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Transcript of doorstop interview: 4 November 2007: Labor's housing affordability policies; Howard give up fight on inflation; road funding; Kyoto; foreign aid.



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Labor's Housing Affordability Policies; Howard Gives Up Fight On Inflation; Road Funding; Kyoto; Foreign Aid Doorstop Interview - 4th November 2007

RUDD: Thanks everyone, I know everyone’s hot out there so we’ll hop straight into it. Mark Buttigieg our candidate for

Cook and Wayne Swan, Tanya Plibersek. I want to talk today about housing affordability and the challenges which working families face right across Australia.

It’s quite extraordinary today what Mr Howard had to say about interest rates and inflation. Before the last election, Mr Howard promised that interest rates would be kept at record lows. They have gone up five times since then and today he made the extraordinary claim that the policies of his Government had absolutely no responsibility or relationship with those rises. The other extraordinary thing which Mr Howard has said today is that he’s hauled up the white flag in the fight against inflation. He said, we’re now facing unavoidable inflationary pressures.

Working families are under real financial pressure. Mr Howard has said that working families have never been better off. Mr Costello said there is no housing affordability crisis. Can I just say, it shows how much both have lost touch with what’s going out there right across our country.

If you look at first home buyers in particular, we have a big challenge on our hands. The Housing Industry Association-Commonwealth Bank housing affordability index recently demonstrated that first homebuyers are now spending a record 31.7 percent of their family income on mortgage repayments. That’s 31.7

percent. We now have housing affordability for first home buyers at record lows. We now have figures which point to the fact that first homebuyers as a proportion of overall homebuyers is now going down and down and down. And a 25 percent reduction, in the number, relative to what it was as a proportion, relative to what it was only a few years ago. We have a real problem on our hands. And the overall figure which everyone has in mind is where we were in 1996 with average homes representing something like four times the average wage. Now, we’re looking at those house prices representing seven times the average wage.

For those reasons, there is a housing affordability crisis, particularly for first home buyers. We’ve already announced three major sets of housing affordability

Kevin Rudd

Tanya PlibersekWayne Swan

Mark Buttigieg

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policies, coming to a total of $1.1 billion. And they’ve all dealt with how we assist on the supply side of this equation. Boost the stock of rental accommodation, affordable levels. Boost the stock of housing in new housing developments which has available where we can actually negotiate a deal with developers to bring down infrastructure charges. And we’ve also released a policy about future Commonwealth land release.

Today, what I’m pleased to announce, is Labor’s First Home Saver Account policy. This first home saver account policy is designed to restore hope in the Australian dream. That young people can still aspire to the great Australian dream of home ownership. I’ve already gone through the figures that suggest that that

dream is getting harder and harder for young Australians to realise in their lifetime. So we want to make it that much easier. So what we’re proposing through our First Home Saver Account is an arrangement like this. We’re putting forward a policy of some $600 million. And we’re going to use this money as taxation receipts forgone in order to make it possible for people to save in a tax friendly environment to buy their first home. And that means we’ll have First Home Saver Accounts set up in a similar way to which superannuation accounts are set up. And that means that with a ceiling of $10,000 contributions per year, that we believe that over a four year period - which is the time over which we would allow people to start withdrawing funds for the purposes of buying a home - they’re going to be able to attract significant tax advantages from doing that.

How would it work in detail, a few points on that.

In that $10,000 threshold it means that $5,000 of that amount of course will be taxed when it goes into the home saver account at the same rate as you are currently taxed for contributions going into a superannuation account, that’s fifteen percent. It also means that on top of that $5,000 you could put in another $5,000 of after tax income. And when at the end of the day the interest earnings start to accumulate, it also means that you’ll be taxed on those at the same concessional rate that applies to interest earnings on superannuation funds.

This we believe is a good way forward. Because over time it means that young people saving for their first house are going to have a real tax benefit in putting that money together to make the great Australian dream possible. Can I just conclude on this. If you look at housing affordability - Mr Howard says that working families have never been better off, Mr Costello says there is no housing affordability crisis - and here we are more than half way through this election campaign and Labor has out four big policies on how to help Australians with the housing affordability crisis. Today I’m proud to announce our policy to assist first home buyers in particular.

We have a proposal also for a Housing Minister. How could Mr Howard be serious about dealing with the housing affordability crisis when he can’t even name a Minister or a department of state which is responsible for something so basic to people’s lives. Having said that, I’ll turn to Tanya to add, and then we’ll take any questions.

