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ABC Q+A HOUSING SPECIAL
THE HON MICHAEL SUKKAR MP – SHADOW MINISTER FOR SOCIAL SERVICES, NDIS, HOUSING AND HOMELESSNESS
TRANSCRIPT
ABC Q+A HOUSING SPECIAL
Patricia Karvelas with Clare O’Neil, Aruna Sathanapally, Alan Kohler
Monday 9 September, 2024
TOPICS: Housing
E&OE
PATRICIA KARVELAS
How do you stop a rampaging property market? A Q+A YouGov poll reveals that six in ten Australians would favour abolishing negative gearing and limit property investors owning more than three homes in a bid to control spiralling prices. For its part, federal Labor has promised to help build 1.2 million new homes. Predictions are, they won’t actually get there. Meanwhile, our politicians and economists argue the toss on the best way to make more homes available. Should we dip into our super? Build more apartments? Or should the politicians ditch housing-related tax concessions?
Joining our panel: the Minister for Housing, Clare O’Neil; the Shadow Minister, Michael Sukkar; lawyer Aruna Sathanapally; and analyst and journalist Alan Kohler.
Welcome to Q+A.
Hello. I’m Patricia Karvelas. I want to pay my respects to the Gadigal people of the Eora Nation, on whose land we’re broadcasting from tonight, here in Sydney.
Remember, you can livestream us around the country on iview and all the socials. #QandA is the hashtag. Get involved.
To get us started tonight, here’s a question from Alastair Fisher. And, hello, Alastair.
ALASTAIR FISHER
Hi. With the comments the other day by the Reserve Bank governor that people may have to sell their houses, and the previous governor suggesting that the solution to the housing crisis was for everyone to take in a lodger, do you think the Reserve Bank is out of touch with the community?
PATRICIA KARVELAS
Clare O’Neil.
CLARE O’NEIL
Well, I don’t agree with those comments. I can be really clear about that. We have a very significant housing crisis in our country today that has been building, really, for more than 25 years. And the fundamental problem that we have is that we haven’t been building enough homes throughout that entire period. When you look at international statistics, Australia has less housing per person than most nations that we compare ourselves to. So our government’s got a really deliberate approach here. Our plan is to build, build, build. We need to build 1.2 million homes over five years, because, if we build more housing, we have more affordable housing for all Australians.
We also recognise that there are really acute problems that are being felt right now. Renters in particular are doing it really tough, and that’s why our government is assisting, with increases to Commonwealth Rent Assistance and other measures. But one of the really important things that’s an article of faith for me personally and for my party is that we want more Australians to be able to own their own homes. So we have a suite of policies which is assisting us to do that, too. It is a big agenda, a really big and rich agenda. And it’s no surprise when you consider that we’re a country today led by a prime minister whose entire life trajectory was transformed by his capacity to get secure housing in his childhood.
PATRICIA KARVELAS
OK, Alastair’s question, Michael Sukkar, if I can put it to you, was in relation to the Reserve Bank governor’s comments that people should sell their homes – will have to sell their homes, to be clear. Clare says she doesn’t agree with those comments. What do you say?
MICHAEL SUKKAR
Well, I think it’s been a pretty unedifying display, seeing the government criticising the Reserve Bank governor, who they appointed, and I think we all supported the appointment, as it being a really good appointment. And the reason why it’s been unedifying is it’s very clear that the government’s mismanagement of the economy, they’re now trying to find a scapegoat for.
And the truth is the Reserve Bank is calling it as the economy stands at the moment. We’ve got very sticky inflation. The truth is that interest rates are going to be higher for longer because of a suite of policies this government has put in place. Most importantly, as I think most economists have stated, the spending from this government has kept interest rates higher for longer because inflation has been sticky. And if you compare Australia to most of the jurisdictions that we would ordinarily compare ourselves to, inflation has remained higher for longer. And you all see that, Alastair, you see it and everyone in this audience sees it when they go to the supermarket. So, the truth is, it’s a bit like complaining about the doctor when they tell you to stop smoking, criticising the Reserve Bank governor.
The Reserve Bank governor is calling it as she sees it, and has been supported by other members of the Reserve Bank. The government’s got to do their duty, and that is to help what the Reserve Bank is doing to try and get inflation into the 2% to 3% target range. That will then give them the opportunity to do what we all hope they will do, which is to reduce interest rates. The average Australian family with a mortgage is $35,000 a year off since the government came into power, because of the fact they’ve not been able to control inflation, renters have seen their rents increase by 22% on average since this government was elected. The last thing they should be doing is criticising the Reserve Bank governor. They should be reflecting on what they can do as the government to improve the situation.
PATRICIA KARVELAS
But the question, again, just drawing you back to the question – or, you haven’t answered yet, so I don’t have to draw you back – but I think Alastair’s question is, this comment, and I’ve got it here, “Some may ultimately have to make the very difficult choice to sell their home.” Is that a reasonable thing for her to say?
ARUNA SATHANAPALLY
Well, I don’t think anyone is watching the pressures that Australian households are under more closely and in a more data-driven way than the Reserve Bank. They only have one tool at their disposal, which is raising interest rates, and it’s a really blunt tool. And when people say it’s a blunt tool, what it means is that it causes a lot of pain on some households and doesn’t really affect others, but that’s the only tool that the Reserve Bank has.
PATRICIA KARVELAS
So is it unfair criticism of the RBA, then?
ARUNA SATHANAPALLY
I don’t think so. I think that, ultimately, the RBA has a job to do. It’s a tough job. And they’ve been fairly clear that they are trying to bring down inflation while causing the least possible losses in the labour market. It’s not an easy thing. I mean, part of the reason that it’s taking longer in Australia is because of that more cautious path. We didn’t hike interest rates as high in order to reduce the amount of pain, but the idea that you could bring down inflation with no pain at all, unfortunately, that was never going to happen.
PATRICIA KARVELAS
Mm.
ARUNA SATHANAPALLY
So we are going to see an economy cool. We are going to see that in terms of, it might be less hours, it might be less jobs. It hasn’t been to date, but the only way that you cool an economy is by contracting it and, like, lowering demand, and that’s the path we’re on.
PATRICIA KARVELAS
Alan, you’ve been a bit critical of the RBA’s strategy. Do you think some of the language has been, as Alastair has raised, a little tone-deaf?
ALAN KOHLER
Yeah. I was wondering why she said that, actually, ‘cause she didn’t need to say that. The main purpose…
PATRICIA KARVELAS
Well, is she not just stating a fact?
ALAN KOHLER
Yeah. That’s right. But, you know, but the thing is, you know, having…when she says something like that, everyone sort of is up in arms about it. I mean, the main purpose of the speech was to basically hose down the idea that there would be rate cuts. So that’s what she was on about saying. And then she said that. So the question I was asking after she… Why would she say that?
ARUNA SATHANAPALLY
Mm.
ALAN KOHLER
And the answer is, because Reserve Bank governors’ speeches should be taken seriously, but not literally. What they try to do with their speeches, always, is to have an impact, to affect behaviour beyond the actual things that they’re doing, which is to…you know, they raise interest rates, cut interest rates, but they also use their words to further influence behaviour beyond that. And so what she’s trying to do is to say not only are there gonna be no rate cuts, but don’t you go spending some more, because things are going to get tougher.
PATRICIA KARVELAS
So did she get it wrong?
ALAN KOHLER
Well, no. Well, you know, I mean, look, the Reserve Bank governors get it wrong. I mean, obviously, Philip Lowe…
PATRICIA KARVELAS
So if Alan Kohler was the Reserve Bank governor that day, what would Alan Kohler have said?
ALAN KOHLER
I might not have said that thing, OK? I mean, I would have said, don’t expect a rate cut, because I don’t think there will be rate cuts. But, you know, she went that…she did that, went a little bit further, and fair enough. She wants to have an impact beyond those words, the original…the other words that she said, she wanted to have further impact. And fair enough. But it shouldn’t be taken as meaning…as her being heartless. Because I think it’s… Aruna’s right – I mean, the Reserve Bank has increased interest rates in Australia less than most other countries because they are trying to not hurt families too much. They’re not…they’re trying not to increase unemployment.
PATRICIA KARVELAS
So, are they smashing the economy, like the Treasurer said?
ALAN KOHLER
Well, the funny thing about that statement by the Treasurer is that the main thing that’s been slowing the economy has been tax increases. It’s the government that’s slowing the economy more than the Reserve Bank.
PATRICIA KARVELAS
Didn’t we all just get a tax cut?
