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Wednesday, 28 February 2018
Page: 2337

Dr LEIGH (Fenner) (19:13): The Treasury Laws Amendment (National Housing and Homelessness Agreement) Bill 2017 seeks to legislate aspects of the proposed new National Housing and Homelessness Agreement, which was announced in the 2017 budget. It provides a total of $4.6 billion over three years from 2018-19. That is all to the good, but the way in which this bill has been managed is yet another example of the chaotic and dysfunctional way in which this government operates. Just when you thought it couldn't get any worse, it has a day like today. For such an important subject as a national agreement on housing and homelessness, you'd think this government could get it right. We are, after all, at a point at which the home ownership rate in Australia is at a 60-year low, a point at which, this Saturday, potential first home buyers will be beaten out by investors at auctions across the country. But, sadly, the government wasn't even able to get such an agreement as this right.

This bill was introduced in the House of Representatives way back on 25 October 2017. You would think, given it is the Commonwealth's enabling legislation to put in place a national agreement dealing with housing and homelessness, that the government would have had the agreement of the states and territories. But what happened after the legislation was introduced was a complete repudiation of the approach that Treasurer Morrison has taken—so much so that the state and territory treasurers decided to form their own body which doesn't include the Commonwealth Treasurer. That is how dysfunctional this government is. It has forced state and territory treasurers, Liberal and Labor, to get together with their own body, leaving out the federal Treasurer, Treasurer Morrison, because of the way in which they've been treated.

Part of the impetus for that new body was that state and territory leaders were upset that this government and this Treasurer brought to parliament a bill for a National Housing and Homelessness Agreement before the deal had state and territory approval. The bill was introduced on Wednesday, 25 October 2017, and treasurers and housing ministers at a state level were supposed to negotiate on the contents of the agreement and the contents of the bill a mere two days later. When they were asked about this at Senate estimates, the Commonwealth Treasury confirmed the states and territories were not consulted about whether the tied funding agreements would be legislated and they didn't receive the bill prior to its introduction into parliament. That's not how you negotiate in good faith with the states and territories on any piece of national reform, let alone an issue such as housing and homelessness, which, as every watcher of federalism knows, is an issue that crosses the state-Commonwealth divide.

Indeed, only days before committing this extraordinary gaffe, the Treasurer had been championing the Productivity Commission's recommendations on closer cooperation with the states and territories. Treasurer Morrison told CEDA on 24 October 2017:

The Commission is principally saying that as a Federation we need to work together better, to play nice, including on securing productivity gains.

I'm not sure what the Treasurer's definition of 'playing nice' is. I don't know what his notion of cooperative federalism is. But it certainly wasn't what the states and territories had dished up to them the following day. On 25 October a bill was introduced into this place to which the states and territories were supposed to agree two days later. It's just another in a long litany of stuff-ups and incompetence by the Abbott-Turnbull government.

This bill seeks to legislate certain aspects of the agreement and, as I've said, provides a total of $4.6 billion over three years from 2018-19. Of this funding, there is just over $1.4 billion a year for housing related purposes, which is provisioned from the ongoing funding in the budget for the National Affordable Housing Agreement. There's also $375 million over the forward estimates to fund ongoing homelessness services. This funding is indexed and intended to be matched dollar for dollar by states and territories. The matched funding requirement is sought to be legislated in this bill.

Naturally, in the time available to me, I can't go into every single detail of the bill, but there are a couple of features that I'd like to point out. There is a legislated requirement for receiving financial assistance that a state or territory must have a housing strategy that indicates the level of housing supply needed to respond to housing demand and outlines the reforms and initiatives that will be implemented to meet this need, and a homelessness strategy that addresses priority homelessness cohorts identified in the National Housing and Homelessness Agreement and includes reforms or initiatives that contribute to reduction in the incidence of homelessness. Other matters, if any, specified in the National Housing and Homelessness Agreement or bilateral agreements must also be part of these strategies.

The bill seeks to legislate a matched funding requirement. Financial assistance is to be provided to a state or territory on the basis that, for every dollar paid to the state or territory in relation to homelessness, that jurisdiction must also spend a dollar out of its own budget in relation to homelessness.

I would note in passing that this is quite a different approach to federalism to what the Abbott and Turnbull governments have pursued in the case of schools funding, where they employed a no-strings-attached approach, tearing up agreements which had been made by the former Rudd and Gillard governments, and required states and territories to contribute $1 for every $2 of Commonwealth funding they received. When it came to schools, the Abbott and Turnbull governments saw no need to require that states and territories made an additional contribution when the Commonwealth put in additional dollars. But that principle fell by the wayside when it came to homelessness. I will leave the government to explain why its approach to federalism differs on these two issues.

The bill also requires states and territories to provide to the Treasurer information relating to housing, homelessness and housing affordability matters as specified in the national agreement or a bilateral agreement in a manner or time ascertained in accordance with the main national agreement or a bilateral agreement. We on the Labor side of the House recognise there are issues and problems with the existing National Affordable Housing Agreement. Key benchmarks are not being met. Over a billion dollars a year is going out, and we recognise that a new approach is required. In April 2017, when Labor announced the next tranche of our housing affordability measures, we committed to work with the states and territories on a new agreement, including new performance and affordability measures. Based on revitalised Housing Supply Council information—the Housing Supply Council being a body abolished by the Abbott-Turnbull government, with its usual short-sightedness—Labor would work with the states to drive better outcomes in performance to achieve a real reduction in homelessness and housing disadvantage.

