Mornings with Wendy Harmer ABC 702 Sydney

25 January 2017

WENDY HARMER, PRESENTER: Chris Bowen welcome to the program.

CHRIS BOWEN, SHADOW TREASURER: Good morning Wendy, happy Australia Day Eve.

HARMER: Thank you wow that is a brand new salutation, Ive never had that said to me before.

BOWEN: Well happy New Year and happy Australia Day Eve.

HARMER: Thank you very much. Now what did you think of Barnaby Joyces comments there Chris?

BOWEN: Well I think Wendy, it underlines a sort of fundamental nature of being out of touch with the problem. I mean we had Joe Hockey remember said, get a better job that was their housing affordability answer. Malcolm Turnbull said rich parents should chuck in for their kids and now Barnaby Joyces big answer is move to the bush. Now lets be clear. Country life is a wonderful life. Its good for many people. Its good for many people who grew up in the country and for some people who grew up in the city who move to the bush. Theres nothing wrong with that. But its not the answer for everybody. And it is certainly not the housing affordability answer for Australia. To hear Barnaby Joyce say youre not going to get a view of the Harbour Bridge and the Opera House, seriously, I mean Sydney housing is unaffordable an hours drive from Sydney. For many people, many tradies, nurses, teachers who we rely on to make the city work. And of course its not just about Sydney. Most of Australias major cities were in the top twenty list of unaffordable cities in the world and I saw Wollongong on the list! I mean decentralisation can be part of the solution but to suggest that people move to Charleville or Tamworth I mean seriously. I think there would be young people, tradies, nurses around Sydney who would just shake their heads and say youre kidding Deputy Prime Minister.

HARMER: Do you think it was more than that? Do you think some people were offended Chris? I mean you live in the West, how do you gauge the problem there? What do you constituents say to you?

BOWEN: Well heres an example, we live on a good day an hours drive from Sydney CBD, on a bad day it can be two hours drive. Not everybody works in the city but many people have to, if they you know, work in say one of the big banks head offices, something like that. Many people make that commute either by road or by rail. Even here if you turn up at an auction in my electorate in Smithfield or Greystanes on the weekend, you will see people walking away saying I just cant afford this shaking their head and being outbid at these auctions and being outbid at the real estate agents and saying how much further do you want me to live from my work?. Often youve got in a couple, one might work in the city, one might work locally, youve got to get home in time to pick the kids from school, afterschool care closes six pm or something like that, these are everyday problems and the answer is not to move to Charleville for many of these people with all due respect for the Deputy Prime Minister.

HARMER: Now just before we get onto what the solutions to this might be, one thing that the Deputy Prime Minister also said was that you have blocked the coalitions initiatives to decentralise jobs to create more options, so you have to take some of the blame for this.

BOWEN: Seriously Wendy. What hes referring to there I presume is his little boondoggle of the APVMA which hes moved to his electorate, and there was a cost benefit analysis which showed the costs far outweighed the benefits and that it would cripple that important government agency. So if he thinks that moving a government agency in the agriculture portfolio from Canberra to his electorate is the answer to the housing affordability issues well again theres another example of him being terribly out of touch.

HARMER: Well we know that the new Premier of NSW Gladys Berejiklian has ruled out pushing for changes to negative gearing, and I know thats where you want to focus your efforts, she says its all about supply, do you agree?

BOWEN: No, supply is part of it. Again, theres no simply answer here. Supply is part of it. But the fact of the matter is houses are coming online in Sydney at record levels, development approvals are at record levels, construction is at record levels and still we are seeing these problems. So of course housing supply is a big part of the answer, but just to suggest build more house and thats all that we need to do is just again and with all due respect to the new Premier, and I wish her well, is out of touch with reality. I appreciated that fact that Mike Baird and his planning minister Rob Stokes called it as it was and said negative gearing has got to change and has got to be part of the solution.

HARMER: Of course the negative gearing move was ruled out by the federal government because they said they had research that showed that it would increase house prices and not the opposite, Chris Bowen.