ALAN KOHLER
Yeah, but that was just on July 1.
PATRICIA KARVELAS
Right. That’s… OK, so that will…
ALAN KOHLER
That’s just now.
PATRICIA KARVELAS
Do you think that will then change things?
ALAN KOHLER
Well, no. So, bracket creep up until July 1 has been…has increased…has taken more out of family incomes than interest, looked at overall, the aggregate numbers, right? Obviously, increases in interest rates impact more…some families more than others. Those who have got a lot of debt get really whacked. But the aggregate number shows that the increase in taxes has been greater than the impact of interest. And so, it’s the government that’s actually been doing more…
PATRICIA KARVELAS
Well…
ARUNA SATHANAPALLY
Well…
ALAN KOHLER
…to slow the economy.
PATRICIA KARVELAS
You don’t agree?
ARUNA SATHANAPALLY
That is part of the job of fiscal policy. So, part of the reason that bracket creep takes more of our taxes when inflation is high is because that’s how fiscal policy works…
ALAN KOHLER
Yeah, yes. I’m not say…
ARUNA SATHANAPALLY
…to do exactly what the Shadow Minister was talking about, cool the economy.
ALAN KOHLER
I’m not saying it’s bad, I’m just saying that…
ARUNA SATHANAPALLY
I’m not sure I’d describe it as “smashing the economy”. I think that’s actually one of the…
ALAN KOHLER
I didn’t say that.
ARUNA SATHANAPALLY
Oh.
ALAN KOHLER
The Treasurer did. It’s the Treasurer who said that.
PATRICIA KARVELAS
The Treasurer definitely did. We can fact-check that.
I want to go back to Alastair. Alastair, are you cranky at the RBA, the government, or neither?
ALASTAIR FISHER
More so the government, I would say.
PATRICIA KARVELAS
Yeah. Why?
ALASTAIR FISHER
I just don’t feel like, as an average Australian, that they’re doing enough to actually help us with what little money we have left after inflation and what we’re having to spend on rent and mortgage repayments.
PATRICIA KARVELAS
In housing, specifically?
ALASTAIR FISHER
Yeah, specifically housing, I would say. As a first-home buyer, it’s really difficult. I work a full-time job, but I’m still unable to get a mortgage.
PATRICIA KARVELAS
So you’ve got a full-time job, but you can’t, what, save up enough for the deposit?
ALASTAIR FISHER
No. So, yeah, I’ve been living at home to try and save up. And, luckily, my parents have just sold our family home and I’m in a very lucky position that I am able to get some money from them to help, but if I wasn’t, it would be near impossible. And I’m not…like, I’m working quite a good job. So it is a big challenge for people of my generation.
PATRICIA KARVELAS
Clare, that is a common story you keep hearing…
CLARE O’NEIL
Yeah, really common.
PATRICIA KARVELAS
…and people are clearly not happy.
CLARE O’NEIL
Yeah.
PATRICIA KARVELAS
So, you say supply, supply, supply is the answer. But supply is going pretty slowly.
CLARE O’NEIL
So, let me just address a couple of points. Just, can I say something very quick about the macroeconomy? There’s a really difficult environment for us here in Australia at the moment with what’s happened with interest rates. We’re seeing that in comparable countries all over the world, and this is a really difficult and important time for governments to be able to balance things.
What our government is trying to do is run surpluses – which is the first time we’ve had a surplus in a really long time, we’ve run two back-to-back surpluses now – but give Australians cost-of-living relief wherever we can. So that’s for everyone who’s a taxpayer in this room. You got a tax cut as of 1 July because of our Prime Minister. We’ve made, you know, important pushes to get the lowest-income people pay rises. And there’s other things in the list here, but I know you’re going to want to…want me to get to housing.
So, your story is a really common one. And you sort of mention a fleeting reference to the Bank of Mum and Dad in what you said.
PATRICIA KARVELAS
I’m sure you called them that, don’t you? Hi, Bank of Mum and Dad!
CLARE O’NEIL
Not to their face, probably, but… So, this is something that deeply concerns me, as Housing Minister. One of the things that we see in the data is that the Bank of Mum and Dad has effectively become almost a normalised part of the experience of buying a home for a lot of Australians. And when I look at all the problems we have in the housing market, there’s really acute issues around renters, and all…everyone’s really struggling in their own way.
The thing that scares me most is when I look at how the housing prospects for young people in our country have changed since the 1980s. So, if you look at a low-income young person in 1980, at the time, 60% of young people owned their own home. Today, that figure is about 20%. And this tells us that the life experience of being a low-income person in our country today has radically shifted over a 40-year period just because of housing.
So we have a…basically, the big macro narrative here is that, in the post-war period, the Commonwealth was really involved in housing and, effectively, since that time, Commonwealth has basically walked back. And if I can say, just so politely to my colleague here, the previous government totally tapped out of housing, completely tapped out. In fact, for most of the period…
MICHAEL SUKKAR
False.
CLARE O’NEIL
…that the Coalition was in government…
MICHAEL SUKKAR
That’s false.
CLARE O’NEIL
…there wasn’t even a Commonwealth Housing Minister.
MICHAEL SUKKAR
I’ll…
CLARE O’NEIL
Now, we’ve taken a very different approach. We’re reaching right into this problem. We can’t fix it on our own, because all of you in this audience would know that federal, state and local government all share power and responsibility here. But we’re stepping in. We’ve got a $32 billion plan to make a difference here, and I’m resolutely committed to doing everything I can to help this.
PATRICIA KARVELAS
OK. Michael Sukkar, did you tap out of, you know, being part of the housing system?
MICHAEL SUKKAR
Well, it’s very interesting… We all have opinions, and it’s not surprising that Clare’s view will be that the Labor Party was better than the Coalition. But if you look at every single metric – and I was the former Housing Minister – on virtually every single metric, we were doing significantly better during that time, whether it’s the number of first-home buyers… I mean, that’s not open for opinion. That’s just a statistic, an ABS statistic, nonetheless.
CLARE O’NEIL
But you didn’t even have a housing minister for most of the period of that government.
MICHAEL SUKKAR
Well, I was Housing Minister between 2019 and 2022…
CLARE O’NEIL
Yeah. But that was it.
MICHAEL SUKKAR
And we had more first-home buyers… Well, let’s just look at the scoreboard. More first-home buyers, more homes were being built, more approvals. On every single measure, you’ve gone backwards, Clare.
CLARE O’NEIL
That’s not true. Absolutely not true.
MICHAEL SUKKAR
Now, admittedly, Clare’s only been in the role for a few weeks, but her government, on every single metric, has seen things get worse, including the statistics I mentioned earlier – 22% increases for renters. So, if Clare is suggesting that we’ve been living in some housing utopia under Labor for the last two and a half years…
PATRICIA KARVELAS
OK.
MICHAEL SUKKAR
…I beg to differ, on every single measure.
CLARE O’NEIL
Yep, and I wouldn’t be suggesting that.
MICHAEL SUKKAR
And on the $32 billion, it was reported today, quite correctly, that of the $32 billion that the Minister talks about, only $3 billion is deployed for housing-related construction projects. And of that, the government can’t even say how many homes it’s built. So, it’s very easy to run around talking about big numbers. But when you look under the hood, so to speak, this government has not been acting with any urgency, which is why those statistics, which I refer to as the scoreboard, are so dismal under this government.
PATRICIA KARVELAS
OK. Alright. We’re going to park that, but we, no doubt, will revisit it.
I’ve got another question now, from Hammad Ali.
HAMMAD ALI
Good evening. I am a first-generation migrant who came to Australia eight years ago seeking a better lifestyle for my family. My wife and I have diligently paid our taxes and worked 60-hour weeks to save for a down payment on our only home. Now, as a proud Australian, I take every opportunity to actively participate in community events that help me integrate within the Australian society. How have I created a housing crisis in Australia?
PATRICIA KARVELAS
Thank you for your question, Hammad. I’ll start with you, Michael, because the opposition has put immigration very much…
MICHAEL SUKKAR
Sure. Yeah.
PATRICIA KARVELAS
…on the agenda when it comes to housing.
MICHAEL SUKKAR
Well, thank you, Hammad. Good question. And I often preface these comments by saying I’m from a migrant background myself, so I’m a great proponent of migration. And, Hammad, you’ve been another part of a long success story. But the truth is, for migrants, as much as it is for Australians who are born here, one of our duties as a government is to make sure that our migration program does not mean that our infrastructure and our lives in big cities are affected negatively. We’ve seen, in the last two years under this government, more than…or around a million migrants, and we’re building about a quarter of the number of homes as migrants.
