E&OE TRANSCRIPT

PRESS CONFERENCE

SYDNEY

SATURDAY, 13 FEBRUARY 2016

 

SUBJECT/S: Labor’s plan to fund health & education – and balance the Budget; Liberal Party’s chaos and division; cancellation of Lone Pine service.

 

BILL SHORTEN, LEADER OF THE OPPOSITION: Good afternoon everyone. Today at the Labor Party New South Wales Conference, I outlined our vision which will revive the dream of Australian home ownership. I want Australia to be a nation where people can aspire to own their own home. I also want Australia to be able to pay for the hospitals and schools which our Australian people need so dearly. I also want to ensure that we have a strong plan for the repair of our Budget and that we can stimulate growth in the future.

Labor has today outlined a major structural tax reform, but in doing so, we have ensured that no one with existing arrangements in negative gearing or capital gains will be disadvantaged. Let me repeat that, our changes will be prospective, not retrospective and we will ensure too that the family home under a Labor Government always remains sacrosanct and not touched by capital gains tax.

Labor today, my colleague Chris Bowen will outline in more detail in a moment, has outlined an ambitious plan which will ensure that Australians have a greater chance to own their own home. It will provide greater support renters in our cities and in the suburbs, it will deliver incentives to build new homes and apartments and also ensure the creation of tens of thousands of jobs for our tradies right around Australia.

Labor is committed to home ownership, to repairing the Budget, to making sure that we can pay and underwrite our education and health care cost and we look forward to taking our plans to the Australian people. I might just hand over to Chris Bowen now.

CHRIS BOWEN, SHADOW TREASURER: Thank you Bill. There's been a lot of talk about tax reform lately and a lot of waffling from Malcolm Turnbull and the Government about tax reform, but today under Bill's leadership the Labor Party is getting on with the job, the job of ensuring a sustainable Budget, and giving Australians a fair go at entering the housing market in Australia, a  dream which is getting harder and harder for many millions of people.

The announcement that we've made today is a big one. It will draw fire and criticism from groups which benefit from the current arrangements. But it's the right thing to do.

This is the most significant economic policy announcement from any Opposition in a generation. It's the right thing to do because Bill Shorten has a plan for not only for a better and fairer Budget but for a better and fairer Australia.

The measures we've announced today will add $32 billion to the Budget bottom line over the next decade. We'll use those to improve the Budget bottom line and also to fund our important initiatives in health and education and other areas.

Firstly, negative gearing. At the moment, a first-home buyer or a young family trying to get a home that's big enough for their growing family turning up an auction, gets less support from their Government than a person buying their second, third, 10th or 20th home through the tax system.

We want to make the playing field fairer. We want to give first home buyers and other people trying to get into the residential market a fair go. We want to keep negative gearing but we want to put it to work by ensuring that from 2017, negative gearing is used to grow the number of houses and apartments in Australia. Experts say the best thing we can do for housing affordability is to get more houses and apartments on the market. So from 2017 if you want the treatment which the tax system gives you through negative gearing all we ask is that you buy something new a house or apartment, if you want to grow your welt through negative gearing you still can but work with the Labor Government to help us expand the number of houses and apartments available.

Everybody knows housing affordability is a real issue, one in seven home buyers are now first home buyers. Investors are taking 50 per cent of the market. It’s so important that the system is fair. The number of young people owning their own home has fallen dramatically over the last decade and it's getting harder and harder. The only contribution this Government has made is to tell people wanting to buy their own home is to get a better job and that's all they've come up with.

Our policy is well designed, as Bill said every single person who has a negatively geared property will keep it and keep the same tax arrangements.

This will be controversial. There will be myths perpetuated and lies told. Let's deal with them up front.

Some will say that this policy will put upward pressure on rents or that this happened in the 1980s when a policy different to this was implemented. That is not true. No credible, independent person can tell you that it would happen this time either. Equally, some people might argue that house prices might plummet. That's not true either. This is about giving first home buyers and people trying to get in the market a levelling playing field and taking some of the heat out of a future rise. We know about housing prices, up 11 per cent over the last 12 months so it's about giving people a fair go

There will be people who say people on low incomes who benefit most from negative gearing, cleaners and nurses, it's not true. We know that half the benefit of negative gearing goes to the top 20 per cent of income earners and anyway, all the benefits of negative gearing will be able to every single Australian if they buy something new from 2017 onwards.

If you earn your money on a factory floor, as a policeman or a nurse, you pay your full marginal tax rate but if you earn your money through your investment growing in value, you get 50 per cent off.

