Legislative Council Wednesday 24 June, 2020

Ms FORREST (Murchison) - Mr President, I make the observation that the impact of COVID 19 has been quite astounding and far-reaching to the point that everyone at the podium, except for the member for Nelson, now has facial fair. That is the COVID-19 look.

Turning my mind to this bill, I have mixed feelings about this bill. We have seen the Government demonstrate commendable resolve, making tough decisions during uncertain days in early April and March when the pandemic struck this state and continue to exercise caution in not bowing to every demand to open our borders prematurely. I commend the Government for that.

This bill sees a proposed handout to property owners or want-to-be owners who are planning to pursue their dream anyway. That is the reality of the HomeBuilder Grant. As many have observed, the grant requirement, whereby a contract needs to be signed by the end of this calendar year and construction to start within three months, means the policy is a handout to those who are planning to build and/or renovate anyway.

Interestingly, the definition of commencement is quite loose. The date of the laying of the foundations for the building or if no foundations have been laid, a date determined by the Commissioner of State Revenue in respect of the building.

I understand that commencement is used in the First Home Owner Grant for first-time builders, but it is pretty loose and I appreciate the Leader organising a briefing for me at short notice this morning.

Mrs Hiscutt - I told my staff they could knock off after we had sorted that. We worked all hours.

Ms FORREST - They did not all go off after they talked to me. They are here now. I made the point that surely this must mean more than a few pegs in the ground. Surely there must be some sort of serious commencement if we are going to be serious about this? The commissioner cannot decide, 'Oh well, they have pegged out a bit of a lot there on a block.'. I would like the Leader to clarify a bit more of the detail around that. The definition in clause 3 of 'commencement', at part (b), is quite loose.

I note the date to end the grant program is set for 31 December this year; however, under clause 14, this can be extended by ministerial order. Amendments to the National Partnership can also result in ministerial orders being used to alter the application of this bill under clause 19.

While both of these are disallowable, we know that parliament does not sit until March over this period. That is assuming things go as planned. If we look across the water to Victoria and New South Wales, both are now experiencing significantly more numbers of COVID-19 infections - not significant in the American or the Brazilian or even the English sense, but in the Australian sense, it is significant.

We are not out of the woods yet and there could be a second wave. We need to be sure that there is proper scrutiny of a notice or a ministerial order issued under this bill. The bill, as it is drafted, excludes the scrutiny of the Subordinate Legislation Committee. In my view, the committee could be charged with considering these orders in clause 14 as the committee has the power to act when parliament is not sitting.

As this is a COVID-19-related bill, to deal with the COVID-19 pandemic emergency to try to stimulate the construction industry, I am proposing - and I am working on an amendment - to allow it to be disallowed should the parliament be sitting. Also, for it to be subject to the scrutiny of the Subordinate Legislation Committee as COVID-19 bill notices are, if parliament is not sitting for a period, bearing in mind that if a notice is issued, it is most likely to be in December, the first one anyway and it does warrant scrutiny. All measures to deal with COVID-19 should be. As soon as that is available, I will circulate it to everyone.

We also hear from other members as well as the community that many will not be able to access this grant due to the shortage of builders in Tasmania to do the jobs. The member for Launceston referred to that, and that is true. Everyone I have talked to - builders, people who are wanting to do work on their homes now or even build - are saying the same thing, which is good news for the tradies and the builders out there but it makes this seem a little bit out of whack.

It may be the case in other states that there is redundant capacity and the National Partnership has been signed to give it effect and we are only following along here, but the number of people actually being able to genuinely access this will only be the people who are ready to go anyway.

We are talking about spending of at least $150 000. A lot of people in my electorate do not have that spare money, even with the $45 000 if they manage to pick up both grants. It is still a lot of money for people to find and borrow at the moment - banks rightly are being very cautious.

The planning and financing required to build a project of $150 000 or more - to quality for it, the project would have to be underway at this stage for them even to be successful.

I know this from people who have been trying to settle properties lately. It is taking weeks and weeks, if not months, to get finance approved.

This is a windfall gain to those already in the queue. Economist, Leith van Onselen, wrote in MacroBusiness on 15 June -

The implication for the HomeBuilder scheme is that rather than creating additional demand for property purchases and renovations, the scheme would just bring forward works that were already planned.

The kind of planning and financing that needs to be organised for a six-figure renovation means it would largely be taken up by those who have already started the process.

He goes on -

The big winners from HomeBuilder are large developers who will be able to inflate the cost of their house-and-land packages, whilst also clearing their inventories.

So, on 22 June, a few days or a week later, in MacroBusiness, Mr van Onselen wrote -

We have also witnessed cases whereby developers have marked-up the cost of house-and-land packages by the amount of the grant, thus representing a direct transfer from taxpayers to developers.

Which shows the failure of this policy in First Home Owner grant as well. Exactly the same, the same effect. It inflates the price of houses, that is what it does.

Mr Willie - It is a demand-side solution for a supply issue and so you are overheating the demand-side really, are you not?

Ms FORREST - It is inflationary. It inflates the cost of the price of houses, so it pushes more people out.

I must say I was not surprised by that. The same transfer occurred with the First Home Builders Boost Grant. That clearly inflated house prices and was rightly scrapped by this Government. I commend the Treasurer - now Premier and Treasurer still - at the time it was also announced that treasurers were getting rid of it because of that impact, a well-understood impact.

The HomeBuilder program is being sold as a boost for tradies, but were they actually suffering?