Now, you never blame the migrant, because they are lawfully coming into this country under our migration program. So, Hammad, we don’t blame individuals. But it’s the duty of government to make sure that we have a planned migration program that ensures that we can build the number of homes needed, because the people who are migrating to Australia, like my father, came here to enjoy the great Australian dream. One of those, for many people, is that prospect of home ownership. From where my father came from, that wasn’t really a prospect, that you would ever own your own home, unless you inherited the family home. That’s the same for many others.
So we’re not helping the migrants and we’re not helping those who are already here if we have a migration program that’s out of step with what I consider the most important infrastructure. Tunnels and roads are important, but a roof over people’s heads, in my view, and in the Coalition’s view, is the most important infrastructure. And you’ve got to make sure you connect those two. So a million migrants, when you’re building fewer homes, fewer homes than the former Coalition government, Clare, that is not a recipe for success. But we never criticise the individual people coming.
PATRICIA KARVELAS
Let me ask, Hammad…
MICHAEL SUKKAR
We criticise the government.
PATRICIA KARVELAS
…do you feel like you’ve been scapegoated?
HAMMAD ALI
Well, I appreciate the comments from the Shadow Minister that they’re not blaming individuals, but I’m also concerned about the messaging at the…and the long-term implications it has. So, for example, when the leaders of this country make populist and simplistic statements like slashing migration is going to simply resolve the housing crisis, I think that has deep, deep, long-term implications. I think that certainly Australia is a land of opportunity, but you have to realise that, I mean, it is going to have a very long-term implication in regards to how the, um…sorry, the…
PATRICIA KARVELAS
How migrants are feeling in the country?
HAMMAD ALI
How migrants are feeling in the country. And it…I think it’s going to essentially create polarisation in the wider Australian society.
PATRICIA KARVELAS
OK. Let me put that to you, Aruna. And the substantial part of the question, immigration… And it’s bipartisan that… Certainly, the levels are different, but it’s a bipartisan view that you have to…need to lower migration to deal with housing. Is that correct?
ARUNA SATHANAPALLY
OK. So, first things first. The bigger driver of our shortage of housing on the demand side is Australians’ demand for space. That has increased. Our household sizes are getting smaller. That is a bigger impact than the impact of migration. So I think it’s really important to lay the facts out here. And there’s a few reasons for that. One is that our family sizes are smaller, another is that we’re ageing, and another is that, coming out of the pandemic, people want more space and they’re willing to move and pay for it. Now, some of that will change over time. Some of that will adjust. But it’s important to be really clear about the fact that Australians are demanding more space than they did before. So there’s less of us to a house. And that alone accounts for…the change over recent years would account for about 300,000 extra homes that we need, just to accommodate the same population.
Second point – tackling…reducing migration to try and solve a housing problem, to me, flips things around. If we’ve got a housing system that is not enabling us to bring in the people that we need, then that’s going to be really costly. And, you know, businesses will tell you it’s costly because they can’t get the workers that they need. The universities will tell you it’s costly because it hits one of our most successful export industries. The care sector will tell you it’s costly because it affects our aged care workforce, our childcare workforce. So, if we don’t get our housing system right and we can’t accommodate the workforce that we need, the working age population we need, that creates all sorts of problems elsewhere.
PATRICIA KARVELAS
Mm.
ARUNA SATHANAPALLY
So, even a reduction such as what the Coalition has proposed, of 25,000, in terms of our skilled migration, we’ve calculated that would cost us more than $200 billion over 30 years. And that’s because migrants pay more in tax than they take in services. And so we can do it, we can cut migration, but we shouldn’t pretend like that isn’t a very costly way to go about solving our housing problem, when, actually, the source of the problem is our failure to build enough houses for the population we always knew we were going to have by this point. So we’ve got only a couple of hundred thousand more people than we knew we were going to have five or six years ago.
PATRICIA KARVELAS
Alan Kohler, is…are the immigration numbers part of the housing crisis?
ALAN KOHLER
Well, between 2005 and 2008, immigration, net overseas migration into Australia tripled. And there was, after that, a long period, eight to ten years, of housing shortage. And there’s another housing shortage now because there’s been a big increase in immigration. So, you know, I mean, I think Aruna is absolutely right that we need to address the supply of houses. I mean, we can’t actually cut back immigration too much, if at all. But it’s clearly an issue. And we need to think about it. I would like to see migration, in some way, connected to housing, you know…
PATRICIA KARVELAS
Well, I think the Minister’s been talking about that today.
ALAN KOHLER
No, but what I mean is that the number of the…the number of migrants should be associated with the amount of housing that is being built, in some way.
PATRICIA KARVELAS
So there should be a nexus between the two?
ALAN KOHLER
I would like to see a press release, a joint press release from the Minister of Immigration, the Minister for Housing, saying, “This is how many people have arrived, this is how many houses have been built, and this is kind of…”
PATRICIA KARVELAS
You’re disagreeing, Aruna?
ALAN KOHLER
“…this is the situation.”
ARUNA SATHANAPALLY
Well, it’s just that the federal government doesn’t build houses, though. So I think what’s missing in that is… There’s a federalism problem we have here. Right? So…
PATRICIA KARVELAS
That old chestnut.
ARUNA SATHANAPALLY
We can obviously talk about the role of the federal government, and it’s important, but, ultimately, what drives the number of houses we have is state governments and local governments. And so that’s the point. That’s the coordination failure, right?
MICHAEL SUKKAR
But in the defence of Alan, we’ve had…
PATRICIA KARVELAS
Someone! “In the defence of Alan!”
MICHAEL SUKKAR
Well, he can defend himself. But we’ve had a million people in two years. That is unprecedented…
PATRICIA KARVELAS
Alright.
MICHAEL SUKKAR
…really other than when you look at immediate post-World War II. It’s not…has not been the long-term average. So, if you’re going to ramp up, as the Albanese government has, migration to a million over two years when you’re building fewer homes…
PATRICIA KARVELAS
We’re going to keep this discussion going.
MICHAEL SUKKAR
…it’s self-evident it’s going to be a problem.
PATRICIA KARVELAS
We have another question, related, with a question from… Our next questioner is Ronan MacSweeney.
RONAN MacSWEENEY
Will limiting international student numbers help to solve the housing crisis?
PATRICIA KARVELAS
Clare O’Neil.
CLARE O’NEIL
Excuse me. So, I am very supportive of what the government has done to limit international students. Effectively, the bit that got a little bit missed, I think, in the discussion we just had about migration is that we had our borders shut in this country for the better part of two years, and for the first time since the Second World War, our population actually went backwards. So it was always going to occur that we had years of higher migration beyond that.
I do think it’s really important that we bring our migration numbers back to normal and sustainable levels, and that is part of the reason why the government has gone ahead and capped international students. What we had seen before the government took this move is effectively unsustainable growth, an education sector which was incentivised to grow as quickly as possible, to grow their numbers as quickly as possible. And it is my really strong view that we can’t allow that just to continue forever. At some point, we have to say…
PATRICIA KARVELAS
But how is it linked to the housing crisis?
CLARE O’NEIL
Well, the broader migration program, of course, is connected to what goes on in housing. But the main reason that we have to do this is because we are otherwise, effectively, allowing our education sector to drive the number of people that live in our country. And I don’t think that’s appropriate. Education is a great export for Australia, but the appropriate people to decide its size is the Australian government and, by extension, the Australian people.
PATRICIA KARVELAS
Alan?
ALAN KOHLER
Oh, well, that’s… I mean, it’s true that the permanent migration is capped…
CLARE O’NEIL
Mm.
ALAN KOHLER
…and decided by the government. The temporary migration…
PATRICIA KARVELAS
Mm.
ALAN KOHLER
…is demand-driven. It’s basically uncapped entirely. So, yeah, I mean, I think…
PATRICIA KARVELAS
Do you support caps on international students? Or do you think the economic ramifications will be too huge?
ALAN KOHLER
Well, I think that the government allowed the international students to sort of almost get out of control because they cut funding for the universities. And the whole idea is to try to let the universities fund themselves by recruiting customers overseas.
PATRICIA KARVELAS
Mm.
ALAN KOHLER
And so I think that the government’s got to be very careful about how it goes about this, because the consequence might be that we end up with second-rate universities that don’t have a decent research capability. So…
PATRICIA KARVELAS
Yeah.
