Speaker 1: I'm Daniel James and you're listening to seven AM in Canberra.
Speaker 1: A fight both major parties have tried to avoid is back.
Speaker 1: The Senate is examining the capital gains tax discount, the
Speaker 1: Howard era change that slash tax on asset profits and
Speaker 1: helped turn housing into a national obsession. It's long being
Speaker 1: considered untouchable, especially after Labour's bruising twenty nineteen defeat, But
Speaker 1: with house prices entrenched, inequality rising, and the budget and distrain,
Speaker 1: pressure is building on the government to do something. Today,
Speaker 1: Economist and executive director of the Australian Institute Richard Dennis
Speaker 1: on why the tax concession exists, the vested interests resisting change,
Speaker 1: and whether the politics around it are finally shifting. It's Saturday,
Speaker 1: February twenty eight Richard, Thanks for joining us. Right now
Speaker 1: the Senate is running an inquiry into capital gains tax discount.
Speaker 1: What exactly are they examining and why is it back
Speaker 1: on the agenda now?
Speaker 2: So in Australia we have this sort of bizarre situation
Speaker 2: that if you work full time and earn one hundred
Speaker 2: thousand dollars, we charge you tax. But if you earn
Speaker 2: one hundred thousand dollars from Capital Gain. If you get
Speaker 2: one hundred thousand bucks for not working, we'll give you
Speaker 2: a fifty percent discount on the amount of tax you
Speaker 2: have to pay. It's truly remarkable, incredibly inequitable, and Peter
Speaker 2: Costello and John Howard introduced it get this, amongst other things.
Speaker 2: They said it would help stimulate investment in housing and
Speaker 2: drive house prices down, and of course the absolute opposite
Speaker 2: has happened and house prices have grown spectacularly since. So Yes,
Speaker 2: the Senate is having an inquiry into these incredibly inequitable
Speaker 2: and ineffective tax breaks. And luckily, you know, after years
Speaker 2: of pressure, decades of pressure from some of us, the
Speaker 2: government are making noises like, yeah, maybe it's time to
Speaker 2: fix this.
Speaker 3: Let me make a declaration of the state.
Speaker 4: Perhaps one of the.
Speaker 3: Few people you have soon in public life have spent
Speaker 3: thirty years working for the trade unions, another twenty six
Speaker 3: years working for Lindsay Fox, one of the richest people
Speaker 3: in Australia, one of the great entrepreneurs.
Speaker 1: A number of people have appeared before the inquiry this
Speaker 1: past week. One of them was Bill Kelty, the former
Speaker 1: labor heavyweight and veteran trade unions. What did he have
Speaker 1: to say, Well.
Speaker 2: I think you know Kelty and former RBA governor Bernie
Speaker 2: Fraser and former Secretary of Treasury Ken Henry. You know,
Speaker 2: they're all out there. Who exactly because this is obvious,
Speaker 2: you know, it's frustrated. I'm an economist, apologies for that.
Speaker 2: It's often the disconnect in Australia between what economists think
Speaker 2: and what non economist politicians say is good for the economy.
Speaker 2: The disconnect is, you know, it's a cabin So it's
Speaker 2: really quite straightforward from an economic point of view that
Speaker 2: this fifty percent capital gains tax discount gives people an
Speaker 2: incentive to bid up the prices of housing assets in
Speaker 2: a way that helps helps nobody accept them in the
Speaker 2: short term.
Speaker 3: What would you be surprised? The capital gainstick discount favors
Speaker 3: people have got capital, then people likely to get capital,
Speaker 3: those who are older and recruit capital. Therefore, there should
Speaker 3: be nothing absolutely surprising about it.
Speaker 2: But of course Bill Shorten in twenty nineteen proposed changes,
Speaker 2: and everyone likes to pretend that. In twenty nineteen Bill Shorten,
Speaker 2: you know, got punished for proposing a progressive tax agender.
Speaker 2: But what the top secret data held on the Australian
Speaker 2: Electoral Commission website tells us is that Labour's vote went
Speaker 2: up in the highest income electorates in the country. So, unfortunately,
Speaker 2: Wealth and Power in Australia are very good at telling
Speaker 2: us scary stories about you better not have a go
Speaker 2: at Wealth and Power. Ever, I'll hate you for that.