Now that might have been sustainable in 1998 when John Howard and Peter Costello introduced it, it's sure as hell not fair and not sustainable now. We know that 70 per cent of the benefit of the discount goes to the top 10 per cent of income earners. It’s not fair, not sustainable, and not targeted. The announcement that Bill has made means that there will still be an incentive to investment in new property for individuals but 25 per cent is fair. This will add billions of dollars to the budget bottom line. The total package comes to $32 billion and again, the changes to capital gains tax are entirely prospective. Don't let anybody run a scare campaign that this is somehow attacking existing investments. That will be a lie. As Bill said, we look forward to fighting the next election on our tax plans. If the Government is fair dinkum they'll come forward with some of their own now. They've had months to talk and they've done that. Bill and I have announced, on behalf of the Labor party, our plans on multinational tax, high income superannuation, tobacco and now negative gearing and capital gains tax. We're not hiding from scrutiny. Malcolm Turnbull and Scott Morrison need to stop talking and start coming up with a plan for Australia.

SHORTEN: Are there any questions?

JOURNALIST: (Inaudible)

SHORTEN: I'll answer that first part, then I'll get Chris to unpack your important question in more detail. First of all, anyone who has a negatively geared property, this doesn't change anything they've done. I'm old school, brought up with the principle that laws should not be retrospective. If you've entered into financial arrangements and investments based on current tax law, I don't believe you should retrospectively change that law. In other words, when you make a new announcement in the future, it shouldn't change the circumstances of the people who are already invested under the old law. If you have a negatively geared property, up until 30 June 2017 the existing laws will apply.

In terms of fairness going forward in the future, I want to look at a couple of tests for what's fair. First of all, people will still be able to negatively gear, but it'll be on new housing stock. The beauty of having more housing supply is it gives more people the chance to buy houses and apartments. It gives more people the chance to live the great Australian dream of home ownership. That will still be available. We're going to use this taxpayer subsidy to help stimulate jobs and build our new housing stock.

There's another point about fairness: what's fair about keeping the existing system indefinitely? It's not fair on taxpayers, because taxpayers are paying all their money and it's being used inefficiently for the benefit of some. There is nothing fair about people not being able to enter the housing market. I believe Australia should be a nation of home ownership. When we talk about fair, for me, fairness looks like this: the opportunity for every Australian to work hard, save up money without having to save for decades or rely on the intergenerational transfer from their parents. What's fair is when Australians work hard, they get the chance to own their own home.
What's also fair is we have properly funded schools and hospitals. A Labor government is prepared to make choices. We're not going to keep shovelling taxpayers' money to one group of lucky recipients and see our schools and hospitals underfunded, or our TAFE system and our great universities. We're confident what we're proposing is fair. It'll generate job opportunities and also it's a sensible, steady change. If you currently negative gear then it is business as usual for you.

BOWEN: As Bill said, we obviously have a number of priorities here and one of them is ensuring certainty and fairness. When we said last year that we would consider changes to negative gearing in a proper, considered manner, we outlined two principles. One, existing investors who have made their decision in good faith with existing rules wouldn’t be disadvantaged, and secondly, we would look at measures to add to the housing supply. The initiatives we've announced today do that. We are not interested in retrospective tax changes. That is a fair dinkum principle that Bill and I believe in. We were also interested in a long lead time so that people can consider this. So 1 July, 2017 is an appropriate lead-time for that to occur.

JOURNALIST: What about in the short-term?

SHORTEN: People will make their decisions. They'll look at our policy and the Government’s policy, it depends on their own financial arrangements. But the only alternative would be to announce a change retrospectively or effective from Election Day. That's not an alternative we're prepared to accept.

We've seen the current Government, frankly, in chaos. We don't know who is the minister for what and we don't know if whatever minister they choose, whether that person will be here in two weeks. They've lost 13 or 14 ministers. Australians were promised a more stable form of new economic leadership with Malcolm Turnbull than under Tony Abbott, but it's almost like the certainties of Australian politics are changing. You've got a government who can't articulate what they want to do on taxes other than their secret passion for a 15 per cent GST. We know they won't fund schools properly; they're making tough cuts to Medicare – at least the bits they're not selling off – and at the same time we don't know who's got what job. By juxtaposition and by comparison, you've got a Labor Opposition which is outlining how we pay for things, how we fully fund things.

I think we've been a strong Opposition, but in order for us to be a government which Australians will trust with confidence what we need to do is tick all the boxes. What we're doing today is explaining how we pay for things. We're not shirking the hard battles. It's been a political cliché: no-one will ever reform negative gearing.

