Topics: Labor’s negative gearing policy, CPI.
E&OE…
PETER VAN ONSELEN
Welcome back to the program, as promised we’re talking now to Senator Scott Ryan. He of course is the Vocational Education Minister. He joins me live from the nation’s capital – thanks very much for your company.
SCOTT RYAN
Good afternoon Peter, thanks for having me.
VAN ONSELEN
These numbers today, deflationary numbers for the first time in seven years – what are you guys doing? You’re not running the economy very well.
RYAN
Well look I’ve seen the announcement, I haven’t seen any comments from the Treasurer. My knowledge of the CPI is that it often gets revised, it is only a quarterly figure, so let’s wait and see what the Budget says and that’ll have the outline for the following year’s forecasts in that next Tuesday.
VAN ONSELEN
But you said it’s only a quarterly figure; that roughly correlates with the change of Prime Minister. So in other words, the Prime Minister changes and then we have deflation for the first time in seven years.
RYAN
Well as I said Peter, these numbers are often subject to revision. It is a small drop but let’s see what the Treasurer has to say. I don’t think it’s that significant, given that these figures are revised on a regular basis, and the important thing is what happens over the course of a year. If it does reflect a cheaper cost of living in certain areas of peoples are – what people spend their money, then that’s not always a bad thing either.
VAN ONSELEN
Obviously the correlation between the change of Prime Minister and these numbers is non-existent, but what is an issue though, is what it will do to the budget bottom line and the forecasts within it. I know that the Treasurer in recent days has been drawing a distinction, Senator, between impacts from spending decisions versus uncontrollable impacts – the dollar, commodity prices, now something like this as well. But that will get lost in the wash, won’t it? If these forward estimates show a worsening of the budget deficit?
RYAN
Well look, Peter let’s wait and see what happens next Tuesday. It’s not long to wait til the budget. I don’t sit on the ERC, I’m not privy to that and if I was, I wouldn’t tell you anyway. Tuesday is the day that the Treasurer will bring down the budget for the year which will have all those details; economic forecasts, estimates of government expenditure, and everyone will get to see it in all its glory.
VAN ONSELEN
Malcolm Turnbull said once upon a time, that he would not lead a political party that is not as committed to climate change action as he is. That, I would have thought, is a truism now, particularly in the context of the scheme that Labor’s come up with which is probably more in line with his philosophical thinking, wouldn’t you think?
RYAN
Well I think the Prime Minister saw some comments earlier today, where he made the point that we have policies that work. Our policies, the policies that he committed to in Paris, actually ensure that we have the second largest per capita reduction in emissions in the developed world. Australia gets judged on what it delivers, not on promises Labor makes, which don’t get delivered. And we’ve got policies that work, that don’t force up the cost of living. Bill Shorten’s policies will force up the price of electricity. When Mark Butler was asked about it nearly a dozen times on Melbourne radio today and wouldn’t give an explicit answer, will this lead to increased costs for people and increased prices? He avoided it.
VAN ONSELEN
I’m going to get a chance to ask the Shadow Treasurer about that later in the afternoon – will it put upward pressure on electricity prices? But at the very least you’d have to concede it will have less of an impact on electricity prices because of the exclusion of electricity prices, and the treating of electricity differently from other factors within the economy, according to the scheme they’ve announced.
RYAN
Yeah but as I read the scheme, Peter, they still require electricity generators to buy international offsets, in some cases. So it’s going to have an impact on the cost of them doing business. Labor’s tried to create this myth that somehow they can bring in an emissions trading scheme, which is a carbon tax by another name, and it won’t actually have an impact on prices. They just don’t work that way. Not even in Bill Shorten’s imaginary economic world can you bring in a tax on things, that doesn’t increase the price like this.
VAN ONSELEN
How can it be tenable for the government to do absolutely nothing about negative gearing? From Steven Ciobo, to Alex Hawke, to the Prime Minister himself, to the Treasurer, Scott Morrison: a number of those names just in February this year talked about some of the excesses that exist in the current system,. It’s almost like politics is coming first here. You want to create some product differentiation with Labor, but as a result those excesses that your colleagues have spoken about aren’t going to be addressed.
RYAN
Well no I think what it demonstrates Peter, is that this is a government that looks seriously at all the issues. The government’s looked at it, and when you realise that two-thirds of people who negatively gear have an income below eighty thousand dollars and more than half have an income between eighteen and eighty thousand dollars, it is clear that this is an important saving and investment vehicle for a great number of Australians.
VAN ONSELEN
But we don’t have to impact on them. I’m critical of the Labor scheme as far as that goes, I’m not defending the Labor scheme, but you cannot impact on them by having some sort of cap, whether it’s financial or the number of properties you can negatively gear. Those people you speak of will not be impacted on.
RYAN
No but you then have an impact potentially on the housing market, and that’s – you know – every Australian’s single most important asset, if they’re a home-owner or re-paying back a mortgage. The problem with Labor’s scheme is that it will dramatically impact the asset-base of every Australian who owns a home. And so, we’ve looked at the issue, and we’ve looked at it in all its detail and we’ve decided that the risk of extra complexity, the risk of impacting home prices negatively, actually, the risk is not borne by any gain that Labor are trying with a revenue tax grab. If Labor want to do anything about housing, they need to focus on land development and opening up more supply of housing. Every inquiry into housing prices have said that is the most important driver.
VAN ONSELEN
But Senator again, I’m not defending the Labor scheme in terms of those things you’re saying, but if you talk about not wanting to have an impact on investment in housing, surely, surely, we’re not going to have that impact – or impacted on – by simply removing the excesses, the people with half a dozen and more properties that are negatively geared.
RYAN
Well it’s not as easy as that, Peter. I mean, this is a long-standing principle of the tax system. Labor’s policy applies to investments in shops, in factories – if you’re lucky enough to have a lot of investment income, if you are one of the wealthy, then Labor’s scheme actually protects you. What Labor’s scheme does is damages the investment and the savings vehicle that so many Australians use to build up some independence for themselves.
VAN ONSELEN
You’re preaching to the converted, Senator. I’m with you on problems with Labor’s scheme, I’m just wondering why the government can’t have a bit more nuance and just wipe out the excesses so that I can’t sit here and say to you, why are you allowing a system where people can have half a dozen, a dozen more properties and negative gear them and reduce their tax accordingly?
RYAN
Peter those numbers are particularly small. Most people who use this, use it to build an independent savings and investment vehicle for themselves and the risk of tampering with that is it damages that for a lot of people and that it actually negatively impacts on housing prices. Those risks, the risks of going after negative gearing that Labor are proposing, or indeed some others have proposed, are too great.
VAN ONSELEN
Just a last question if I can – the Prime Minister was asked last night on ABC about whether he’d done any modelling with his criticism of Labor’s negative gearing plan. The answer seems to be no and says it’s intuitive – I don’t think Labor have done any modelling either. Should either party or both party do a bit of modelling?
RYAN
Well I think we’ve got to understand that modelling is always a touch imprecise, it doesn’t always lead you to an exact dollar figure here or there – economic modelling has that impact. But the point the Prime Minister was making is that we know how many people are involved in this sector, we know that more than half of them earn less than eighty thousand dollars, we know what the impact will be on housing prices, because you can’t take this many buyers out of a market and not have that impact. I mean, that is a simple statement of basic economic fact.
VAN ONSELEN
Scott Ryan, appreciate your insights, thanks for joining us.
(ENDS)