MONDAY, 16 FEBRUARY 2016
SUBJECT/S: Labor’s Plan to Fund Health and Education; Negative Gearing; Stuart Robert.
EMMA ALBERICI: Tony Burke is the Shadow Finance Minister and the Manager of Opposition Business and he's with me now in the studio to discuss this further. Welcome back to Lateline.
TONY BURKE, MANAGER OF OPPOSITION BUSINESS AND SHADOW FINANCE MINISTER: Good evening, Emma.
ALBERICI: So how much of the housing affordability crisis in Australia is down to negative gearing?
BURKE: Well, it's simply not fair when you turn up to any auction around Australia that the person buying their 2nd or 10th home is getting more help from the Government than the first home-buyer. Probably the biggest issue though remains housing supply and that's why we've specifically - we've targeted this policy to make sure that all future negative gearing would be targeted at new builds. The best thing you can do for first home buyers or future home buyers and to do something about home ownership is to increase supply and the policy's been very deliberately targeted to deliver that.
ALBERICI: So if you wipe out those investors into the existing home market, you'll necessarily depress prices, won't you?
BURKE: Well, one of the things that you would expect to happen is people holding negatively-geared properties in old stock would be less likely to sell. So, there's no reason to expect housing prices would fall and certainly Australia's experience has been that that's not something that happens. But you take some of the sellers out, some of the buyers out as well, but most importantly, increase supply.
ALBERICI: Steve Ciobo, the newly-minted Trade Minister, says you'll decimate the housing market with this?
BURKE: It's an extraordinary claim. He's in the part of Australia where there have always been cranes in the sky, where new build and new supply has been -
ALBERICI: On the Gold Coast.
BURKE: An absolute feature of the Gold Coast. Anything that is targeted at new builds must help supply, absolutely must. That's why when I saw the story that you just ran then with the Master Builders Association, as they work through the policy and see that this is not an abolition of negative gearing, it's making sure it's targeted at the area of the property market that deals with housing affordability and the area of the property market that creates jobs, and that's new build, I think they'll be able to reflect further on their position.
ALBERICI: But there won't necessarily be large stocks of new housing in areas that people necessarily want to buy.
BURKE: Well, one of the reasons the start date is as far off as 1 July 2017, because obviously you could have your start date any time from whenever the next election is on the election promise, is to make sure that there's a decent lead time to be able to work with the states on different land release, on in-fill, on the different proposals that state governments would have to make sure when the extra investment becomes available and targeted at new supply, the states are in a position to be able to work with that.
ALBERICI: But you do concede that existing homes will come off a little? I mean, all the economists say that will be the necessary effect of this. It's a bold move in an election year, especially when older Australian home owners in particular rely on that asset more than anything else. It represents about 80 per cent or more of their wealth.
BURKE: When you look at a period where we've had extraordinary price distortions and massive spikes in the property market, this would temper some of those by simply meaning when someone goes to an auction for an old property, they're less likely to be constantly competing with investors. But that said, it's also the case investors who have properties that are negatively geared will probably hang on to them for a bit longer as well. So there'll be some tempering, but I don't think anyone could reasonably say you'd be getting any sort of violent shift in the price market as a result of this.
ALBERICI: It's potentially bad news for renters too, isn't it? The cost of rents are likely to rise in terms of supply and demand issues
BURKE: Well, no. Every time a house is sold from someone who was a landlord to someone who's a home owner, yes, you have one less rental property available, but you also have one less renter, one fewer renter on the market. And the experience -
ALBERICI: That presumes, doesn't it, that the renter can suddenly afford to buy it?
BURKE: Well the experience of the 1980s, which is often referred to in this, it's true that rents went up in Sydney and Perth, but only in Sydney and Perth. Across the rest of the country, rents either held steady or went back a little bit. The reason they went up in Sydney and Perth was principally the exact issue I've been talking about tonight, and that's one of a limitation on housing supply in those two cities.
ALBERICI: But you'd imagine it is an issue of supply and demand and existing homes not being as attractive to investors, so fewer of them presumably available to rent, newer homes, more expensive anyway and not necessarily available in the areas people want to live in; that is, close to big cities.
BURKE: Well, you have some softening of the crazy price pressure that we've seen. What we've seen over the last few years has meant that, you know, people wonder - even people who negatively gear a number of properties wonder if their children will ever be able to get into the property market other than through an inheritance, wonder if they'll be -
ALBERICI: Well if they've got a few properties then they've got that under control.