Most people know the capital gains discount treatment of 50 per cent artificially favours people who can turn their income into big assets and then sell them off at a profit and they pay half the tax rate that ordinary Australians pay. It's been regarded as too hard, well a Shorten Labor Government with Chris Bowen as my Treasurer, we'll deal with the real issues. What people want is not radical change, they just want straight talking. That's what we're giving them today.

JOURNALIST: Mr Bowen, you mentioned that doctors, sorry nurses and teachers only make up a small amount of those who negatively gear, but won't this punish those hard-working Australians that you do represent?

BOWEN: Not at all, I mean you're right to say that many people right across Sydney invest in property. Of course, right across Australia, but it is also a particular sport in Sydney to invest in property and nothing wrong with that. And that's why we have taken the decisions to one, have all existing investments protected. There will be nobody who can tell you this affects any existing investment; that will be a lie. And secondly, to ensure that people can continue to invest in housing through negative gearing. They, of course, can buy an existing house and they can then only claim the tax deductions against their investment, but if they want to have the existing arrangement of negatively gearing their loss in their house against their salary, all we say is buy something new. Those rules are clear and transparent and will be available for all.

JOURNALIST: With the Government backing away from a GST hike, is this just a knee-jerk reaction to offer something in the way of tax reform?

BOWEN: Well we've been working on a policy for 18 months, deeply considering it, consulting. We had in this building the former shadow Minister for Housing Affordability and I, we had roundtables, getting the (inaudible) in, consulting with property groups, consulting with experts, academics. Bill asked myself and Katy Gallagher to concentrate on the matter of housing affordability in our policy development, and we have. We have and we've consulted, we've developed and now we're announcing.

JOURNALIST: Mr Shorten does the policy address at all, I guess the areas where potential new housing would be built? Would there be further land release?

SHORTEN: Great question. Not all the issues of housing affordability can be dealt with by the Federal Government. States quite often control land supply. What we've outlined in the information surrounding our announcement is that Chris would lead the negotiations with States. We've got to make sure that if the Federal Government's coming to the party and a Shorten Labor Government will do that for housing affordability, that the States work on supply of land as you identified.

Now I'm very confident that our consultations will improve the opportunities for ordinary Australians. For me what matters in the policy we've outlined is how does it affect people? People are interested to know can their kids get a house. 30 years ago you needed - to be able to afford a house you needed to have 3.2 times your annual average income. So that was if you had 3 years of your annual income that would be the price of the house. In the last 30 years it's now increased to 6.5 times. So this is putting housing affordability out of the reach of a lot of people and not just young people, single people as well. And so we're determined to do our bit to make sure that our tax subsidies which are given are making, you know, doing the job to help people into the housing market, not keeping them out.

I might also just say about this capital gains tax change which we're making, it isn't fair that if you can convert millions of dollars into assets and make a capital gain that you're paying the same effective marginal tax rate as nurses and teachers. In Australia we want to incentivise some capital investment, but we shouldn't have a tax system where the more money you have the greater chance you have to pay no tax. I said in my speech to the NSW Labor Conference that two years ago there were 55 very fortunate Australians who earned over a million dollars who managed to minimise their tax quietly. They paid no tax, not even the Medicare levy. What is interesting, though, is that of those 55 lucky people, 40 of them paid accountants bills of over $1 million. So some people if you have enough money you can opt out of the system, but we do need to work with the states and Chris will lead consultations about implementation.

JOURNALIST: And what about for investors who aren't happy to put their money into the housing market, are you considering other possibilities, options for them, incentives in other sectors?

BOWEN: When we write tax laws, we have to make sure that they are either not distortionary, either they don't encourage one activity over another or if they are, they're encouraging good activity. So we say the construction jobs that are created through new house building and new apartment building, the addition to supply that's created is a good. And so we encourage it through allowing negative gearing. We're not in the business of writing in Canberra tax laws, which says you know, this share or that share or that option is a better investment for you, the tax laws should be flat in terms of a level playing field apart from where governments have made deliberate decisions like we have today on new housing. Now people say negative gearing is designed to encourage new house building, well 93 per cent as Bill has outlined in his speech, 93 per cent goes to existing houses. If that is a well-targeted program, well then I'd hate to see a poorly targeted one.

JOURNALIST: What about the commentary that the changes will mean that value of houses will drop?

