MICHAEL BRISSENDEN:
Treasurer, good morning.
TREASURER:
Good morning, Michael.
BRISSENDEN:
So can we assume from this that any changes to negative gearing are off the table for you now?
TREASURER:
Well, the Government continues to finalise its assessment of all things because what we do, is we don't rush out there like those opposite have done, like what Labor have done and the BIS Shrapnel report you've made reference to today is a very damning, I think, indictment on Labor's policy. It is true that it doesn't take into account all the things in Labor's policy. For example, it doesn't include the fact that they also want to increase capital gains tax by 50 per cent on these same investments. So, you know, the impact, is far worse I can only assume. But it is a damning, damning thing. Particularly, you know, we had the National Accounts yesterday which showed that our economy is transitioning successfully. What this report shows is that it will drag growth, it'll send growth backwards and retard grown in the economy and that's no way to manage a transitioning economy.
BRISSENDEN:
It's undeniable; it's also politically convenient for you, for your political argument at the moment. Who commissioned it?
TREASURER:
I don't know. I mean you'd have to ask BIS Shrapnel. BIS Shrapnel have released reports…
BRISSENDEN:
Well, they won't tell us.
TREASURER:
Well, that's a matter for them. You'd have to ask them. But BIS Shrapnel has been around a long time and people like Frank Gelber, you know, who I knew many, many years ago and you know he's done, he's well respected in the community.
BRISSENDEN:
But they usually don't, they're usually not reluctant to tell us who commissioned any report…
TREASURER:
Well, I have no idea who's commissioned it.
BRISSENDEN:
Isn't that an important detail? People will want to know. This is a central piece of the argument and how can anyone trust it?
TREASURER:
Well, because it's BIS Shrapnel's report. I mean everybody knows who BIS Shrapnel is. They've set out what their assumptions are, they've set out what their analysis is and they are a respected economic consultancy firm. They've been around for a very long time. They can defend their own reputation and their own report. It's their report and it's for them to say who has commissioned the report – not for me or anyone else.
BRISSENDEN:
Okay, it's their report which attacks Labor's policy pretty hard. So…
TREASURER:
Look, it makes a fundamental assessment of a very big policy issue that's out there in the public domain. Labor says they've done modelling. Well, they haven't done modelling but BIS Shrapnel have and BIS Shrapnel have said and belled the cat…
BRISSENDEN:
But we know that their research, their policy is based on research at least from the Labor-aligned admittedly, McKell Institute. Now they're quite up-front about that.
TREASURER:
Yeah, but there's no modelling in it, Michael. Where is the modelling in there which shows what the impact on house prices is?
BRISSENDEN:
Well, have you done any modelling?
TREASURER:
Well, it's not my policy so why would I have done any modelling on it? This is Labor's policy.
BRISSENDEN:
But you're going to be using this modelling.
TREASURER:
Well, we didn't do this modelling, Michael.
BRISSENDEN:
I know, I know, that's the …
TREASURER:
It's a credible economic consultancy that has decades of experience of research and analysis in the property markets and …
BRISSENDEN:
I understand that, just …
TREASURER:
I don't think you're suggesting that BIS Shrapnel is not a credible organisation, at all.
BRISSENDEN:
No, but I am suggesting that it's unusual for them not to tell us who did their modelling and …
TREASURER:
Well, that's a matter for BIS Shrapnel. I mean that's not something I can enquire into. But it is a credible report and it shows what we said would happen with Labor's policy. It would have a significant impact on property values; it's going to push many people into housing stress. It's going to require compensation of hundreds of millions of dollars, more than is actually raised by the policy itself. And what it shows is they just haven't done their homework on this. They've rushed out there with this policy, they've cobbled it together. It has a devastating impact on property markets and people's homes. Yesterday's National Accounts showed that household consumption, off the back of people feeling confident about the future, can be seriously damaged, can be seriously damaged if people start losing confidence in the value of their homes.
BRISSENDEN:
But you haven't, you haven't decided to take negative gearing off the table then?
TREASURER:
Well, we're just doing our homework as you'd expect us to do.
BRISSENDEN:
No, I understand that but you have said in the past there were excesses in negative gearing. You identified there were some, you didn't identify what they were. What are they?
