Senator BARTLETT (2.51 p.m.)—My question is to the Minister representing the Treasurer. Does the minister acknowledge that the crisis in housing affordability in Australia is now more serious than ever for both home buyers and many people in the private rental market? Is the minister aware of the latest proposals released by housing groups calling for a national affordable housing agreement that includes increased investment in public and community housing and federal tax incentives to encourage private sector investment in affordable housing? Is the government giving consideration to this proposal? If not, can the minister outline what specific action the federal government is planning to take that is directed at the serious and very longstanding problem of housing affordability?
Senator MINCHIN—The government is always interested in ideas in the community about housing affordability. We are concerned to ensure housing is as affordable as is possible; therefore, I am sure that relevant officials are examining the report that the senator refers to and will provide advice to relevant ministers on that matter, because it is indeed something that we keep under constant review. Housing affordability really is a function of three factors: it is a function of people’s incomes, it is a function of interest rates and it is a function of house prices. The two things that we can most influence through our policies are, of course, ensuring that our fiscal policy is such that there is as little pressure on interest rates as is possible from a federal government level.
The fact is that home loan mortgage rates today are lower than they were at any time under the previous Labor administration. That is a remarkable fact, but it is the fact, as a result of our very tight fiscal policy, our maintenance of government surpluses and our elimination of government debt. We are doing more than any previous government to keep downward pressure on interest rates by not being in the market borrowing money and therefore competing for funds and putting upward pressure on interest rates. That is probably the most significant thing we can do for housing affordability, because obviously, if interest rates today were at the rates they were back in the early nineties, housing affordability would be much worse than it is.
In terms of the other variable, income, the fact is, as Senator Abetz and I have been saying, real wages have been rising under this government and under our economic reforms to the point where just in the last year real wages have risen more than they rose in the whole period of the previous Labor administration. The deplorable fact of life is that real wages actually declined through the period of the previous Labor administration. So, from the point of view of the capacity of households to afford housing, both in terms of interest rates and real incomes, the position is as strong as it could be from the federal government’s point of view.
House prices, of course, are a function of a whole range of variables, many of which are beyond the federal government’s control. The cost of actually building a house, as the housing industry has been pointing out, has been declining in real terms. The greatest contributor now to the actual cost of housing, at least new housing, is of course the cost of land. The cost of land is a function of a whole range of variables, but it is a function of state Labor government policy as to the availability and price of land. It is also certainly true that with a strong economy and strong population growth, which we have, there is greater pressure on the most desirable areas for housing, and obviously there has been a rise in house prices, most particularly in inner city areas. But the price of housing in outer suburban areas should be a function of the availability of land, and the fact is that state Labor governments are not making sufficient land available to ensure that the price of land is maintained at a level that new homeowners can afford.
It is also a function, most critically, of state taxes. We have complained long and loud about the extent to which state taxes place an unbearable burden, particularly on new home purchasers. They represent a remarkable proportion of the price of a new house, and there is something that the state Labor governments could do about it. (Time expired)
Senator BARTLETT—Mr President, I ask a supplementary question. I ask the minister: is it true, despite all the statistics he runs off about wage increases and the like, that housing affordability has got significantly worse over the time of this government? The increase in the cost of housing has outstripped growth in the rise of wages. Will the government reconsider the recommendations made by the Productivity Commission report into this area that applied to the federal government, which the Treasurer rejected in June 2004, including examining the various tax incentives and distortions in the housing market, to see if there is more that the federal government can do to alleviate what is a very serious burden on a growing number of Australian families?
Senator MINCHIN—We do share Senator Bartlett’s concerns that we maximise the extent of housing affordability. The Productivity Commission report was a very good document and a very interesting document, but Senator Bartlett knows full well that the Treasurer did reject the proposals in that report on taxation. One of them was negative gearing. Of course, we have had an experiment in the abolition of negative gearing. The previous Labor government for a period abolished negative gearing and it resulted in a disaster for those seeking to rent housing. There was a drought in the availability of rental housing as a direct result. As a result, the previous Labor government reintroduced negative gearing for that very reason. So it is a reminder that you have to be very careful when you start fiddling around with the policy settings in this area.