Listening to pollies talk, you’d think the whole point of government is giving battlers a fair go…
So Joe Hockey took the time to tell us what he really thinks as he left the Treasury.
Well kind of. I reckon what Hockey really thinks wouldn’t be fit to publish in a decent and modest blog like this.
Anyway, one of the things that grabbed a fair bit of attention was his u-turn on negative gearing. After spending his entire tenure as Treasurer arguing that we didn’t need to touch it, he let us know that actually, we probably should have a look at it.
We must increase and over time broaden the GST…
We should be wiser and more consistent on tax concessions… in particular tax concessions on superannuation should be carefully pared back.
… negative gearing should be skewed towards new housing so that there is an incentive to add to the housing stock rather than an incentive to speculate on existing property and we should never ever forget small business.
Suddenly it seemed like a review of negative gearing was on the cards. Maybe its head was on the chopping block. Do-gooders worked themselves into a lather.
But then the new assistant Treasure Kelly O’Dwyer came out and hosed down any expectations that it might be reformed in the near term.
It's on the table – all these things are – although I would note…there's obviously a lot of discussion about negative gearing and a lot of people say that only wealthy Australians take advantage of negative gearing.
When you look at the facts that's not the case, average income earners are largely the people who do get to take advantage of negative gearing.
Nurses, police men and women on an average wage, for instance investing in a property, most of them hold only one property which adds to the housing stock that's available for other people as well.”
So you need to look at things holistically, which is what we're saying we will do.
It’s a bit contentious as to whether negative gearing is used by average income earners. The RBA has some data that says other wise.
And personally I’d find it a bit surprising. We know that wealthy people invest in property – a lot more than less-wealthy people. So to argue that it’s mostly used by average income earners is to say that despite the relatively smaller percentage of average income earners investing in property, they use negative gearing in such numbers that they manage to outweigh wealthier Australians, who we know invest a lot more in property overall.
I’d be very surprised to hear that that is true. But I look forward to seeing the data.
At any rate, it’s not really the point. Tax concessions will always be used more by wealthier people because they tend to pay more tax (and have much more flexibility around how they structure their tax affairs.)
And if we’re looking for ways to help battlers become property investors (which I think would be a good thing), I don’t think negative gearing is the first policy I’d go to.
Anyway, the point of today’s blog is that as I’m reading this, I’m thinking, I’ve heard this speech before. It felt very familiar.
And then it clicked.
NRAS.
The NRAS scheme was designed to bring more affordable rental options to the market – to help out important service workers like, … wait for it…
… teachers, nurses and police officers.
Here’s former housing minister, Tanya Plibersek:
The National Rental Affordability Scheme is about helping people like police officers, nurses, teachers, key workers who work in the local area, live in the local area.
And so it seems that if you want to assess the effectiveness and efficiency of housing policy in Australia, you need to understand how it’s going to affect people in uniform.
Ask a fireman.
Of course this is sound-byte politics, but I think it tells us 2 things.
- “Battlers” are to Australians what sacred cows are to people in India.
If you want to sell a policy in Australia, just tell people how pro-battler it is.
And if you’re not on side with the battlers, you’re toast. Take Bronwyn Bishop and the helicopter hoo-ha. Taking a helicopter to dinner was just so non-battler that it was impossible to defend. No one would touch it. Everyone knew it was political suicide.
Bishop is also seen as old-school establishment (and very non-battler) herself, which didn’t help.
- We recognise that nurses, teachers and police officers get a raw deal.
The system just doesn’t do a good job of valuing people who make some of the most important contributions to society.
In a just world, your contribution to society would be reflected by what you earn. But right now, almost the opposite is true.
Banking CEOs I’m looking at you.
And I’m willing to say this as a successful businessman. You might say that I am rewarded for the risks I take, and sure, at some level that’s true. But I’ve never faced a risk like having some junkie go me with a knife.
There are risks and then there are risks.
This is still one of the great failings in the system. Essential service workers tied to government wages are always going to struggle. And we all recognise it. And so any policy that is seen to throw these guys a bone will always win the popular vote.
But why faff around with band-aid solutions? Admit this is a bug in the system and come up with ways to deal with it, head on.
Then we could all stop feeling sorry for battlers and deal with policies on their merits.
The ultimate question is, how do we fix housing affordability?
Should policemen, firemen, nurses and all essential service workers get some sort of subsidy/support to help them enter the housing market?
