Interview with Michael McLaren on 2GB

‍Subjects: House prices, housing supply shortfall, Labor tax policy, Budget, rents, economy, self-managed super funds, reverse mortgages, inflation, RBA interest rates, stamp duty, One Nation, Budget Reply.

E&OE....

Michael McLaren:

Andrew Bragg is a Liberal Senator for New South Wales. He's a bit of a boffin when it comes to housing, it's sort of been his schtick for a while. He is the Shadow Minister for the Environment among other hats. He's with me on the line. Always good to speak, Andrew. Thanks for jumping on the line.

Senator Bragg:

G'day Michael, how are you?

Michael McLaren:

I'm okay. Look, you don't want to talk any market down, but by crikey, we're skating on some thin ice here, aren't we?

Senator Bragg:

Well, this is the consequence of the high-tax model that Labor have introduced in their Budget in May, where they put $77 billion of new taxes onto the economy, and it's just tanked the whole place. And this is exactly what we thought would happen in the sense that it would damage the economic foundation of the country. And what you're seeing in housing is not a lot of new first-home buyers at all. What you're seeing is just effectively destruction of wealth, and no one actually gains from this.

Michael McLaren:

No, they don't. Rents are on a tear. This is the other aspect, because a lot of young people, before they buy, they obviously rent when they move out of home, or whatever the age-old story is. Pretty hard to get a deposit together, even if property prices are coming down, if your rent's going up.

Senator Bragg:

Well, even before the Budget, this government was building 30,000 fewer houses than the last government on average. Then the Budget proposed to reduce housing by another 35,000 as a result of their taxes. And then their bans on SMSFs and other things investing into new properties takes away another 16,000. So, what you see is a massive reduction in housing supply, and as a result, you see higher rents.

So I just think most people will look at it and think: why is the Government trying to reduce housing supply? I mean, they're going out of their way to damage the economy and the housing system just because they don't like certain investors.

Michael McLaren:

Yeah, well, this is it. They're playing favourites, and I think we all know—those who study politics know—the Labor Party, and every party would have, but Labor particularly have worked out that they need to win a certain percentage of the vote to win majority government. They don't need more than 32%. They can get there easily with 32% primary. So they've said, "Right, we'll go after the young, and we'll go after a percentage of the young, and if we get ‘em, we win." I mean, that's just the way that the preferential system works. But is it working for the economy?

Senator Bragg:

Well, I'm not sure what sort of political calculations they’ve made. I mean, I thought maybe they did some focus group testing on this stuff before the Budget, which I think went awry anyway. But clearly the idea that more taxes on everything would help the housing equation, I just think it failed at the first hurdle. I think most people looked at it and said, "Well, why is there a 30% new tax on small businesses and crypto and ETFs, and other things?"

So I think they've done a really bad job here on the economics, but also on the politics, which is why I think you're seeing so much pressure on the Labor Party as well as all the other parties.

Michael McLaren:

Just on that though, the economics filter. Okay, so we lay the blame at the Treasurer. He has the ultimate sign-off with the Prime Minister and the Cabinet. But we have Treasury—Secretary of Treasury, what is it, 1,200 staff nationwide or something. You know, there's a lot of people paid to put a Budget together. And it seems to me, Andrew, that a number of them—did anyone, I don't know, speak up and say, "Well hang on, what about this widow’s tax? What about the impact on self-managed super funds? What about this, what about that?"

I mean, all of these backdowns and clarifications and problems that have come to light since the Budget was handed down either weren't picked up or if they were, they were ignored. What does that say about the state of the Treasury?

Senator Bragg:

Well, I think it also shows that Jim Chalmers—I mean, if he was a CFO of a company, he would have walked the plank a long time ago. He would have been sacked, because his unrealised gains tax policy collapsed, his Budget has collapsed four different ways, so he has to take some responsibility—I'd say the most responsibility—for this.

