A NEW TAX SYSTEM () BILL 1998 – GST
9 December 1998
Mr ALBANESE (Grayndler) (7.36 p.m.)—Today I rise in this debate to oppose, as indeed the member for Indi has said, this government’s GST proposal. I particularly want to highlight the impact of this proposal on the housing sector and on people, all of whom rely upon housing of one sort or another. Unlike the government, I believe that good quality, affordable housing is a basic social and economic right.
I believe that all human beings have a right to decent food, clothing and shelter. In an advanced industrial nation like Australia, this belief translates at a practical level into support for legislative initiatives designed to redistribute wealth and provide access for all to good quality and affordable housing.
Unlike the government, however, the Labor Party does not believe that only the wealthy should be able to buy their own home. We do not believe that only the wealthy should be able to live with security, knowing that there will always be a roof over their heads. But, Mr Deputy Speaker, the government, by their actions in introducing this GST with its impact on the housing sector, clearly believe that housing, like other necessities of life, is the preserve of the privileged.
The introduction of the GST will ensure that the average Australian home is thousands of dollars more expensive. Anyone pushed out of the housing market by the increased costs of buying a home will find that private rental rates have also soared. And, despite the government’s protestations, public housing in no way escapes the impact of a GST. The four per cent compensatory increase in pension will ironically lead to rises in rents for residents of public housing because their rents are directly linked to their income.
The great Australian dream has always been to own a suburban brick house surrounded by a quarter acre block. Private ownership of the family home is also socially beneficial in the broader sense. Home ownership provides an important protection for many Australians against poverty in their old age.
The introduction of the GST will make home ownership that much more difficult for ordinary Australians. Before the last election, Australia’s peak building industry association, the Housing Industry Association—not known for its support for the Australian Labor Party—stated that the government’s estimation of a 4.7 per cent increase in the cost of new homes was drastically understated. The real impact, according to the HIA, will be as much as an eight per cent rise in the cost of a new home.
The GST will apply to new home building, land development, renovations, additions, repairs and maintenance. During the election campaign, the government attempted to sell the GST to first home buyers by promising $7,000 up front to first home buyers purchasing a house with a construction value of up to $150,000. When you examine the legislation before the House tonight, you find that it does not appear. The reason the scheme does not appear in the legislation is quite simple. The government relies upon the goodwill of the states to introduce this scheme. Its implementation relies upon a belief that they will do the right thing regardless of whether there will be any compensatory factors for them.
Questions such as how the states will administer the program, whether the scheme will be uniform across the states, have not been answered. Even with the states’ full cooperation the government’s First Home Owners Scheme does not adequately insulate first home buyers from the government’s imposed hike in housing prices. The Financial Review—again, not a publication noted for its support of the Australian Labor Party—stated, on 15 August 1998, that the First Home Owners Scheme `only compensates for the increase in homes valued up to a less-than-average $90,000′. There is not a home in the Sydney metropolitan area that sells for $90,000. Anyone buying a house valued in excess of this amount will be paying eight per cent more than they would have before the implementation of this unfair GST.
To add salt to the wounds, the government has retained stamp duty on residential properties, thus allowing the rise in house prices to force a corresponding rise in the amount of stamp duty which has to be paid. HIA’s Managing Director, Ron Silberberg, has estimated that there will be a $400 average increase in house and land packages as a result of this government’s GST.
For private renters, the news is just as grim. The President of the Real Estate Institute of New South Wales, Mr Stephen Francis, said in the Financial Review on 15 August 1998:
As it stands now, rents are not subject to a GST, but what is likely to happen is that costs of the inputs to the owners will go up. They’re going to be reliant on passing these costs off to the tenant.
I outlined before that maintenance costs—all of these costs—are going to be subject to the GST. Are the people who have invested in housing to gain tax advantages simply going to absorb these costs or are they going to pass them on to the renters? I believe that everyone in this chamber knows that they will be passed on to those in the rental market.
