Peter Stefanovic:
You’re watching First Edition on this Wednesday morning, folks, and thank you for your company. Well, the federal government is defending a political gamble as Labor breaks election promises in its fifth Budget. It includes the largest housing tax changes this century, billions of dollars in new spending and a warning that Australians will experience worsening price pressures.
Joining us live this morning is the federal Treasurer, Jim Chalmers. Treasurer, thanks for your time. Now that the lie has been confirmed, will you apologise to the Australian public?
Jim Chalmers:
Good morning, Pete. Well, I’m fronting up to explain to the Australian public why we’ve come to a different view on some of these contentious policy areas, and the reason we have is because it’s becoming increasingly clear and increasingly unacceptable to see so many young Australians and Australians more broadly locked out of the dream of owning their first home. That’s why we’ve made these changes.
We understand that people who would rather the existing arrangements stay in place. The defenders of the status quo, would rather focus on the politics of that rather than the substantive issue. But the substantive issue is the intersection of the housing market and the tax system has locked too many Australians out of the housing market for too long, and so we’re taking these difficult decisions to address that.
Stefanovic:
Right. But no apology to those who listened to you saying multiple times that CGT and negative gearing wouldn’t be touched?
Chalmers:
Well, the position that we expressed at the election reflected our policy at the time, which is overwhelmingly about supply and 5 per cent deposits. And I’m being upfront with you and with all of your viewers, Pete, when I say that we have changed our view. Not on supply, we’re doing more on supply in the Budget, that is still the main game, it’s still where this problem begins.
But it doesn’t end there. There’s also a very substantial challenge when it comes to how difficult it is for Australians to get their first toehold in the housing market. I understand that these changes are contentious. I understand that there are people who would rather us leave things exactly as they are, people who think the housing market and the tax system is working just fine. But we don’t think that it is, and that’s because too many Australians, and particularly young Australians are being locked out of that aspiration, that dream of owning their first home.
Stefanovic:
Right. But on the question of supply, your changes will mean less homes built and higher rents, so doesn’t that run counter to your own housing plans and targets?
Chalmers:
No, you’ve got to look at the whole housing package in the Budget, Pete, and the housing package in its entirety means about 30,000 extra homes in our economy, and that’s because the tax changes are not all that we are doing for housing. We’ve got a couple of billion dollars there to bring another 65,000 homes online, and so the net effect of our housing policy is to build more homes at the same time as we deal with some of these tax concessions, which are skewing the market.
Stefanovic:
Now that you’ve gone after investors, will the hit on the family home be next?
Chalmers:
No, Pete, and I wouldn’t characterise what we did last night the way that you just have, either, or in your introduction, to be clear. The Budget last night recognises and respects decisions that people have taken when it comes to their investment portfolios. This is not about fewer people doing well, it’s about more people doing well, particularly when it comes to buying their first home.
In your introduction, you didn’t mention that the Budget actually saves more than it spends. It’s got a big net improvement in the budget, we’ve got the deficits smaller every year of the forward estimates, we’ve got the debt down compared to the December update, and that’s because it’s a very responsible budget. It’s a responsible budget, and it’s a reform budget at the same time.
Stefanovic:
Okay. I’ll get more on that in a moment, Treasurer, but no hit on the family homes coming next, is that what you’re saying?
Chalmers:
No, we’re not changing the arrangements when it comes to the family home, we’re not changing arrangements when it comes to things like inheritances, all of those sorts of things that people push around on social media and the like, we’ve made very clear.
Stefanovic:
Okay.
Chalmers:
The policy changes that we made last night are overwhelmingly about this challenge that we have in the housing market that too many people, particularly young people, are locked out. We’re taking difficult decisions to try and address that.
Stefanovic:
Right. But you say that now. With respect, how does anyone believe you?
Chalmers:
Look, I understand that that’s something that our political opponents will say, obviously, when you come to a different view on the policies that we announced last night –
Stefanovic:
Well, it’s not just political opponents, it’s a lot of people who think you broke promises.
Chalmers:
And we’re explaining to people why we came to a different view on the policy changes that we announced last night. To be upfront with you, Pete, we know that this is very politically contentious, of course it is, and we know that there’s an element of political risk involved with changing our view.
