently the case in rental matters—then I think we should be told whether that tax offset can occur as a rebate; in other words, the ATO sends a cheque notwithstanding. It is easy to assume that everyone will make a taxable profit.

Furthermore, I am not able to clarify in my mind whether local government is seen as a not-for-profit institution. I draw the attention of the chamber to the fact that throughout my electorate the great shortage of rental accommodation is for public servants. Some might shrug and say, ‘That’s somebody else’s fault.’ Well, we have abandoned the blame game, and local government in my electorate—I think particularly of the town of Tammin—is desperate to get some quality housing so it can actually get schoolteachers, policemen and other such officers to attend in their town.

The tenant eligibility criteria table indicates that a single person, typically the young graduate schoolteacher who comes to rural electorates on their first posting, has an annual income limit of $39,351 and an upper income limit—and I do not know how that differential is calculated—of $48,189. But one of the first actions of the newly elected Liberal state government in WA has been to increase the first-year salary of a schoolteacher to $50,000, so they will not be able to get subsidised rental accommodation in a rural area where, of course, unlike in the cities, other accommodation is simply not available.

Someone might want to tell us how that is going to be resolved and whether there is an inadequacy in all of this. This particular table does, of course, give instruction and advice as to what low- and middle-income earners happen to be. I would say that, more particularly in cities like Sydney, people on those limits as provided to us would be very low income earners in a relative sense. That raises this question: is a fixed amount of $6,000 applicable from state to state, from city to city, considering the huge differential in building costs?

Might I add that Australia’s biggest public housing home builder, BGC, resides in Western Australia. BGC was so hated by the previous state government because the proprietor took the view that you could choose whether or not to join the union, and yet the business was vertically integrated and was providing public housing of acceptable quality cheaper than anybody else. The previous state government created a provision that no tenderer in WA could have more than $5 million worth of work on at any one time, just to get this bloke. Their own agency manager went berserk. The builder had to take them to court for the right to continue to provide more houses for the dollar. Can you imagine that circumstances—a state government reducing the number of houses that could be constructed, primarily from Commonwealth funding, so they could try to force a particular builder to make everyone join the union even though most of his people would earn about double what they would ever get if they were on any form of award structure because they are subcontractors. As I said, the business was vertically integrated. The builder won the court case and the minister involved then had to resign, but he came back through the back door later on and resumed his job as a minister until they lost government recently.

So eligibility is a serious matter, and I think that the eligibility criteria that identify people in that category will be found to be too low. But then we also discover that the states are going to make a contribution of $2,000. They will rip out somewhere between $100,000 and $150,000 in upfront charges and costs for the development of land. And, remember, this has to be new properties; you cannot subdivide a large old-fashioned house and make two duplexes out it, so you have to go out there and develop building blocks where the state governments, through their decrepit planning arrangements, cause you to achieve very substantial interest charges after purchasing the lot and getting to the point where it is actually delivered. They have headwork charges and all sorts of other costs that, as I said, add somewhere between $100,000 and $150,000; then they will be the eventual recipients of the GST on the property and will give back 2,000 bucks—excuse me! The reality is—and I hope I have a few moments to speak further on headwork charges and all these other matters, and possibly better alternatives—that the states should have been obliged to match the Commonwealth. Furthermore, by any measure, a contribution on their behalf of around $50,000 might have been sincerely altruistic.

They have made an art form of pushing up the cost of land, and everybody knows, from a substantial series of surveys, that the cost of building a house has in real terms been reasonably stable. Yes, some people have increased that cost by wanting three bathrooms and things of that nature—bigger houses—but the actual construction cost has substantially stayed where it was in real terms. This blow-out in costs that is putting people under mortgage stress—it was never interest rates; they used to be 13 and 14 per cent for housing under the Hawke government—has been driven by the avariciousness of state Labor governments in ripping money out of residential land development. That, I think, is something that the government should address, because it was the Howard government that gave the states the GST for the purpose of addressing their own responsibilities. All they have done is to employ more and more people. There were an additional 5,000 public servants in Western Australia in the last year of the Carpenter government. And what was their job? To tell people what they cannot do. I cannot find anybody in the Public Service today at state level who ever gives people the incentive to get out or the encouragement to do something. You, Mr Deputy Speaker Secker, might note how that has occurred in the rural sector. We used to have a department for agriculture; now it is the very department that goes around like a copper trying to fine farmers for clearing a bit of land or something of that nature.