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PLIBERSEK: Thanks, Kevin. The key to this First Home Saver Account is that people will be able to save a lot more than if they were simply putting this money into an ordinary savings account. To use the example of two people on the average income. If they save about 10 percent of their wage, the tax treatment of this account means that after five years they’ll have about $55,000 saved, and that’s about 34 percent more than if they just have this in an ordinary account. So that can be a really substantial deposit on a new home.

That’s very important for a few reasons. We believe it’s very important to support a savings culture in Australia. We know that Australians today are saving less than they ever have in the past. We believe that this measure will encourage Australians to save an extra $3 billion over three years. That’s very important for the national economy. But it’s also very important for the family budget. What we’re hearing more and more these days are that people are borrowing 95 percent, 100 percent - even 105 percent - of the value of the home they’re buying. So if anything changes, if one person has to drop back to part time work, if someone loses their job, if a baby comes along unexpectedly, or if interest rates change, they are in serious trouble. And we’re seeing that mortgage defaults have gone through the roof. In fact, they have doubled in recent years. So, borrowing a smaller proportion of the value of the home is very important for people’s future financial security.

We also want to emphasise that we don’t think this policy or any policy is the silver bullet for housing affordability. We believe that we have to have a range of measures, and this goes along with the First Home Owner Grant that is already in existence - we will keep that - it also goes along with our National Rental

Affordability Scheme which will drop rents on 50,000 properties, new properties that are going to be build using this tax credit. It goes along with our Housing Affordability Fund which can save up to 20,000 on the value of a new home. And it goes along with our policy to release surplus Commonwealth land for new housing. We believe that all of these things together will make a difference to housing affordability in Australia.

RUDD: And just before taking questions, and we’ll be having further to say about housing and housing affordability also between now and the election.

JOURNALIST: Over four or five years, won’t the price of housing go up?

RUDD: Well, as Tanya just said, there is no silver bullet in this. But we just want to get people into a savings culture early, saving with a tax friendly environment so that they have much more of a chance to enter the home ownership market and to get out of the rent trap. That’s where we see the real problem now, and there aren’t at present incentives in the taxation system to do that.

JOURNALIST: If people are struggling already to make ends meet though, do you expect that it is possible that they could save 10 percent of their income?

RUDD: Well, that’s why we designed a system whereby people can, for example, deposit a minimum of $1,000 a year. And they can obviously go up to a maximum

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of $10,000 a year. So we’re very mindful of people’s different income circumstances and what can be saved. And, therefore, we’ve set a minimum withdrawal point at four years. But of course, it could be much longer than that. For example, if you’re an 18 year old and you’re saving for a house, then why not get into the culture of putting some money away, and seeing it grow over time. I think that reflects a good positive signal to young people out there in terms of the hope and dream of home ownership.

JOURNALIST: Mr Rudd, have you announced this strategically because you anticipate an interest rate rise this week?

RUDD: We have worked on this policy for the better part of four or five months. If you attended our housing affordability summit in Canberra, you would have noticed that most of the measures that we are taking forward to the Australian people were canvassed in one way or another at that summit - in public forum or in private discussions. We brought the whole industry together.

Certainly our policy on affordable rental accommodation, $603 million, that came out of a very good session of that summit. Secondly, we put forward our policy on bringing down infrastructure charges on new developments, again out of new ideas that were canvassed at that summit. This also has its origin back there. We believe that when it comes to housing affordability, Labor has a positive message for working families. We’ve been putting in out there for months now. And Mr Howard’s response is - more than half way through this election campaign - through Mr Costello - who will replace him as Prime Minister, is there is no housing affordability crisis.

JOURNALIST: What do you say to claims that young people, first home buyers, want it all in the one go. They want all the mod-cons and (inaudible) if they want to afford property?

RUDD: Well everyone makes their own decisions and their own call in life. What I’m concerned about is the dropping number of first home buyers each year relative to the overall number of home purchases each year. The figure I gave you before is that’s come down some 25 percent over the last three years. That’s a direct reflection of the problems that we’ve got. And if you look at the housing affordability index put out by - not the Labor Party - the Commonwealth Bank and the Housing Industry Association, this says that for first home buyers we now have housing affordability at record lows.

So under Mr Howard’s and Mr Costello’s Government, housing affordability for first home buyers is at record lows. They have nothing by way of new policy until the eve of an election about this. We have concrete policies on the ground now.

JOURNALIST: Mr Rudd, what happens if, say, after four years somebody changes their mind and wants to invest that money in shares? Will they have to pay back the tax concession?