Speaker 2: My prediction is that after Labor does something on capital
Speaker 2: gains tax, it'll be so popular that the Liberals will
Speaker 2: actually end up supporting it. Remember with the Stage three
Speaker 2: tax cuts, the Liberals were like, you can't break a promise,
Speaker 2: you can't break a promise, And within twenty four hours
Speaker 2: of Labour saying oh we've had a second look, we're
Speaker 2: going to fix this, the Liberals came out and said, yeah,
Speaker 2: fair point.
Speaker 1: We don't really want to.
Speaker 2: Go to an election opposing that.
Speaker 3: Increase the capital gains tax produced a discount, but you
Speaker 3: don't address a reform.
Speaker 1: What does he do. One thing Bill Kelty also said
Speaker 1: was that scrapping the discount alone wouldn't fix the underlying
Speaker 1: problem of inequality. Things.
Speaker 3: If I can't pay the bills next week, I'm a
Speaker 3: young person has to go to the second VIEWA say,
Speaker 3: do you feel better because the government has actually reduced
Speaker 3: a couple of games discount? I said, what makes no
Speaker 3: difference to me. I still can't pay the bills.
Speaker 1: So what would scrapping the discount achieve in your analysis?
Speaker 2: Oh, look, it achieve a lot of things. It will
Speaker 2: collect a lot of revenue, and how you spend that
Speaker 2: revenue really matters. Look, I'm not quite sure what he
Speaker 2: means by that. The capital gains tax concession is an
Speaker 2: enormous incentive for people to use housing assets as a
Speaker 2: speculative low tax vehicle. I think removing those concessions will
Speaker 2: have quite a significant impact on housing affordability going forward
Speaker 2: and on equity going forward.
Speaker 1: To the point of political pressure, like you said. Bernie
Speaker 1: Fraser also appeared before the committee.
Speaker 5: That case can be made for doing away with the
Speaker 5: discount on the gains capital game stakes are bolishing it
Speaker 5: all together, and.
Speaker 1: He told the inquiry he'd abolige to discount outright, but
Speaker 1: described a cartel of vested interests blocking reform. Who is
Speaker 1: that cartel? And how does that stop change?
Speaker 2: Stay classy Australia. Yeah, Look, unfortunately so many things in
Speaker 2: Australia are off limits it's.
Speaker 5: This cartel which comprises existing homeowners, property developers, and not
Speaker 5: least lots of politicians who like to see house prices
Speaker 5: rise and go on rising.
Speaker 2: What happens in Australia. I don't hate political parties, but
Speaker 2: when you have two parties where what the leader says
Speaker 2: or what the party are increase sticks and sticks hard,
Speaker 2: it's very easy for powerful groups to take things off
Speaker 2: the agenda because you only have to convince two people.
Speaker 2: Let's not have this fight. Come on, we can all
Speaker 2: be grown up, you know, labor and liberal. You can
Speaker 2: have a nice big fight about industrial relations. You can
Speaker 2: even have a nice big fight about the company tax
Speaker 2: rate or something if you want. But how about we
Speaker 2: put taxing gas over here in the too hard basket.
Speaker 2: How about we put gambling reform over here? How about
Speaker 2: and for years we did this with same sex marriage, right,
Speaker 2: everyone knew most people supported it, Everyone knew that most
Speaker 2: people in Parliament supported it. But if the leaders of
Speaker 2: both parties agree to call it a drawer and just
Speaker 2: not talk about it, then it doesn't happen. And I
Speaker 2: think Australia is kind of uniquely vulnerable to this because
Speaker 2: this historic two party system with this uniquely binding party
Speaker 2: caucus vote culture in Australia just meant that running dead
Speaker 2: on an issue was easy to achieve if you could
Speaker 2: get two groups to agree not to talk about it.
Speaker 1: So do you think Labour's actually going to change this
Speaker 1: when it comes to capital gains or will they merely
Speaker 1: say that they've had an inquiry to look at it,
Speaker 1: or they're just got to think around the edges. What's
Speaker 1: your feeling on that, Richard.
Speaker 2: My feeling is they will do something that's not based
Speaker 2: on any insider speculation. It's just a combination of things.
Speaker 2: The case for it is so strong, It's always been
Speaker 2: so strong. You know, the Australians has been banging on
Speaker 2: about this, you know nearly twenty years now that in
Speaker 2: one week you can see Bernie Fraser, Bill Kelty, Matt
Speaker 2: Coben at the you know, the CBA boss is out
Speaker 2: saying it right, So it's a real everyone's now. Oh yeah, yeah.
