Interview with David Speers, Insiders, ABC

Subjects: Homes for Australia: A National Plan, federal Budget, housing supply, social and affordable housing, rental support David Speers: Clare O’Neil, welcome to the program. Clare O’Neil: Thank you for having me, David, really appreciate the chance. So you’ve talked a lot about boosting supply, the need to build, build, build, as you have said.

Is the Treasury Secretary right when she says the tax changes here aren’t really about supply? Let’s just take a quick step back. We’ve got a housing crisis in Australia because for 40 years our country has not been building enough homes.

So if you’re at home and you’re trying to understand why home ownership rates are in decline for young people, why rents are going up and why we’re seeing an increasing number of Australians who are without a roof over their head, this comes back to a basic problem that for 40 years we haven’t been building enough homes. To get out of it we need to build, build, build.

Now we have without question the boldest and most ambitious agenda for housing that a Commonwealth government has had since the Second World War. The centre of that agenda is building more homes for Australians, $47 billion, the majority of which is going into that piece of building more homes for the country. Now I’d ask you to take the Budget as a whole.

We’re making changes to tax in the Budget to level the playing field for first home buyers. We are also building more homes through the budget through a $2 billion additional investment in last mile infrastructure that will build an additional 65,000 homes for the country. Yes.

So for those who may not have read the Budget papers, the tax changes will have a negative impact on supply. What you mentioned there, the $2 billion infrastructure spend will make up for that, or more than make up for that. The problem is the industry groups, all 3 of them, say you’re massively overestimating what you’ll get for that $2 billion.

They don’t think there will be an increase in supply. Can you guarantee we won’t see completion rates for housing fall as a result of this? Well, there’s a lot that goes into completion rates for housing, as you know, David.

But what I can absolutely tell you is that we are building more homes through our policies. I mean Treasury’s looked at the entire $47 billion package and said that the home building aspect will build about 420,000 new homes over the decade, and we’re dead serious about this. But I would say to you, you know, resolving the housing challenges facing the country starts with supply, it doesn’t end with supply, and I don’t think there’s a single person watching right now who thinks that it doesn’t matter who owns that housing.

We’ve got home ownership rates in freefall in our country. For a low-income young couple in this country they are half as likely to own their own home as they were in the year that I was born. And I’ll say to you, this is not just about the housing market, this is about the sort of country that we want to be.

Do we want to be a country where ordinary people can aspire to their own home? Our government believes that we do want to be that, and that’s what we’re focused on. I understand that, but the question’s about supply, you’re the one who’s made supply a big priority here.

Again, can you guarantee we won’t see completion rates fall? Respectfully, David, there’s a lot that goes into completion rates. What I can tell you is that government policy is going to lift those numbers by 420,000, based what they would otherwise be.

That’s what the Treasury modelling tells us. You know, we want to build more homes as a country, that’s a big challenge for us, but it’s not the only thing we’re doing about housing. Remember, 260,000 Australians in their first home, more than a million households around the country getting a 50 per cent increase to Commonwealth Rent Assistance, and that big focus on home building.

But if I just step back just one quick thing, I just really want to just contextualise this. Remember we’ve got an Opposition in the parliament that for 9 years couldn’t be bothered for most of that time having a Housing Minister – Right, let’s just move – – that has no housing agenda. So I think we’ve got a really big bold ambitious plan here, and we’re making it work.

I understand the political points about the other side. But just one more on supply. You’re raising a lot of revenue with the changes to the negative gearing, capital gains tax.

The community housing sector says you should be spending all of that on social and affordable housing. You could build more than 70,000 more homes over the decade if you did that. Why won’t you?

Well, one of the reasons that things with housing have gotten so bad for our country is because governments have stepped back from their critical role in building homes for Australians. If I go to any civilised country in the world the government is involved in housing people who need extra support, but for a long time the Commonwealth stopped doing that and under the Liberals stopped doing it altogether.