BOWEN: Thats a total myth, well theyve claimed that actually house prices would crash and then one of their ministers said theyd go up and then..

HARMER: Well I probably should have said that they probably claim both, but it would have a catastrophic impact on the market. Now just to recap can you outline for us again what your policy on negative gearing is?

BOWEN: Yes. So our policy is to obviously firstly, most importantly, anybody who has made that investment in good faith has to be protected, so fully grandfathered. So anybody who has invested under the current rules would not have their investment rules changed. But going forward we would say that if you want to negatively gear a property, then you could only do that if you buy something new. Which is again adding to that issue about supply, encouraging people to get into the new housing market, which encourages more houses to come on board. Now some people say negative gearing is necessary to stimulate new construction, well if thats the case about 93 per cent of negative gearing goes into existing properties. It does absolutely nothing for new housing construction, in other words its a 93 per cent failure rate. I accept that it plays a role in stimulating new construction but its failing 93 per cent of the time at the moment. We need to focus it on new construction. You can still do it, still open for everybody to do but we ask you to work with the government and agencies to encourage new housing supply. If you want to get that tax concession, which is the most generous tax concession for property investment in the world Wendy, in the world we have in Australia. When you get young people turning up at auctions as first home buyers they are competing against investors who have this tax concession

in their pockets so they can go further in their bidding at the auctions and the first home buyers are missing out. And this has got to give. Its a very important part of the solution. Im not suggesting its the only part of the solution, but Im suggesting its the integral part of the solution.

HARMER: Okay. Before I ask for your opinion on Scott Morrison heading off to London to look at this housing affordability plan we might take a couple of calls if thats okay with you?

BOWEN: Sure.

HARMER: Goodo. Heres Richard from North Bondi. Hello Richard.

CALLER: Hi thanks for taking my call. Unfortunately when you ask politicians, whichever ones you ask, youre going to get ideology based specialised approaches. I think the Germans did it many, many years ago in Berlin. They wanted people to move into Berlin and not be in the other cities so they gave everybody a huge tax incentive, it was tax free to move your business, tax free if you went there to work, and now Berlin is five times bigger than the next largest city in Germany. I think Barnaby Joyce is completely correct, you can go to Tamworth, you can go to Armidale, but the Government needs to get on board, and I would like to see Chris Bowen answer what is wrong with making huge tax incentives for people to move to these places and I dont mean pitiful ones, I mean tax free holiday for ten years.

HARMER: Okay. Well what do you think of that as an idea Chris?

BOWEN:: Well the problem, as you and others have pointed out Wendy, is that youve got to have jobs for people to move to, and its not for everybody. Some people want to live close to their family, grandparents, if theyve got young kids and communities they grew up in. Its not for everybody. And apart from the budgetary impacts of saying dont pay tax for ten years, what are people going to do when they get there? I mean these are all sorts of issues that people need to consider in their lifestyle and the choices they make. And it is not for everybody to move to the bush. For some people it is, some people want to and thats great, whether they grew up in the bush or not. Other people grow up in the bush of course and move to the city for the opportunities that they want to take. And people should be free to make those choices. But I want to see people have the chance of a life in Sydney and Melbourne and other capital cities if they choose to take it up. And at the moment people are just struggling to work out how they could every afford to own a house.

HARMER: Okay, well we have Ben Wyndham with us hes with the Scone Chamber of Commerce. Obviously Scone is in Joyces electorate. Hes in town at the moment and listening in. Good morning Ben and thanks for the call.

CALLER: Good morning Wendy, thank you for taking the call. HARMER: Away you go.

