Legislative Council, Wednesday 4 May 2022

Ms FORREST (Murchison) - Mr President, I cannot recall in recent times a shorter second reading speech than the one we just heard. This is also a short bill. It is almost impossible to argue against measures that provide relief for Tasmanians who own property in Tasmania, obviously not all Tasmanians. I know from the Leader's second reading speech the intent of the Government - which was outlined by the former premier in his state of the state response - was to reset land tax rates and thresholds, but no mention of the base. It is the same discussion we have time after time, some of us do, as it is usually a one-way conversation.

I want to talk more broadly about the issues the bill addresses here and I ask, how is it - when the state is staring at fiscal unsustainability and the complete inability and total unwillingness to look for more revenue sources - we are confronted with a bill which ignores the giant elephant in the room and proceeds to hand out tax relief to a few, without any overall plan? I am not suggesting for a second that tax relief is not an appropriate action and I will not be voting against the bill, even though I do not think it does anything to assist the debate. Especially with the cost of living pressures rising alarmingly and yesterday - it seems like - when the interest rate rose.

Ms Rattray - It was yesterday.

Ms FORREST - It was yesterday the RBA finally moved on interest rates and raised them, which will cause additional pain for many home owners, along with all the other cost of living pressures they are experiencing at the moment. The issue for me is that the actual problem is lack of a long-term plan or strategy. A problem that looks like another elephant. It is a continuation of the same pattern we saw in the extraordinary generosity shown to the poker machine operators. This time, the Government has offered another non sequitur to justify measures in this bill. The Government has said in the second reading speech that there is no doubt that Tasmania's strong economy and desirable lifestyle has meant more and more people will want to live, work and raise a family in Tasmania. Yet the Government deems it necessary as stated by the Leader - to ease the cost of living for Tasmanian families and to continue adding downward pressure on rents. Let us be clear, people owning their own places of residence do not pay land tax, so the measures are not directed at them. The measures in this bill are not directed at those who own their own primary residence and live in it. The measures are supposedly intended - according to the second reading speech and the rhetoric around it - to assist renters.

I am sure we are all hearing the same stories in our electorates, as I am sure the Treasurer is in his, former and current. We have a situation where there is a chronic shortage of rental properties. It is extremely difficult to find a place to rent, certainly at an affordable rate. It is a sellers' market. I will be happy to hear from any member who wishes to disagree with that and it is a very lived, real reality in my electorate. In that case, I cannot understand what makes the Government confident that land tax reductions will pass on to renters in the form of lower rents - when the market is so tight, there is no pressure to. That is what the Government expects us to believe, and would like to imagine that land and property owners will do, but there is no evidence to suggest that will be the case. Maybe a few might pass on the tax savings and I encourage every one of them who gets this tax relief to do so, but to imagine there would be a general tendency to do so is delusionary. It simply will not happen for the vast majority.

What is the primary effect that flows from lower land taxes? It is an increase in a net rental income for landlords and commercial property owners; they are the ones who pay the land tax. Well, they do not, their tenants do. Which in turn will lead to higher property valuations, which will lead to an increase in loans to banks that the banks that will provide to property owners and prospective property owners, which in turn will lead to higher property prices. Will this not lead to higher rents? Does anyone seriously believe that land tax reductions will lead to joy amongst renters? I find it somewhat insulting to expect us to accept this as a fact as there is no evidence this has happened in the past or will happen now.

This tax relief measure is designed to benefit the property-owning constituency which is more likely to vote for a government that looks after its interests. Why, if people are queuing to come to Tasmania to live, work and raise a family, is it necessary to cut taxes to make it even more attractive for them to do so? Particularly, some of those cashed up buyers from the mainland, where the property prices have gone through the roof too, except in New South Wales. They seem to be coming off a little bit. Why not cut payroll tax, slash rates? It really is a nonsense argument.

This is where the limitations of our federal system become apparent. We have three levels of government with overlapping and, at times, ill-defined responsibilities. I hope that the review of local government can look at this aspect as well.

The social security system should be the responsibility of the Australian Government. If renters need more assistance, there is a policy instrument in place for that. It is called rent assistance. Perhaps the Leader can inform us what this Government has done to lobby the federal government to increase rent assistance once it recognised that the renters needed help? Clearly there are a number who do.

We need a tax system that is fair, equitable and efficient. Land tax is universally recognised among economists as meeting these three criteria. It is one of the few taxes that does. You cannot move it offshore, we are not making any more of it and you know where it is. The more land you have, the more you pay. That is fair and equitable.

There can be a problem with inability to pay when asset-rich and cash poor but this, too, can be addressed through properly designed welfare payments at a federal level. I will not go into that now.

The third criteria is efficiency. While a properly designed system is efficient if everyone pays, we have a system that favours principal place of residence over rental properties. If the Government seriously believed in helping renters, this would be the first problem that needs to be addressed. The current system favours home owners rather than rental property owners. The effect is, as is all too apparent, overcapitalisation on principal places of residence. We spend too much on our principal places of residence. The system encourages us to do so.

We sometimes forget that owners of principal places of residence pay some land tax every time they pay rates. The rateable value of a property contains a land component. So they do; it is just not called that, it is called rates, and the councils collect it.

This is further evidence of what I have alluded to above the overlapping and, at times, ill-defined responsibilities of two levels of government. A properly designed tax system could have one level of government raising land tax, or taxes on land, if you prefer to call it that. Arguably it should be local government. In the majority, they have shown themselves to be better at sustainably funding their own operations.

However, the arguments for local government reform will have to wait for another day. I am sure there are many in this Chamber who will be contributing to that process. I hope that when members contribute to that process they think about this question about the roles, responsibilities and functions of councils, not just how many there should be, how many members there should be and where the boundaries should be. Those are important matters too, yes, but this is equally important.

Land is absolutely crucial to the economy and, more importantly, to our community. Whenever we talk about housing and housing affordability, the first thing we should do is unbundle housing into its two components: land and the buildings erected on the land. It is the price of land that is the main driver of house price rises. I say that with fingers crossed, hoping that the recent rise in building cost is just a temporary phenomenon. Time will tell on that. If that continues, that statement may no longer hold true.

The rate of increase in land values has unbalanced our economy. Slowing the increase and channelling the benefits back into the community should be the primary focus of housing policy; trying to find long-term solutions, not short-term fixes and not simply schemes which rescue a few people each year while the overall problem worsens. Government policies and decisions are responsible for much of the increase in land prices, from rezoning, basic infrastructure, improvements and building other public infrastructure such as schools and hospitals. Most of the benefits accrue privately, they do not come back to the community, by increased land prices in that neighborhood. Governments should claw back some of the benefits, not just to build a revenue base for themselves, but to reverse the worrying trend toward a more unequal society which is where we are heading with the current systems - that is the discussion we should be having. I know this is not entirely the place to have it, in relation to this bill, but it is a discussion we need to have and I will take every opportunity that comes up in relation to any of our taxes, particularly in relation to land and to property, because that is where people are hurting.

This bill is a step in the wrong direction, even though I will not be voting against it because that would be churlish and the Government has made a decision it needs to support a group of people who are mostly investors, not everyday Tasmanians who own their property and live in it. I long for the time when we can have a mature, reasonable and informed debate about the issues I have raised, rather than this piecemeal approach that assists very few and exacerbates the unbalanced community and unequal society.