Home buyers and private renters will definitely suffer under the GST, but I want now to address the group that the GST will hit hardest—those who are most vulnerable in our society and, in particular, public housing tenants. Public housing rents have been declared by this government to be GST free. However, the government has stubbornly refused to take into account the fact that public housing rents are indexed to pensions. Due to the dramatic decline in capital spending in public housing, public housing is more and more becoming the preserve of those who are on limited fixed incomes, essentially welfare housing. I think that is unfortunate, but it is a fact. The rents of those tenants are directly aligned to their income—between 20 and 25 per cent. Therefore, with regard to any increase in pensions, such as the four per cent compensatory package proposed by the government, 20 to 25 per cent of it will be eaten up immediately by a rise in the rent that those tenants have to pay.
The government has also announced that it will not exempt state governments from paying GST on building inputs. Senator Kemp stated, in response to a question from my colleague Senator Chris Evans, that the states would be taxed in the same manner as private residential rents are taxed. When asked how the states would recover the extra capital costs of public housing under the GST, Senator Kemp gave a very interesting reply. It is a reply that exposes just how elitist some senior members of this government are. It is extraordinary, but I put it on the record again:
Public housing tenants will have significantly greater disposable income as a result of the government’s tax reform policies. It could also be noted that state governments’ finances as a whole will benefit substantially from tax reform.
In other words, the government is not providing a plan to compensate states for the extra costs associated with public housing. Indeed, state governments will be paying GST when purchasing or maintaining public housing stock. This revenue, it is true, will be returned to the Commonwealth and the Treasury with no guarantee that the money will be reinvested into public housing. Chances are that it will just go into consolidated revenue because, whether it is the Treasury here and the Commonwealth or the Treasury and the states, when they have a chance to absorb revenue they do—and it will again add to the pressure which is on public housing.
Senator Kemp’s remarks seem to suggest that the GST will mean that public housing tenants will be so wealthy that they will now be able to afford higher rents. It is an extremely callous statement. Low income Australian families will be struggling to survive under a GST. Their day-to-day basic living costs will soar and now the government, as a result of this tax, will see those families’ rents increased as well. Senator Kemp says, `They’ll be better off.’ He is living in Disneyland if he thinks that is the case because, quite simply, working-class Australians in public housing do not have extra affordable income. They will be hit more by the GST because they spend a greater proportion of their disposable income on the essentials of everyday life: on food, on clothing and now on shelter; at each and every level those things will be hit by this callous government.
I also want to talk about the impact this GST will have on the construction industry by dampening growth in the housing sector. This is an industry in which over 600,000 Australians are currently employed. The Housing Industry Association, a body which has never supported the Australian Labor Party, predict the increased cost in construction and materials will mean that there will be a construction boom before the GST comes into force. So you have got this massive distortion of the market being created, followed by a debilitating slump. So much for the GST improving employment in this country. In the construction industry, the GST will be a massive disincentive for growth.
The community housing sector will also be savaged by this heartless GST. Because most community housing organisations have a turnover of more than $100,000 and are commercial rather than charity organisations, they will be subject to the GST. That will impact on them in a number of ways. For a start, their start-up costs in capital, such as offices and computer equipment, will be taxed. Their ongoing costs, such as maintenance of their dwellings, will also be taxed. And as if this were not bad enough, from the date that the government’s GST comes into force they will become tax collectors.
In conclusion, I want to talk about the impact that the GST will have in general on the housing sector. The GST will create a massive cycle of poverty. Because of the increased costs many people will be excluded from the private housing market. But then you go to the next rung and you will not be able to rent a house due to the increased costs. But you cannot get into public housing because of the reduced stock. If you do, there will be increased costs. You will be more likely to move and, if you do, your moving costs will be subject to the GST. All this adds up to the government facilitating structural inequality and poverty by having an impact on the housing sector right across the board, whether it be public or private. I want to put on the record that the housing industry is just one reason why this dreadful GST should be opposed. There is no mandate for it because the majority of Australians voted against it.