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- [00:01]
A
I'm Ruby Jones and you're listening to 7am. For two decades we've had a tax policy that pushed up house prices, gave landlords huge advantages and ultimately created an intergenerational wealth divide. A week ago, the government said it wanted to do something about that and announced changes to negative gearing and capital gains tax. But the budget hasn't gone down well. For some, it doesn't go far enough to make a real difference to the housing market. For others, particularly in business, changes to capital gains go too far. Today, the Treasurer Jim Chalmers defends his budget. It's Thursday, may 21st. Treasurer, welcome to 7am it's great to have you on the show.
- [00:57]
B
Thanks very much, Ruby. Thanks for having me back.
- [00:59]
A
So it's been just over a week since you released the budget and fair to say a lot of people don't like it. Polls suggest that more than half of Australians believe that your changes will make them worse off. It was given the worst approval score since 1993.
- [01:14]
B
If you already own a home or an investment or an asset, this budget doesn't really affect them. So why would they ever sell their asset, you know, and then for new buyers, it's like, now I lose those benefits if I buy it.
- [01:24]
A
I'm terrified though, of the future. It doesn't seem to be getting any better. I'm a single mum on a pension. There's no way for me to own a home.
- [01:31]
B
I don't understand how this is going to free up properties for the younger generation because as an investment property owner myself, I'm going to either hang on or sell it for more. I think it'll take a lot.
- [01:43]
A
So, Treasurer, it's not going well. Where do you think you've gone wrong?
- [01:47]
B
Well, first of all, I think it's important to acknowledge that when you're making a significant change, a controversial change to the tax system, then obviously not everybody is going to be supportive of that. We had realistic expectations when we came to these views expressed in the policies in the budget, that they would be contentious. And so I think in the midst of, you know, a pretty full on scare campaign, in the midst of a big global oil shock which is putting extra pressure on people, and in a budget which is full of hard decisions rather than handouts, I think the kind of reaction is not especially surprising. Our job is to try and do the right thing for the right reasons, even if it means paying a, a short term political cost. In the polls that you reference, I
- [02:33]
A
want to talk in a bit more detail about the changes to Negative gearing. So existing investors are protected, they'll keep the old arrangements, which means that the impact of this is going to be limited, especially in the short term. So how worried are you that you've taken this big political hit for a policy that really only nudges the housing problem?
- [02:55]
B
Well, first of all, I thought it was really important, or we thought it was really important that we recognise and respect investment decisions that people have taken already. And so that's why there's those transitional arrangements in negative gearing. So if you're negatively gearing now, you can continue to do that. It's important to remember there as well that at some point properties become positively geared and so some of those investments will exit the negative gearing system. And if you want to make a new investment, you can negatively gear a new build. So we think that's the right balance, encouraging people to invest in more housing supply, recognising and respecting the decisions that people have taken already. Now, obviously, Ruby, there's going to be some people who think we should have gone further. There will be some people who much prefer the existing arrangements. They might be doing well out of the existing arrangements. Our job is to try and strike a series of fine balances, and I think we've struck the right one because this is all about housing. This is all about recognising that the way that the housing market and the tax system intersects is working together to shut out a whole generation of Australians from home ownership and from aspiration more broadly. And so that's why we've taken these difficult decisions. There will always be strong views about policies like this, big economic reforms like this, but we're prepared, as I said before, to wear some of that criticism if it means getting to the right outcome. We didn't want to be the government that left, that consigned another generation to being locked out of housing because of the way that the tax system and housing market is broken.
- [04:33]
A
Sure, but it's a modest increase that we're talking about when it comes to new homeowners. 75,000 households over 10 years. But there are millions of young people who say that they can't get into the housing market. So is there a part of you that wishes that you'd gone further, perhaps abolish negative gearing altogether?
- [04:52]
B
No, I'm pretty confident in the balance that we've struck. And, you know, not everybody would agree that it's a. That it's too modest a change. As I said, there's always a range of views about it. 75,000 households which were rental households, becoming homeowners. I think that's a substantial number. And it's also not the only thing we're doing in housing. The Budget had important steps on youth homelessness. It had billions of dollars of investing in more housing supply as well as making the tax system fairer for younger people who work and also in the housing market. So across the board, we're doing a lot on housing and we think it will shift the needle on a problem which has been a really difficult problem, not just in our economy but in our society for a long time Now.
