Mister Speaker
This report was timely and important in 2015; it is now critical. The report we have before us today is a history almost as colourful as one of those fabled, colourful Sydney racing identities of yesteryear. It is a textbook or comic book study in what happens when a government feels the urge to do the right thing by the community at large but cannot quite find the perfect moment to break the bad news to those who might not see things quite its way so prefers to do nothing.
This saga begins on 24 April 2015 with the former Treasurer Joe Hockey handing the House Economics Committee a fairly broad reference on home ownership. The inquiry chaired by the excellent member for Bennelong, Mr John Alexander, began work in May 2015 with public hearings starting on 26 June. Treasurer Hockey resigned from parliament in October 2015, observing in his last speech to the House of Representatives that negative gearing should be skewed towards new housing so that there is an incentive to add to the housing stock rather than an incentive to speculate on existing property. It soon becomes clear that the member for Bennelong and other members of the Economics Committee are thinking along similar lines to the former Treasurer. The member for Bennelong is even reported as saying that Australia was turning from a Commonwealth with huge home ownership into a kingdom made up of landlords and serfs. Those comments notwithstanding, the member for Bennelong remains a proponent of incremental reform. For his troubles, the member for Bennelong finds himself no longer chair of the housing inquiry in September 2015 and the relevant committee fails to report for the prorogation of the parliament for the July 2016 election.
For four months after that election, inexplicably, the inquiry remains incomplete because the Treasurer will not renew the committee's reference. Whether it was to appease the member for Bennelong or simply blunt almost universal criticism of the shelving of the inquiry, the Treasurer belatedly reactivated the inquiry on 22 November under a new chair with a short reporting time of 16 December. In the interim, the Labor Party in February 2016 has announced the core elements of a policy in terms of former Treasurer Hockey to skew negative gearing and capital gains tax concessions so that they promote the construction of new dwellings instead of further amping up speculative and investor demand for existing housing.
Post election, the Turnbull gamble, an increasingly prescient title, reveals that the Prime Minister and the Treasurer and, presumably, their departmental advisers were once in favour of winding back the excesses of negative gearing and had taken a proposal to cabinet before the 2016 election but could not get it adopted. A re-elected Turnbull government mostly continues to duck and weave on the issue. The government's rhetoric veers from the sublime to the completely absurd, sometimes constructive and hopeful but mostly evasive. When all else fails, others, including Liberal states, get the blame. Some have had enough obfuscation—for example, the comments by Minister Rob Stokes, the former New South Wales Minister for Planning, regarding negative gearing: 'Exotic supply-side solutions are floated as the best way forward, even though the RBA is on record in evidence to the committee as pointing to their limitations. The latest variant on such contradictory themes accuses those for pressing for stronger action of favouring silver bullet solutions.' This does not, though, prevent the Deputy Prime Minister telling the nation to stop pining for an affordable house in Sydney with water views and go bush—go way bush, even to Charleville. This in turn provokes a certain amount of uncharitable eye-rolling amongst anyone who has recently scanned situations vacant columns in rural Australia. Many soon conclude that this is the Mad Hatter's variant on instant solutions to affordable housing.
The dust has barely settled and yet another fresh start was promised by the PM in his Press Club address on 1 February. Even so, the government, publicly at least, has not changed course but continues to leak some rather bizarre solutions. They continue to favour incremental measures to increase housing supply. These are universally recognised as having a role, but few believe they can readily plug an $11 billion hole in the federal budget or instantly put first-home buyers on a level playing field with highly geared investors. A fresh burst of incrementalism now would only be truly useful if we could turn the clock back to 1999 and tell the Howard government not to link negative gearing with a 50 per cent capital gains tax concession. Those measures changed a nation of 1.3 million tax-paying landlords, who made a collective profit of almost $700 million in 1998-99, into a country of 1.8 million landlords making, astoundingly, a $7.8 billion tax loss in 2010-11. That is shameful.
I have spoken previously about the ills and weaknesses of the housing market, the misallocation of resources, the drain on the federal budget, the inequity in excluding ever increasing numbers of the under-45s and the over-65s from the housing market and the lack of affordable and suitable rental accommodation. These are all major public policy failures, but this government's manipulation of the Standing Committee on Economics' inquiry into housing ownership can only be described as shameful and negligent, as is its treatment of the committee's former chair. It is insulting too to all those who put a lot of effort into preparing and making detailed submissions to the committee. Much of that work is really extremely valuable.
In the late 1960s, Senator Lionel Murphy and others encountered massive scepticism when trying to establish the Senate's extensive system of standing and investigative committees. It is my belief that one reason people are very sceptical and dismissive of politicians is parliament's inability to respond to committee findings in a meaningful way. Could the parliament rise above itself and conduct fair-minded inquiries into complex matters and report on them in a clear-headed and sensible way? Would partisan politics render the whole exercise as an expensive farce? That is what the housing inquiry is.
The majority of the report we are noting today, and its lamentable backstory, raises too many questions about House of Representatives committees. How can House committees ever do good work or be taken seriously when they are subject to such overt and ham-fisted levels of executive government control? Any government members who report on one of the great issues of the day and make no recommendations to speak of should get a fail any day. Who would really seriously sign off on a report on the complex and difficult issues associated with home ownership and affordability without some reference to the budgetary impact of negative gearing and capital gains tax concessions? You have to wonder too how much time the committee's majority members were really given to weigh up what was put before them, and there are several examples in the report of this. Paragraph 2.55 of the majority report, in what has to be one of the great understatements of all time, observes:
There are clearly some pockets of the market, particularly in Sydney and Melbourne, where prices may be inflated. However, this is not a reflection of the Australian housing market as a whole and does not therefore affect the majority of Australians.
What a joke! Large swathes of Sydney and Melbourne are 'pockets'? Forty per cent of our population is being ignored by this inquiry—such small beer that they can be ignored! If the highly leveraged Sydney market ever suffered a bust, that would not affect the national economy. I really do not believe it.
There are several other things that are really very unusual about this report. The government members of the committee also seem inclined to believe that even tailored cuts to existing tax concessions would produce either a landlord strike or a sharp rise in rents. That is notwithstanding strong contradictory arguments from some of the experts, such as independent people like Saul Eslake. Lastly, there is a claim in paragraph 2.58 that says:
… rates of home ownership … have remained broadly steady for many decades …
That is not true. What has happened is that home ownership peaked in the sixties and there has been gentle decline since then, which has been more rapid recently. Where we were once a world leader, we are now closer to the middle range of developed countries in terms of homeownership, and we are slipping further behind. That ignores also the changes in the composition of home ownership, where there has been a steady decline in home ownership for those aged 25 to 45.
What was Honest Joe's parting attempt to set things right has become a saga of false starts and damage control from a government that are desperately hoping that younger and disadvantaged voters will not get any angrier with them than they already are. People that I saw as a paediatrician, hardworking families, now tell me they will no longer ever be able to afford a home. That is shameful in Australia. If you want a case study about why the public has just about given up on politicians, you would not have to look further than this inquiry. We need to act now to bring first-home buyers back into the market and reduce the huge financial advantage that investors have over the first-home buyers, who are mostly young families. It is time