I know of no evidence that of all the industries out there this industry required preferential treatment. On the contrary - as I said, the anecdotal evidence I hear is that building tradies and the workers have suffered less than most. What we could see here is the bringing forward of works that were on the go, were in the forward plan. They will be brought forward and pushed forward to try to meet these criteria to get this money because they are already ready to go. Then what happens in 12 months time? Do we get to a cliff and need to look at, 'Well, now the construction industry in Tasmania is really in trouble'? Bringing forward work may have the perverse impact of creating a void in about a year's time or thereabouts.

Mr van Onselen goes on in the article -

This is one of the reasons consensus is mounting around social housing being a much more efficient use of government expenditure on housing because it guarantees the upgrade and building of homes through direct expenditure.

Mr van Onselen goes on and describes the vacuum effect of this policy, saying -
A vacuum effect describes housing stimulus bringing forward a planned decision to purchase property. It reflects a surge in buyer activity soon after housing grants are made available and a significant drop in activity thereafter.

The implication is that rather than stimulating sustained, new demand, stimulus is simply bringing forward activity to a certain date, where it would have likely occurred over time anyway.

It happened in 2000 when the GST was introduced and after the global financial crisis in 2008. On both occasions, a boost in first home buyer grants saw increased activity quickly subside when the stimulus was withdrawn.

That could be when the builders and others in related sectors feel the real pain. There will also be some Tasmanians who will be adversely impacted by this measure as it stands here and now. I have heard from a property agent who has a 'spec' home to sell. This property was commenced before 4 June 2020. It now risks becoming very difficult to sell because buyers will look to purchase a property that is eligible to access this grant, pushing up the price of the home contracted and built after 4 June 2020. She gave me an example - and this is a quote from the agent who contacted me about this and to talk about others as well -

I currently have a brand new completed home to for sale. If this home is in competition with a new home to be built after 4 June 2020, I'm sure the buyers will wait for the new one when they are able to obtain another $25,000.

She said $25 000, but they could actually get $45 000 if they are eligible for both. Back to the example -

Hence this property may be worth less -

The one that has been built, or soon ready to sell -

The owner of this property is a developer, which if not sold won't go on with his future new builds until sold. The active builders/developers are disadvantaged by this incentive with their spec homes were started and/or completed prior to 4 June 2020.

To keep it simple, it should just apply to all new built homes.

She goes on to state that in a new subdivision, this could happen. You have an example of two new spec homes side by side, one started before 4 June 2020, or started and completed after 4 June. Which home would the buyer go for?

There are people out there who are actually going to find this negatively impacts on them already.

Mr President, this clearly shows how this program will inflate house prices and do nothing for affordable housing in the state. But this was not about affordable housing; it was about stimulating the construction industry.

The priority given to the property sector at the expense of other areas of the economy, which are suffering far worse, is also bewildering. Given there is a growing homelessness problem, why are the funds not being directed to more public housing, where we know there is very real and actual challenge, especially as this could have a perverse impact of increasing housing prices, making houses less affordable to those who may be trying to leave the rental market, either public or private?

Mr President, I am really struggling to explain why, at a time the Government is decrying the massive amount of red tape supposedly strangling the economy and avowing a commitment to streamline processes, we are being asked to provide a bill with 55 clauses to hand over funds so a fortunate few can renovate or build a new house - something they were going to do anyway, which is effectively how it is going to play out.

The home builder deal is being sold as a boost to tradies, but that would occur with spending on public housing, and it would also create additional value in the process.

If you want immediate economic impact, this spending can be directed at clearing the maintenance backlog with public housing, rather than building new ones. Spend the money there. That will keep the tradies busy.

Delays caused by planning and other problems with new construction could be neatly sidestepped with money that would flow immediately into the economy. The beneficial social effects of better housing for the disadvantaged would also be immediate. We need to rein in our obsession with housing being the cornerstone of an investment portfolio. Housing is first and foremost a place to live. We should not be pursuing policies that give pre-eminence to housing as a source of wealth, when many - and an increasing number - go without.

We need to look at our priorities. Unlike an investment in a productive asset, the aim of which is to produce future returns, once a house is built, it tends to drain resources from the real economy by the servicing of loans, which inevitably grow with encouragements by governments as we are being asked to approve this bill.

Home building is an important contributor to the economy - do not get me wrong - but its role is disproportionately exaggerated by the property lobby, and its effect on the real economy is largely ignored. The paper wealth with increased house prices accruing to a decreasing number of privileged owners is forever being paraded as evidence of a successful economy. It is not. It is a charade.

State governments are always happy to play along with propping up the housing sector, because of our poorly designed, unfit-for-purpose dysfunctional tax system. State governments give preferential support to housing because they depend on a steady stream of conveyancing duties to finance budgets. The pandemic has revealed the flaws in relying on volatile conveyancing duties to fund essential services. It really is a dumb system. When demand for services rises and government income falls, that is not the perfect system for a state government, I suggest.

I guess I am going to have to vote for this bill, but I will be doing so reluctantly.

Our Premier has agreed at a national level on our behalf without discussing it with us first. I was not engaged in that consultation - that was a National Cabinet decision, and we are party to a national agreement we had no say on.
It makes it impossible to oppose a poor policy that we are condoning in this bill. It is the wrong time to be giving this handout, and it will negatively impact some. This is a policy that does not do the best it could, or should, with the money being made available.

Mr President, it is bad public policy.