- [05:39]
A
More than 40 business founders have written to the Prime Minister urging him to walk back controversial capital gains tax changes that could hit them when they decide to sell. And one of the other big criticisms that you're facing at the moment is around the impact of the capital gains tax discount changes on business. So there is this growing campaign from the business community. There's been viral memes, there's a joint letter from 40 young founders who say that this is an aspiration ambush that's going to affect every growing business in Australia. Because if we tax risk taking in the same way that we tax ordinary income, then we're left with the question, why take the risk in the first place? So when you were designing these changes to capital gains, why didn't you limit it to just property?
- [06:24]
B
Well, because we didn't want to replace one big distortion which has been turbocharging house prices, with another distortion. You know, there was a big policy mistake made about a quarter of a century ago by Howard and Costello when they changed these arrangements away to what we are proposing now, away from what we're proposing now. It made investment in established housing way more attractive. And so we saw the decoupling of house prices and incomes around the turn of the century. And we're trying to fix that and not by replacing one distortion with another distortion. But the really important thing to understand about that, Ruby, is if you look at a 20 year period in between when that policy change was made, on average, what we saw is that investment in established housing was overcompensated for by the old arrangements. And investment in shares and medium density units and a whole bunch of other types of assets was actually under compensated. So by removing this distortion, we hope to rectify that. Now there is a campaign being run. I understand that there's also, unfortunately, a fair bit of misinformation being pushed around by our political opponents. You know, the 47 cent campaign, for example, pretends that there's no CGT discount anymore. That's obviously not true. We're just calculating the discount differently. There's a whole bunch of exemptions for small business, actually four different exemptions, carve outs and concessions for small business, and all of them are staying in place. And so my job, and one of the reasons why I'm grateful for this opportunity, Ruby, is to point out where there is misinformation about the changes that we're making. We're actually making it easier for people to make an investment based on good economic outcomes and not just the distortion introduced into the tax system in 1999.
- [08:11]
A
And you've spoken about having further consultations these exemptions. So is there more on the table here? Are exemptions being considered for startups, for example?
- [08:21]
B
We are talking with the startup sector. We actually began those conversations before the budget and we made it really clear in black and white in the budget papers themselves that we understood that when it comes to calculating the cost base for startups, that they are a bit of a different case. And so we were doing some private consultation before the budget and now publicly, I've done a bit of that myself. My department, the Treasury Department's been doing that in a more formal way to see if we can find a way through which recognises, first of all, how important startups to our economy, providing that dynamism in our economy which we really cherish and value, and making sure that we can recognise that startups can be a bit of a different case in the tax system. So if we can find a way through there, that would be good. But those conversations, that consultation is still happening right now.
- [09:09]
A
Still to come, is the government using gas industry figures to justify its decision not to introduce a gas tax? You've introduced a gas reservation policy, but not a stronger gas export levy. And there is again another very strong online campaign around this, around the need for a gas tax.
- [09:35]
B
No significant additional funding for Nature. There is absolutely no way labor can deliver on their promise of no new extinctions with this level of funding. Our entire budget on Nature is less than a week of what a gas export tax would bring in. We don't have a shortage of supply. We have a glut of greed, we may be told.
- [09:50]
A
Ed Husick and others have also argued that Australia just isn't getting a fair return from gas exports. So, I mean, couldn't the Budget have used that money?
- [09:59]
B
Well, there's a bit of a tick up in PRRT receipts in the Budget, but I understand that people have got strong views about taxing the gas companies more I introduced some reforms in our first term in office so that the gas companies were paying more tax sooner. But again, I acknowledge that people would prefer we go further and some people would prefer we go much further. I get that and I understand their arguments. From our point of view, we think there are good reasons to prioritise that gas reservation policy that you're right to point to in your question, which is all about decoupling the Australian gas market from the roller coaster of international prices so that we can get more supply at cheaper prices for Australian industry. That's the first thing. But the second thing as well is we've got to make sure that we can secure these two way supply arrangements with our refining partners in Asia. And so we've prioritized those two things. And again, I understand that's contentious. I mean, I, I do pay very close attention to the arguments being run about different gas tax arrangements, but those are our two priorities for the time being and I think they're really important priorities.