ALAN KOHLER
…I think that, you know, it’s a really careful balance.
PATRICIA KARVELAS
So it’s a double-edged…
CLARE O’NEIL
(SPEAKS INDISTINCTLY)
PATRICIA KARVELAS
…question, really. There’s the consequences for universities, Aruna, but the question actually was, “Will limiting international students lead…?” You know, “Is it linked to the housing crisis?” Is it?
ARUNA SATHANAPALLY
So…
PATRICIA KARVELAS
What is the percentage?
ARUNA SATHANAPALLY
I think all of this is a little bit of a hyped-up debate. International student numbers went up because of the phenomenon that was just described. Taking it in context, for two years, perhaps longer, they couldn’t come into the country. We saw a catch-up. The number was going to come down next year anyway, because the catch-up effect would have run its way through. There had been a series of measures that the government has already taken with respect to visas that would have further brought that number down. So, what the caps might be doing above that is a little bit unclear. I think when you look at the proportion of the housing market that is international students, the density with which students typically live, I think this is overblown in terms of its significance to the housing market.
ALAN KOHLER
Yeah, I think that’s absolutely right. I mean, in fact, if you look at the places where international students live, the tenancy ratios, the ratios are quite high. I mean, the vacancy rates are quite high. It’s not as if those areas where international students live are all, kind of, got vacancy rates of 0.1%. They’re like 2%.
PATRICIA KARVELAS
Alright. Let’s move to our next question. And our next question is from Peter Tulip.
PETER TULIP
Yes, so, my name is Peter Tulip. I’m an economist at the Centre for Independent Studies, where I do research on housing policy. A question for Alan Kohler and Aruna Sa…
PATRICIA KARVELAS
Sathanapally.
PETER TULIP
…Sathanapally. Sorry.
ARUNA SATHANAPALLY
That’s OK.
PETER TULIP
Alan, you’ve written that negative gearing and the capital gains t…gains discount have large effects on housing affordability. But the Grattan Institute research by John Daley and Danielle Wood estimated that those concessions boost housing prices only by about 2%. And other researchers using different approaches have estimates similar to the Grattan Institute estimates. Who’s correct?
PATRICIA KARVELAS
Alan Kohler, who’s correct?
CLARE O’NEIL
It’s nice not to be the ones fighting at the moment.
MICHAEL SUKKAR
I know!
PATRICIA KARVELAS
You can…you can just have a warm hug.
MICHAEL SUKKAR
We can sing Kumbaya in the middle!
PATRICIA KARVELAS
Kumbaya over there. Alan?
ALAN KOHLER
OK, so, I wrote this Quarterly Essay a year ago, and I thought, “OK, well, let’s…” So I consulted the graphs. Right? As one does. And it’s quite clear that house prices started shooting up in the year 2000. So I kind of wanted to know what happened in the year 2000. And the answer was, it seemed to me, that in September 1999, capital gains tax was halved. Up to that point, there had been an inflation adjustment. And then in 1999, the capital gains tax was halved and up went house prices. So I thought, “Well, that’s instructive. That’s interesting.”
I also thought, at the time… I didn’t do the sort of calculation that the Grattan Institute and Peter Tulip have done, which is the exact mathematical impact of those…of that, and negative gearing, on house prices. But what… But I did think, “Oh, well, it probably isn’t that much of a mathematical effect on house prices,” but what it seemed to me had occurred then was that it flipped the way people thought about housing, so that housing went from being a human need, an essential kind of product or service, to being an investment market. And what negative…the combination of negative gearing and capital gains tax did, no matter what the…you know, the actual mathematical impact on house prices is, whether it’s 2% or what, it changed the way people thought and think about housing.
And so suddenly housing, it seemed to me, became a market. And when something is a market, you end up having speculators and people investing in order to get a return and in order to build their wealth. And the return has to be greater than the cost of capital. Investors have to invest and get a return that’s greater than the capital – than the money, the cost of the money that they’re investing. And the cost of money in housing is the interest rate and/or the opportunity cost of what else you could do with the money. And so, suddenly, the return on housing went from – the capital gain of housing – went from being 3% per annum to 6% per annum.
And the whole problem we’ve got now, the whole reason we have a crisis is because, for 25 years, house prices have been rising on average at 6% per annum, which is double the rate of income. So the house-price-to-income ratio has gone from 3%-4% to 7% or 8%. And that’s the problem. And it started in the year 2000. So, I don’t know. I mean, it just seemed to me that that changed the way everyone thinks about housing.
PATRICIA KARVELAS
Do you think it has, Clare O’Neil?
CLARE O’NEIL
Well, I think the fundamental problem that we have in the housing market is that we don’t have enough housing in our country. I’m just…
PATRICIA KARVELAS
No, but on the question of negative gearing, because I’m going to take you back to it…
CLARE O’NEIL
Yeah.
PATRICIA KARVELAS
…is it having an impact on housing prices?
CLARE O’NEIL
Well, I think, you know, Peter Tulip, one of Australia’s renowned housing economists, has talked about the fact that there are different views here on the panel. At the end of the day, what I know is that we don’t have enough housing, and if we want more affordable housing for Australians, our government’s got to roll up its sleeves and make more of it.
PATRICIA KARVELAS
It’s funny you say that, because we asked Australians what they think of these issues – whether…you know, whether they think that this market is good for investors, what kind of playing field it is.
TITLE: To make housing more affordable, governments should abolish negative gearing for investors
Oppose: 39%
Support: 61%
YouGov survey Aug 30-Sep 4 / Respondents 1,526
PATRICIA KARVELAS
And while Labor abandoned its losing 2019 election promise to cut negative gearing, our Q+A YouGov poll found broad support – around six in ten are in favour of abolishing the offset mechanism, rising to seven in ten among voters under 50.
TITLE: To make housing more affordable, governments should ban owning more than three properties
Oppose: 36%
Support: 64%
YouGov survey Aug 30-Sep 4 / Respondents 1,526
PATRICIA KARVELAS
There’s also majority support for reining in investor portfolios, with 63% supporting a ban on owning more than three homes, which is pretty seismic, in many ways.
If you look at the polling – RedBridge did a polling a couple of months ago too – there seems to be broad support for looking at this system.
CLARE O’NEIL
Well, it’s not the approach of the government. And, PK, if I can very politely remind everyone who’s watching, as you point out, our party took this to an election and we lost that election. In fact, the Australian people decided that they would vote for Scott Morrison over Bill Shorten, and that policy didn’t come to life. We have a different approach to this now.
PATRICIA KARVELAS
Does that mean it’s dead and buried forever? Any kind of looking at tax settings? Because of one election?
CLARE O’NEIL
It’s not something our government’s considering. We are focusing on building more homes for Australians, and that’s the one thing I can be abundantly certain is going to create more affordable housing for all Australians.
PATRICIA KARVELAS
Michael Sukkar, I’ve spoken to your colleagues and I know some of them think that you need to have a bigger look at this. Do you think the tax settings around property are worth having a look at?
MICHAEL SUKKAR
Well, I think there’s some sort of self-evident truisms of housing and the economy more broadly. And if you want less of something, you tax it more. You want people to smoke less, you increase the excise on cigarettes. You want people to invest less into housing and build fewer homes, you tax it more. Housing in Australia is one of the most overtaxed asset classes as it is, between stamp duty, land taxes, and every single developer contribution that’s made when you build a home.
Grattan Institute research, which is admittedly a little bit old now, but not that old, shows that when a first-home buyer goes in to buy their home in Sydney, nearly 50% of the cost of that home is taxes and regulatory charges. Nearly 50%. So it’s very galling on one hand, when you have any politician saying, “Well, we want more affordable housing,” yet they’re taxing housing to death, and that’s what’s happening. So you abolish negative gearing for housing. And let’s remember, no-one’s talking about abolishing negative gearing for people who are speculating on the share market or in other assets. All you’re going…
PATRICIA KARVELAS
I mean, you could raise that!
MICHAEL SUKKAR
All you’re going to do is make fewer people invest in housing, which means you’ll have less housing supply.
And secondly, I know this is a long answer, but this is important. What we’re also seeing is a coalescing of very interested vested interests here. About a third of Australians rent, and I don’t think that’s going to drop. So that means a third of every home needs to be owned by a landlord. There’s a movement that’s been adopted by the Albanese government to basically bring in corporate landlords – so, foreign funds, Vanguard, Blackstone, our superannuation funds – to own the housing stock in this country.