Remember, 373 homes – I understand you want to talk about the Opposition, so just to come back to the question – I’m just showing you the contrast. – the community housing sector says use the money you’re raising to build, build, build. Why wait? Yes, and we are build, build, building in community housing, David, we are – But not what they’re suggesting.

Using this revenue – We’re building 55,000 social and affordable homes up until the middle of 2029. That is a big contribution for a Commonwealth government that really hasn’t done much home building since the post‑war period. But can I just talk about the broader issues of the tax package.

What we are doing with that revenue is giving it back to Australian workers. Our government has a firm view that Australian workers are doing it really tough right now. If you’re watching at home and you’re paid with a wage, you’re probably feeling, as I do, that Australians are working really hard, they are struggling to get ahead.

We want them to get ahead and we want them to do it in a home of their own, and that’s exactly what this Budget was about. I want to ask you about house prices. The tax changes already appear to be having an impact on what we’re seeing in the market; it’s not just the Budget measures, it’s the 3 interest rate rises this year, also the volatility globally as well, it’s clearly spooking buyers.

Economists and property market experts are forecasting that house prices could fall by as much as 10 per cent. Could they fall that much? Look, I think there’s a bunch of economic models out there that are in the news, and I’ll let the modellers speak for themselves.

What I can tell you is that the tax changes we’re making in the Budget are not the main driver of that. When house prices in our country move – the biggest driver of them is what goes on with interest rates. Treasury has modelled the impact of our tax changes on house prices.

There is a mild affordability impact. For that we get 75,000 rental households into their own home and a fairer market for housing in this country forever. So it’s about a 2 per cent slowing of growth that Treasury has predicted, and indeed it’s not just Treasury.

If you look at the Grattan model that they’ve built – they’re very reliable voices on this – their estimate’s the same; same with the Commonwealth Bank of Australia. But when you put on top of that what’s happening with interest rates in particular, do you think prices will actually fall? Look, again, I don’t get into a speculation about what happens with property prices in this country.

What I can tell you is that our government is fiercely committed to building more homes and getting more first home buyers to own – I’m sure you’d accept there’s a chance that prices will fall. Are you worried at all for the young buyers that you’ve helped into the market with their first home under the 5 per cent mortgage deposit scheme, government picks up the 15 per cent remainder of that deposit, they could end up in negative equity, owing more than they own.

Does that worry you? Our government is incredibly proud of this program. We’ve now got 260,000 Australians into their own home with the support and backing of an Albanese government that saw their aspiration and helped them realise it, and I don’t care what your politics is, that is a massive number of people to have supported.

I guess the question is if prices fall though. Is that scheme a problem? So this is a really robust scheme.

Defaults against this scheme are vanishingly small, and in fact CBA said pretty recently that the average 5 per cent deposit holder is actually more ahead on their mortgage than the average mortgage holder in this country. What does that tell us? It tell us that when ambitious young people who are trying to build wealth for themselves and their family get the opportunity of a government to back them in, they will do the right thing.

On rents, you mentioned rents. About a third of Australians, or nearly a third of Australians rent. Some might be able to buy if prices do come off or ease.

But a lot won’t. And these changes to negative gearing in particular, according to the Budget, will see rents go up a little. What do you say to renters?

Well, the overall effect of the Budget is actually to put downward pressure on rents. So the model that you’re talking about models only the tax change impact. But this is all about renters, this is all about making sure that more renters in our country get that fantastic opportunity to own their own home.

So what’s going to put the downward pressure on rents? Additional supply. So the fundamentals of how much rents are in this country is basically how many homes do we have and how many people need a home, so when we build more homes – So it all rests on that? – we’re able to see rents go down.

But could I just say, there’s a lot of people in this debate who are saying that they’re speaking for renters. Could I ask Australians to focus on organisations that have got decades of experience in advocating for renters, organisations like ACOSS, like Better Renters, like National Shelter, all of them are backing in the changes we’re making, because they see how much renters around this country have been punished by what’s gone on in housing in the last 40 years, and they want to see it resolved, as our government does.