TREASURER:
Well, what I said yesterday in the press conference was we'd looked at the distribution of those who engage in this practice. And as Peter Costello said in your introduction, he's absolutely right. I mean it is a normal practice under tax policy for people to be able to offset income, sorry, offset expenses against income that they earn. That's a general tax principle.
BRISSENDEN:
Ok, but the rhetoric does seem to have changed on negative gearing.
TREASURER:
Sorry?
BRISSENDEN:
The rhetoric does seem to have changed on negative gearing from you.
TREASURER:
No, I think people just constantly get ahead. Just because when the Prime Minister said negative gearing went back onto the table for assessment last September, that means it went back on the table for assessment. There are other things that were put back on the table for assessment. GST was one of them and we did our homework and we came to a considered conclusion. Now we're working through that process. The Budget is in May. We'll continue to do our homework on these things. But what this document shows, what this credible analysis shows by a respected economic consultancy, is that Labor's policy will damage growth. Labor's policy will damage house prices and home values. Labor's policy will increase rents. Labor's policy will put Australians into rental stress.
BRISSENDEN:
As I said, it would be nice to know who commissioned it…
TREASURER:
But Michael, I ask you, are you suggesting that BIS Shrapnel is not a credible agency?
BRISSENDEN:
No, I'm not. As I've said before I'm …
TREASURER:
So their analysis is there.
BRISSENDEN:
… suggesting that it's unusual for them not to tell us, anyway …
TREASURER:
Those mysteries you can enquire into but there's no mystery about the fact about what Labor's policy will do to people's home values, to rents, to growth.
BRISSENDEN:
Well, this is an argument about, about, you keep bringing up the house price argument. There is a generational divide here on house prices, isn't there, because there's a lot of young people, young families who simply cannot get into the market. So, many of them might actually welcome house prices dropping a bit. You concede that?
TREASURER:
Well, APRA changed the rules on loan to value ratios in their engagements with the banks last year and that has had, I think, a positive impact on cooling what was some very, very strong increases in house prices. That was a good measure from APRA, working with the banks, and I think that has produced a good result in measuring what was happening out there. That's what a good policy does. APRA did their homework, they made some changes …
BRISSENDEN:
That's not the lived experience of people trying to buy a house in Sydney and Melbourne, is it?.
TREASURER:
Well, if you actually looked at what has happened in house prices particularly over the last six months, there was some very strong increases, the last 12 months. APRA changed the rules and that had the desired effect of cooling off what was happening in quite a hot market. This has been acknowledged by the Reserve Bank Governor who over a long period of time has made the commentary on these types of issues and that's been well received by the Reserve Bank Governor.
BRISSENDEN:
So you think the market's cooled now, do you?
TREASURER:
Well, certainly the impact of what APRA did has had that effect and that's not just me saying it. The Governor of the Reserve Bank is saying it. Now on top of that, what we saw in yesterday's National Accounts was a very strong dwelling investment outcome. Now the dwelling investment which was actually for the December quarter particularly in apartments but we had a strong pipeline of supply now coming back into the market and that's going to continue for a while. Now, the best thing you can do to make houses more affordable is to build more of them and the problem we've had over a long period of time whether it was in the Labor states when they were locking up land supply and all these sorts of things, you know, that's why house prices go up, when there's not enough houses for people who want to buy them.
BRISSENDEN:
Sure. You've got people in Sydney though still warning of the housing bubble, you've got people like John Alexander as I understand it forwarding some reports warning about a Ponzi scheme in housing. There's some pretty emotive language around about it still.
TREASURER:
Well, look, there are always emotions about housing and rightly so. It's the principle asset that most Australians…
BRISSENDEN:
That's right and particularly for people who can't afford to buy one.
TREASURER:
… hold. I mean two-thirds of people either are living in a house they own or they're paying off, and you've got one third of people who are renting. And what the BIS Shrapnel report says today is it's bad news if you own a home, it's bad news if you're an investor in a home, and it's bad news if you're renting a home. So, as far as I can see, that's three strikes and you're out on Labor's policy. They've rushed out there on this, they've got ahead of themselves, and they've got it wrong. They have rushed to failure on their policy.
BRISSENDEN:
And they've put policy out and they've got you talking about policy.
TREASURER:
Well, they've put bad policy out. They've put tax increases out there. And if they want to claim that as some sort of success when they're going to damage people's home values, damage investment and put people into rental stress, if that's your criteria for good policy Michael, well, I think you should recalibrate your model.