The Coalition does not want our housing stock owned by foreign corporates. We are much… We would much prefer it be owned by Australians. And we don’t think that just targeting those who invest in housing is going to do anything other than reduce the number of homes that are built to start with. And secondly, we don’t want a US corporate housing market where your landlord is a big corporate that owns tens of thousands of property. And that’s what’s happening, particularly with the government, who have now bought in tax changes which provide the cheapest…or the best tax arrangements for any investor in this country now, is a foreign US or a foreign fund to purchase…
PATRICIA KARVELAS
Aruna, is that what’s happening?
MICHAEL SUKKAR
…and own property in Australia, which is terrible.
CLARE O’NEIL
That’s not what’s happening at all.
ARUNA SATHANAPALLY
There’s just…
ALAN KOHLER
No.
CLARE O’NEIL
That’s not right.
ARUNA SATHANAPALLY
There’s so much to unpack here.
ALAN KOHLER
Yes. (LAUGHS)
ARUNA SATHANAPALLY
So I’m going to have a go.
MICHAEL SUKKAR
There’s a lot in there.
CLARE O’NEIL
Seriously.
PATRICIA KARVELAS
Aruna’s got the talking stick.
ARUNA SATHANAPALLY
Let me…
ALAN KOHLER
It’s my turn next.
ARUNA SATHANAPALLY
Let me take the talking stick for a moment.
CLARE O’NEIL
And then me.
ARUNA SATHANAPALLY
And let me just tackle this point around tenancy, because, look, you make an important point, right? A third of households rent.
PATRICIA KARVELAS
True.
ARUNA SATHANAPALLY
We don’t think that number’s going to go down. Renting has to be a decent option.
CLARE O’NEIL
Exactly.
ARUNA SATHANAPALLY
It has to be secure. It has to be affordable. Individualised landlords are not a good way to ensure secure and affordable tenancy.
MICHAEL SUKKAR
Oh, well, we disagree.
ARUNA SATHANAPALLY
Well, it…
MICHAEL SUKKAR
We disagree.
ARUNA SATHANAPALLY
There are a number of reasons for this and there’s evidence to show this. But if you want a landlord who can support long-term tenancy, a landlord that can engage in maintenance at scale, a landlord that can take some risk across a pool of renters, an institutional landlord will be able to do that. We’ve got a number of settings that disincentivise that in Australia, but Australian super funds do invest in that asset class elsewhere.
CLARE O’NEIL
Mm. Overseas, exactly.
ARUNA SATHANAPALLY
So, our money, if we hold, you know, funds in super, is supporting that sort of investment elsewhere, but it isn’t supporting that investment here. There’s one concrete reason why – we have a progressive land tax system, that sounds great, but what it means is that if you hold a bigger landholding, you have a much bigger tax bill. So I would actually agree here. This is where we need to think about lowering the tax impost on bigger landholdings, instead having a flat rate that would enable institutional investors to be better landlords.
PATRICIA KARVELAS
Clare O’Neil, are you allowing big foreign companies to come and be the grand landlord?
CLARE O’NEIL
Well, I mean…
PATRICIA KARVELAS
The grand landlord…person?
CLARE O’NEIL
…the way that Michael described that is just so profoundly inaccurate.
MICHAEL SUKKAR
Well, how do you describe it, then, Clare?
CLARE O’NEIL
So, let me… Yeah. Let me…let me share it with you.
MICHAEL SUKKAR
Foreign fund managers.
CLARE O’NEIL
So, essentially, there is a model of rental called build to rent. And this is a model that’s very common around the world and in other markets, like the US.
MICHAEL SUKKAR
Mm. Like the US.
CLARE O’NEIL
Significant parts of the housing stock are created by institutional investors who will build, for example, an apartment building, and they will run the entire apartment building as a tenancy. And for super funds and the like, this is a really attractive investment, for a variety of reasons that I won’t go into.
We have a problem in Australia where institutional investment is being blocked because of a decision Scott Morrison made around raising taxes on property investment. Now, we’ve probably got some property developers in this room. They will tell you we need more finance to help us build more homes. Labor has a bill to resolve this problem sitting in the Senate at the moment, and Michael and his friends in the Australian Greens are stopping us from moving ahead with this bill.
MICHAEL SUKKAR
Very proudly. Very proudly stopping it.
CLARE O’NEIL
They are stopping us from moving ahead with this bill.
MICHAEL SUKKAR
Very proudly stopping it.
CLARE O’NEIL
And this is not the first time this has happened. Pretty much everything that Labor has tried to do about housing in the last two years, we’ve had these two political parties…
MICHAEL SUKKAR
Foreign private equity is not the answer, Clare.
CLARE O’NEIL
…kicking up a strink…kicking up a stink, talking about all the problems that they have…
PATRICIA KARVELAS
Can I just get your view…
MICHAEL SUKKAR
Foreign private equity’s not the answer.
CLARE O’NEIL
…and not working with the parliament to fix this.
PATRICIA KARVELAS
…Alan?
ALAN KOHLER
OK. So, one thing Michael said was correct, which is that housing is taxed as if governments are trying to prevent it, or at least to discourage it.
PATRICIA KARVELAS
To stop it happening.
ALAN KOHLER
I mean, I think that the taxes on housing are too high. But the idea that we don’t want foreign capital is ridiculous. I mean, what are you talking about?
CLARE O’NEIL
Mm.
ALAN KOHLER
Well, I mean, this is…
MICHAEL SUKKAR
Well, I’ll tell you in a moment.
ALAN KOHLER
I mean… Of course we need foreign capital, for virtually everything. They’re just… I mean, we’ve got… And super funds – we need to encourage the super funds to invest in housing as well. And the Housing Australia Future Fund that the government’s got going is one of the best policies I’ve seen.
CLARE O’NEIL
Mm.
ALAN KOHLER
The… Because…
CLARE O’NEIL
They held it up for six months.
MICHAEL SUKKAR
How much…?
ALAN KOHLER
Because what… So, what the HAFF does is bridges the gap between what sort of return we want the housing to provide, which is not very much, because we don’t want house prices to rise very much and we don’t want rents to be too high. But super funds need a certain return, right? They need 10%…9% or 10% return. And the HAFF actually bridges that gap, it’s great.
PATRICIA KARVELAS
Let…
ALAN KOHLER
We need more of it.
MICHAEL SUKKAR
Can I just answer a couple of those points?
PATRICIA KARVELAS
Briefly.
MICHAEL SUKKAR
So, firstly, on the HAFF, assuming that the government’s right and the HAFF’s a great policy, for their $10 billion that they’ve parked with the future fund, they are promising – we don’t know when it will start – but they were promising 5,000 homes a year, so 5,000 homes a year over six years, which, to be frank, for a $10 billion investment, isn’t going to cut the mustard. And secondly, we are very proudly opposing a bill that is before the Senate as we speak, that is going to see foreign private equity, who are not investing here out of some benevolence to Australia, who want to be corporate landlords. We don’t want that in this country. And, Alan, to your point…
PATRICIA KARVELAS
So, if they were Australian…
MICHAEL SUKKAR
To Alan’s point…
PATRICIA KARVELAS
…corporates, would you be happy?
MICHAEL SUKKAR
…there’s no shortage of capital trying to find its way into housing. There is no shortage of Australian capital that would love to invest in housing. The bottlenecks around housing are planning and zoning and actually getting them built.
CLARE O’NEIL
Mm! That’s not right either.
MICHAEL SUKKAR
There’s no shortage of capital. We don’t need to go off and offer tax rates to foreign funds that we wouldn’t offer an Australian. Cheaper tax rates to foreign funds…
CLARE O’NEIL
Sorry, it’s the same tax rate for Australians.
MICHAEL SUKKAR
…to invest in Australian property
PATRICIA KARVELAS
So, you’re…
MICHAEL SUKKAR
…and to be corporate landlords. We’re very proudly standing in the way of that. I hope the Greens continue to.
PATRICIA KARVELAS
Just a quick right of reply. Next question’s coming up.
CLARE O’NEIL
Yeah. So, I just actually really want to just mention one thing that Alan’s talked about – the Housing Australia Future Fund – just very quickly. I don’t think this is well understood by Australians. Our government has made the biggest investment in social and affordable housing in a decade. We are doing this through a $10 billion fund that will provide half a billion dollars a year and support 30,000 social and affordable homes.
This is a policy that was delayed for six months because the Liberals and the Greens would not let us get this through the parliament. And I want you as Australians to understand that, for all of the tears being shed for housing issues in our country, almost everything our government is doing is trying to be blocked by the Liberals and the Greens, and I want them to get out of the way so we can get on with the job.
