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Wednesday, 28 February 2018
Page: 2297


Mr BOWEN (McMahon) (16:17): These bills give effect to the government's announcement in their 2017-18 budget of the establishment of the National Housing Finance and Investment Corporation. The corporation would operate an affordable housing bond aggregator and administer the National Housing Infrastructure Facility. The bond aggregator is intended to bring together the lending requirements of multiple community housing providers and finance those requirements by issuing bonds to institutional investors. Let me make it clear that the Labor Party supports the bond aggregator. In fact, this announcement came after Labor's housing affordability announcement in April last year, in which we announced that we would establish the bond aggregator to increase investment in affordable housing. So we are very glad that this idea has been taken up by the government. We welcome it and support it.

We announced that the bond aggregator would help community housing providers access cheaper finance for new affordable rental housing. The housing bond aggregator would directly source cumulative funds from wholesale markets on behalf of community housing providers by issuing bonds to private investors. Funds raised by bonds issued could then be loaned to providers. The National Housing Infrastructure Facility is intended to provide financial assistance of up to $1 billion in the form of concessional loans, grants and other financial instruments. The facility comprises $600 million for concessional loans, $225 million in equity investment and $175 million in grants.

The bill sets out the corporation's functions, which are, primarily: to make loans, investments and grants to improve, directly or indirectly, housing outcomes; to determine terms and conditions for these loans, investments and grants; and to provide to registered community housing providers business advisory services and other assistance in capacity building. The bills state that the Treasurer may give the board of the corporation directions about the performance of the NHFIC's functions, which constitute the investment mandate. The investment mandate may include directions about the strategies and policies to be followed for the corporation to function effectively; decision-making criteria for making loans, investments and grants; granting financial assistance to the states and territories; providing services and assistance to community housing providers; and risks and returns relating to the corporation's investments. The bill also establishes the corporation's board, whose members must have appropriate qualifications, skills and experience in one or more of the following fields: banking and finance; law; housing, including social or affordable housing; infrastructure planning and financing; local government; or public policy.

When the infrastructure facility was first announced last year, we did raise concerns that this was a $1 billion slush fund for the coalition. Treasury officials at Senate estimates said nothing had been set in stone and there would be flexibility in how the allocation of these funds would take place. Now we have received some degree of comfort from the investment mandate direction exposure draft, which suggests this is less likely to be the case. Concerns do remain over the extent to which the facility will actually contribute to increasing the housing stock, particularly affordable housing, as opposed to facilitating greenfield development of new private-market owner-occupied housing or new private-market investment or rental housing. We will suggest in the other place that there be a short Senate inquiry, which will in part go to this issue.

Given that we don't have any major issues with these bills, we won't be opposing them in this place. To be very clear, though, any housing affordability package or strategy which the government claims to have is simply a grab bag of ill-thought-out measures. Just last week the International Monetary Fund released the latest Article IV consultation with Australia. The Treasurer liked some of it, but he was not quick to point out a press release which said that the IMF had endorsed the Labor Party's policy, in effect, of changes to negative gearing and capital gains tax. The IMF surmises that the Commonwealth's housing tax settings favour leveraged housing investments in upswings that might encourage excess demand for housing—a point that we have been making for years. The Treasurer also failed millions of young Australians when it comes to adequately dealing with housing affordability. He has seen an Australian economy and housing market which is locking out young people from the housing market.

The IMF report expressly states:

On the investment side, the combination of high capital gains discount rates and unlimited negative gearing can encourage leveraged real estate investment in market upswings. While similar tax incentives are also present in other countries, they tend to be more limited …

This adds to the long list of bodies which have supported negative gearing or capital gains tax reforms. The IMF goes on to say that the capital gains tax discount on housing should be reduced and other tax incentives limited. It is a very clear position from the IMF. The other tax incentives are, of course, negative gearing, and our policy is, of course, to limit it to new housing only.

The IMF also adds that the government budget position is predicated on a rapid rebound of nominal growth at the time when the government's unfunded company tax cut will deliver a structural hit to revenue over the medium term. I also make the point, as I said before, that the IMF is one of a long list of organisations, experts and individuals who've called for negative gearing reform. This list includes, but is not limited to, the OECD, the Committee for Economic Development of Australia, the Grattan Institute, the Reserve Bank, former Reserve Bank governor Glenn Stevens and, indeed, former Treasurer Joe Hockey, who stood opposite during his farewell speech, before Labor had announced its policy, and called for exactly this policy to be introduced. The only people who don't seem to get it are the cabinet, who just simply refuse to deal with negative gearing, despite reports that the Prime Minister and Treasurer went to cabinet with a proposal to reform negative gearing—and they got rolled in the cabinet.