RUDD: What we’ve got - and you’ll see this outlined in the policy there - are

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some flexible arrangements for down the track. If, for example, a person chooses not to purchase their first home by that means, then they can of course roll that amount into a superannuation fund. If they want to withdraw it for other purposes, for consumption purposes, then they would at that point, as the document indicates, lose the tax advantages.

JOURNALIST: How many people do you anticipate will set up one of these accounts?

RUDD: Well, we’ve done a fair bit of modelling around this based on some schemes which operate around the world. We’ve also looked at the way in which co-contribution systems currently work for the superannuation industry within Australia. And therefore we believe there will be a very significant take-up of this. If you look at some of the numbers, I’m advised that currently in Australia we have about 150,000 first home buyers entering the market each year. That number is going down. That represents some 220,000 individual income earners. Put that out over two or three years, and you’re looking at about 600,000-plus.

We’re anticipating something in the order of about an 80 per cent take-up, around that figure. And, of course if we widened the net in terms of those eligible who are not out there buying their first home at the moment, it would still represent a significant take-up rate. So we have been very mindful of international experience in putting together the cautious costings.

JOURNALIST: Mr Rudd, this morning John Howard …

RUDD: I’ll do this one and get back to you.

JOURNALIST: I was going to ask the same question, but is John Howard, do you believe, softening up the electorate for an interest rate rise this week through his changed rhetoric?

RUDD: Well, what I am stunned by with Mr Howard today is him hauling up the white flag in the fight against inflation, by saying it’s unavoidable. And what I’m stunned by today is Mr Howard owning no responsibility for his Government’s policy over the last several years when it comes to the five interest rate rises that we’ve seen. We’ve had Mr Howard saying in response to a question, “So, no policy miscalculations at all?”, Mr Howard says, “No, no, no.” Three years ago, Mr

Howard said he would keep interest rates at a record low, and today he says he has no responsibility whatsoever. I find that a remarkable [inaudible].

SWAN: I just wanted to add a couple of things to that. Mr Howard this morning said he had no responsibility for inflationary pressures in the Australian economy; it was all the fault of somebody else. Now, the truth is Mr Howard has refused to take seriously repeated Reserve Bank warnings about skill shortages in the Australian economy and the consequences of infrastructure bottlenecks. Those are the factors that have put upward pressure on inflation and upward pressure on inflation rates, and he cannot escape responsibility for that fact.

He did make an irresponsible promise at the last election to keep interest rates at

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record lows, and five interest rate rises later, he now seeks to say that he bears no responsibility for inflationary pressures in the Australian economy. It has been his inaction and his complacency when it comes to skills and infrastructure that has put upward pressure on inflation and upward pressure on interest rates, and he ought to accept some responsibility for that.

JOURNALIST: This morning John Howard raised an interview with Charles Woolley that puts Peter Garrett in the spotlight again, and said that he’s been saying things that he shouldn’t have said in relation to Labor’s promises. Are you concerned about that?

RUDD: Well, Mr Howard is showing signs of being increasingly desperate. I’ve said for a long time Mr Howard has lost touch with working families. I’ve said for a long time that Mr Howard is lost in the past, no plan for the future. What I see more and more is Mr Howard becoming politically desperate after 11 years in office and, on the eve of an election, prepared to say anything and do anything. And the desperation reflected this morning, talking about reports of reports of reports. I mean, let’s get real here.

We have a plan for the country’s future, it’s a positive plan, and one of the core pillars of that plan is what we’ve put out for housing affordability. Now we’ve got $1.7 billion worth of policy on this out there. Can I just say, where is Mr Howard on housing affordability? Or are we going to have the usual - 5 minutes to midnight in the Liberal Party election campaign launch, something, you know, out of the hat, having ignored the problem for a long, long time.

JOURNALIST: Mr Rudd, you said you were not going to make any comments with regard to keeping interest, or having interest rates at record lows. What is your commitment to the public on rates?

RUDD: My commitment to the Australian people is to do everything we can through the budget policy and through skills policy and infrastructure policy to maintain maximum downward pressure on inflation and, through that, maximum downward pressure on interest rates. That is the responsible undertaking to the Australian people. The irresponsible, untruthful undertaking to the Australian people was that given by Mr Howard three years ago when he looked down the barrel and said he would keep interest rates at record lows. They’ve gone up five times since then and if you’re a first home buyer out there, guess what that’s cost you? An extra $200 a month, $2,400 a year. That’s on a mortgage of about $242,000 for a first home buyer. First home buyers are paying through the teeth for Mr Howard’s broken promises on interest rates.

JOURNALIST: Is the Coalition’s tactic of trying to outspend you on the Ipswich motorway going to work?

