04 Nov Labor fails its own test on negative gearing – Denita Wawn
Contrary to Labor’s claims, its policies on negative gearing and capital gains tax will not increase the supply of new housing or create new jobs in the building industry and we give you the proof as we speak to Denita Wawn Master Builders CEO.
Kevin: Well, contrary to Labor’s claims, its policies on negative gearing and capital gains tax will not increase the supply of new housing or create new jobs in the building industry, according to new independent economic modelling commissioned by Master Builders of Australia. According to Denita Wawn, CEO for Master Builders Australia, Labor’s policies on negative gearing and CGT fails its own test. Denita joins me. Denita, thank you very much for your time.
Denita: My absolute pleasure.
Kevin: I’m surprised with this pushback from Master Builders because Labour say their policy will increase housing supply, which would be, I would think, a good thing for builders.
Denita: You would think so, and certainly when the policy was first announced, on face value it did look good for our members, and we thought, as a consequence, it was important to test what those results would be if the policy was implemented. And I must say, many of our members were quite shocked when we came back and said that the reverse is in fact the case. This is because of the interaction between the provisions on negative gearing, but how it then impacts with the capital gains tax changes, which ultimately results in the fact that there will be less houses, less employment and less building activity. That is disappointing, and hence the reason why we thought it was important to bring that to the attention of the public.
Kevin: Yeah, certainly very important. I notice that Labour have actually pushed back and said that they are prepared to grandfather the changes for current investors, so that current investors aren’t penalised. Wouldn’t that cushion the impact?
Denita: It may well cushion the impact on existing property investment on existing homes, but that’s not what we were testing. We were testing what it would do to new construction, future building development. It’s very hard to grandfather something that doesn’t exist, and so we wanted to focus on new construction and what that does to employment. Grandfathering would have an impact on price, but that’s not what we were testing. We were testing what it meant to new construction, particularly given that ALP had assured our members that it would result in new construction, and it would result in employment.
Kevin: Well, we’ve got two reports here, and of course your claims of less construction, less jobs, and even a slow down in renovation is quite dire. Could I just ask you, how robust has your modelling been?
Denita: We’re feeling very confident with our modelling. We did use an independent modelling research team that has also been peer reviewed. It was important that they looked at modelling that was undertaken, and they have used similar assumptions of that taken by the government in their Henry Tax Review. We’ve looked at both lower and upper limits, so we’re feeling very comfortable with our results that we have published last week.
Kevin: Well, certainly, polling would indicate that maybe Labour might just win the next federal election. If that’s the case, obviously we’re at great risk of this actually coming into play, and then if your research is correct, it could be a pretty dire outlook for the property market. Have you any plans, does the Master Builders have any plans to be really getting aggressive, in terms of putting a counter … not so much offer, but proposal to Labour, and what do you see as the solution?
Denita: Well, our solution, in terms of housing affordability, is quite simple. It actually focuses on the cost of land, not necessarily the cost of building. We know we simply have not had sufficient supply of land in this country to keep up with demand, which has then driven up prices. So we actually need Labour to really put focus on the state governments, if they were successful in getting into government, to ensure that we have a good steady supply of land, that state governments are not putting unnecessary developer charges in terms of actually building on that land, and also that our planning laws are actually reflective of market needs.
Denita: So the answer lies in land supply and land costs, and this was clearly indicated in the Henry Tax Review. You should not be focused on property taxes in trying to resolve housing affordability. We should be focused on land supply. That is the solution, we say. It is not, therefore, necessary to change property taxation, particularly when we’re experiencing and seeing a downturn in the property market in the year’s close, and we’ve already seen a significant downturn in the property market, in the construction of new dwellings on the west coast. So we say this is a wrong approach to an important issue that we do need to address, but Labour needs to rethink its strategy on this one.
Kevin: Yeah, there have been so many people and organisations like you that have come out and discredited this policy by Labour, but it just seems to me to be almost like low hanging fruit. This is not as deep as it should be, in terms of their thinking.
Denita: Yeah, certainly, in terms of the issue around housing affordability, this policy was introduced two years ago when the market was very different. No one had really tested the Labour market policy and I think we’re now seeing a series of assessment of the Labour market policy in conjunction with the change in the market, and really, the focus really now needs to be to say to Labour, “Can we please rethink it? Can we look at alternative solutions to driving housing affordability?” We know we want to resolve housing affordability, we know we need more social housing, but equally, the strength of the economy in this country is very much on building and construction, and if we actually have adverse policies that affect, by and large, small to medium sized building businesses, then we’ll have adverse consequences throughout the economy. It just needs a rethink and that’s all we’re asking the Labour Party to do.
Kevin: Denita Wawn, thank you very much. Denita is the CEO for Master Builders Australia. We’d like to stay across the top of this. Any further updates you have, we’d love to hear about it, Denita.
Denita: My absolute pleasure, and thank you so much today.