JOHN STANLEY:
Treasurer, good morning.
JOSH FRYDENBERG:
Good morning to you, John.
JOHN STANLEY:
Does that surprise you that we've had this drop of what, nationally 4.8 per cent, in house prices, given the pull-back in lending from the banks?
JOSH FRYDENBERG:
Well we've heard from the Reserve Bank of Australia that the slowdown in growth in investment and investors in the housing market has actually been good for the economy, it's helped stabilise the housing market.
So what we have seen, as you say, a bit of a correction in the housing prices. But what we don't want to see is policies introduced that will drive prices down further and then impact upon the real economy, on people's consumer spending for example.
And that's why we've been very critical, John, of Labor's plan to abolish negative gearing as we know it and to increase capital gains tax by 50 per cent, because that will only do one thing to people's homes. It will see them worth less and if people rent, they'll end up paying more.
JOHN STANLEY:
I want to get into that in just a moment, but just in relation to the house price situation, what do you think will happen now? Do you think they should be lending more? Because ultimately the tightening of lending means they're essentially lending to people to make sure they can pay it back. You don't want a complete free-for-all do you?
JOSH FRYDENBERG:
Well, we're seeing housing credit from the banks slow to well below the ten year average and I think it's as a result of a number of factors including maybe a bit more risk aversion following the Royal Commission. There's also been some tightening in the lending standards, like I said, that has contributed to the resilience of the overall economy.
But the fall has been predominately in the capital cities and more so even in Sydney and in Melbourne. But as you know, those two markets make up the overall majority of the housing market across the country.
JOHN STANLEY:
Of course, alright, so what about interest rates? There are now predictions of a possible cut in interest rates later in the year. What's your thought on that?
JOSH FRYDENBERG:
Well, as the Treasurer, I'm very careful not to comment specifically on interest rates because they're decisions for the independent Reserve Bank of Australia, monetary policy. But we have seen interest rates at historic lows and to be there consistently, the cash rate for over two years.
But I'll leave that to the independent Reserve Bank, but I know that they're watching very closely the movements in the overall economy.
JOHN STANLEY:
We're going to hear a lot about negative gearing from you and from Scott Morrison leading into the election. We've had a lot of correspondence from our listeners on this as well. Isn't the argument that if negative gearing's going to push , or scaling back negative gearing, is going to push house prices down, haven't they gone down anyway without the change?
JOSH FRYDENBERG:
Well, the problem for the Labor Party is firstly, they don't even know the start date of their signature policy. And secondly, they actually don't know the real impact will be on prices.
Chris Bowen and Bill Shorten tell you that prices will come down. Shadow Finance spokesman Jim Chalmers says prices will go up and then poor old Joel Fitzgibbon says prices will neither go up nor down. So, their frontbench can't even get their lines straight.
But they came up with this policy when prices were going up in the housing market and they said it was fit for purpose then. Now prices are coming down, they're too embarrassed, they're too humiliated to walk away from that policy, so they're sticking to it even though it's a very different housing market.
And we know that the 1.3 million people, John, who currently negative gear include a majority of people with a taxable income of less than $80,000 and it includes 58,000 teachers, more than 40,000 nurses and around 20,000 police and emergency services personnel.
So, these are not wealthy people, per se, overall who are investing in the property market. But like I said, the impact of Labor's policy will be to reduce the overall number of buyers in the market and that means anybody, whether you negative gear or not, who own their own home, will see them worth less under Labor's policy.
JOHN STANLEY:
Would you urge them to walk away from the policy?
JOSH FRYDENBERG:
Absolutely. I think it's a terrible policy, and they only have to listen to their new President of the Labor Party, Wayne Swan. Because when he was the Treasurer of Australia, he said, in his own words, it would be economically disastrous to change negative gearing and as you know, Paul Keating flirted with it in the 80's, abolished it and brought it back. This is a very bad policy from the Labor Party.
It's a desperate tax grab to fund their reckless spending promises and it's not just the negative gearing policy that bad, and their housing tax, but it's also their retirees tax and their promises to increase income tax, which will hurt the Australian economy overall.
JOHN STANLEY:
Yeah, we've got a Budget coming up in April, I think there's an amount from the mid-year review or something, like $7 billion that you haven't actually announced that you're going to be spending on measures such as tax cuts and the like. When are we going to hear more about those, in the Budget or before?
JOSH FRYDENBERG:
Well, John, as you know we'll leave major announcements for the Budget but we do have some decisions that have been taken but not announced.
But overall, the Mid-Year Economic and Fiscal Outlook showed, despite the headwinds in the global economy and even some challenges domestically, the overall fundamentals of the Australian economy have been sound and that economic growth is stronger than other G7 countries in the world, except the United States, that we have seen our AAA credit rating confirmed by the leading credit agencies and we're also seeing the Budget come into surplus in 2019-2020, which will be the first time in more than a decade.
But these sort of economic outcomes and results are not an end in itself, they're all about strengthening the economy so that your listeners can get more money spent on health and education and infrastructure.
JOHN STANLEY:
Okay, and look, Lyn's got a question. So, I might just get Lyn, while you're still on the line, it might be an easier way of doing it than me answering. Hello Lyn, what do you want to say?
CALLER LYN:
Hi, I would just like to ask Josh when he's going to start explaining more about tax on superannuation for retirees that Labor intends to bring in? I don't think retirees quite understand that their shares are going to be taxed and how much money they'll lose. And that's low, people with low money in superannuation and people with a lot of money…
JOHN STANLEY:
This is the franking credits change. Alright, I'm sure you'll be quite happy to answer that question will you?
JOSH FRYDENBERG:
Look, absolutely. I don't know if Lyn is going to be in that category but there are over 900,000 individuals across Australia who are going to be whacked with the retirees tax, and 200,000 self-managed super funds will be affected as well.
Labor seems to protect their industry funds but seems to whack people who save for their own retirement, for instance self-managed super funds. And again, this is a Labor tax grab to fund their reckless promises, again it's bad policy that should be dropped and again it's targeting people in the community who don't have necessarily high incomes but who have put away a bit each year of their working life to save for their retirement and now the Labor Party is going to take a brick bat to their savings.
JOHN STANLEY:
Alright well, Treasurer, I am sure we're going to hear a lot more of you, you'll be appearing on this program and other programs through 2019. Happy New Year and thanks for your time today.
JOSH FRYDENBERG:
Good to be with you John.