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Chapter 1: What is the main topic discussed in this episode?
I'm Ruby Jones and you're listening to 7am.
Chapter 2: What are the current challenges facing the housing market?
The housing market and young people without rich parents being locked out of it has dominated dinner table conversations for years. This budget, the Albanese government decided to try and do something about it, limiting negative gearing and replacing the capital gains tax. So what difference will that make? And how long would it take for anything to change?
One person who can help answer those questions is Stephen Kakoulis. He's been an economist for decades, including as senior economic advisor to then Prime Minister Julia Gillard. He's seen firsthand how these tax policies have shaped the housing market and how reversing them has seemed impossible.
Chapter 3: How does the Albanese government's budget address housing issues?
Today, economist Stephen Kakoulis on the future of housing in Australia. It's Wednesday, May 13. Stephen, welcome to 7am.
Thank you, Ruby.
So as you listened to the Treasurer last night announce these changes to the way that housing works, what was your first thought?
My first thought is at long last.
The reforms in this budget will lift our total investment in housing to a record $47 billion. We're levelling the playing field for first home buyers with 5% deposits and tax reform to help more young Australians into their own home.
We've been talking about the unfairness of the tax system as it applies to housing for many, many years and the distortion it creates in the housing market giving that unfair financial advantage to investors. And as a result of that, the unfair disadvantage to first home buyers or even early stage upgraders in the house. So you go from your two bedroom flat to a little cottage somewhere.
So you're actually seeing some tax reform that takes away some of this financial incentive.
to negative gear established dwellings and to have a more realistic taxing arrangement to the capital gains through the change to the capital gains tax discount and indexing it back to inflation, which seems to be a lot fairer, but a lot more constructive in terms of improving the interplay of first homebuyers versus investors.
And in terms of impact, I mean, these changes to negative gearing, they aren't retrospective and the changes to capital gains, they don't begin until 2027.
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Chapter 4: What impact will changes to negative gearing have on first home buyers?
And you mentioned earlier that politics got in the way in terms of making any of these changes retrospective. So do you think that they could have been bolder? Would there be more impact if they had been?
They could have been bolder but probably would have lost the next election because we know that about one in six, one in seven householders has an investment property that they negatively gear or use as part of the structure of their self-managed superannuation fund and these sorts of things. So you're hitting a big part of the electorate if you do it.
And, of course, the scare campaign would have been really huge. Ideally, if the government didn't have to appeal to voters, they should have made it retrospective, but it's a little bit like a lot of other discussions on tax and spending.
A lot of the ideas are very, very good, but they're politically unpalatable, which makes them hard to implement because you're impacting a relatively small part of the population quite significantly for the benefit of the masses, and the masses only get a small amount of that benefit. That's the policy versus politics issue on many of these issues, including as far as housing policy goes.
Coming up, the future of the housing market under these changes. Can we talk more about supply? Stephen, the government says housing supply is still the main issue when it comes to housing affordability and it has this target to build 1.2 million new homes over the next three years.
We want more Australians to own their own home. We have a plan to build 1.2 million homes by the end of the decade. We're training more trainees.
How is it tracking on that?
It's tracking well below that. We're not going to see the – well, highly improbable to see the $1.2 million. Having said that, if they'd started it a year later, they might have got a lot closer because what we're actually seeing in the dwelling building approvals numbers is quite a marked upswing in the number of new building approvals. And, of course, approvals become –
completed dwellings after 12 months or so of construction. So interestingly, in the last three months, in January, February, March of this year, the latest available data, it's increased by 30% from the low point two and a half years ago. So there is a pickup in building approvals occurring, but I think they'll fall short of the 1.2 million. My current educated guess is I'll probably get to about
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