- [11:12]
A
In the lead up to the budget, when this idea of a gas tax was being canvassed, your government was hosing down calls for it by saying that the gas industry already pays $22 billion in tax.
- [11:24]
B
Well, look, they pay around about 22% billion. And importantly as well, and I noticed
- [11:30]
A
that figure, that 22 billion that actually comes from the gas industry, they are quite proud of it. So why was the government taking the lobby group's word for how much tax they pay? I mean, you're the treasurer, so have you asked treasury about that figure?
- [11:45]
B
Yeah, I think that was just our way of reminding people that the PRRT is not the only tax that the gas companies pay. I know that. Again, I know it was controversial when those figures were announced. The figures I focus on in the PRRT went up a little bit in the budget, but again, I acknowledge that for a number of, a lot of people who might be listening to us or watching us today, I acknowledge that people would prefer us to go further. I've tried to explain why We've got these two other priorities at the same time as the PRRT's gone up a bit. I know that people would like it to go up by much more.
- [12:20]
A
You've spoken about people feeling disconnected and disregarded by the political class and anxious about the lack of opportunity that they see for themselves. And you've said you want to address those concerns. That's, you know, part of what this budget is about for you, addressing people's fears for the future. A week on from the budget, it doesn't feel like that's working. So do you think that you've underestimated people's grievances? Do you think that you still are?
- [12:48]
B
I'm not sure I think about it exactly like that. I mean, I take, I take the, you know, the feedback inherent in your question seriously. But I don't think anyone expected a week or a week and a bit after the budget that in. Of any budget that people would necessarily. That there would be some kind of unanimous agreement about it. Obviously these things are big and contentious. They're controversial. But that point that you made at the start of your question is really important to me. I look around the world and I see whole generations or whole cohorts of people who are feeling disconnected and disregarded. I think this is a big, serious question for all of us, not just in our economy, but in our society. More importantly, this sense of people feeling like the economy is working in somebody else's interests. And when you try and change that or address that, try and avoid that situation in Australia that we're seeing in other parts of the world, there will be resistance to that. We're seeing that resistance play out in some of our newspapers. We're seeing it in the language of our opponents, but that doesn't mean you shouldn't try. And when I look around the world and see the way that communities are fracturing, particularly in an intergenerational sense, I take responsibility for trying to address that. Even if it means that we cop a bit of political turbulence or a bit of grief or a bit of feedback about it, or even these misinformation scare campaigns. I think it's worth it to try and avoid the situation that we're seeing around the world now. Not everybody sees what's happening around the world and wants to take a different path to that. Some people, including our opponents, they want to kind of copy the very divisive politics that we're seeing in other parts of the world. I don't want to. And I think that one of the reasons people feel disconnected and disregarded is because of this sense that the economy doesn't work for them anymore. And that's why we're taking some of these difficult decisions, particularly in the housing market and where it intersects with the tax system, because we care enough about it to do something about it.
- [14:45]
A
Treasurer, thank you so much for your time.
- [14:48]
B
Appreciate it, Ruby, thank you.
- [15:00]
A
Also in the news, health officials across the country are working to control Australia's largest diphtheria outbreak on record. More than 220 cases have been recorded across the country so far this year, with the vast majority in the Northern Territory and Western Australia. Diphtheria is a contagious bacterial infection that's preventable through vaccination, and authorities say crowded living conditions and low immunisation rates in remote communities are fuelling the outbreak. And Australia's special envoy to combat Islamophobia, Aftab Malik, is calling on the federal government to respond to his recommendations to combat Islamophobia in Australia following a deadly shooting at a mosque in the United States. Three people were killed at the Islamic center of San Diego, with authorities saying the two teenage attackers had expressed broad hatred towards different religions and races. Their writings also reportedly reference the 2019 Christchurch mosque attack in which 51 people were killed and another 40 shot. Mr. Malik says Australia cannot wait for a Christchurch style attack before taking action on Islamophobia. I'm Ruby Jones, this is 7:00am thanks for listening.