Some of those groups you mentioned don’t like the fact that you’re grandfathering negative gearing for existing investors, nor do the Greens. You’re going to need the Greens to get this through the parliament. They want you to drop that.

More than a million investors will be able to keep negative gearing. I understand that the political reason for the grandfathering. What’s the policy reason?

Look, you know, there’s people in the debate who want to see the government go further, I really understand that, but I just think we need to step back. Negative gearing is a very immediate impact on a household and family budget, and it’s not something that governments when they’re making tax changes should do to interrupt people’s immediate arrangements. But we also don’t want to create significant disruptions in the housing market.

These are big and important changes that will create a fairer housing market into the foreseeable future. We’re doing this in a way that really strikes that right balance, a big change but done in a way that’s going to assist first home buyers. So just to be clear, the policy reason is what?

The policy reason is that governments shouldn’t make dramatic tax changes to systems and affect people’s day‑to‑day management of their household budgets. You are changing the capital gains tax. Yes, but that’s well into the future for most people, and also, David, remember that people who have made a capital gain get to bank that capital gain that they’ve made, so that applies from capital gains 2028 onwards.

But can I just talk again about the disruption, you opened your show talking about changes in the housing market. This is a really big and important part of our economy. We’re a sensible reformist government that’s getting the balance right.

So if you didn’t do the grandfathering there’d be a much bigger disruption in the property market? Well, we’d be changing the immediate tax arrangements for a very large group of people. Okay.

Look, the Opposition says part of the answer when it comes to housing is tying migration levels to housing completions, and I want to show you the figures, you know them well. Net overseas migration went up after COVID, it has come down. Housing completions, the total dwelling completions, has remained relatively flat during your period in government.

Do you accept part of the problem is too much migration? Well, just to the proposal that the Liberals have put forward, this is one from the old Peter Dutton era. I have watched many a Liberal fall apart in interviews trying to explain how this would work.

I mean remember that the net overseas migration figures include Australian citizens returning from overseas, so I don’t know if Angus Taylor’s planning to stand on the border and shut the gates at a certain point. Okay, but what do you think? Yes, let me just say, migration’s a piece of the puzzle here, it’s not the only or dominant thing that’s driving our housing issues as a country.

But that’s why we’re bringing migration down and bringing our home building numbers up. We’ve brought migration down by 45 per cent already from the post‑COVID peak, and those numbers are projected to come down further. If I just come quickly to the housing completions that you just showed me there, I want to talk to you about commencements, that’s sod turns, houses coming out of the ground.

When we arrived in government commencements were going down by 29 per cent in one year. In the last year they went up 26 per cent. Now we’ve still got a long way to go on home building, but we’re making a heap of really good progress and we need to keep pushing.

Okay. Look, on the Budget, there’s a lot of criticism that you haven’t just kept these tax changes to property, that they’ve gone across all investment classes, the capital gains tax changes. What is the problem the government’s trying to fix by making these changes across the board?

Yeah, it’s a good question. So just stepping back for a sec, the 1999 changes that John Howard and Peter Costello made were a huge mistake for the country. They created effectively a shorthand for how the capital gains tax exemption would be calculated.

They said at the time that this was about getting more Australians to invest in the share market. What they actually did unwittingly was make residential property the most lucrative low‑risk investment in this country, and what happened, investors flooded out of shares and went into property, and that’s brought us to where we are today. The reason I make that point to you is because the tax system should not create and drive investment decisions for people.

We want a neutral platform for investors to make good decisions. So a good tax system that’s working well is when investors make the best economic decision for them, and that’s also the best economic decision for the country. And that’s what the CGT changes are about, calculating the real gain that people have made rather than the shorthand.

But isn’t the tax system meant to drive behaviour to a degree? Don’t you want to get investors out of the property market; wouldn’t it be better to keep some sort of attraction for them to invest elsewhere? Well, let me just come back to a few basics on the CGT changes.

