Prime Minister Anthony Albanese’s purchase of a $4.3 million cliff top house in Copacabana, on the New South Wales Central Coast, has rightly spurred debate about Labor’s policy amid the housing affordability crisis.
Sure, this will only be his third property: other MPs have declared they own more than twice as many.
The Australian Financial Review has come to the PM’s defence, deriding any criticism as an expression of the “tall poppy syndrome”. “The derision of people in politics making a buck and accumulating wealth risks deterring successful people from entering the political arena,” warned John Kehoe, the AFR’s economics editor.
Kehoe chided Labor under former PM Bill Shorten for rhetorically attacking the “top end of town”, noting “Albanese didn’t like that language and dropped it when he became leader”.
He reproached Albanese for trimming back the Stage 3 income cuts for those on the highest tax brackets, before warning Labor not to touch the negative gearing and the capital gains perks for the rich, let alone consider the Greens’ “absurd housing policies” — rental price freezes, a government-owned company to build public housing and forcing the Reserve Bank of Australia (RBA) to cut interest rates.
Curtailing negative gearing and the capital gains tax discount (CGT) “won’t fix the housing affordability problem and could have the unintended consequences of deterring investors from building new homes”, he argued.
“Albanese seems to understand this, saying last month he is yet to be convinced that touching the tax arrangements would help the supply of homes,” he added.
Deloitte report and housing afforability
This praise for Albanese from the mouthpiece for the top end of town was prompted by the PM citing a 2019 Deloitte report, commissioned by the Property Council of Australia, to hose down speculation his government was considering changing the negative gearing and CGT discount rules.
However, Greg Jericho, chief economist for The Australia Institute (TAI), has since revealed that the Deloitte report concluded the opposite.
It found that had the CGT discount been reduced from 50% to 25% and negative gearing restricted to new homes, as Labor proposed in 2016, housing affordability would have improved and home ownership would have risen 2.5% over a decade.
This would have been “the biggest 10-year improvement since the 1970s”, Jericho said. “From 2009 to 2019 the rate of home ownership fell 2.5% points from 68.8% to 66.3%. In effect this policy would have reversed that fall, but also led to the first significant increase in home ownership in 40 years.”
This would have translated into an additional 300,000 home-owning households by 2030. The same Deloitte study found that these measures would also not increase rents.
TAI estimates that negative gearing and the CGT discount cost around $20 billion a year.
Why is Albanese, who loves to remind us that he was raised in public housing, lying about the Deloitte report? To justify Labor’s landlord tax concessions.
Despite some of its rhetoric, Labor is determined to prove itself a trustworthy servant of the rich and powerful.
Labor backs the fossil fuel corporations’ climate wrecking expansion plans, helps bosses smash militant construction industry trade unions, and supports the US-led arms race and complicity in Israel’s genocidal war in the Middle East.
Its housing policy serves the same class interests.
Liberals' policy unchallenged
The John Howard Coalition’s CGT discount, introduced in 1999, in conjunction with negative gearing, has made housing more unaffordable than ever before. Then, it took about nine years of per capita household disposable income to cover the average price of a dwelling, according to Australian Bureau of Statistics (ABS) figures. Today, it is approaching 17!
TAI senior researcher David Richardson explained in September that the latest ABS figures show that total capital gains ($1390.6 billion) now outstrip total wages ($1254.6 billion) and go mostly to “the rich and untaxed”.
“People earning more than $1m a year made up just 0.2% of all taxpayers in 2021-22, but they earned 41% of the realised capital gains.
“All up the richest 9% earned just under 80% of all the capital gains realised in Australia in 2021-22. This accords with the latest Treasury estimate that 80% of the $19bn in taxation foregone in 2023-24 (some $15.5bn) due to the 50% capital gains tax discount went to the richest 10%.”
TAI released a paper in August by Richardson and Professor Frank Stilwell on the worsening inequality of both income and wealth.
Their study found that the share of Australia’s total wealth held by the richest 200 people nearly tripled Gross Domestic Product (GDP) during the last two decades.
This year, the combined wealth of the 200 richest people was $625 billion (Gina Rinehart topped the list with a personal wealth of $40.6 billion) and equivalent to 23.7% of GDP. Twenty years ago, the combined wealth of the richest 200 was $71.5 billion, or 8.4% of GDP.
“Most countries have one or more forms of wealth tax,” the Richardson-Stilwell report found. “Australia is unique in simultaneously lacking a wealth tax and taxing capital gains concessionally. In short, Australia’s tax treatment of wealth is a major cause of inequality in Australia.”
The report found that capital gains tax discount since 1999 “has had a particularly damaging effect on housing affordability”. Once, purchasing housing was “regarded primarily as getting a safe and secure place to live” but now it has “come to be seen as a tax-favoured way to build your wealth”.
The price of this is greater housing unaffordability, with disastrous generational consequences.
The latest Intergenerational Report showed that in 1981, almost 55% of people aged 25–29 were paying a mortgage on a home, or owned one, now only 35% are.
Those who have managed to get a mortgage are saddled with much bigger debts to service.
According to a Roy Morgan survey, the number of mortgage holders considered “Extremely At Risk” is now 1,013,000 (18.6%), which is significantly above the long-term average of 14.5% over the last 10 years.
Ever bigger numbers of people are being forced into the private rental market, where rents continue to soar.
Anglicare found in March that there is no affordable rental accommodation for low income families in Gadigal Country/Sydney and the Illawarra. Even full-time essential workers, such as nurses, aged care workers, early childhood workers, ambulance officers, cleaners and hospitality workers, were struggling to find affordable rents. Only 1.2% of rentals were affordable to nurses and only 0.9% for a cleaner.
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The AFR, Business Council of Australia and Property Council Australia all want to reduce the housing crisis to that of supply.
While post-COVID-19 material and labour supply shortages and immigration rebound are factors, these are not the core reasons for the housing affordability crisis.
The billionaire class is happy to scapegoat immigrants and foreigners so that the public won’t see who the real culprits are.
TAI has pointed out that, over the last 10 years, housing supply has increased faster than the population, but house prices have still risen 75%.
The key driver fueling house price inflation is the capitalist class’ push for greater capital gains.
If they realise their capital gain by selling properties, they get the CCT concession benefit. But they can also use the unrealised capital gain as collateral to borrow more to acquire more properties.
One of 21st century capitalism’s cruel contradictions is that, increasingly, it seeks to make a return on investment without producing anything useful.
Unproductive and destructive speculation remains rampant even after the Great Financial Crisis of 2007-2009. The housing crisis today is a direct result of this.
[Peter Boyle is a member of the Socialist Alliance National Executive.]