CALLER: I just wanted to say, look, in Scone as a small business owner myself I know there is a shortage of skilled labour. We live in an area where there is a huge number of skilled jobs available particularly in mining and mining related stuff, and the agricultural industry and other industries are also taking off. I really have to say that there are great jobs out there and housing affordability is simply not such an issue. I mean my friends in Sydney, Im a North Shore boy born

and bred, I moved to the country when I was eighteen and Ive never looked back. My friends come out to our place in Scone and see that weve got a quarter-acre block and a four bedroom house, and it cost us, well an average four bedroom house costs about four hundred grand in a country town like Scone. And Scone is not out in the sticks or the desert, Scone is quite a civilised place surrounded by beautiful horse studs and all those things. So, Mr Bowen seems to say that moving to the country is only for country people, with respect to Mr Bowen, Greystanes aint exactly very far west either. Its a great thing to move to the country and I have to say its a great way to regain your sense of community.

HARMER: Mhmm. Alright well thank you for that Ben. Well perhaps people are telling you Chris Bowen that perhaps there should be more of a push to decentralise, much more than there is now.

BOWEN: No I think the point is, as I said to you at the beginning Wendy, that its good for some people. Its a fine choice for some people to make to move to regional or rural Australia. A lot of people make that choice and its a perfectly appropriate choice to make. But its not for everybody and it should be a choice. It shouldnt be well I cant afford to buy a house in Sydney so I have no choice but to move to the country I think thats the situation that in many senses we are heading towards, and I dont think thats a sustainable or acceptable choice. Yes as I said, I think of course, there are many beautiful places to live in country New South Wales and country Australia but its not everybodys choice.

HARMER: Mhmm. Alright well a few texts here, Leigh from Annandale says the song Go West by the Village People is about going to the west coast of America, like California, to the ocean. There aint no ocean west of Sydney, the heat out there, no thanks! Says Leigh. Tom from Gosford joins us as well. Hello Tom.

CALLER: Gday, how are you? HARMER: Good thanks.

CALLER: Look Chris thanks very much for articulating your point. I want to repute and point the other direction. I completely agree with the other callers in decentralising and moving west or moving north and obviously coming from Gosford and being forced for twenty-five years to work in the city and travel to and from the Central Coast. And what buggers me, or sorry bugs me is that whilst ever were pointing one direction towards the city, traffic backed up like you would not believe, theres three perfectly lanes heading the other direction and you think You know, somethings a miss here. If we decentralise and we use 100% of all of our systems, 100% of the road system 100% of the train system in both directions all of the time, then we get a city that actually functions or a populace that actually functions being five satellite cities around Sydney and then further abroad, Wollongong, Central Coast and further on.

I cant work on the Central Coast just because the number of jobs in a professional environment on the Central Coast is a skerrick of the population that is there to be able to fulfil them. No whilst ever as a population we continue to educate people and drive them up the education scale, but we dont have the jobs in the areas in which they live, theres something seriously broke here and your policy is only continuing to perpetuate that problem.

HARMER: Okay, wow. Well thanks for that Tom. We should move on because I think weve address that there Chris Bowen but we should move on to as I mentioned this move by the Treasurer

Scott Morrison heading to London to find out what theyre doing to make housing more affordable. And what do you think about that move?

BOWEN: Yeah look absolutely no problem with Scott Morrison travelling to London... HARMER: That's for low income more though isn't it?

BOWEN: Yeah we're talking about two quite different quite things though Wendy. As I said I have no problem with him going. In fact housing bond aggregation is something that we have been looking at ourselves and we are on the record as saying this is something that is part of the solution and it might seem like a false dichotomy but it actually is a real one.

There is affordable housing and there is housing affordability. Now affordable housing is about specific programs to generate social housing which is designed for people on particularly low incomes. Then you've got people on middle incomes who are struggling with housing affordability as well. Now of course as I said when Scott Morrison goes to the United Kingdom well he should also have a look at what the Cameron Tory Government did there about their equivalent of negative gearing which was to pair it's right back. And if you look at when George Osborne did that, the Chancellor of the Exchequer, the Budget speech in which he did it, it could have been a speech which I gave. He talked about putting investors and first homebuyers on a more equal footing, making sure the system is fair for everybody. I mean the Conservatives in Britain have recognised that the tax concessions for property investment are part of the solution. When Scott Morrison is looking legitimately at bond aggregation he should also be looking at what they did with the tax system.

