Samantha Donovan: New analysis has revealed the federal government is missing out on billions of dollars in revenue because of property market tax concessions. Commissioned by the Greens, the Parliamentary Budget Office figures show negative gearing and capital gains tax discounts are set to cost the federal budget more than $160 billion over the next decade. Our business reporter David Taylor has the details. David, why have these figures been made public?
David Taylor: Well Sam, the Greens commissioned the analysis. It seems the analysis has been leveraged by the party to demand the Albanese government wind back negative gearing incentives and reduce capital gains tax discounts. Now that’s in exchange for their support in the Senate to pass Labor’s Help to Buy scheme. And Sam, you’ll remember that the proposal, known as a shared equity scheme, aims to help eligible applicants get into the housing market by loaning them 30% for an existing build or 40% for a new build of the purchase price. So the Greens essentially have put this analysis up to get the debate back on the agenda and try and do some wrangling with the government in terms of housing affordability. That’s the sort of the background to the fact that these figures have been published.
Samantha Donovan: And so what do the figures actually show?
David Taylor: Well, the PBO, the Parliamentary Budget Office analysis, shows that tax revenue foregone due to the federal government’s policies of negative gearing and capital gains tax discounts will total about, wait for it, $165 billion between 2024-25 and the 2033-34 financial year. A lot of figures I just threw at you then, so let’s just be very clear about this. Over the next decade, when you consider these property tax policies, the government, according to this analysis, will be missing out on between $100 and $200 billion worth of tax revenue. Now that would pay for a lot of things, obviously. But Sam, economists are sceptical of the figures that have been published. I spoke with the Australian National University professor, Ben Phillips, a short time ago.
Ben Phillips: It is true that, look, if you got rid of negative gearing and capital gains, you get a fair bit of money. I don’t think it would be quite that sort of money.
David Taylor: Does it highlight for you the sensitive nature of the way that property is taxed and what could be done in terms of both improving access and affordability in the property market and making it a more efficient vehicle for funnelling money to the government?
Ben Phillips: Look, I think some people are of the view that investment concessions, or sorry, taxation concessions to investors are having a huge impact on the property market. And look, they’re probably having some impact, but I would say it’s probably relatively small. I don’t think it’s really what’s driving rents in Australia or property prices in Australia at the moment.
Samantha Donovan: That’s Professor Ben Phillips from the ANU. And David, the Reserve Bank has released the minutes of its June board meeting. Do they give us any clues as to where interest rates may head next?
David Taylor: Well, Sam, I actually thought it was a little amusing that on social media, some commentators have mentioned the fact that they’ve read through these minutes of the Reserve Bank June board meeting and still can’t work out what the Reserve Bank wants to do in terms of interest rates. And that’s fair enough because the Reserve Bank has made it crystal clear that the outlook is very uncertain. One thing to note, Sam, there was no discussion in the June board meeting in determining interest rates of an interest rate cut. Now the Reserve Bank Governor, Michele Bullock, did mention that in the press conference that followed the decision, but it was confirmed today. There was quite lengthy discussion about a potential interest rate hike, but the balance, I guess, in terms of judgment shifted to rates being on hold for the month of June. As far as the rest of the year is concerned, it will completely depend on what happens with the June quarter inflation figures and of course the unemployment rate. But Sam, as I mentioned before, it is very unclear what the Reserve Bank will do with interest rates for the remainder of the year. And I suppose that’s their intention.
Samantha Donovan: We’ll have to wait for that August meeting. David Taylor, thank you.