PATRICIA KARVELAS
OK, the Greens are not represented tonight – we’ve had them on another housing program – so they can’t defend themselves. But Michael Sukkar is right next to you.
If you’re just joining us, you’re watching Q+A live with Aruna Sathanapally, Michael Sukkar, Clare O’Neil and Alan Kohler.
Lots to get to tonight. Here’s Gavin Seipelt on Skype. Hello.
GAVIN SEIPELT
How are you doing?
PATRICIA KARVELAS
Good. What’s your question?
GEVIN SEIPELT
OK, so we’ve seen proposals to allow people to use part of their superannuation to help buy their first home. Does this not effectively rely upon house prices continuing to outpace inflation in order for buyers to “make back” the money that they had to take out?
PATRICIA KARVELAS
Michael.
MICHAEL SUKKAR
So, I think it’s a good opportunity to just quickly outline what our policy is. As Housing Minister before the last election, we announced a policy to allow first-home buyers access to a portion of their superannuation to supplement their savings, to add to their deposit. In Sydney right now, your average first-home buyer, it will take them over a decade to save their deposit to buy a home. We know the deposit hurdle is one of the toughest things…
PATRICIA KARVELAS
And it’s only up to $50,000. You’re looking at making it higher.
MICHAEL SUKKAR
I’m going to… So… Well, we’ve announced that people can access up to $50,000 of their super with one condition, and that is, when you sell the home – and on average, Australians sell…hold their first home for seven years – when you sell that home, you re-contribute it back into super. So you get the best of both worlds – you’re getting use of your super when you need it, when you’re trying to scrape together enough for a deposit, but you’re also then re-contributing it to your superannuation at the end, which means that your retirement income is maintained.
We know, whether it’s the Intergenerational Report… I’m sure the Grattan Institute has done work on this. If you enter retirement not owning your own home, your outcomes in retirement are infinitely worse. So, allowing people to use their own money – it’s not the government’s money, it’s not the union super fund’s money, who control the Labor Party. It’s your money.
PATRICIA KARVELAS
OK.
MICHAEL SUKKAR
Your money.
AUDIENCE MEMBERS
(CALL OUT INDISTINCTLY)
MICHAEL SUKKAR
For you to use your money to purchase a home and then to re-contribute it back into your super is, I think, a very popular policy.
PATRICIA KARVELAS
So, on Gavin’s question…
MICHAEL SUKKAR
And I think your polling showed it was quite popular.
PATRICIA KARVELAS
It did. Our poll did show that, in fact, I think it was 61% supported the notion. But the question that you put, actually, Gavin – I looked at it carefully – is, are you relying upon house prices to outpace inflation for people to make the money back?
MICHAEL SUKKAR
No, because the primary…the primary reason for this policy is to take a first-time buyer from having to save for 12 years to infinitely less than that. We think at least four years’ savings…
ALAN KOHLER
Ugh!
MICHAEL SUKKAR
…of time that it would save you.
PATRICIA KARVELAS
Alan… Alan?
MICHAEL SUKKAR
No, no. Hold on. So the counterfactual is this – anyone that opposes this policy is basically saying, well, taking 12 or 14 years to save for a home is fine. The Coalition does not believe that. We think first-home buyers should be able to do that…
PATRICIA KARVELAS
Alright. Alan?
MICHAEL SUKKAR
…in a shorter period, using their own money.
ALAN KOHLER
It’s not so much relying on house prices to keep rising more than inflation. It actually relies on house prices to keep rising more than super. Because if you’re going to…if the idea is you take $50,000 out of your super and you put it into a house, and then at the end of whatever time it is, you put it back into super, if house prices haven’t kept up with super, then you’re going backwards. And the problem is…
MICHAEL SUKKAR
Except you own a home.
ALAN KOHLER
…we do not want house prices…
MICHAEL SUKKAR
Except you own a home. That’s the whole point.
ALAN KOHLER
…we don’t want house prices to keep rising at the same rate as super. Super’s going up at 9% a year. I mean, crikey, that’d be terrible.
ARUNA SATHANAPALLY
Mm.
PATRICIA KARVELAS
Mm.
MICHAEL SUKKAR
The purpose is that you can own a home, Alan.
ALAN KOHLER
(LAUGHS)
MICHAEL SUKKAR
The purpose is that you don’t enter retirement not owning a home.
ALAN KOHLER
No, but you’re robbing…you’re robbing your retirement.
MICHAEL SUKKAR
The purpose is you own a home when you retire.
PATRICIA KARVELAS
Aruna wants to get in here.
ARUNA SATHANAPALLY
We’re maybe missing something here. So, Michael’s entirely right. Right. If you go into retirement owning your home, that is predictive of less financial stress and less risk of poverty. So, that’s absolutely true.
Unfortunately, the people who have super to use for their houses are not low-income people. So this policy isn’t actually going to help people who are likely to go into retirement not owning their home and are at risk of poverty. And what it will do, unfortunately, like all demand side measures, like first-homeowner grants and exemptions, is that it increases prices. Maybe not hugely, but it increases prices.
It’s certainly not going to help the situation, unless you do the thing that, you know, Clare’s talked about, which is you’re going to have to build more houses. And so that…you come back to the idea that there’s nothing that is going to solve this problem that is not building more houses.
PATRICIA KARVELAS
Mm.
ARUNA SATHANAPALLY
There are other things you can do around the side. You know, you can, you can fix negative gearing. There are good tax reasons to do that. You can use super for housing. All of these things are tinkering around the edges because, fundamentally, what you need is more houses and you need greater density – you need those houses to be in established suburbs where people want to live.
PATRICIA KARVELAS
Gavin, would you tap your super?
GAVIN SEIPELT
Well, to be honest, I’d rather leave it in there ‘cause you want to kind of get that sort of sweet, sweet compounding interest, don’t you?
PANELLISTS
(LAUGH)
PATRICIA KARVELAS
Sweet, sweet, Gavin! I love how you’ve sweetened up the super! Thank you for your question.
Clare, I’ll give you a right of reply and then we’ll go to our next questioner.
CLARE O’NEIL
Yeah. I mean, this is a really, really important one because it’s about all the Coalition’s got on housing policy. And so I do want to have a good crack at explaining why this is a terrible idea. In fact, if we were going to look for ways to exacerbate the problems that we have right now, this is where I would start. What joins Malcolm Turnbull and John Howard and Peter Dutton together isn’t much, but they all have said and agreed that this is a terrible thing
MICHAEL SUKKAR
False. False.
CLARE O’NEIL
…for us to do, a terrible thing for us to do.
MICHAEL SUKKAR
False.
CLARE O’NEIL
What it will do, it will not build a single new house in our country. And, fundamentally, this is what has to change. But, obviously, obviously, if you think about this for more than five seconds, this is going to immediately inflate house prices. And this is the opposite…
MICHAEL SUKKAR
No.
CLARE O’NEIL
…of what we want to see happen. And I just want to leave you with the words of Saul Eslake, who, along with a handful of other people, knows more about housing than anyone in this country. He has said that if we went ahead with this, it would probably be the worst public policy decision of the 21st century.
MICHAEL SUKKAR
Well, I mean, Saul Eslake… (CHUCKLES)
PATRICIA KARVELAS
Alright. Alright. Next, we’ll hear from Marika Martinez.
MARIKA MARTINEZ
I’m a real estate buyer’s agent, and I’m going to bring the question back to taxes, which have already been touched upon. I know that stamp duty is a state tax on the transfer of property. However, wouldn’t eliminating or seriously reducing this huge government money grab go a long way to improving housing affordability for both young families and also encouraging to downsizers to make a change? Now, please don’t sweep this question under the rug as a state decision. Commonwealth government could be involved in changes to this system.
PATRICIA KARVELAS
OK. Michael Sukkar. And you’re not allowed to sweep it under the rug!
MICHAEL SUKKAR
I’ll try not to. Well, consistent with my previous answer, I agree. I mean, I think housing is overly taxed in this country. Stamp duty is one of those components. Stamp duty is also a real disincentive for people to move, whether it’s to downsize, whether it’s to move for work, or, you know, a whole host of reasons that we don’t have that sort of flexibility that many other nations have.
Stamp duty is one of many taxes, land taxes – in my home state of Victoria, the Labor government there is massively jacking up land taxes, which is an unfunded liability. A windfall gains tax that they’ve put in place in Victoria as well, which stifles investment into housing. So you’re not going to get any disagreement from me.
