Interview on RN Drive with Andy Park

Subjects: Build-to-Rent, super for housing, superannuation thresholds

E&OE………

Andy Park

If you're renting at the moment, I hardly need to tell you how quickly the cost of housing has been rising in this country. Last month's figures from CoreLogic showed rents are at record highs, up 8.5% on last year. One of the government's proposed solutions is to use tax incentives to entice developers to fund what are called build-to-rent schemes. But both the Greens and the Opposition voted today to split this aspect out of the Treasury Bill and send it to the Senate Committee for further examination. Senator Andrew Bragg is the Coalition's Assistant Housing Spokesperson. He joins me now from the Parliament House studios in Canberra. Senator, welcome to you.

Senator Bragg

Andy, how are you going?

Andy Park

Not too bad. The government expects the tax incentive could lead to the supply of 150,000 rentable homes. Surely that'd be a good thing, wouldn't it?

Senator Bragg

Well, the government's very focused on what's good for institutions like big super funds and foreign fund managers. But I'd rather that they focus on people, on individuals, and how they can help first home buyers actually buy a house, rather than rent it from a foreign fund manager.

Andy Park

If there was a national interest test on the tax benefits for developers taking part in this build-to-rent scheme, you'd support it then?

Senator Bragg

We want to see individuals at the focus of policy. So if you want to try and solve the housing problem, you need to have effective supply policies. Now, the government has two supply policies. They have the Housing Australia Future Fund, they have the housing targets, both of which have not been successful. And on the demand side, they have the Help to Buy program, which is where the government takes a share in the house. So I think they could have tried harder to actually build more houses and then to help first home buyers into the market by tilting the scales in their favour. Instead, they appear to be focused on what's good for institutions and what I call a perpetual renting plan.

Andy Park

The Coalition has proposed allowing first home buyers to withdraw from their super as part of their housing deposit, but superannuation peak body, the Super Members Council found the scheme would simply fuel more demand, pushing property prices up 9%, their words, not mine. The inference there is that's hardly going to solve the housing problem.

Senator Bragg

Well, it's a $10 trillion market, and of course, they would say that, wouldn't they? But the reality is that if you let people use their own super to buy a house, that would just ensure that those people have a much more secure retirement. Now, the Labor's logic is that it's a good idea for major super funds to invest in the housing market and then rent them out to Australians. But it's a bad idea somehow for individuals to use their own super. If you can make sense of that, then you're going better than me, Andy.

Andy Park

But it's not just the super industry, though, Senator, I mean, CPA Australia's General Manager Jane Rennie says, "We caution against implementing any demand-based solutions that might inflate house prices further, such as the Coalition's Super Home Buyer Scheme or Labor's Help to Buy policy." Your policy would raise house prices, wouldn't it?

Senator Bragg

Well, it's a $10 trillion market, so if people use their own super to go into the market, I don't believe it would blow up the market in any way. In fact, the independent economists who've looked at this that haven't been commissioned by big super would generally say that it is immaterial in a $10 trillion market. But let me give you an example. If there's a 38-year-old out there, their average super balance would be about $90,000. This might be their only chance to get into the housing market, absent being able to benefit from the bank of mum and dad. So for many older millennials in particular, this may be their only crack at getting the deposit together. So I think it is mean and nasty for a government to deny people access to their own money to get into the housing market because we know that the key determinant of your success in retirement is not your superannuation balance, it is your home ownership status.

Andy Park

Isn't there some risk here that the government will have to cave to some of the Greens' demands, as it's done on other bills recently, perhaps increase the percentage of affordable housing in this package and maybe sideline your concerns completely?

Senator Bragg

Well, I want the government to be successful on the supply side because we need to see more houses built if we're going to solve the problem here. But we also need to make sure that we're creative and we allow people to use their own capital to get into the market where they can. I don't mind what other speculation might be canvassed in Canberra. But in reality, if you want to solve the problem, you've got to do two things. You've got to have effective supply policies which actually build houses. And at the moment, we're building only about 170,000 houses this year, whereas we built 230,000 houses just seven years ago. And the second piece is, we need to find effective ways to tilt the scales in favour of first-time buyers, and the easiest and best way to do that is to let people use their own capital.

Andy Park

You mentioned ideas that perhaps are emanating around Canberra. Let's go to your state Liberal counterparts in Tasmania. They seem to have this idea of affordable rentals. The proposed ahead of the March election to give 100% land tax exemptions for property owners who took up build to rent options. Are you saying that's the wrong idea?

Senator Bragg

Look, Andy, I just think that there's an important role for public housing, and governments do everything but build public housing these days. Now, most Australians don't want to live in public housing, so that's why my main argument against the Labor Government's plan is that it hasn't been effective in helping average wage earners into privately owned houses. But there is an important role for public housing. So I would rather the government use its limited tax dollars to build public housing rather than give tax breaks to foreign fund managers.

Andy Park

What is your solution for renters? Apart from getting them into-

Senator Bragg

Build more houses.

Andy Park

Yeah, but you got to have to accept at some point that not everyone is going to own land in this country. Do you have any policies for renters?

Senator Bragg

Of course we do. We have policies to ensure that there are more houses built so that prices for renters are more sustainable. As I said to you at the moment, you've got only 160-170,000 houses being built, Andy. Eight years ago, you had 220-230,000 houses being built. So, we are going in the wrong direction. So, it is very important that we are able to calibrate the settings to get the houses built. Now, you need to work with state governments, you need to work with local governments, you're going to work with the private economy to make it happen. And after two years of Labor, we are going rapidly in the wrong direction.

Andy Park

It's 24 minutes past 4:00. Should the government be incentivizing developers to build more rental properties? The Coalition says no. Assistant Housing Spokesperson Senator Andrew Bragg is with me on RN Drive. On the topic of super, Senator, the government's proposed reforms would double the tax paid on earnings from balances in super accounts with more than $3 million from 15 to 30%. You oppose this. Why?

Senator Bragg

Well, we don't think that this is a good idea. We don't think that more taxes is the way to go. We would rather see the government find ways to cut spending.

Andy Park

The Association of Superannuation Funds of Australia found that about 7% of those would be hit by this tax change in rural areas, and even fewer are farmers. I've heard you say this. This is mostly a tax that will affect people in a wealthy suburbs, isn't it?

Senator Bragg

Yeah, but Andy, the thing is, one of the reasons we've got a massive inflation problem in this country, which is going to make housing so much worse, because we're looking at the prospect of higher interest rates. As you know, rents have gone up over 7% in the last 12 months. It's because the government keeps on spending. And because they keep on spending, they have to raise taxes. So they have to raise taxes on super. Over the medium term, there's higher taxes on income taxes. There's the franking credits changes, so on and so forth. I don't think this is a good way to go. This is really hurting people across the board.

Andy Park

Hang on. Treasury has estimated $3 million super tax would hit just 80,000 people. That's literally less than 1% of Australians. It will raise 2.3 billion annually. Do you think voters, most of whom don't have these huge super balances, will understand your rationale here?

Senator Bragg

Well, I just don't think that the way to go is to raise taxes, Andy. That's my view. I would rather see the budget more carefully calibrated to reduce inflationary pressures because the government talk about increasing wages all the time in the Parliament every day, but what really matters is real wages, and wages are being eroded by high inflation because the government in Canberra is spending so much money.

Andy Park

Senator Andrew Bragg.

Senator Bragg

I appreciate your time this afternoon. Thanks, Andy. See you.

[Ends]