There is a further concern when it comes to this admission by the government that we may need to make improvements to the scheme before it is expanded. I moved to the town of Carnarvon in 1958 and there was, because of the nature of the territory—it was a flood-prone little town stuck on the only remaining bit of sandhill, which was 11-foot above sea level—a block of very old houses that were privately owned and thereafter every new house was built by the then state housing authority. So everybody occupied them—business people, all sorts of people. But people got these houses—and I have seen it elsewhere—when their income was below the figures that have been quoted in this legislation. So, when someone on $30,000 a year gets one of these houses and then mum goes to work and they are over the limit, do you kick them out? Do you tell the private owner that they are no longer entitled to their $6,000 incentive? Do you tell one of the church bodies to go there and kick these people out? I can find nothing that addresses that issue. How long are people allowed to stay in subsidised housing if, as we hope for everybody, their income increases by one means or another? What are you going to do about it? I hope the following speaker says we have all this under control, because I have seen it in public housing. I have seen how difficult it is. Those people are typically very good tenants. They pay their rent on time and they do everything right, but they should have gone out and bought their own home, because their circumstances have improved or, in some cases, they were given housing because no other housing was available. In fact, in that town of Carnarvon, I as the Shire President and others intervened and built levee banks and things and developed 500 blocks of land as a council so that people could own their own house, and of course that is the ultimate ambition of most Australians.

These are issues of concern that are not sufficient to cause me to oppose the legislation but do raise very big ifs in terms of the administration. In fact, to refer to a personal experience, I made a note on this many years ago. I was in business—I had a profitable business—when Malcolm Fraser brought in the investment allowance just prior to my buying two brand spanking new road trains. When I say ‘buy’, I mean that I bought them under lease finance. I outlaid upfront $2,000 for each of these vehicles. They were to operate north of the 26 parallel, and I got a $40,000 tax cut for both of them. On paper that made me a pauper and my son became eligible for the then university study allowance. I had outlaid $4,000 and got an $80,000 tax cut. How does that work? Are you poor if you paid no tax? How is that going to work? These are the issues. Maybe I am doing the government a favour. They can go back and rewrite the rules before this program moves too far.

There are many sorts of tests that you apply in these matters. I have made the point that I hope that local government, particularly rural local government, will be treated as not-for-profit organisations and be involved. I think we are going to have great difficulty, with the returns that are suggested, getting substantial commitments from the private sector. I, of course, would not discourage that and I hope it occurs.

In closing, having made those remarks—and I support all the amendments that are proposed by the member for Cook—I want to make the point that I believe we are barking up the wrong tree in attempting this. The first responsibility is to get the price of land down. Then many other problems would disappear. Typically in the past, state governments saw it as their responsibility to provide services. Today they want to apply taxes even to the roads they have not built and may never build. As I said, it has become an art form—and that should be changed.

I think the Commonwealth, as a pilot scheme, should take one of the large areas of land it owns—Defence or otherwise—and teach the states a lesson. They need to have an area of land sufficient for it to be self-supporting. It could generate its own electricity, including from the garbage collected. There would be included sufficient solar panels to meet the electricity need. Each block would have in its development costs a large underground rainwater tank et cetera. You could do everything. You could treat the sewage on site. I represent a small country town of 2,000 or 3,000 people and we have our own sewerage plant. You would tell the states to get lost.

Furthermore, and I believe it is financially possible, you would not sell the land—that is when the states rush in and get their stamp duty—but you would rent it. You would rent it on a weekly basis and at an opening price that is pretty attractive. You would issue a bankable document to say that the city works on leased property, although you would pay freehold prices for it upfront. People then would only have to find the cost of construction of a house in the first instance. You could give them an opportunity within that lease to pay market value for that land after 10 years, or whatever—at which stage of course the state governments would be in there with their stamp duty grab. But that is another issue.

It is a fact of life that you could create a facility within Australia to teach the states a lesson and you could run it along those lines. You could have private involvement and, of course, they would wait for their profit. It would be a great opportunity for superannuation companies, particularly the industry ones, who would be creating a lot of work for their members. These sorts of opportunities need more development than I could give you in the time available today, but I have done some of the figures. It is a really cheap house, because you do not burden the land with the state’s rip-off and, what is more, you do not oblige people to pay for it in the first instance and attract the stamp duty and other fees that go with it. You run it as Commonwealth property; that is why it needs to be leased, not sold. I think we should look further at some of these ideas, rather than the types of schemes that are promoted. I think the government will find this a very difficult scheme to administer.