Sky with Kieran and Zed

24 February 2016



SUBJECT/S: Negative Gearing and House Prices; Senate Voting Reform

KIERAN GILBERT: This is AM Agenda, it's good to have your company. With me now, the Shadow Minister for Financial Services and Superannuation, Jim Chalmers, and Liberal Senator Zed Seselja. Gentlemen, good morning to you both. I want to start with Zed Seselja this morning in relation to where the tax system is at right now because we're seeing Fairfax reporting this morning that far from being a wide-ranging ambitious tax reform, that there are two modest proposals on negative gearing, one on super - hardly, amounting to major reform. If that amounted to everything the Government was going to plan to take to the election, that's squibbing it.

ZED SESELJA: Well, let's wait and see what the Government takes to the election. I wouldn't necessarily take as fact what's written up in Fairfax today. That's a matter for that journalist as to where they're getting their information - it may well be speculation. There is an active debate going on about tax policy. We certainly don't want to go down the path that the Labor Party's gone down --


SESELJA: In damaging the property market which we know their policy will do in a really severe way. So we're not going to follow that path and I've urged caution on things like negative gearing. I continue to do that. But in the end, we want to see taxes lower overall. We're not looking for every tax grab under the sun that --

GILBERT: What about this idea of capping the overall amount that people can deduct on their tax? The figure that's been referred to in the story by Mark Kenny and Peter Martin today is $50,000 per annum. 

SESELJA: Well, I guess I'd want to know what the policy rationale for such a cap would be. If you accept that negative gearing is a legitimate tax deduction - as I do - then why is a $50,000 tax deduction worse than a $40,000 tax deduction if that's what you would spend in order to invest in an asset? We don't cap it at the moment on margin loans and all sorts of other things. So if you are borrowing money in order to generate an income-producing asset then the principle is you should be able to claim that against your losses.

GILBERT: Jim Chalmers, your thoughts on the merits of these two proposals? The question I put to Tony Burke before the break - isn't it more equitable to say that the Government would only target those higher-wealth investors?

CHALMERS: I'll come to that in a minute, Kieran. I mean, the reason that Zed's heart wasn't really in this scare campaign about house prices and Labor's policy is because that crashed and burned yesterday, really badly, when they tried to simultaneously argue that Labor's policy will send house prices up at the same time as it will send them down. That's the reason why this scare campaign has really crashed and burned in the last twenty-four hours.

But on the specifics of this proposal, the really important thing to understand about what's in the Fairfax press today is that the changes that Malcolm Turnbull is considering are retrospective. One of the reasons that our policy is so well-designed and one of the reasons that people like Saul Eslake and others say that house prices will continue to rise but in a more sustainable way, is that our policy isn't retrospective and it's got a long lead time.

What we need to know from the Prime Minister today - he should put this plan on the table. If he's got a plan to change negative gearing, he should put it on the table and he should rule out any retrospective changes. And I think Zed should be able to do that today because it's the retrospectivity which is really dangerous in this space. And what the story speculates about is that the Government is contemplating hitting investors who are currently in the market. The genius of our plan is that it impacts on people down the track.

GILBERT: But why is it dangerous if you're going to cap it at that high amount? If individuals already have seven or eight properties?

CHALMERS: Because people have already made the investment. And we hear all the time from Zed and others that you can't change the arrangements for people who have already made an investment. I think, if they go down this path -- I don't think they know what they're going to do yet, Zed doesn't know yet because Scott Morrison doesn't know yet, Malcolm Turnbull doesn't know yet, they don't have a clue what they're going to do in tax policy -- but if they do go down this path, I think what they haven't considered is the retrospective nature of what's floated today. Ours is not retrospective.

GILBERT: Well, let's hear Zed's response to that.

SESELJA: Well, first I'll just respond to the other aspect of what Jim said. The Grattan Institute, for instance, who supports Labor's policy says prices could drop up to ten per cent. Are they making that up? I don't think they are.

CHALMERS: ANU, McKell Institute, Saul Eslake, Richard Holden.

SESELJA: Well McKell Institute is a Labor think tank.

CHALMERS: Saul Eslake?

SESELJA: Well, what's wrong with the Grattan Institute? They support your policy but they think prices will go down up to 10 per cent?

CHALMERS: There is a bevy of independent experts.

SESELJA: When you have to cite the McKell Institute, which is a Labor Party thinktank --

CHALMERS: The ANU, which is in your electorate -- are you running down the Australian National University?

SESELJA: Well, I don't agree with Ben Phillips. Ben Phillips got it terribly wrong.

CHALMERS: You're in very tricky territory now!

SESELJA: Terribly wrong on tax policy here in the ACT - but we won't go into that. But when you have to quote the McKell Institute... The Grattan Institute says… Let's take a step back here. If you take all of this demand out of the market --

CHALMERS: This scare campaign crashed and burned yesterday when Kelly got it so horribly wrong.