Speaker 2: I've always supported that. I've always supported that. So these
Speaker 2: people look powerful by being right, They look powerful by
Speaker 2: being on the side of power. They wouldn't all be
Speaker 2: out there saying they think something should happen if they
Speaker 2: thought there was no chance it's going to happen, So
Speaker 2: I think it's I think lots of people want to
Speaker 2: do it for lots of reasons. It to solve a
Speaker 2: big economic problem, it'll help solve or reduce inequality in Australia,
Speaker 2: and it's the right thing to do. And we've just
Speaker 2: put it off for a long time because that's what
Speaker 2: we do in Australia. We put off things that powerful
Speaker 2: people don't want to do.
Speaker 1: Coming up, Albanezi stumped over beer and gas.
Speaker 4: This one has come in from Andrew. He says, please
Speaker 4: get Albo to explain how we live in a country
Speaker 4: with some of the best natural resources in the world,
Speaker 4: but the average person pays more in tax to have
Speaker 4: a beer than the billion dollar mining companies get taxed,
Speaker 4: bleeding our resources dryer. How do you respond to that, Well.
Speaker 1: Two things.
Speaker 3: One is that the mining companies do pay taxes.
Speaker 1: And if we pivot to the political landscape more broadly,
Speaker 1: you say, there are two questions you get all the time.
Speaker 1: One is whether the till should form a part and
Speaker 1: the other is why Australia gives so much of its
Speaker 1: gas away. Why are those questions linked?
Speaker 2: I guess I already hinted at that. It's because when
Speaker 2: there's two leaders of two parties that can between them
Speaker 2: keep something off the agenda, and keeping something off the
Speaker 2: agenda is different from persuading everyone.
Speaker 1: It's not a problem.
Speaker 2: Keeping things off the agenda is easy, just don't talk
Speaker 2: about it. So when neither major party want to talk
Speaker 2: about something is very hard in Australia to make people
Speaker 2: care about it. And for whatever reason, both major parties
Speaker 2: have for decades just gone along with the idea that
Speaker 2: we should literally give more than half the gas we
Speaker 2: export away for free. That's not what they do in Norway,
Speaker 2: that's not what they do in Qatar, it's not what
Speaker 2: they do in Saudi Arabia, but it is what we
Speaker 2: do in Australia. And when both major parties decided that
Speaker 2: they didn't want to have a row with the gas industry,
Speaker 2: and in turn I didn't want to have a row
Speaker 2: with each other about that issue, it just wasn't talked about.
Speaker 2: It is being talked about now.
Speaker 1: Great. How do we live in a country that exports
Speaker 1: one of the biggest gas exporters in.
Speaker 3: The world and we're getting more tax from beer.
Speaker 1: Than pot.
Speaker 2: People are appalled to learn that, you know, beer drinkers
Speaker 2: pay more beer excise than we collect in petroleum resource
Speaker 2: for intact. Appalling, It is appalling. But here's the thing,
Speaker 2: it's not news. This is where I think independence and
Speaker 2: minor parties have got a really important role to play,
Speaker 2: and a growing role because even though they might not
Speaker 2: have votes in the Parliament today that can force Labor
Speaker 2: to do anything, the fact that this question now won't
Speaker 2: go away because so many voices that can't be co opted,
Speaker 2: so many voices that can't be silenced by party discipline
Speaker 2: or a promotion to cabinets or a job after parliament
Speaker 2: if you do the Resources minister's job. Well, there are
Speaker 2: so many independents in Parliament now saying hang on, I
Speaker 2: call bullshit, like I keep hearing we can't afford to
Speaker 2: spend more on mental health and it turns out we're
Speaker 2: giving half our gas away for free and getting more
Speaker 2: tax from beer. This is an outrage now that you
Speaker 2: know one nation is saying that Greens are saying that
Speaker 2: David Pocock's saying that a bunch of independence in former
Speaker 2: Liberal seats are saying that it just gets harder and
Speaker 2: harder for the Labor and Liberal Party to go. Yeah,
Speaker 2: but we're still not going to talk about it, are we.
Speaker 1: So the tails strength is in their independence.
Speaker 2: I think so, And you know they should do what
Speaker 2: they want to do. They want to form a party,
Speaker 2: they should. I just think it's a bad idea because
Speaker 2: the word independence is a good word. Clearly it's bringing
Speaker 2: a lot of growing market share if you want to
Speaker 2: use that terminology to them, voters are responding to it.