BRISSENDEN:
It's true though isn't it, that negative gearing and the capital gains discount are no longer serving their purpose, if they ever did, which was really to boost housing supply. I mean, it doesn't seem to be doing that at the moment.
TREASURER:
Well, you need to unpack that for me because what I understand about negative gearing is that the vast majority of Australians who do it are on middle incomes, they do it as a way of ensuring that they can provide their own future. It's entirely legitimate. They make sacrifices to do it and in so doing they take a burden off potentially the taxpayer later in life when they're drawing down on that asset and other investment income they've made and indeed their superannuation. So, I don't think Australians, mums and dads, whether they're Defence Force personnel or if they're plumbers or whether they're teachers or nurses or police – almost 20 per cent of police by occupation engage in this. I don't think they're the problem, Michael. I don't think you do either but Labor certainly thinks they do because they want them to get slugged.
BRISSENDEN:
Alright, a few other issues quickly. Reports around this morning that the Prime Minister has struck a deal with the states to at least give them some interim funding for health and education – $7 billion is the figure mentioned – that's not quite the $80 billion that was taken away from them in the 2014 budget.
TREASURER:
That they assert, yeah.
BRISSENDEN:
Well, okay, but that's enough to give them breathing space apparently until after the election. Did you know that this deal was coming?
TREASURER:
Well, again, that's not a sourced report and the Commonwealth continues to talk to the states about these issues and I wouldn't take that as an outcome or something that's been settled.
BRISSENDEN:
So it hasn't been settled?
TREASURER:
Well, it's a process that's working through COAG and the Prime Minister and I continue to engage with the states about a whole range of issues and I think that sort of report is premature.
BRISSENDEN:
You did say recently that you weren't interested in raising taxes to give the states money.
TREASURER:
That's right.
BRISSENDEN:
So, where's the money going to come from if you do strike any sort of deal?
TREASURER:
Well, you're assuming there's some sort of settled position here, Michael, and what I'm telling you is that…
BRISSENDEN:
Well, you're not telling me there's not.
TREASURER:
Well, I'm saying you shouldn't assume that.
BRISSENDEN:
Alright, on Tony Abbott, is he undermining the Government?
TREASURER:
The former prime minister, as the current Prime Minister said last night and commended him for the incredible work he did to ensure that we got rid of the worst government we've seen in a very, very long time. And that is well recognised in the Liberal Party and that's why Tony will always have a very strong place in the affectionate heart of Liberals and they're the things I choose to focus on.
BRISSENDEN:
Well, what about this leak? Pretty damaging, isn't it? It really does seem to be designed to…
TREASURER:
The former prime minister has said he had nothing to do with it so…
BRISSENDEN:
Well, if it didn't come from him, it's come from a highly placed political source.
TREASURER:
Well, you make a very good point. It comes, I mean that's why the Secretary of Defence has been asked to investigate this matter thoroughly because, I mean I sit on the National Security Committee. I wasn't sitting on the committee when those matters were being considered of those stages of those reports. But it is a very serious matter and we should have confidence about these documents and I think the Prime Minister has done exactly the right thing in terms of the integrity of that process. And if someone has been found to have violated that, well that's very disappointing and…
BRISSENDEN:
But it was someone within…
TREASURER:
…national security is not something people should play politics over.
BRISSENDEN:
Precisely, precisely. But it was somebody within, within the senior echelons of the national security environment in this country who leaked it and presume…
TREASURER:
Well, one can only make that assumption but that's why the Secretary of Defence has been asked to get to the bottom of the matter and so he should.
BRISSENDEN:
But it obviously was leaked to damage the Prime Minister, wasn't it?
TREASURER:
Well, people will make their judgements about who the target was on all these sorts of things. I'm just not going to get into a commentary on it because the right action has been what the Prime Minister has done. I mean he's focused on this on what is in Australia's interests and that is to protect our national security and ensure that the integrity of the way these sensitive matters are handled and respected is preserved. Now, that's why he's taken the action he's taken and whoever the culprit was, well, I certainly hope the Secretary of Defence gets their man or woman.
BRISSENDEN:
Okay, Scott Morrison, we'll leave it there. Thanks very much for joining us.
TREASURER:
Thank you.