Simon says
There is no cheap housing for the working poor in australia, the govt. limits supply even in desert towns, v easy to find out for yourself, go on real estate.com.au and look for the cheapeast rent you can find,
rockbank in the western fringe of melbourne is the most worthless land for farming, no topsoil, rain shadow, the govt. won’t release it for housing, but is green wedging it for a future eddie obeid, and if a resident I spoke to is correct, the govt. fees on each block they do release is over $100,000
60 mins last week, govt sponsored scam has a group of people providing ‘certificate 3’ in whatever trade you are in, and govt. gives about $4500 for each certificate that is handed out, a 1 hour visit to a mum dad and son hobby farm netted the certifier nearly 14G of public money,
we are headed the way of nauru, where it’s govt. managed to offload nearly 1 million / man woman and child from phosphate rock mining, and turn them into a nation of beggars,
rather than seeking personal wealth thru realestate investing, which makes it harder for the working poor to survive, and business to afford to hire them, australians need to look into the future and learn mandarin, or rethink our role in the world economy, in terms of manufacturing things that people need, rather than paying ourselves for ever more convoluted bureaucratic processes, and using that money to buy from china
Carl says
NRAS properties going to policemen, firemen, nurses etc ???. I own an NRAS property and they are available to anyone on the housing list that meets certain criteria. NRAS properties going to essential services people was just a marketing ploy to sell these properties and then someone realised they couldn’t get enough of said people to fill them.
NOYB says
I wouldn’t call police persons, firemen and nurses battlers. They are all earning roughly $50000+ if fully qualified, most would be classified as breakthrough middle-class if they are earning $80000+. The battlers are those that are on pensions, or worse poverty stricken and or homeless persons. And then there are people like me, treading water and doing my best to stave off poverty by working as best I can, and saving and investing and hoping to get ahead in time for retirement. I’d love to be able to do what you and Dymphna do in property, and I’ve tried but my experiences have left me pretty wrung out, and mistrustful of Real Estate agents, politicians, bureaucrats and Fed and State Legislation.
All in all it’s been a pretty horrendous experience, and I’m not keen to get involved in it again.
Maurice Callery says
I make 50K per annum and I have managed to accumulate a few rental properties. Without negative gearing I would be screwed.
ron says
ha ha…hi jon..i always have a laugh when somebody brings up ‘housing affordability’. the very essence of our problem australia wide, is encased in one, no….two words…one is greed and the other is security. we are essentially a greedy species because our very existence is caught up in fear. fear of the unknown, fear of starvation, fear of rejection etc. so our defensive mechanism goes to work at an early age; from the school playground (bullying) and onto our first job..fear of failure. to mask all of this debilitating lifestyle we pursue dreams of engrandisement so that we can remove ourselves from the ‘battler life’ to something more pleasant. some people enter politics lol and dream on in their lonely world of visions extraordinaire, making magnificent speeches to enhance their ego(sorry prestige).
others join the ‘public’ service….not the ones you mentioned..no, the ones who gravitate to high places and form real policy which politicians read out to the populace as their own creation. what i am getting at is that by the very lifestyle we lead in australia we as a people create our own problem en masse.
by stocking up on a portfolio we create a demand for property, that leads to competitive bidding(auctions) or many offers by private treaty. i know you have your own creations and wherewithal, but i wonder why we as a species could not be satisfied with one house for one person or family. you might say, ‘but what about the renters’? well that problem might not exist if house prices were more ‘affordable’. i am not advocating a communist set up here, but i wonder if such was the case with housing it would, i think , do much towards bringing prices into line with wages and salaries. at the moment in australia we have a situation wherein the salaries and wages are unable to cope with our ..flambouyant’ lifestyle that we aspire to. taking for example a 4:1 ratio of salaries to house prices is next to impossible now in sydney or melbourne..you might agree. even if one was earning $150,000 (double the average wage)..by the government stealing say $35,000 of it..its called tax, one is left with disposable income of $115,000..now four times that is $460k. and that is only less than half the average or mean price of the aforesaid houses. even in perth (where i am) the mean price has dropped to $500k, that figure is still unaffordable to the many aforesaid lol, ‘battlers’. how do i know..well half of the new houses built here in the wonderful boom we had, are now on the market for sale .. a big percentage are in ‘mortgagee in possession’ mode. now that to me is a tragedy. also in perth we have the awful existence of many hundreds of families living in cars and under bridges, because of unaffordablilty. in our lucky country. this scenario was utterly unknown many years ago. how did this happen? to me, if the average wage is say $75,000..after (yuk!)..tax, it is say 62,000..well four times that is $248,000. and that is where the prices should be..and wouldn’t be nicer to pay off a loan of say 180k than 700k,. i know that two incomes comes into play here. and more than likely it won’t go away. but given the extraordinary way the world economy is at the moment..i don’t know that many jobs will be in existence very soon…for two people to be in, in one family. again we can apply loans to cars, credit cards (most of them maxed out i hear) , personal loans etc,. somethings has to ‘give’. what we are seeing in the world today is a huge transfer of wealth from the middle class and the poor to the mega rich, via the various forms of investments available..and the usual jerrymandering which goes on in the banking, investment managing or broking, and stock exchange! i am happy in my little cocoon lol….i still have a daughter to bring up..but i can manage that. i hope all is well in your part of the world. cheers, ron
David says
All this talk of first home buyers not able to afford housing makes me laugh. Of course if you’re trying to afford something in, or around, the CBD you’ll most likely be priced out of the market.
