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Tuesday, 4 November 2003
Page: 21913

Mrs GASH (2:21 PM) —My question is addressed to the Treasurer. Would the Treasurer inform the House of the effects of housing activity on rent levels? Is the Treasurer aware of any policies which would impact negatively on building activity and rent levels?

Mr COSTELLO (Treasurer) —I thank the honourable member for Gilmore for her question and acknowledge all of the work that she, as one of the most energetic members in the area and, indeed, in the parliament, does in that capacity. As the House would be aware, construction in housing has been very strong in the past year, with about 170,000 dwellings compared with an average of about 150,000 dwellings per year in the 1990s. Indeed, investor finance in the housing sector has risen quite considerably.

As I have said on a number of occasions, with the increase in house prices, people outside the market find that a difficulty, although people who own houses no doubt find that a source of accumulating wealth. I noticed today that, in light of these figures, ACOSS has claimed that tax law should be changed to discourage investor housing on the basis that investment in housing by investors was working against renters. I want to make it absolutely clear to the House that investor finance in housing does not work against renters; in fact, it works in favour of renters.

One can be critical of investment in housing by investors because of its effect on price, but one cannot be critical on the grounds of its effect on rents. One of the consequences of investment in housing is that rents have been falling in Australia. According to the CPI, they fell 0.7 per cent in real terms up to the September quarter of 2003 and over the past two years have fallen 1.6 per cent. TD Securities and the Melbourne Institute estimate that rents in Melbourne have fallen 11 per cent in the five months since May 2003. The point I want to underline is that that actually works in favour of renters.

We do have empirical evidence that making the taxation treatment of investor housing more onerous works against renters. It was tried in 1985. In the two years from June 1985 to June 1987, when the Keating government changed the taxation treatment of investor housing, rents across Australia rose by 37 per cent. During that period, the average rent for a three-bedroom house in Sydney rose by 57.5 per cent. So the one thing we know is that changing tax treatment to work against investor housing—whatever effect it has on house prices—most certainly works against renters.

We also know, of course, that the poorest people in the community tend to be renters. So I say to ACOSS that its proposal is not going to help renters—whatever other effects it might have. I notice, of course—and I have informed the House of this before—that it was in fact Labor policy, for 12 hours, to change the tax treatment in relation to investor housing, but sanity prevailed. The Leader of the Opposition repudiated the member for Werriwa on his second day in the job, after the member had raised that possibility on Lateline the night before.