The Turnbull government is prepared to further intervene in the housing market, Treasurer Scott Morrison says, if the federal budget’s housing package fails to calm rising house prices.
Mr Morrison told Fairfax Media there would be significant measures to increase housing supply and put downward pressure on prices in next Tuesday’s budget, while confirming a reduction in the capital gains tax discount and negative gearing changes were off the table.
Better days are ahead: ScoMo
The Treasurer has touched on debt, wages growth and housing affordability ahead of the Federal budget while Labor has its own ideas on getting back to surplus.
And in comments that mark a departure from the approach of his predecessors, Joe Hockey and Wayne Swan, Mr Morrison has declared his second budget will not “tickle the ears of ideologues”.
Instead, it would “set out practical plans that help people get the services they rely on, reduce cost-of-living pressures and grow the economy”.
Asked if the second Turnbull-Morrison budget – which is expected to finally jettison the remaining “zombie” savings measures from the Abbott-Hockey 2014 budget – marked the beginning of the “era of the achievable”, the Treasurer said “that’s a fair way to describe it”.
Though he was tight-lipped about what specific measures the federal government could take to unlock additional land supply – which remains primarily the domain of the states – Mr Morrison confirmed the federal budget would take steps in that direction.
Unused or surplus Defence department land, including in Maribyrnong in Melbourne and in Penrith in Sydney, is said to have been ear-marked for sale and re-development in the budget to increase the supply of housing – a move the Victorian government has been pushing for.
“We have taken steps, pretty significant but calibrated steps to address the heat at the investor level [in the housing market] through the regulations by APRA [the banking regulator], they are pulling loans back, increasing the required level of savings to actually access loans, whether for investors or otherwise,” he said.
Treasurer Scott Morrison flags further action if the budget fails to cool the housing market. Photo: Alex Ellinghausen
Those changes, announced last month by the regulator, have required banks to tighten their lending practices, particularly on interest-only and investor loans.
But if they did not go far enough and the housing market roared back to life in 2017 in the wake of the budget, Mr Morrison confirmed further steps would be taken.
He did not specify how the government could further cool the housing market, but one step available would be a further clampdown on investor loans.
“We will always watch this closely and take the calibrated measures that are necessary,” he said.
“We have just taken a significant step, we are about to announce some additional measures in next week’s budget, which particularly address issues around supply, and we will see how those impact.”
The Treasurer cited the government’s move to address housing affordability, emphasise the difference between “good” and bad” debt to unlock infrastructure funds and tackle university funding arrangements as evidence of a more pragmatic approach.
“There is a pragmatism, a practicality to how we are going about these tasks. There is too much ideology in all of these debates, people want us to deal with the problems in front of them,” he said.
“There has been criticism of us looking to address issues in the housing sector. I make no apology for it. All of the political navel-gazing that has gone around the tactics of these things, frankly, if you can’t afford your rent, you don’t care.”
He also confirmed the government would stick to its rule that any new spending should be offset by savings, while conservative forecasts for key commodity prices such as coal and iron ore would be maintained.
These steps were designed to send a message to the three major ratings agencies about the reliability of the return-to-budget-balance timeline of 2020-21.
“Politics has changed a lot in the last five years or so,” he said, and after years of return-to-surplus timelines slipping again and again “about 12 months ago the music stopped and the ratings agencies said we are not putting up with that any more, and we will look at budgets based on what we will believe will happen”.
While the government had not put together its budget with “pre-emptive vetos in mind, it was “mindful of the political environment” in the Senate.