RUDD: I was pretty interested about all that, because I am advised - I mean, what stuns me about this package today is that, after 11 years in office, we had this sort of razzamatazz announcement about roads here and roads there. And of this $10 billion, I am advised that $4.1 billion has been previously announced. I

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am also advised that $3.1 billion replicates announcements already made by us. But the one which I think really takes the cake is the upgrade of the Ipswich motorway - $1.1 billion. And in terms of high levels of policy consistency on the part of Mr Howard, I asked him this question earlier this year in the Parliament about committing to the full upgrade of the Ipswich motorway, and he said the commitment the Government has made is an amount of $2.3 billion. And, of course, that’s in relation to the other alternative, which was the Goodna bypass.

He says, “The reason we do not support the upgrade of the Ipswich motorway is that there is clear evidence that as soon as that upgrade was completed it would be necessary to invest in a further expansion because of the enormous amount of traffic.”

He goes on to say, elsewhere in March, he says that upgrading the Ipswich motorway is a short-term option, but won’t provide a long-term solution to traffic problems in that part of southeast Queensland. So here we had six months ago Mr Howard saying this is the absolutely wrong investment to make in roads in southeast Queensland. On the eve of an election, Mr Howard back flips to the tune of $1.1 billion, on top of the $2.3 billion he’s putting into the Goodna bypass, and he expects us to believe that his roads policy is credible. Give us a break.

JOURNALIST: Is Mr Garrett a repeat offender, though, by saying multiple times that your policy will change after the election?

RUDD: I think the great thing, as I said earlier today, about Pete is his deep commitment to action on climate change, up against a Government which for 11 years has been inactive on climate change. Remember, we had recently, revealed in the nation’s newspapers, that the previous Environment Minister had written to the Prime Minister and others - oh, no, to the Treasurer and others, a couple of years ago saying Australia must increase the renewable energy target. Nothing was done. Nothing was done on Kyoto. Nothing was done on lifting the carbon target, either.

JOURNALIST: Mr Rudd, you said you would keep the first home owners grant with this policy, but will you commit to maintaining the same amount in that grant?

RUDD: Well, I’ll turn to Tanya on this.

PLIBERSEK: Certainly. We’ve always said that housing affordability is going to require a range of responses, and we will certainly commit to keeping the first home owners grant as it is now, in its current form. The advantage of our policy is that when people go to buy their first homes, they’ll have a much more substantial deposit, they’ll be borrowing less. Presumably they won’t have to pay mortgage insurance, which is an additional cost if people are borrowing 90, 100 per cent of the cost of their home. So they’ll find their place, they’ll have a substantial deposit. On top of that, they’ll get their first home owners grant.

SWAN: Could I just say one more thing about this policy, because it is very significant. This policy is about encouraging a savings culture in Australia. And there are two very big investment decisions that all Australian families make. One

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is their super. And the other one is to buy a home - and to give those first home owners some tax preferment here is an historic decision, a very historic decision. It is part of that great reform process that this country has been through, where we decided to encourage people and to get them into saving for their retirement. And many people now are benefiting from that long-term policy. This is a long-term policy which is going to put in place encouragement for people to save from an early age.

JOURNALIST: Just on foreign aid, again. Is it useful calling on the Government to match your foreign aid commitments?

RUDD: We have a long-term plan for Australia’s future, and part of that is a long-term plan for stability in our immediate region, the southwest Pacific. If you travel around the southwest Pacific, anywhere from East Timor through PNG, down through the Solomons and elsewhere into Fiji, we have major problems with the state of basic economic infrastructure, basic social outlays in education and health.

What is the long-term cost to Australia of not acting? If we fail to act in our region to build the economic and social fabric, and rebuild it of our neighbours - guess what? We run the grave risk that we will pay a huge price downturns through military interventions, which are massively expensive, as well as the possibility of long-term refugee outflow as well. That is the basis for my clear-cut commitment that, if Labor is elected, by 2015 we will increase our overseas development assistance to 0.5. [of GNI]

We believe that is the right way to go, and my challenge to Mr Howard is to think of the long-term national interest - not just his short-term political interest leading in to the election - and to commit to that 0.5 target. So many in Australia want to see that happen. The churches want to see that happen. Aid organisations want to see that happen. People out there right across the community and the region need to see that happen. It’s in our national self-interest for that to happen as well.

I’ve got to go.

JOURNALIST: Does Mr Garrett still have your confidence?

RUDD: Absolutely.

Authorised by Tim Gartrell, 161 London Circuit, Canberra City, ACT 2600

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