HARMER: And why do you think that the Government is so recalcitrant on having a look at negative gearing?

BOWEN: Well, we know that Malcolm Turnbull and Scott Morrison actually asked the Cabinet to agree to changes to negative gearing but the rest of the Cabinet didn't agree and the reporting out of the Cabinet was for political reasons because they wanted to run a scare campaign against us.

Now we went to the last election and we are going to the next election with a policy of reforming negative gearing. Now a lot of people have said that is crazy brave, you know negative gearing is too much an important part many Australians financial arrangements and we would lose the election as a result. And of course that wasn't the result, we came very close to winning the election and many people I think recognise that it is time for re-form of negative gearing. As I say, I don't suggest it's the only solution but I say any solution which doesn't include re-form of negative gearing is bound to fail.

Saul Eslake, the economist, calls housing affordability policy in Australia 50 years of policy failure and I think that's fundamentally right and it will continue to be right as long as we continue to ignore the fact that we have the most generous property tax concessions, property investment tax concessions in the world and when youve got the sort of housing affordability crisis we are facing, and I don't use the term crisis lightly, it's not a word that I use very often. Some people use it a lot, I only use it when I think it is just very justified and I do you think we are facing a housing affordability crisis in Australia, not just in Sydney and as I said for some people they can make it work to move to the regions and decentralisation can play a role. The previous Federal Labor Government for example established The National Disability Insurance

head office in Geelong, not in Melbourne, not in Sydney but in Geelong as part of an approach to that but that is only ever going to be part of the solution. You're always going to have jobs which need to happen in big capital cities, people who need to live in big capital cities and you are always going to have people for whom that is the way they need to live their lives.

HARMER: I should mention here Chris Bowen that Australia, I mean rather Melbourne comes in number six on this rank of list of least affordable housing so Sydney comes in at number two and as you say this is not just a Sydney problem. Australia coming in at number six and I'm speaking with Chris Bowen this morning he is the Shadow Treasurer and Federal MP for McMahon, it's about four minutes to nine and I think we've got time to take a couple more calls if you can hang there with us Chris?

BOWEN: Sure.
HARMER: Goodo, and here is David. G'day David. CALLER: Hello Wendy, hello Chris.
BOWEN: Good morning David.

CALLER: I think that the main answer we have in Sydney has to be the enforcement of the Foreign Investment Review Board rules. I'm a property value are and I see every single day people nominating themselves as local purchasers when I very much doubt they are unless they are coming under the student resident schemes or the temporary resident schemes.

HARMER: Your thoughts there Chris?

BOWEN: Well I agree that the rules need to be in forced. Absolutely. I don't think it is the only or the major thing that can be done but I think it is part of it of course, the laws are in place, they are appropriate laws. They restrict foreign ownership of land and housing in Australia, in many ways they are similar to our proposed negative gearing policy. It is easier to buy a new house if you are a foreign investor than existing houses. It is the same principle that applies. Now Joe Hockey used to make a big thing about this and say this was his big answer. You know he made a big thing about kicking somebody out of a multimillion dollar mansion on Sydney Harbour. I said at the time I didn't think that was really the answer to housing affordability but of course the law should be in forced and I support the Government in forcing the law completely.

HARMER: We talked to Council of Vancouver recently and they are bringing in an empty house tax. Have you looked at that Chris Bowen?

BOWEN: Yeah, and that's an issue in the United Kingdom as well that's been raised. I know in the House of Commons I lot of people are saying Look at the houses which are being used for occasional use while people are having housing affordability problems. Now again that is something which I think is something that is perhaps a bigger issue in some other parts of the world than here but nevertheless if there is sensible suggestions I'm always happy to hear them.

HARMER: Okay, well goodo. Thanks very much for joining us this morning, I appreciate your time. BOWEN: Always a pleasure, enjoy today and enjoy Australia Day tomorrow.

HARMER: Thank you very much and happy Australia Day to you too.