Andrew Clennell:
Well what a budget we’re covering. Joining me live is the Assistant Treasurer Mulino. Thanks for your time. Jim Chalmers looks like he’s ageing at the moment I’ve got to say.
Can you confirm the view of the government is once you axe negative gearing for new investors, the system will even up anyway because those currently negatively‑geared properties, it’s the view of the government, will eventually be positively geared once rents go up?
Daniel Mulino:
So Andrew, look, great to be on. So last time we talked I made the offer to come on after the Budget, and I still make that offer. Now that I’m coming on slightly earlier than expected before the Budget, look, I’ll obviously have to preface answers by saying that the details of any policies in this area are obviously something we’ll have to wait for tomorrow night, as is any of the analysis or modelling underpinning it.
But what I would say is this: The government has said throughout the last term, and this term, that housing is a first order issue in the community. I think the 2 top issues are cost of living and housing. Supply is our priority and I think that’s the right priority. But what we’ve heard this term is a discussion amongst policy experts, amongst community leaders, in the broader community, that we need to pull all the levers we can when it comes to this policy.
Clennell:
So if you were to grandfather it though, isn’t the view of Treasury, if you were to do this, that eventually those negatively gearing would be positively geared so no one would be negatively gearing?
Mulino:
Well look, I think that really gets into some of the details of a particular way in which you might implement a policy, and what I would just say more broadly is that when you’re looking at tax policies that involve long term decisions and investments, transition arrangements are generally a factor that you take into account.
So that’s not to suggest anything in particular about tomorrow night, but what you’re raising are some pretty specific modelling issues. But what I will say is –
Clennell:
We’ll see modelling in connection with this, will we?
Mulino:
No, no. What I’m saying is that the government has clearly looked at a range of approaches, has undertaken analysis and, you know, when it comes to this issue, the priority is supply, but there are other levers.
And the way in which property is taxed in our community, it’s been an issue in major tax reviews for decades in Australia. It’s been an issue which is out there as, you know, needing attention.
Clennell:
Yeah, but you could have taken it to an election. I mean that’s what I find it hard to get past. I mean you probably still would have won. You know, you’re well in front.
Mulino:
So what –
Clennell:
That must that can’t sit comfortably with you, does it? Wouldn’t you rather –
Mulino:
So what has –
Clennell:
The people of Fraser, wouldn’t you rather tell them, ‘Oh, we’re going to change capital gains tax and negative gearing’, rather than spring it on them?
Mulino:
So what has been the focus throughout this term is supply, and the last term, and that remains the focus of the government. We have over $45 billion in initiatives. But not just that, we passed the EPBC Act, we froze the National Construction Code, but there are other levers. And when we held the national economic roundtable this was an issue where there were unanimous calls for the government to have a good look at this.
And so I don’t think it’s any surprise –
Clennell:
But Jim set this up. I mean he’s set up the productivity roundtable so he could do this. He’s had this ambition for years.
Mulino:
Well, so that
Clennell:
Hasn’t he?
Mulino:
That roundtable had 3 days. One was on productivity, one was on regulation and coming out of that was the EPBC Act and the NCC being frozen, and one was on tax.
I don’t think anybody much knew what was going to come out of the tax discussion.
Clennell:
Jim set that up to get to here, didn’t he? He didn’t have a productivity roundtable just for a chitchat.
Mulino:
I did not go into that roundtable expecting there’d pretty much be unanimity on intergenerational fairness as this theme. And that’s why when Jim came out of 3‑day roundtable, that was one of the high‑level themes he brought out as pretty much everybody signed up to.
In tax, as you know, you generally get at least as many views as the number of people in the room when it comes to tax. But on that one everybody was agreed.
And when I go out –
Clennell:
So that just changed Jim’s mind, did it, even though he’d been wanting to do this since 2013?
Mulino:
No, well I think what it said was supply needs to remain the focus, but I think we’ve got other levers we need to –
Clennell:
Is this why new properties are exempt from these negative gearing changes, right?
Mulino:
Well, look –
Clennell:
Can we stop pretending we don’t know what’s in the Budget? This is in the Budget.
Mulino:
Well look, I’m going to have to, on my next visit, delve into more of the details. But what I can say is supply remains the focus, and that’s appropriate. I think everybody agrees that’s the long‑term solution.
But clearly we’ve looked –
Clennell:
What you’re doing though is going to fundamentally change the housing market. Would you at least admit that?
Mulino:
I wouldn’t admit that. And what I –
Clennell:
You don’t think it will be a fundamental change? New properties will be worth heaps more, existing less.
Mulino:
Look, what I would say is that there are other levers and these were raised at that reform roundtable. They’ve been raised in the broader community. They were important to look at.
Clearly there’s a lot of detail in how you implement different policies, and that’s what we’re going to see tomorrow night.
Clennell:
On the capital gains tax changes, has the government looked at how damaging this could be for start ups?
Mulino:
So look, the government is going to work through any policies that it announces tomorrow night. One thing I can say –
Clennell:
[Inaudible] you’re not consulting, you’re just announcing.
Mulino:
One thing I can say that in this year, in this role as AT, I’m very conscious that tax is a complicated area, and this government has been very methodical and stepped through all the tax policies [inaudible].