The only word of caution I would add is this. And this is…you know, states will take this unsolicited advice. You don’t want to replace one bad tax with another bad tax. And of many of the models I’ve seen thus far, it seeks to replace stamp duty with just another bad tax.
And so if we were thinking about a utopian world where the states were saying we’re going to abolish stamp duty altogether, you’d absolutely have my support. If it was an example where the states wanted to replace stamp duty with an equally or potentially worse tax to sort of fill the gap that that would create, then I would have more reservations.
PATRICIA KARVELAS
Marika, have you noticed that it affects people’s decisions?
MARIKA MARTINEZ
Oh, absolutely. Particularly…
PATRICIA KARVELAS
What happens?
MARIKA MARTINEZ
Particularly people who are looking to downsize. It has a huge impact, because if you’re going to be selling a home and hoping to come out $500,000 in your back pocket, as an older, retired person, there are other things that will affect that as well, along with pensions, etc.
But just simply then having to give the government an extra $100,000 of the money that you’ve worked so hard for, that’s a very hard pill to swallow, and it’s definitely a huge disincentive for people to make a move. So, in which case, the people who are moving from a large family home and perhaps giving that opportunity to a growing family who really need that family home, it’s not there.
PATRICIA KARVELAS
Mm.
MARIKA MARTINEZ
The change is not being made.
PATRICIA KARVELAS
Alan, is that a really big issue, ultimately? And does that need reform? And how can the Commonwealth be involved?
ALAN KOHLER
Oh, well, I mean, obviously, stamp duty is an important tax for the states. I mean, I presume if Michael Sukkar wants to get them to abolish it, he’d compensate them. Is that right? Give them the money. I mean…
MICHAEL SUKKAR
Well, that’s why I referred to a utopia!
ALAN KOHLER
So… Yeah, so look… I mean, yeah, I agree, you don’t want to replace it with another tax, bad, worse tax. Stamp duty is a tax that the states absolutely have to have. I mean, you know…
ARUNA SATHANAPALLY
Just to be clear, a broad-based land tax is not a bad tax. From an economic perspective, a broad-based land tax is one of the most efficient taxes that states have. So stamp duty is a bad tax. It…you know, it cuts down how much people move. It means we have a misallocation of housing. It means people are in houses that are too big, or they buy a house that’s too big ‘cause they don’t want to move later on. We could have a better tax system with land tax instead of stamp duty. But, to Alan’s point, that’s really expensive, like, ‘cause, at the moment the states get…
PATRICIA KARVELAS
(SPEAKS INDISTINCTLY)
ARUNA SATHANAPALLY
…all the money up front.
PATRICIA KARVELAS
Mm.
ARUNA SATHANAPALLY
And you know, this isn’t trivial, right? This is…in a particular year, it might be the biggest source of revenue for the New South Wales government, which means that that’s the money that goes into funding hospitals and, you know, funding schools and…etc. So it’s a non-trivial problem to work out how you plug that gap.
But to go back to our conversation earlier, negative gearing tax concessions are a form of expenditure and we could use that money better. So our proposal that we were referring to before on negative gearing was that you could pull it back, so it isn’t as expansive. In Australia, negative gearing is really expansive. You can deduct rental losses against unrelated forms of income. If you pulled it back to something more sensible, where you could only deduct it against the rental income itself, that would save you billions of dollars, and that then provides money that could potentially cross-fund the states to ditch stamp duty.
So there is potential here for tax reform, but you probably need to think of it in terms of a package of things that happen across the federal government and the state government. And it will take a bit of… you know, a bit of courage.
PATRICIA KARVELAS
A bit of courage.
Now we have a question from Mark Attard.
MARK ATTARD
Good evening. My question is for Clare O’Neil. I’m a property developer in western Sydney and build affordable houses and townhouses for families. We currently spend about…on average, about three years in the approval process…
CLARE O’NEIL
Mm.
MARK ATTARD
and a further year for building itself with its significant expense and at times, legal costs, to get an approval. Can you please outline how you propose to address these rising compliance costs, delays and roadblocks?
CLARE O’NEIL
Mm. Yeah, really, really important question. Thank you. So, this is a really difficult one. I talked a little bit before about how the states and local government and the federal government all have some responsibility for housing here and planning and red tape really cuts to the heart of this. It doesn’t mean that the Commonwealth is totally powerless. It just means that Michael and I don’t have the levers in our own parliament to fix the problem.
So what has the Commonwealth done about this? I said before, we’re rolling up our sleeves and getting into housing for the first time in a long time, and we’re doing that in collaboration with the states. We have to. We can’t fix the problem without them, and probably they can’t fix the problem without us.
So we have something now called a National Housing Accord. This is where the Prime Minister has sat down with all of the state and territory leaders and asked them to sign up to some big changes, which only they can make. One of those is about renters’ rights, and I hope we’ll get to talk about that in a minute. But the other is about planning reform.
So one of the things that’s really obvious about our housing situation is that we are going to have to densify in our cities. We are going to have to, as Australians, accept that some of us are going to live in medium- and high-density dwellings, and our planning system is not really designed for that. We’re all familiar with the debate about NIMBYs. I’m very excited to see that YIMBY movement starting to really take off.
PATRICIA KARVELAS
YIMBY meaning ‘Yes In My Back Yard’.
CLARE O’NEIL
‘Yes In My Back Yard’. This is local people who are saying, if we’ve got a housing crisis, we’re going to have to accept that our local area is going to have to change along with the rest of the country. So we are working with the states that have signed up to commitments to reform their planning laws, and we’re pushing them to make those changes as quickly as possible.
PATRICIA KARVELAS
Mark, what are your frustrations? You’re like, “Do we have another hour?”
MARK ATTARD
There’s many, but I believe New South Wales planning is on the right track. It’s just, when the policies come down to local councils, there’s always a pushback and there’s always tinkering in the background to make sure it doesn’t happen. And we start from a position of “no” and then we’ve got to fight…
CLARE O’NEIL
Mm-hm.
MARK ATTARD
…backwards to get an approval. And it shouldn’t be that way.
PATRICIA KARVELAS
No.
MARK ATTARD
It should be, “How can we help you to build these houses?” And we just don’t feel that way.
PATRICIA KARVELAS
Wow. OK. Well, that… Yeah, we’ve got a housing crisis, right? How does that land on you? Like, if at the local level…
CLARE O’NEIL
Oh, I mean, I’m not even vaguely…not even vaguely surprised to hear that. I mean, I hear that same story from almost everyone who’s trying to build anything other than a normal detached house in our country, and I don’t want to… There’s some really interesting work that Alan’s actually just done recently about the connection between densification and affordability. I know many in this audience would know, we are seeing some states make real strides here, and some states who have started to say that where housing is in shortage and we have rail corridors and community infrastructure, the state government will become much more heavy-handed about it making decisions over local governments. And this is probably something that’s going to have to happen. But, Alan, I just think you’ve done some really good work on this that… You’re the host, PK. Sorry. But… (LAUGHS)
PATRICIA KARVELAS
No. No, no. I’m looking at Alan and I’m like, “It’s all over to you, Alan.”
ALAN KOHLER
Uh, well, the point…
PATRICIA KARVELAS
Everyone loves Alan. Come on!
CLARE O’NEIL
(LAUGHS)
PATRICIA KARVELAS
Yes!
ALAN KOHLER
Thank you. Um, yeah, well, so, New South Wales and Victoria have densified to a large extent. Perth and Adelaide have not, to anywhere near the same extent. Perth and Adelaide house prices have taken off, Melbourne and Sydney have not. In fact, Melbourne is going backwards. So, yeah, I mean, just at that level, that’s right. I mean, and if you just take a more…another big picture look at it, housing is a kind of market – I mean, everyone looks at the prices and, you know, treats it like a market – but it’s a product that is very, very inelastic.
CLARE O’NEIL
Mm.
ALAN KOHLER
I mean, you know, we’ve seen prices rise in the last couple of years, enormously in the last couple of years. But housing approvals are falling, right. Most markets, if the price goes up… Like, if the price of this chair suddenly doubled, whoever made it would suddenly start making a whole lot more, and there’d be a whole lot of other companies getting in to make more of the chairs. But that can’t happen…doesn’t happen with housing. Price goes up, it can’t actually…it can’t respond. And the reason is because the zoning restrictions and it’s very…and also the problem of getting labour. The construction industry’s got… hasn’t got enough capacity. So the market actually can’t respond to the increase in prices.