Labor also seeks to strengthen measures in the current agreement across the housing affordability spectrum, including planning reform, inclusionary zoning and accelerated release of state and territory government owned land for housing development. All of these areas of reform are crucial for lowering the cost and supply of new housing stock. So we do recognise that need for change, particularly around accountability and reporting.

The Senate inquiry also heard concerns that housing and homelessness funding would be at risk as a result of this bill. Stakeholders such as National Shelter, Homelessness Australia and Melbourne City Mission all outlined concerns. The states and territories, represented by Victoria, pointed to the risks of the conditionality provision in the bill allowing for subjective assessments of state and territory housing and homelessness strategies to potentially determine the provision of funding.

It is also notable that submissions to the inquiry stressed the importance of tax reform. Why wouldn't they? Across the political spectrum, there are many who realise the importance of reforming Australia's uniquely generous tax concessions provided to housing investors. We have seen such calls from Liberals such as Mike Baird, former Treasurer Joe Hockey in his outgoing speech to parliament and Jeff Kennett. We have seen it from think tanks, such as the Grattan Institute. We have seen it from the Reserve Bank of Australia. We have seen repeated calls from organisations that are tax experts, saying, 'If you want to improve housing affordability, if you want to help with balancing the budget, if you want to ensure financial stability, you need to reform negative gearing and the capital gains tax discount.'

As I noted earlier today, speaking on another bill dealing with tax and housing, the International Monetary Fund said in its latest article IV consultation with Australia:

On the investment side, the combination of high capital gains tax 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.

The IMF went on to say:

The capital gains discounts on housing should be reduced and other tax incentives limited.

Negative gearing and the capital gains tax discount haven't achieved their aim of boosting housing supply and encouraging the building of new houses. Their annual cost to the budget is over $10 billion. We have seen the capital gains tax discount subsidy growing rapidly. It is projected to double from $4.2 billion in 2013-14 to $8.6 billion by 2018-19. The cost of the capital gains tax discount is growing at eight per cent per annum over the forward estimates, a rate of growth which is more rapid than funding for research, universities, vocational education and schools.

These tax concessions have their origins in the 1999 introduction of the capital gains tax discount. Negative gearing was introduced during the Depression as a form of economic stimulus, but it is the interaction between negative-gearing and the 1999 capital gains tax discount. Prior to that, net rental income had been positive in some years and modestly negative in others. But, in the years immediately after, you can see the graph plunge into the red, as net rental income recorded by the Australian Taxation Office is consistently negative. In other words, landlords were consistently making a loss rather than a gain. That is not consistent with good investing principles. We should not be encouraging investors to put their money into assets which will lose them money on a recurrent basis in the hope of an upcoming capital gain. That is encouraging speculation. We also should not be encouraging investors to only put their money into housing. That is encouraging crowding into a single asset class, not the diversification that any sensible financial planner would recommend if someone came to them seeking investment advice.

We've seen the Henry tax review and the OECD noting that these tax concessions are skewed towards the most affluent taxpayers. On negative gearing, NATSEM estimates the top 20 per cent of income earners receive around half the negative-gearing benefits. The top tenth capture more benefits than the bottom 60 per cent. The only way one gets to the sort of calculus that suggests that negative gearing and the capital gains tax discount are actually great benefits for the poorest Australians is if one is to analyse the data based on taxable income—in other words, income after those tax concessions have been received. This has been referred to by one fact checker as a 'zombie fact', one that ministers such as the Minister for Revenue and Financial Services keep on repeatedly coming back with but that has simply been shown to be absolutely false. Economist Saul Eslake says:

… after the Howard Government's 1999 decision to tax capital gains at half the rate applicable to other income (instead of taxing inflation-adjusted capital gains at a taxpayer's full marginal rate), 'negative gearing' became a vehicle for permanently reducing, as well as deferring, personal tax liabilities.

Labor will support this bill and its passage through the House. Getting this right is an important piece of public policy, and it is unfortunate that the government has thoroughly stuffed it up. We hope that the government is able to negotiate successfully with the states and territories to ensure that this agreement, the funding it provides and the outcomes that are sought are all successfully implemented.

I flag now that Labor will be moving a detailed amendment at the consideration in detail stage that will specifically state that matters relating to the accuracy of the level of housing supply or the quality or effectiveness of the reforms and initiatives in state and territory housing and homelessness strategies are solely a matter for those states and territories. That amendment addresses the concerns the states and territories, and some stakeholders, had about the apparently conditional nature of the funding in the agreement that was tied to those housing and homelessness strategies. I also understand that the government will be moving amendments that also reflect concerns from the states and territories and some stakeholders, providing some certainty and clarity around the condition for payments in relation to the primary and supplementary housing agreements.

We need a government which is willing to implement reforms across the board, which isn't simply interested in announceables and fig leaves but actually wants to make sure that we have reforms to our taxation system which are good for housing affordability. We have now in Australia a situation in which home ownership rates for young people aged 25 to 34 have fallen from 60 per cent to 48 per cent. First home buyers make up just one out of seven of all home purchasers, and Australia needs to do better than this.

Debate interrupted.