E&OE - PROOF ONLY
TIM BENNETT: With recent polls showing it might not be as cut and dried an election as we perhaps were expecting in the Malcolm Turnbull honeymoon last year. The Labor Party is saying if they were to win the election they would seriously look at negative gearing and they’ve got some options on the table. To have a look at it from a South Australian perspective we’re joined by South Australian Senator Penny Wong. Good morning.
SENATOR PENNY WONG, LEADER OF THE OPPOSITION IN THE SENATE: Good morning. Good to be with you.
BENNETT: Penny Wong, why would negative gearing – actually let me ask you a different question first, the conversation is focused on big cities like Sydney and Melbourne, what kind of impact does negative gearing have in your mind across the rest of the country.
WONG: It’s a policy where we’re looking at the whole nation and let’s start by understanding what we have actually proposed and understand why. We are saying, not that we would get rid of all negative gearing, that we would focus negative gearing from 1 July next year on new housing supply. So people could still negatively gear, but only in respect of new housing supply. Anyone who currently has a property that is negatively geared that would be grandfathered, that is those existing arrangements would continue for as long as they held the property. So that’s the first point and that is a sensible, cautious transition.
The second point I’d make, that I think Daniel made, he suggested it’s all about mums and dads. Can I just make the point that about half of all negative gearing subsidies go to the top 20 per cent of income earners. So this is a tax subsidy that all of us are paying, all of your listeners are paying, and half of the subsidy – which is what negative gearing is, it’s a subsidy from taxpayers – go to the top 20 percent of income earners. Now that’s fine, but we’ve got to make a decision together as a country, whether this is the highest priority for the budget in a circumstance where obviously the budget and the economy are facing some pretty big challenges.
Negative gearing and capital gains tax for this year will cost the budget in excess of $10 billion, that is more than what the government spends on higher education. So I suppose the question is, first from a budget perspective and in terms of the challenges we’re all facing, in South Australia particularly we’re facing, because of what this Government has done to shipbuilding, to the submarines promise where they’ve walked away and of course the auto sector. You have to say, is this the best use of taxpayer’s money.
BENNETT: Now, I guess my then question, because you’ve said you won’t retrospectively pull this tax, so people who are already on the current arrangements will stay, there will still be negatively gearing on new houses which-
BENNETT: Of course will incentivise building new houses and building new properties, which I guess will be a boost for the construction industry and of course an increase in supply for cities that are facing a crisis like Sydney and Melbourne in terms of affordability. Will though, because you’ve still got so many of these tax breaks in place, with the grandfathered schemes as well as the new houses, will there actually be all that much increase in revenue down the track under the Labor Government?
WONG: We’ve has this independently costed by the Parliamentary Budget Office and they’ve made clear the sort of budget effect you’d have on this and of course what it has enabled us to do is commit to the Your Child. Our Future school funding, which is the Gonski reforms, which is not only an increase in funding, but making sure that we have what’s called needs-based funding, which means that the funds go to schools and kids that need it most where ever they are. And of course know rural and regional Australia we’re in need of much greater investment in our schools.
BENNETT: I just want to try and make sure we’re comparing apples to apples. So you say $10 billion negative gearing currently costs the government each year, but how much would you save by your changes over the-
WONG: -It’s around $30 billion over the decade, 32.1. And the figure I gave you was a current financial year figure for negative gearing and capital gains tax. And can I just come back to housing supply, which was the point that you made?
WONG: It is an incentive for investment in new housing, which obviously is a good thing for housing construction. We’ve thought through this very carefully, we’ve consulted with a lot of business sector, a lot of different industries, and we do understand you’ve got to be very careful about these tax changes, but ultimately I guess the question the country needs to ask is do we actually want to try and make our tax policy fit for purpose for the next 10 years, do we want to make sure our budget can fund schools and hospitals, that does mean making some decisions.
Now I think one of the things Daniel asserted, which is one of the various aspects of Prime Minister Turnbull’s scare campaign, was that investors would exit the market. Well in Canada and the US we don’t have this level of generosity when it comes to negative gearing properties. Investors are still a part of the housing market in both of those, so I think the Property Council would probably do well to recognise – I understand why they want to continue arguing for it, it obviously benefits their members – but there’s a national interest point here.
BENNETT: Penny Wong, thank you very much for joining us on the program, it’s been a pleasure.
WONG: Good to speak with you.