SESELJA: Labor thinks that will have no impact, prices will just continue to rise as they have before, or maybe just --

CHALMERS: Do you agree with Kelly or Malcolm Turnbull?

GILBERT: Let's hear from Zed, you've made your point.

SESELJA: Well, Kelly clarified her comments. I think the Grattan Institute is very close to it. They support the policy -- I don't support the policy -- but they say, even supporting the policy, prices will drop by around ten per cent.

CHALMERS: You’re all at sea.

SESELJA: What have they gotten wrong - what part of their modelling is wrong?

GILBERT: That's a fair point. Grattan Institute, well-respected John Daley, saying they'll back it, but the reduction in house prices will be ten per cent. That's a big hit to people's assets.

CHALMERS: Australian National University --

SESELJA: One academic at the ANU.

CHALMERS: Saul Eslake, Richard Holden -- all of these people say and they're right to say, we'll still see house price increases. They'll be more sustainable because we'll be putting first home buyers and investors on a level playing field. We'll still see house prices rise, but in a more sustainable way.

GILBERT: But at a slower rate?

CHALMERS: Well in a more sustainable way, because we're taking some of the speculation out of the market. We've said that all along. We've been saying that for two weeks now.

SESELJA: You can say it, but it doesn't make it true.

CHALMERS: But yesterday, you had both sides of the argument. Yesterday, Kelly said that house prices would go up. Malcolm Turnbull said they'd go down.

GILBERT: She's clarified that though -- she said she was talking about new homes. But let's move on to electoral reforms, now. I want to talk about this, because Labor is being accused of hypocrisy. You've got Gary Gray, your own spokesperson, tabling this in Parliament saying this argument doesn't make sense -- that he was rolled in Shadow Cabinet.

CHALMERS: Well, that's on the public record.  We've finalised a view. From time to time, we have differences and we resolve them. I think the best way to think about this Senate voting reform - two things, really. The first thing is the reality is how we vote on this issue is not relevant because there's a deal done by the Liberal Party, the Greens and Xenophon. So, actually as much as it pains me to say it -- whether we vote for or against it won't change the outcome. That's the first thing; that's just the reality of the situation -- we've got this insider deal done between the Greens and the Liberal Party about the voting system in the Senate.

The second reality is about the consequences for people of this. And the reason that I don't support the changes is that I think that this dodgy deal between the Greens and the Liberal Party means that the Liberal Party will be more likely to get up some of the more extreme cuts to hospitals and schools and pensions and payments and all of those sorts of things. So I don't support it really for that reason.

GILBERT: But isn't it about honouring the will of the voter? It's a more accurate representation of the outcome of what the voter wants if you have optional preferential voting.

CHALMERS: That's not everybody's view. That's not necessarily a settled view that it will deliver a better outcome.

GILBERT: But if you have an opaque system of preference deals that ends up with Ricky Muir being elected on 0.5 of a per cent, that's a joke.

CHALMERS: There are pluses and minuses of every voting system and you can send yourself crazy trying to work out the ins and outs of Senate voting. I'm sure you'd pay more attention to it than I do.


CHALMERS: But at the end of the day, Labor's position on this is clear. We've resolved the position. We think that it's a dodgy deal done and rushed through the Parliament, by the way.  People should be very afraid when you get these sorts of things rushed through the Parliament. And the end result, the end consequence is the Liberal Party are more likely to do to the people that we represent the things that we've been able to prevent in the past.


SESELJA: Well what the Labor Party has done in their position is -- in Gary Gray's own words -- they've taken the 'dumb' view in terms of this. They've effectively taken the Sam Dastyari view of the world. It's the student politics, back-room dealer approach rather than Gary Gray -- the very well-respected electoral spokesman.

CHALMERS: You actually did a back-room deal!

SESELJA: You had a good go. Their spokesman, very well-respected, is saying the Labor Party's approach is dumb and he's right. And why it's dumb and why it's wrong is because they don't seem to trust the voter to actually choose where their preferences go. The Labor Party and some crossbenchers are saying that voters can't be trusted to preference who they want and if you leave it to voters, they'll get it wrong or their votes won't flow through. That's simply wrong. If you give choice to voters, they will get it right. Sometimes, they will back our side of politics. Sometimes they'll back the other side. Sometimes they'll back minor parties. That's up to them. I'm very happy to trust them. Sometimes we'll get burned if we get it wrong, sometimes we'll do well -- that's democracy.

GILBERT: And the point that Gary Gray makes which I think is a very potent point is that just because the person you vote for loses, doesn't mean your vote didn't count. They just lost. That's fair enough.

CHALMERS: It's a fact, yes. Your vote counts no matter how it's expressed. The system you have now, other systems that are being proposed, lower house, upper house -- your vote counts.

GILBERT: Gentlemen, we're out of time. Good to see you both. Jim Chalmers, Zed Seselja. A quick break, back in just a moment.