BOWEN: As I said before, I think all the analysis and a careful consideration will say this is about giving people a fair go, taking some of the heat out of future rises. You're seeing increases of 10 per cent a year and I say this, obviously everybody likes their house to be, you know, worth a decent amount, but I speak and I know Bill does to parents and grandparents who say, it's all very well for me to have a house that's gone up in value by so much, but how are my kids and grandkids going to get into the housing market? It's getting harder and harder. I know that many parents say that to us, I know that we think that about our own families. Look at the housing market and say if it keeps getting worse, how is the next generation going to take part in that great dream of home ownership? And so I am sure that when people look at this policy and say well, this is something fair, all for the future and to give younger generations a fair go, that they'll look very seriously at this option.

JOURNALIST: Seven News ran a poll this morning, it's an equal split between for, against and undecided, obviously it's an election year, are you confident that this policy will be enough to lift your rating right now?

SHORTEN: Sorry they said they were for, against, undecided on what? I missed the poll.

JOURNALIST: I beg your pardon, sorry, on the negative gearing. It's early days obviously.

SHORTEN: Yeah, you know, we don't retreat at the first whiff of poll gunpowder, unlike Mr Turnbull. We're interested in the future. What matters to me is when I talk to Australians on election day, have we got a plan to do something about getting the Budget under control and stop public spending? Tick, this does that. Have we got a plan to ensure that Australians have a greater chance to get into home ownership? Yes we do, tick. Are we doing something which will help renters? Yes, we are, tick. Are we making sure that we can explain how we can fund health care and education? You can have the most beautiful Point Piper mansion in the world, but if your schools aren't functioning, if your healthcare is running down, if you don't have a properly funded childcare system, if your TAFE system is going to the dogs, you know, we're a community as well as individuals, but I'm very confident because we are having no retrospectivity, we're grandfathering. Once people realise their current investment is exactly what it was tomorrow as it was yesterday, I think that's important, and Australians will get the chance if they want to, to take the opportunity to do some negative gearing, but it'll be focussed on new housing. That's got to be good for Australia. When Australians are getting more work and more jobs, then Australia is doing well. Perhaps one last question.

JOURNALIST: After a pretty scrappy first fortnight from the Government, are you worried that Malcolm Turnbull might be getting his house into order today?

SHORTEN: You'd have to be a pretty optimistic betting person to think that after this fortnight Malcolm Turnbull's getting everything into order, or anything into order. Really, since he got elected 6 months ago, what's happened? I mean what has he actually done? We know that he's 13 or 14 ministers down over the last 6 months. We know that they're going to be putting in brand new people into major Cabinet portfolios and expecting them to get up to speed by the time of the Budget. That is diabolical for the Budget preparation and what we see is a divided Government. I think we all know through the Stuart Robert scandal, that there were some people key to Malcolm Turnbull who didn't want Mr Robert to walk the plank and there were others who were leaking against Mr Robert. They're a divided government. But more importantly than the divisions over personalities, they are focussed on their own jobs.

I want to hear from Malcolm Turnbull what he's going to do about education. I want to hear from Malcolm Turnbull what he's going to do to fund Medicare. I want to hear from Malcolm Turnbull what he's going to do to stimulate housing construction jobs, I want to hear what his plans are to encourage greater Australian home ownership. I want to hear from Malcolm Turnbull that he could say confidently he leads a united team. Anyway, I think they're a Cabinet in chaos. They used to say Tony Abbott was Captain Chaos, I don't know what rank of chaos you'd give Malcolm Turnbull at the moment, but it hasn't been a great fortnight, you're quite right.

JOURNALIST: Mr Shorten very briefly if I may on another topic, late yesterday the Government announced that the Lone Pine service at Gallipoli would cease from this year and will not be occurring?

SHORTEN: I have two relatives who are buried at Lone Pine. Their names are on the memorial there from the Gallipoli campaign. If they've done this for security reasons, then I accept that. But if what we're doing is seeing some shaving and cost cutting so that Australians don't celebrate the tragedy and commemorate the great honour of thousands of young Australian men who died at Gallipoli and in particular, the Lone Pine conflict, then that is disgraceful. You know, I didn't agree a lot with Tony Abbott on many things, I can't imagine Tony Abbott though wasn't interested in commemorating our war history. The Lone Pine battle was a terrible battle. Many young Australians lost their lives in almost just a needless military manoeuvre that day and over those days. It was the scene arguably of the fiercest fighting at Gallipoli. Every Australian should know the history of Lone Pine. Unless it's been for security reasons I would call upon Mr Turnbull to reconsider immediately. Lone Pine is as much a part of Australia as any star on our flag. Thank you.

ENDS

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JAMES CULLEN (BOWEN)