Speaker 2: One thing is to do something absurd and say will
Speaker 2: have the Independence Party. Well that's a contradiction in terms,
Speaker 2: so it's not a thing all. The other thing is
Speaker 2: just stop using the word that defines you. I'm independent.
Speaker 2: You might not agree with everything I say, but I
Speaker 2: can just tell you what I think. They could abandon
Speaker 2: the word independent. They could abandon that independence of thought
Speaker 2: and say no, no, I'd rather form a package deal. That's fine.
Speaker 2: If they want to do that, they should, but by definition,
Speaker 2: giving up the thing that makes them different, giving up
Speaker 2: the thing that voters are currently responding to, to look
Speaker 2: more like the Labor Party and more like the Liberal party.
Speaker 1: So probably there are there liberal and Labor MPs. You
Speaker 1: think it's crazy, we don't taxt gas properly, but they
Speaker 1: can't say it until the whole party agrees. Look, there are.
Speaker 2: Dozens of MPs in the major parties that think it
Speaker 2: is not just ridiculous but one of the low points
Speaker 2: in our democracy that we can't even haven't even met
Speaker 2: able to talk about it.
Speaker 1: That's how good.
Speaker 2: The fossil fuel industry, mainly the gas industry, have been
Speaker 2: in buying silence, and that's what this is. It's the
Speaker 2: buying of silence. So yeah, no, Look, I don't think
Speaker 2: you'll find many people that will stand up and try
Speaker 2: to defend the status quo, and when they do, it's
Speaker 2: such a half asked defense. I mean, there was a
Speaker 2: really good interview that Conrad from Punter's Politics did with
Speaker 2: Tanya Plibasec, really long interview that she gave him, and
Speaker 2: he pushed it pretty hard on it. Come on, come on,
Speaker 2: surely you and she's like, oh, of course, I want
Speaker 2: to collect more tax from them, but we just kind
Speaker 2: of can't. It's like, yes, we can.
Speaker 6: You know, the resources that are underneath our soil and
Speaker 6: in our oceans belong to every Australian and we should
Speaker 6: be getting a fair return on them.
Speaker 1: I've collected done make a policy.
Speaker 6: Well, I agree with that and we you know, we
Speaker 6: tried to do it, and we tried to do it
Speaker 6: at at a higher rate. We eventually had to compromise
Speaker 6: and do it at a lower rate, and even that
Speaker 6: once we left government was reversed.
Speaker 1: So are we stuck in this cycle, Richard, until we
Speaker 1: get a massive increasive independence in the parliament, or that
Speaker 1: we have permanent minority government. I mean, is the status
Speaker 1: quoe likely to change it? Or are we stuck in
Speaker 1: this cycle forevermore?
Speaker 5: No?
Speaker 2: No, I'll make a joke at my spence. I might
Speaker 2: be a bit centrist here. There's a middle path, Daniel.
Speaker 2: The Liberal Party got a warning in twenty nineteen when
Speaker 2: Zalie Stegel took the once safe seat of Wringer off
Speaker 2: Tony Abbott. The Liberal Party in twenty nineteen could have thought, oh,
Speaker 2: that's risky, we should change direction, but they chose not to.
Speaker 2: In twenty twenty two, the Liberal Party lost six more
Speaker 2: seats safe seats to independence, and they could have in
Speaker 2: twenty twenty two when well, that's risky, maybe we should
Speaker 2: change direction. And then in twenty twenty five it happened again,
Speaker 2: and this still won't change direction. What's interesting to me
Speaker 2: is well be smarter than that. Now, Labor did well
Speaker 2: at the last election, obviously won a lot of seats,
Speaker 2: but off a very low primary vote. Well, guess what
Speaker 2: at the next election, they've kind of got their liberal moment.
Speaker 2: So you framed the question as you know, is it
Speaker 2: all or nothing? Just because the liberals were too dumb
Speaker 2: to listen doesn't mean Labor's too dumb to listen. But
Speaker 2: if Labor are too dumb to listen, then yep, that's
Speaker 2: what's going to happen. They're going to lose. They're going
Speaker 2: to lose more seats as more people go. That's just crazy.
Speaker 1: Richie will let you go and get your coffee. Thanks
Speaker 1: so much for your time. Thank you. Seven am is
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Speaker 1: Ariel Richards, Chris Dangate, Crystal Color, Nicole Johnston, Travis Evans,
Speaker 1: Zoltan Veecio and me Daniel James. A theme music is
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Speaker 1: for listening to seven Am. Have a great weekend.