PATRICIA KARVELAS
Aruna?
ARUNA SATHANAPALLY
I mean, on density, Sydney, Melbourne are still far less dense than major global cities and particularly really close to the city, like between 5km and 10km from the city. The density you see in our major cities is far below what you would see in other countries, and that has implications for how pleasant it is to live in these places, the infrastructure that you can get, the transport scale you can get.
But Auckland is a really good example here because Auckland is, in many ways, a similar city to an Australian city. You know, New Zealanders are similar people to Australians. We would think that they would have similar preferences in terms of housing. And Auckland is a great example of the government stepping in, upzoning a large part of the city, about three-quarters of the city, upzoning particularly around transport, but then also broadly, so wherever someone had one house, you could build two. And you can see, over five years, the impact that that had in terms of boosting the number of houses that were built, and ultimately meaning that prices in Auckland didn’t rise in the way that they rose elsewhere in New Zealand, and Aucklanders benefit from that today.
And so there are measures you can take in terms of zoning, but they do require those decisions to come in and…you know, at scale and say, well, this is a big city and big cities need some density. And the places where we have established suburbs, established infrastructure. It’s very lovely if you can get, you know, a single dwelling 3km from the city. But it’s no surprise that those houses cost millions of dollars and are completely inaccessible to people. The only way that city housing can be abundant, secure and affordable is if we uplift density in the established suburbs of our cities.
PATRICIA KARVELAS
Now let’s bring in Wendy Hayhurst. Hi, Wendy.
WENDY HAYHURST
Do the Minister and the Shadow Minister agree that, as well as aiming to reverse the decline of homeownership, Australian government should be doing everything possible to improve the offer for renters, both in the social and the private sector?
PATRICIA KARVELAS
OK, so we’ve got a third of the country renting and so far tonight everyone said that’s not going down. So what more can you do?
CLARE O’NEIL
Well, we definitely need to do a lot more. And I think I said earlier, when I look at everyone who’s suffering because of what’s going on in the housing market, I’m probably most concerned about renters. We’ve got renters who are facing rent increases that are too frequent, that are too high, and we also have this sense of, frankly, just total despair for a lot of renters in Australia, that they feel that home ownership is just getting further and further away from them, and that’s not what I want to see.
So some of the things that we’ve done about this, I talked about, you know, fundamentally, the answer in the long run for everyone is that we need to build more houses. And the Labor government is trying to do that at the moment. For renters, we’ve made two very substantial increases to Commonwealth rent assistance. So this is a payment that goes to renters who are effectively on the lowest incomes of all. We’ve made a lot of strides on renters’ rights. So, constitutionally, renters’ rights sit with the state government, But like your planning question, Mark, we’ve worked with the states to ask them to commit to changes that will improve their rental experience. And the state governments are now going through and individually legislating all of those things.
And then the final thing I would just say about renters is that my aspiration is for more of those people to get into the home ownership market. I want people to be able to own their own homes. There are some people in this debate who say, you can rent for life, and we should just make that a great experience and not worry about home ownership.
PATRICIA KARVELAS
So you don’t want…
CLARE O’NEIL
That is not my view.
PATRICIA KARVELAS
Let me just check. Would you like to reduce this one-third of Australians that are renters?
CLARE O’NEIL
I would like to do that, yes. I mean, it’s…
PATRICIA KARVELAS
To what?
CLARE O’NEIL
Well, I don’t know what the exact number would be…
PATRICIA KARVELAS
Do you have an aspiration?
CLARE O’NEIL
…but I would like more young people, and indeed many not so young, who don’t own their own homes today, to have the ability to get into the housing market.
PATRICIA KARVELAS
So to lower it from a third of Australians?
CLARE O’NEIL
Well, I would like to see it lower. Absolutely. I mean, that would be…that would be a real aspiration of our government.
Can I just draw to your attention… I know you’re aware of this, Wendy, because you bring your own housing expertise to this discussion. But we have a…we have part of the puzzle here in the Senate at the moment. Another bill, unfortunately being blocked by Michael and the Greens, which is something called Help to Buy. So we talked, we started off talking about the bank of Mum and Dad.
PATRICIA KARVELAS
OK.
CLARE O’NEIL
The Help to Buy scheme is basically when the government comes in and acts as the bank of Mum and Dad. The government helps you put down your deposit. The government helps you pay off your home and this is something that would help people who are on those low and middle incomes…
PATRICIA KARVELAS
OK.
CLARE O’NEIL
…who are in the most distress right now.
PATRICIA KARVELAS
Just a quick answer on renters, addressing that question.
MICHAEL SUKKAR
Well, look, I mean, I agree. The rental experience has to be one that provides people with certainty. And the truth is…
PATRICIA KARVELAS
Especially if people are raising children in rentals.
MICHAEL SUKKAR
Correct. And, in fact, one of the things I did as housing minister, I established a scheme called the Home Guarantee Scheme, which enables people to purchase a home with a 5% deposit, and I extended that for single parents, 84% of which were women who were single mothers, to purchase a home with a 2% deposit. And what we saw there was those single mothers went from renting… And the story I often heard was, “Finally, my child can put a poster on the wall or a picture on the wall, and I’m not fearful that we’re going to be pulling my son or daughter out of school next time we get evicted because we can’t get a home.”
This is where you’ll see agreement across the whole table. When you’ve got vacancy rates at about 1% at the moment – for a period of time, they’re dropped by 1% – there’s no availability of any other rental in your community, let alone, you know, in your immediate neighbourhood. And so that puts huge pressure and creates a perverse sort of relationship. And so the truth is you’ve got to increase the rental stock. You’ve got to increase stock more broadly, but you’ve got to increase the rental stock. That is the best thing you can do to provide the sort of certainty and security that renters should have.
And, you know, again, I agree that, look, the truth is a third of people rent. It’s unlikely to go down, but the Coalition is going to do everything we can to get home ownership rates as high as possible. They’ve been as high as 71% in the past. We’d love to get them there again.
PATRICIA KARVELAS
Alright. Last question, and a quick answer on this one. Samuel Lightfoot. Hello, Samuel.
SAMUEL LIGHTFOOT
Hello. With the urgent need to build hundreds of thousands of new homes in our major cities, is the Australian dream of owning a house with a backyard in a city over for all of my generation?
PATRICIA KARVELAS
OK, 15-second answer from all of you. Alan Kohler, is it over? Goodbye, backyards?
ALAN KOHLER
Yeah, it might be. Yeah. I mean… No. Well, the backyard… as Aruna is saying, the backyard has become really expensive, particularly close to the city. If you want to… I think we’re in the situation now where, if you want a backyard, you’re going to have to move a fair way away from the city. I think that’s right.
PATRICIA KARVELAS
Yeah. Clare?
CLARE O’NEIL
I mean, what a hard question. I think… I mean, I suppose Alan’s made a good point there. Maybe, if you want more space, you’re going to have to move further away from the city. Um, but what we really need is lots of options for young people like yourself. And right now, you don’t have enough. Our government’s trying to do everything we can to create more.
PATRICIA KARVELAS
OK. Michael, kids need a backyard?
MICHAEL SUKKAR
I think you need options. I think the truth is Alan’s right, Clare’s right. I mean, if you are going to be aspiring to that traditional 800-square-metre block, it’s probably going to be further out than our capital cities. And I think there’s a role for that. If you look at Australia’s housing market right now…
CLARE O’NEIL
Yep.
MICHAEL SUKKAR
…the cheapest form of housing is detached housing. It’s the first-home buyer…province of first-home buyers, because the construction costs…
PATRICIA KARVELAS
OK.
MICHAEL SUKKAR
…aren’t what they are elsewhere. So I would say we in the Coalition don’t want to see the backyard as being dead. But the truth is, it may not be in those absolute inner city suburbs, as it’s been in the past.
PATRICIA KARVELAS
Aruna, a quick one from you.
ARUNA SATHANAPALLY
I… Like, my housing dream is a great inner-city place with a fantastic park where my kid can play with other kids in the neighbourhood. I think that for many people that is also a dream. I think that’s fine.
PATRICIA KARVELAS
And that’s all we have time for. Thanks to our panel: Aruna Sathanapally, Michael Sukkar, Clare O’Neil and Alan Kohler.
Thank you for sharing your stories and your questions.
Next week, I’ll be with you live from Newcastle. The panel will include – there’ll be others too – Tim Ayres, Barnaby Joyce and Dee Madigan.
Head to our website to register to be in the audience.
ENDS