Similarly if you expect to jump straight into an established 3 or 4 bedroom home in a ‘nice’ suburb….same issue. It’s called supply and demand.
Unfortunately in today’s environment of the “entitlemen era”, everyone expects to be able to afford what they want. Sounds harsh but it’s a fact.
Without sounding like some old bloke who talks about the “good old days”…it was the same back then. The big difference was we didn’t expect anything more than we could afford and just used every purchase as a stepping stone. When I got married, we had to buy a 2-bed terraced house because that’s all we could afford. In percentage terms, the house was valued at 5 x times our combined incomes – sound familiar ? Mortgage rates were 7%.
The only difference was that we just got on with it and didn’t look to blame anyone that would listen.
And yes, it was a great learning curve and motivator to get us where we are today.
TP says
Agreed
Andrew says
+1 – First purchase = dream home… your doing it wrong
ron says
jon further to my short note..it seems that there is a $5 trillion debt bomb about to explode..in the oil industry. you see when the oil industry was getting over, well over US$100 bucks a barrel..things were great. so the ‘fracking’ mob (and every other energy supplier including australia) went on a borrowing binge..lots of it. now the saudis were very upset with all of this, and, being the worlds biggest oil producer slammed on the skids and dropped their oil price to initially 80 then 60 then 50, 40 and so on. they can afford to do that..their extractions costs are $10 a barrel. the price of around 50-60 a barrel has virtually bankrupted the frackers (and will most other oil and gas producers), who have borrowed the aforesaid trillions for their business at over 100 a barrel. now they face total ruin and somebody has to pay up over US$5 trillion. now that is very big money..even for you. the tentacles are wide ranging and vast. so lets see how the world banking system can cope. i don’t think they can, even with money printing. and the saudis are playing for keeps..they are islamic and support isis to the hilt of their swords. ask obama ..he is one of them….seriously there is talk in america of this guy being ‘impeached’
cheers, ron
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realist says
The government wants beggars because that makes people helpless. That way, when the shit hits the fan, thats what most people will be… helpless and vulnerable and easier to control.
I dont see any one in the government giving their funds up in a hurry to make way for the vulnerable. They are just procrastinating and buying time.
Funny thing is when people have nothing then they learn to fear nothing. Keep creating beggars and you end up with a herd of people with nothing to lose. Thats alot of junkies with knifes to fear…. Maybe that why they want to suck up to police officers etc. Keep them on their good side for their own protection.
Optimistic says
I join David’s comments re housing affordability – I bought ” a shack “in a suburb 22 yrs ago in Perth that was not a “desire able” suburb – ie high crime rate, low socioeconomic population – because that was all we could afford ( 1 income family)…lucky for us our suburb powered ahead … So we went from “battler” status ( literally living from week to week )to middle income earners….. Since then we have bought and sold a unit which also increased in value over ten years, the first couple of years of owning our unit we were back to living week by week…..the rent we charged only went up by $100/week increase in that whole ten years……so our rentee paid about 1/2 the average rent for our suburbs average…..negative gearing on that property only really paid back to me what I outlayed ie strata fees and rates…..and I was happy with that..because the property value increased and believe me the government made their money back ten-fold when we sold it…..my point being- it is only when people get greedy and try and “milk” the renters and the government dry that a problem is created. There is no doubt that taxation policies in this country need to be overhauled…..the biggest rorts to me are claiming tax breaks on clothing,work cars ,petrol and government workers been subsidised with entertainment cards, or church schools and hospitals claiming salary packaging to name a few…….as a society we need to “pull our proverbial heads in” and be happy to earn an honest living…….by the way I am a nurse who happens to think my wage is fine……..I do have to work every weekend and at night to earn that middle income wage ..but that is my choice to get ahead
Bob says
Perhaps they could allow full negative gearing for the first property, then no or reducing deduction for further properties
Glenn Jackson says
Quite a simple solution here, allow emergency services workers to negative gear part or whole of their residential home to offset their humble wages!