BURKE: But wonder what sort of opportunities there are for people to be able to get into the home ownership market. I mean, every taxation decision, every finance decision for government is about priorities. That's what it's about. We simply can't afford to provide this sort of loophole at the same time where there are other budget pressures. The entire cuts to schools that have been forecast by the Turnbull Government, the saving to the Budget is less than what this would save in terms of improving the Budget bottom-line. You can't have a situation where a government's deciding that they can't afford to properly fund Medicare, but believe a loophole like this should be sacrosanct forever.
ALBERICI: I don't think they've said that. They've said they're looking at it as well. They've also said that in fact doing this to negative gearing will affect in the main average income earners and those earning around $80,000 who make up two-thirds of those who negatively gear.
BURKE: Yeah, the way they've arrived at that figure is quite extraordinary. That $80,000 figure they've used is taxable income. So they've actually taken the negative geared deductions off the income before they arrive at that average. The way you can tell is on that same modelling, there are 64,000 people listed having zero income. Now that's not because they're living on breadcrumbs with no money at all. It's because the individuals there have successfully negatively geared away their entire salary. The better way to look at it is to look at actual household income and that's where you get, I haven't brought the Chris Bowen flow chart that we just saw there, but that's where you have a situation where the tax benefit being provided to surgeons is 100 times the tax benefit being provided to cleaners. And that's - oh, sorry.
ALBERICI: You said - sorry, no continue.
BURKE: That's both because they're more likely to use it, but also, if you're on a higher tax bracket, the nature of deductibility is the benefit that you get back from the tax system of a deduction will be higher, the subsidy to you is higher.
ALBERICI: You mentioned a moment ago it's all about priorities. Does this measure indicate, being your big marquee announcement, does that indicate that for Labor, reducing the deficit is not a priority?
BURKE: Well, as of today, we've now announced more than $100 billion worth of improvements to the Budget bottom-line to deal with both election promises, both spending priorities we have -
ALBERICI: $100 billion?
BURKE: Over 10 years, over the decade. If you're going to do structural reform, you have to do it over 10 years. Let's not forget the cuts to schools and hospitals, the cuts to the pension that the Government's referred to are all on 10-year projections.
ALBERICI: How do you arrive at $100 billion worth of savings?
BURKE: Oh, well, you go through the changes to negative gearing and capital gains tax, the changes to superannuation tax concessions, to tobacco excise, to multinational tax avoidance, then you've got abolishing the Emissions Reduction Fund, right through to details like not going ahead with the reintroduction of the Baby Bonus and also making sure that you don't waste some money on a plebiscite every Government's minister's in a different view as to whether it'd make a scrap of difference to how they voted anyway. You put these measures together, and over the decade, you're there dealing with more than $100 billion worth of improvements to the budget bottom line.
ALBERICI: You've talked a lot about - about measures to increase revenue. What are your spending cuts likely to look like?
BURKE: Well, three of the ones I just mentioned then were spending cuts in terms of the Emissions Reduction Fund where you're paying polluters to pollute, the plebiscite, the reintroduction of the -
ALBERICI: But presumably you'd have another carbon tax or climate change mitigation measure which would cost money, or in the very least, cut somewhere.
BURKE: Well, certainly what we won't be doing is paying polluters to pollute, which is what the current system does. Similarly, the plebiscite and the reintroduction of the Baby Bonus. We'll have more to say on spending measures. There's more than $20 billion, we're much higher than that now, of proposals the Government has put forward which were sensible that we were willing to support. But their cuts to Medicare, their cuts to schools and hospitals, their cuts to the pension, if you want to make those sorts of decisions, then you can go down that path. Our approach has been to shut down loopholes.
ALBERICI: Now shifting to another matter briefly, Stuart Robert. He was found to have breached ministerial standards. He's been sacked from the ministry. Why is Labor continuing to pursue this?
BURKE: Oh, the reference that's been made to the Australian Federal Police Mark Dreyfus has had comments on that. If there's a belief the law's been broken, then the Australian Federal Police'll look into that and it's appropriate that they be left to look at that themselves.
ALBERICI: So it wasn't punishment enough? It's a pretty big deal to be dropped from the ministry, lose your job.
BURKE: Oh, I think the issue of whether there's illegality is one that's appropriately dealt with by the police.
ALBERICI: So what is Labor looking for here?
BURKE: Well, the Federal Police have been asked to have a look at it and I don't intend to add to that further. Our view in terms of the breach of ministerial standards was that it was clear from the first moment Stuart Robert said he was on a private trip that he'd broken the ministerial code.
ALBERICI: Well the Government has agreed with that. It's just curious to see that it would appear that Labor's looking for some sort of criminal charges to be laid. Is that right?
BURKE: Well, it's been raised with the Federal Police. We've got confidence in the Federal Police to be able to make their own determination as to whether or not there's criminality.
ALBERICI: Tony Burke, thank you very much for your time.
BURKE: Good to be back.