Any housing affordability package which doesn't include negative gearing reform is a damp squib, and it gives false hope for young people. We have the most generous property tax concessions in the world, and they should be reformed. You should not get more support from the taxpayer to buy your fifth, sixth or seventh home than you do to buy your first. It is warped. It provides warped incentives in the market. It distorts the market and provides an encouragement to overleverage. We have one of the highest household debt rates in the world—certainly in the OECD. If we wonder why that's the case, it's in part because we have the most generous property tax concessions in the world.

We provide more support to property investors through the tax system than any other country does, and that encourages leverage. It encourages people to buy more houses and to borrow more money for investment purposes, and that leads to the risk of financial instability. It leads to concerns that, should there be a change in the market, should there be a downturn, should there be an increase in unemployment, should there be increases in interest rates of some substantial proportion, that would lead to instability, which is in part due to the very high household debt in Australia. So there are multiple reasons to reform negative gearing and there are multiple reasons to reform the capital gains tax discount.

We believe in budget repair which actually has a positive social outcome. The government believes in budget repair which does not deliver a positive social outcome—quite the contrary. They believe in cutting the age pension by changing indexation. They believe in scaling back support for families on low and middle incomes. They believe in all those things. But, where you have a proposal which would put first home buyers on a more level playing field, which would help with financial stability but which would provide a very strong return to the budget, particularly over the medium term, over the decade, the government reject it. They say: 'That's not good enough. It might improve the budget, it might improve housing affordability, it might actually deal with some elements of financial instability, but we don't like it.' That is because they are not prepared to take political risks.

We've got a Prime Minister and a Treasurer who lack ticker when it comes to reform. They will not do negative gearing reform, and they should. Instead, they search around for measures like this, which are not objectionable in and of themselves, like most of the measures the government embraces, but which simply don't add up to much. They are not a reform package. They are not changes which will see people on low and middle incomes find it easier, young people in particular, to get into the housing market. They are simply not. What they are is a grab bag of measures cobbled together as an attempt to look like the government's doing something. Remember our old friend the assistant minister who said in the lead-up to the budget that the housing package reform would be amazing in its scope, breathtaking in its reform, unbelievable in its achievement? Expectations management was never his strong point. But this was the point he was making—he was suggesting that we would have a massive reform program. Of course, none of that happened. Instead we had the grab bag of measures, the minor matters involved in the budget, which amount to not very much at all. The Treasurer is casting around—

Mr Husic interjecting

Mr BOWEN: As my friend the member for Chifley reminds the House—and I'm in his debt for doing so—the government instead attempted a scare campaign on negative gearing, and said it would crash the housing market. The Minister for Home Affairs said it would crash the stock market. And all the time they were sitting on that Treasury advice which said, 'Actually, Treasurer, that's not true. That's not the case.' Treasury made it very clear in their briefing to the Treasurer that they weren't entirely opposed to Labor's package. They could see the strong points in Labor's package. They didn't see that it was going to crash the stock market.

Mr Husic: Any sledgehammers?

Mr BOWEN: They didn't see a sledgehammer. The Treasurer is very quick to trot out Treasury advice when it suits him. He's very quick to trot out advice which is actually from his own office when it suits him, but where he's got Treasury advice which contradicts him, he sits on it. Not only does he not release it; the government resists ferociously the FOI requirement and sits on it. It took two years to get that out of FOI. I give credit to the ABC for getting an FOI from the Treasury, eventually, released in January. The Treasurer still hasn't dealt with it, still hasn't provided commentary on it, still hasn't answered the questions about why he misled the Australian people, contrary to the advice he had. He knew what he was doing. He knew what he was saying was not true. Instead, he engaged in the scare campaign.

The Australian people can look at both sides of politics and say, 'Well, maybe we don't endorse every single policy element of the Australian Labor Party,' and they're entitled to make that judgement, 'but the Labor Party has a very comprehensive housing affordability plan and the Liberal and National parties do not.' They do not care about housing affordability. They believe in a scare campaign. Their believe that their priority is to scare people about the impact of Labor's policies. We believe our priority is to put first home buyers on a more level playing field. On that basis, we do not oppose this legislation in the House, but we call on the government to do so much more.

Debate adjourned.

Ordered that the resumption of the debate be made an order of the day for a later hour.