Remember, we’re not scrapping the capital gains tax discount, we’re changing the way it’s calculated so it’s neutral across asset classes; that’s a good thing for the economy. But remember, David, just listening to your discussion before, you know, small businesses have got 4 very significant concessions in terms of how they pay capital gains tax, which means that the vast majority of small businesses in this country either pay a very reduced capital gain or no capital gain.

And just one final thing, of course we’re making that right consultation that we should do with small businesses around the country, and the Prime Minister and the Treasurer are leading that. Yeah, and part of that is whether the definition of small business should be more than a $2 million turnover. Do you think it should be?

Look, I think there’s a range of things that are on the table in those conversations, and I won’t speak about them in detail, they’re being – What do you think though? – they’re being led by the Prime Minister and the Treasurer. Look, I don’t want to express a view about the specifics of it, but can I just say something really quick: I grew up in a small business household, both of my parents actually ran their own small business, and so my childhood was the blood, sweat and tears of watching my parents create something out of nothing.

I could not be more respectful of the work that small businesses around this country do for us, but I really want them to understand that I think a lot of the commentary about what’s going on with CGT is completely out of proportion with what’s actually happening here. The government’s – you know, we need to keep reminding people we’re still having a capital gains tax discount, small businesses concessions will all remain, and we’re in that consultation.

But this consultation could take some time. Are you relaxed about this running through the course of much of this year, or would you rather get this settled quickly? Look, I mean the government wants to get the right outcome here, and we’re not going to be driven by the politics of the moment.

It’s really important that we reach, you know, the right landing point for this, and I think I’ve spoken in previous interviews this week about some of the issues we see, for example, where businesses start with a cost base of zero. The new model of CGT calculation isn’t perfect for that kind of model of the economics of a small business that starts with no cost base and grows really quickly.

Look, we’ll work through this and we’ll get to the right landing point, and I hope Australians see, you know, they’ve got a government in Canberra that’s sensible, that’s considered, that thinks things through properly and is making some big moves for a country that needs some hard decisions to be made. But to John’s point earlier, is there a risk that the longer you take to settle what the change – what the landing point will be for those start‑ups and for small business, who’s going to invest?

Are you going to lose the venture capital investment in Australia if no one knows what the rules are for months and months and months? Well, those people are right in the conversation with the government, as you know, and indeed Jim Chalmers was consulting with our start‑up and venture capital sector before the Budget papers were released. But they don’t know what the landing point is.

Yeah, sure, of course, and of course we need to land this, and we’ll do that in the appropriate time given, you know, the need for certainty in the economy. Is the appropriate time – when’s the appropriate time? Yeah, so all I’m just saying to you is that this is not a political timeline, it is a policy timeline that’s set – No, I’m asking about investment timeline here.

If this is going to spook investors, if they’re going to look elsewhere, because they don’t know what the tax rules are in Australia until later this year, is that a problem? Yep. Sure.

Look, it’s important that this gets resolved speedily, and that’s what the government’s working towards. Speedily. What’s that, speedily is that [indistinct]?

Well, I’m not going to put a timeline exactly on it, David. I just make the point to you again, this is a significant and very necessary tax change for our country. We’ve got some really big challenges that we’re facing here in Australia; an aging population, serious productivity problems and a generation of young people who no longer think they’ll be able to own their own home.

We’re tackling those changes, and we’re doing it the right way. Okay. But on this, you’d like them dealt with speedily, you accept there’s a risk if it drags too long?

Well, I wouldn’t use that language. I think the government has announced a big change – You did say ‘speedily’ though. I think the government’s announced a big change.

It’s really important for us to work through that really carefully with the sector. That was always the intention, of course it was. If we’re making a significant change to the tax system, any government worth their salt is going to properly consult, and that’s what we’re doing.

All right. Clare O’Neil, thanks so much for joining us this morning. Great, thanks.