But what would have been worse, what would have been much easier but much worse, is if we became increasingly of this view that this needed to be attended to, and we didn’t do it because we were worried about what our political opponents might say. This is about doing the right thing and explaining why that has necessitated a change in policy.
Stefanovic:
Do you negatively gear any properties?
Chalmers:
I don’t, Pete, no. I did maybe a decade ago or something like that.
Stefanovic:
So, would you expect other parliamentarians to follow the Prime Minister’s lead and not negatively gear if they have multiple properties in the interests of generational fairness?
Chalmers:
I expect people to comply with the rules, and every Australian who is currently negatively geared can continue to do that. We’ve made that really clear. That’s one of the ways that we’re recognising and respecting decisions people have taken in the past. Those transitional arrangements mean that anyone who is currently negatively gearing can continue to do so. A lot of those properties will become positively geared over time and will phase out.
Stefanovic:
Right.
Chalmers:
If people want to negatively gear in the future, they can negatively gear a new property and add to supply.
Stefanovic:
What about parliamentarians who have enjoyed these benefits in the past and continue to do so, some with multiple properties?
Chalmers:
I’ve already answered your question, Pete, by pointing out that any Australian who’s currently negatively gearing a property can continue to do so.
Stefanovic:
Okay. But here’s the problem with that. You’ve got one section of the economy who still benefits from the old system while others miss out, so therefore, you’re running a 2‑tier system essentially.
Chalmers:
No, if people want to negatively gear in the future, Pete, they can do that, they just need to make a contribution to the housing supply. One of the most important elements of what we announced last night was to say if you want to negatively gear in the future after the cut‑off date, you’re welcome to do that, but you’ve got to add to housing supply by negatively gearing a new property.
Stefanovic:
Tell me something, if this is about housing fairness, why go after the share market?
Chalmers:
Well, what’s happened over the last quarter of a century or so, ever since the big change was made in 1999, is we’ve had a big distortion in the incentives for investment. And so if you look at – there’s about a 2‑decade period in there that we’ve looked at where on average what’s happened is the CGT discount, as it’s currently calculated, has overcompensated investment in existing housing and pushed the prices up and locked people out of housing.
But it’s undercompensated other areas like shares, like units actually in the property sector, and so what we’re doing is changing it so that it better reflects the real gains that people make. We’re trying to address this distortion, which has helped create a housing market that people find it too hard to get into.
Stefanovic:
Okay. I know you’ve got to go, but I just want to ask a final point on responsible economic management. The total spending still outweighs total savings, while gross debt is about to break through the trillion‑dollar mark. Where is the fiscal control there?
Chalmers:
Well, first of all, gross debt was going to break through the trillion‑dollar mark 3 years ago, and because of our responsible economic management –
Stefanovic:
It will be on you, though, when it does.
Chalmers:
We’ve been able to get the debt trajectory – we’ve been able to get the debt trajectory considerably lower. Even in just the coming year, I think debt is down about $180 billion from the trajectory that we inherited. Debt is down compared to the old trajectory, and that’s saving us on interest costs.
If you look at the Budget last night, Pete, it is historically responsible. We’ve got $26.1 billion net improvement, the bottom line gets better in every single year of the forward estimates, and debt comes down in every year of the forward estimates. We get spending as a share of the economy from up near 27 per cent down near 26 per cent by the end of the forward estimates. So any –
Stefanovic:
Can I just jump in there? Much of spending assumes savings though, right, including the NDIS, which might not happen, given that it’s not means tested?
Chalmers:
Every budget works in that way, Pete. There are savings in the Budget, there is responsible spending in the Budget. We found $64 billion in savings, Pete, that is a historically large number, and that’s because this is an historically responsible Budget.
It’s the kind of responsible economic management which would be unrecognisable to our predecessors – getting the debt down, getting the deficits down, saving more than we spend. These are all the essential elements of a budget which any objective observer would conclude was very responsible, particularly by the standards of the last couple of decades.
Stefanovic:
I know you’ve got to get to another interview, but Treasurer Jim Chalmers, thanks for your time this morning, appreciate it.