Stamp Duty – Interview with Tim Lester, 7.30 Report

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Reappointment of Mr Ian J Macfarlane as Governor of the Reserve Bank of Australia
July 29, 2003
Stamp Duty – Interview at King David School Business Breakfast- Melbourne
July 31, 2003

Stamp Duty – Interview with Tim Lester, 7.30 Report



Full Transcript of
Interview with Tim Lester

7.30 Report


Wednesday, 30 July 2003

SUBJECTS: Stamp Duty


Treasurer first, how far has State stamp duty on home purchases, come

from its originally intended purpose do you think?


Well, as the property market has moved up, the States have not adjusted

their thresholds or their rates. So that in Sydney or Melbourne, a standard

which in the mid-90s was attracting a stamp duty of $5,000 is now attracting

a stamp duty of $16,000. So that’s a tripling, a 300 per cent increase

over the term of the State Government. And now it has just become a milch

cow for State Government revenue.


You must envy it as a Treasurer, looking at what State Treasurer’s can

do in terms of income from housing booms?


I can’t believe they get away with it. We have just cut income taxes

at the Commonwealth level, because we believe that you should return

taxes to people and adjust the scales. There has been no adjustment in

New South Wales and Victoria for decades. And in that time, you have

seen house prices going up, in some cases 30 per cent per annum.


On that question, why do you think house prices are accelerating so fast

when inflation and earnings growth are relatively, accelerating so slowly?


I think there are two factors here. One of course is that interest rates

are low. Because interest rates are low, people can afford to buy a more

expensive house. I think there’s another factor too, which is you have

just been through one of the greatest world stockmarket crashes, and

people realise that a house is a pretty safe investment, in difficult

times. Money is coming back into the property sector and with low interest

rates people can afford more, and what that means is that prices have

risen. Now this is actually good if you own a house. For the overwhelming

majority of Australians they are sitting back watching their prices going

up, feeling that they have got a good investment. It only works against

those people that are not in the market because it produces a barrier

to getting in.


And what policy options does the Federal Government have to try and increase

housing affordability, for first homebuyers particularly?


Well, we are not going to reverse our low interest rate policy. I can

assure you of that. We are not going to do that. So, people can rest

assured. What we did, is, we introduced the First Home Owners’ Scheme

for people who were outside the market and trying to get in. It has now

gone to 482,000 Australians – $7,000 grant for the buying of the first

home. I think that was a pretty big commitment. When we introduced the

First Home Owners’ Scheme we pointed out to the States that getting more

people into the market would push up prices, and they would get a windfall

on stamp duty and we asked them to reduce their stamp duties to help

those first home owners. We didn’t want a situation where the Commonwealth

grant was eaten up by increases in stamp duties. Unfortunately that is

what has happened.


Is stamp duty, or a reduction in stamp duty, the single greatest step

government could take in Australia to increasing housing affordability?


I think it’s the most practical step that could be taken at the moment.

As I say, nobody is going to be pushing for a high interest rate policy.

So, what are the practical steps that can be taken? Well, one obvious

one, hand back some of the windfall on stamp duty.


Your critics say that in fact you have your hands, or the Federal Government

at least, has its hands on some of the important levers, particularly

for example, migration into the Sydney Basin, that that’s been a major

spur on cost increases in housing. What’s your comment to the suggestion

that the Federal Government could have calmed housing price rises in

that way?


I think it’s a bit unfair to blame house price rises on migrants. In

my experience migrants that are coming into Australia are not the kind

of people that are likely to be bidding up house prices. They generally

come in with not very much, and if anybody is suggesting to you we can

blame migrants for house prices, I think that’s a bit unfair.


The Acting Premier in New South Wales I think is suggesting it, and he

is also suggesting that if Peter Costello had been committed about a

reduction in stamp duty he would have raised it in 1999 in the context

of the GST negotiations. Couldn’t you have put stamp duty on the table

back then and forced some concessions from the States in the context

of those talks?


Well, I will make a couple of points here. The first of course is, the

States did not ask for stamp duty to be part of the GST package. Did

not ask for it. And the reason they didn’t ask for it, is, they wanted

to hold onto it. It is one of their revenue bases. They wanted it. The

second point is, for a Labor Premier to say that we should have picked

this up in the GST negotiations, when he opposed the GST hook, line and

sinker is a bit rich, don’t you think?


That said, you could have made an issue of it then, couldn’t you Treasurer?


The States wanted stamp duty. You can see why. It is a big revenue base

for them. Now, what I would say to the State Governments is this, that

if you want to run a Government, you have got to be responsible for a

tax policy. The State Governments are responsible for a tax policy. There

is no point in saying, if the State Government is being held accountable

on its tax policy, the Commonwealth should fix it. They’re a Government,

they have got a revenue base, it’s their decision, they can fix it.


Is there a need for a Federal Housing Affordability Inquiry?


I think there are some things that would be worth looking at to get more

detail on. For example, the release of land – this is again within the

province of State Governments. I think it would be worthwhile having

a look at whether enough land is being released, whether it’s being released

at the right price and some of those technical issues, I think that would

be worthwhile, yes.


Might you push for one personally?


Well, I will seek to have some work done on it, absolutely.