In terms of the SMSF policy, I mean, this was pushed through by the Greens at the behest of the big union super funds, because they were worried about losing market share to SMSFs, because people who have a bit of money in super are smart enough to realise that they don't want to give their money to Wayne Swan and the 40 thieves at Cbus or AustralianSuper or whatever, and they'd rather just do it themselves. And so cutting off their ability to invest into property just damages SMSFs as a concept and actually helps the big super funds keep market share. So they didn't do any proper analysis on these things. These were just political things.

Michael McLaren:

I agree with that. Ideology. One aspect that yet hasn't been fleshed out in any detail, that is becoming more and more popular: people that have access to a reverse mortgage, Senator Bragg. Sure, properties in Sydney and whatever have gone up over 30 years, almost unbroken. So they've been on a tear, but you don't take out a reverse mortgage on the value of an asset from 1980, you take it off from the moment you took out the reverse mortgage. Now, if we start to see declines of nearly 20% in some of our markets, what does that mean for all of these people that have got reverse mortgages on an asset which isn't worth anywhere near what it was?

Senator Bragg:

Well, I think it leaves people in a terrible position. And the point about pricing is if you want to have more affordability and you want to have more young people buying houses, then you do that by providing more supply. You don't do it by putting in new taxes. And that shouldn't be a lesson we need to tell people today, but the outworking of this new tax policy is fewer homes. And as a result, that has made rents go up, but also the transaction cost of the new taxes plus the interest rates going up because of Labor's inflation has actually shocked the whole market and the whole system in a way which is not a good outcome for anyone. No one wins out of this.

Michael McLaren:

No, no one wins, including the Government. Mind you, just with that said, you just touched on that issue of inflation. A lot of the smart people are now saying at the September meeting, this month, of the Reserve Bank, we'll see a rise in interest rates. Their hand is forced; underlying inflation is still too hot. Okay, so it goes up another 25 basis points or a quarter of 1%, that'll obviously take even more heat out of the property market. Where does that leave us?

Senator Bragg:

Well, I think the government has given up on their Budget. They've given up on ever getting back to surplus. As a result, they keep on pumping money into the economy, and they give the Reserve Bank no choice but to use monetary policy to try and rein in the speed of the economy. I mean, we've effectively now got a speed limit of about 11⁄2 to 2% of growth before we start seeing interest rates go up.

So we're actually in a very sick position until we have a fiscal position that actually supports getting interest rates down. All the while Chalmers is at the Treasury, I don't think we're going to see inflation be defeated. Because last time he declared victory on inflation, that came back to actually show that he has failed.

Michael McLaren:

Absolutely. Just finally, politically speaking—you are a politician—we are, I agree, in a very sick position, and yet a lot of Australians seem to increasingly believe that the medicine comes from Pauline Hanson and One Nation. Why is that?

Senator Bragg:

Well, we've announced a lot of good policies in the Budget Reply, but we need to announce a lot more policies, and that needs to come over the next few months, because I think we're in a situation where there is more competition in politics. That's a good thing, I welcome that, but we need to step up to the plate and put out more economic policies which are ambitious and bold.

Otherwise, we will drift to our political deaths ourselves. And I think it's quite clear to me that people are hungry for detailed and ambitious policy solutions, particularly that help the economy.

Michael McLaren:

Yeah. Just finally, from a state’s point of view, there'd be a few treasurers saying: "Crikey, we're losing a lot of stamp duty here." A lot of them are Labor governments. Reckon they're on the phone to the Federal Treasurer?

Senator Bragg:

Well, I mean, this is the chickens coming home to roost, isn't it? They've been relying on this transaction tax-based system for way too long, and they've had the rug pulled from underneath them. And frankly, it was never a very good way to underwrite a Budget. I just don't think it's a good thing for Canberra politicians to spend their time trying to solve the problems of the states. The states could fix this if they wanted to, but they've decided they want to have an addiction to transaction taxes.

Michael McLaren:

Yeah, well, that would require of course a broader Federation Roundtable of some sorts, and I was trying to get the Coalition to take that to the last election as a policy, but it didn't land. But we've got another one on the way down the track, you never know. Thank you for your time, Andrew.

Senator Bragg:

Thanks, Michael. Thanks a lot.

[Ends]

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