Clennell:
This is a good point actually. Why not consult on this? Why not put out a white paper 2 months before the Budget and find out what the hairs are on the proposals? Why just whack it with us on Budget, ‘Here you go, if you bought a property before now you can’t get the tax break’?
Mulino:
No, no. So this government has stepped through a process and the 3‑day reform roundtable –
Clennell:
That was it.
Mulino:
– was an important part of it.
Clennell:
That was the process. What else was there?
Mulino:
Well we’ve gone through a series of steps when it comes to considering a wide range of options. And look, that’s a very responsible path to take. This government has throughout this term been has had strong process when it comes to these kinds of complex policies.
Clennell:
What happens if there’s hairs on it? What if there’s unintended consequences and you’ve just put the regime in place? Do you think the government would be of a mind to change or it’s very difficult once you announce it Budget night, isn’t it?
Mulino:
There’s a lot of hypotheticals there, but what I can say is this has been a very rigorous process and has involved – it goes back to last year with extensive consultation with stakeholders right across the board, tax experts –
Clennell:
So you reckon you’ve flagged it enough?
Mulino:
That process that we started last year included tax experts, policy experts in this area, community leaders, unions, business, and it’s worked forward since then.
Clennell:
Do you expect a lot of people to buy shares today and tomorrow knowing this capital gains tax comes into effect Tuesday night?
Mulino:
Well look, you can imagine I’ve got enough on the plate without speculating on market [inaudible].
Clennell:
Do you think people out there should be buying shares if they want to get the best tax arrangement at the moment?
Mulino:
What I can say to people out in the community is that this government is making long‑term decisions. I’d say the 3 themes for me of this budget will be intergenerational fairness, productivity and resilience.
And I think people can have faith that it’s a budget which particulars all those boxes. It’s a budget where the measures have been worked through carefully and I think it’s going to be a really important budget.
Clennell:
You’re not going this hybrid CGT model, are you, capital gains model where you get half tax on one thing and half on the same asset. Two different systems tacking the same asset, you haven’t gone with that, have you?
Mulino:
Well again, that’s a level of detail that I’ll be able to talk through at the next meeting.
Clennell:
Because that’d be a dog’s breakfast, wouldn’t it? I mean I said to you last week it would an accountant’s picnic. I mean basically you’re just better off grandfathering it, aren’t you?
Mulino:
Well look, I go back to the 3‑day reform roundtable, and as I said, what came out of that was in an area of tax policy where you rarely see unanimity, what people said to us was right across that spectrum of participants that we needed to do more on intergenerational fairness.
There was a sense that our tax system and in a lot of other policy areas is just not working for young people, and that’s what’s been a key focus of our budget deliberations.
Clennell:
What’s the evidence this is going to solve any of that? I mean how much do you expect house prices to come down by because of these measures?
Mulino:
Well look, you’re very specific questions about a policy that hasn’t even been announced yet.
Clennell:
Well we all know what the policy is, Mr Mulino, with respect. I mean no one’s out there denying it. Anthony Albanese’s saying, ‘We had to change our mind’. Jim Chalmers is. Will we see modelling tomorrow night saying how much house prices will go down by? Will house prices go down as a result of this policy?
Mulino:
But I think what you’re asking for are –
Clennell:
These policies?
Mulino:
– very specific questions around detail.
Clennell:
The thing is you’re talking about tackling intergenerational inequity, right?
Mulino:
Yeah.
Clennell:
Is it the case that in this Budget, this Budget has policies which will lead to a decrease in house prices? Because you’d have to have that to tackle intergenerational inequity, wouldn’t you?
Mulino:
Well what I would say is on intergenerational equity, we have taken some material actions. I point to the 20 per cent reduction in HECS, I point to the 5 per cent home deposit.
Clennell:
That’s all fair enough. Will house prices –
Mulino:
And what I say is –
Clennell:
– go down?
Mulino:
– but when you look at other measures –
Clennell:
Will they go down?
Mulino:
– you need to look at them in totality, and that’s the thing.
Clennell:
Yes, but will they go down or will they flatten out? What has Treasury told you?
Mulino:
But you’re asking questions about particular policies where we haven’t confirmed whether it’s happening or not.
Clennell:
Yeah, but we all know what you’re doing, so what I’m asking you is will they go down. Will house prices go down?
Mulino:
What I can point to is we’ve taken action on intergenerational equity. When you look at this Budget as a whole I think you’ll see that it goes further on that path.
Clennell:
Jim Chalmers yesterday described it as a tax package. Does that mean there’s good news as well as bad news tomorrow night?
Mulino:
Well again, I’m not going to talk about specific measures. But I think that as the Treasurer has said, the overarching principles we can identify as being intergenerational fairness, productivity growth and making sure the tax system works better, which is an ongoing task for government.
And I think again, when it comes to those 3 key criteria for tax reform, what you’re going to see tomorrow are measures that tick all 3 boxes.
Clennell:
Including with young people on the tax front, apart from negative gearing and capital gains?
Mulino:
Well I think when you look at the Budget as a whole, including any tax measures, it will build on the intergenerational fairness measures that we’ve already put in place. And you know, as I, and a number of people have said, that was one of the key themes which was underpinning the considerations of the Budget, but also our policy deliberations more generally.
Clennell:
Mulino, thanks so much for your time.