Jim Chalmers knew he would be branded a liar as he prepared the Budget that he and the Prime Minister have now conceded 39 times in less than a day backflipped on election promises to leave property investor taxes untouched.
The Coalition has swiftly vowed to repeal the curbing of capital gains tax concessions and negative gearing – although it would keep the $250 Working Australian tax Offset, which will cost more than $23 billion over a decade.
Opposition Leader Angus Taylor will use his Budget reply speech on Thursday night to link housing and migration numbers, promise to more than double the housing infrastructure fund that was in Labor’s Budget, and scrap the Government’s four signature housing programs.
The Budget raises $77b in taxes over the next decade by lifting the rates levied on incomes from trusts and capital gains to a minimum of 30 per cent, and restricting negative gearing.
The capital gains discount and negative gearing changes will be grandfathered, and the older, more generous version can still apply to newly-built homes.
Dr Chalmers conceded the changes — explicitly ruled out repeatedly during last year’s election — were “contentious”.
“We expect that that charge will be levelled at us,” he told the National Press Club when asked why voters shouldn’t think they were just another lying government.
“The worst thing to do, the easiest thing to do would be to leave things as they are, and understand that the longer we leave things, the worse they get.”
The Treasurer and Anthony Albanese started their post-Budget sell standing outside in the crisp pre-winter Canberra morning and acknowledging umpteen times, yes, they broke a promise.
“We’ve changed our position,” was Mr Albanese’s euphemism of choice, repeated 21 times in media interviews and several more during Question Time.
Dr Chalmers went with, “We have come to a different view,” some 18 times.
“We think getting another 75,000 Australians, and most likely, primarily, younger Australians, into the housing market is a very good thing to do. It’s worth the political risk,” he said.
Opposition Leader Angus Taylor was far blunter.
“My question is to the Prime Minister: why did Labor lie to Australians about your plan to tax them more?” he opened Question Time.
Earlier, he said the Coalition would repeal the changes if elected.
“We’ll do whatever it takes to roll these taxes back,” he said.
Shadow treasurer Tim Wilson said the changes — “by the confession of their own documents” — would push up rents, “knee-capping” young people who were trying to use investments to get together a home deposit, and cut the number of houses being built.
The Budget papers forecast the tax changes will lead to 35,000 fewer homes being built than without them, but supply measures such as the $2b infrastructure fund would more than offset this loss. Rents are forecast to increase about $2 a week.
Mr Taylor will outline the Coalition’s alternative housing policy on Thursday evening, pledging to cap net overseas migration based on the number of new homes built in the previous year.
Last year, 173,890 new homes were built. Skilled visas, many of which would have gone to people already in Australia, were capped at 185,000 and net overseas migration (which includes returning Australian expats, who can’t be prevented from entering the country) was 295,000.
The Coalition would also scrap the Housing Australia Future Fund, the Help to Buy shared equity scheme, build-to-rent tax incentives, and the $3b bonus on offer to States who build more than their share of the 1.2 million home target.
But it would increase the infrastructure fund to $5b, the same as Peter Dutton proposed at least year’s election.
Mr Taylor described it as common sense that “Australia should only bring in as many people as it can house”.
“This is about mass migration running ahead of the homes, roads, hospitals, schools and services Australia can provide,” he said.
“Labor built bureaucracy, the Coalition will build homes.”
Dr Chalmers used his speech to the National Press Club to explain how his backflip on taxes came about.
Over the summer he was thinking primarily about business tax reforms, scribbling notes “on planes and in the backyard, one eye on the kids in the pool”, but this evolved during conversations with colleagues and others who had been at last year’s economic reform roundtable.
The shift to contemplate capital gains, negative gearing and trusts came on slowly and the final decision only taken “either towards the end of April or perhaps the beginning of May”.
“We were thinking about tax reform over the summer; there wasn’t a moment where we completely switched into considering some of these sorts of issues, but the decision was taken relatively recently to change our policy,” he said.
Earlier, Mr Albanese said it was the gradual realisation that despite having “thrown everything at the housing market . . . it still wasn’t enough to get young people, in particular, into the housing market” that led to a willingness to go further.
Without the Coalition’s support, the Government must turn to the Greens to enshrine the tax plans into law.
Mr Albanese said he wanted to see them pushed through as soon as possible, ideally before Parliament rises for winter.
But the Greens are lukewarm on the idea, saying the proposed changes are a step in the right direction but won’t go anywhere near far enough. In particular, they don’t want existing tax arrangements grandfathered.
“They’re trying to be clever here, but it’s a bit of a con, because they’ve kept 95 per cent of these property investor tax perks, and there is nothing in this Budget for renters,” leader Larissa Waters said.
One Nation leader Pauline Hanson accused the Treasurer of stripping baby boomers of the wealth they had worked hard to accumulate and handing it to others, saying: “I see this as nothing but communism.”
Dr Chalmers has flagged using some of the $77b over the longer-term to give more tax cuts to working people now that Labor has set up a mechanism to target relief on wages income.
And he failed to rule out coming back to taxing franking credits — one of few Labor tax policies that hasn’t returned from the 2019 election purgatory — saying only that it wasn’t part of this package.
A happy-sounding Bill Shorten said he felt vindicated by the adoption of tax measures he championed in Labor’s losing 2016 and 2019 election campaigns.
“I think the great Australian dream of owning a home is a worthy one, and needs to be that that flame needs to be kept alive, not smothered under a tax system,” said the former Labor leader, now University of Canberra vice-chancellor.
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