Latest news with #Eslake
The Advertiser
03-08-2025
- Business
- The Advertiser
'Not right': Australia urged to wind back tax breaks
Australian workers could be locked out of home ownership unless property concessions are reined in, but any reform would require careful manoeuvring from the government. As the federal government seeks ways to reinvigorate the nation's languishing productivity, the Australian Council of Trade Unions has urged it to reform the tax system and make housing affordable. Tax concessions like negative gearing, which allows investors to claim deductions on losses, and the capital gains tax discount, which halves the amount of tax paid by those who sell assets owned for a year or more, have incentivised property investment and tied up capital that could otherwise be invested more productively, according to the union. "Working people can no longer afford to live near where they work and young people are locked out of the housing market and locked into high rents," ACTU secretary Sally McManus said. "It's just not right and has to change." The union has proposed limiting negative gearing and capital gains tax discounts to a single investment property, though those tax breaks would be grandfathered for five years on properties that already benefit, giving investors time to adjust. Independent economist Saul Eslake, who has spent decades advocating for the abolition of negative gearing and the capital gains discount, said the ACTU's proposal was "good policy". "One of the things about our tax system is it provides enormous incentives for people to invest in residential property - not so much in building more of it but in speculating that its price will go up," he told AAP. But reforms to property tax concessions have historically been political kryptonite for Labor. A previous proposal to limit negative gearing contributed to the party's narrow defeat at the 2019 election, which may not come as a surprise given about one in five taxpayers have at least one investment property and about half of them are negatively geared, Australian Taxation Office statistics have found. While Labor won the May election in a landslide victory, Australian political orthodoxy would suggest the government may not do much with its margin and instead seek to argue for an expansive mandate at the 2028 contest when it will be prepared to take some flack. "There's a lot of votes at risk," Mr Eslake said. "But what's the point of having political capital, if you're not prepared to spend it?" Treasurer Jim Chalmers appears keen to break from the political orthodoxy in pursuit of major tax reforms. However, this will come at a cost, Mr Eslake said. Australia's last big tax reform - the introduction of the GST - came during a time when the Howard government had maintained a significant surplus that could be drawn down on to ensure everyone was better off. The current government is staring down a decade of deficit, which means some people will have to be worse off. "(But) the government can afford to alienate people who would never vote for it in the first place," Mr Eslake said. He says this is the implicit attitude behind such Labor policies as its proposal to lift taxes on super balances above $3 million from 15 per cent to 30 per cent, which will impact about 0.5 per cent of savers. Dr Chalmers will convene a roundtable later in August that will focus on lifting living standards by improving productivity, building resilience and strengthening the budget. The union has also urged the government to implement a minimum 25 per cent tax rate for individuals who earn more than $1 million and a cap on the Fuel Tax Credit Scheme for big business to ensure companies cannot claim more than $20 million in those credits. But the Business Council of Australia has hit back, calling the proposals "ad hoc tax grabs". "You don't fix Australia's lagging productivity and investment by taxing businesses more and making Australia less competitive," chief executive Bran Black said. Australian workers could be locked out of home ownership unless property concessions are reined in, but any reform would require careful manoeuvring from the government. As the federal government seeks ways to reinvigorate the nation's languishing productivity, the Australian Council of Trade Unions has urged it to reform the tax system and make housing affordable. Tax concessions like negative gearing, which allows investors to claim deductions on losses, and the capital gains tax discount, which halves the amount of tax paid by those who sell assets owned for a year or more, have incentivised property investment and tied up capital that could otherwise be invested more productively, according to the union. "Working people can no longer afford to live near where they work and young people are locked out of the housing market and locked into high rents," ACTU secretary Sally McManus said. "It's just not right and has to change." The union has proposed limiting negative gearing and capital gains tax discounts to a single investment property, though those tax breaks would be grandfathered for five years on properties that already benefit, giving investors time to adjust. Independent economist Saul Eslake, who has spent decades advocating for the abolition of negative gearing and the capital gains discount, said the ACTU's proposal was "good policy". "One of the things about our tax system is it provides enormous incentives for people to invest in residential property - not so much in building more of it but in speculating that its price will go up," he told AAP. But reforms to property tax concessions have historically been political kryptonite for Labor. A previous proposal to limit negative gearing contributed to the party's narrow defeat at the 2019 election, which may not come as a surprise given about one in five taxpayers have at least one investment property and about half of them are negatively geared, Australian Taxation Office statistics have found. While Labor won the May election in a landslide victory, Australian political orthodoxy would suggest the government may not do much with its margin and instead seek to argue for an expansive mandate at the 2028 contest when it will be prepared to take some flack. "There's a lot of votes at risk," Mr Eslake said. "But what's the point of having political capital, if you're not prepared to spend it?" Treasurer Jim Chalmers appears keen to break from the political orthodoxy in pursuit of major tax reforms. However, this will come at a cost, Mr Eslake said. Australia's last big tax reform - the introduction of the GST - came during a time when the Howard government had maintained a significant surplus that could be drawn down on to ensure everyone was better off. The current government is staring down a decade of deficit, which means some people will have to be worse off. "(But) the government can afford to alienate people who would never vote for it in the first place," Mr Eslake said. He says this is the implicit attitude behind such Labor policies as its proposal to lift taxes on super balances above $3 million from 15 per cent to 30 per cent, which will impact about 0.5 per cent of savers. Dr Chalmers will convene a roundtable later in August that will focus on lifting living standards by improving productivity, building resilience and strengthening the budget. The union has also urged the government to implement a minimum 25 per cent tax rate for individuals who earn more than $1 million and a cap on the Fuel Tax Credit Scheme for big business to ensure companies cannot claim more than $20 million in those credits. But the Business Council of Australia has hit back, calling the proposals "ad hoc tax grabs". "You don't fix Australia's lagging productivity and investment by taxing businesses more and making Australia less competitive," chief executive Bran Black said. Australian workers could be locked out of home ownership unless property concessions are reined in, but any reform would require careful manoeuvring from the government. As the federal government seeks ways to reinvigorate the nation's languishing productivity, the Australian Council of Trade Unions has urged it to reform the tax system and make housing affordable. Tax concessions like negative gearing, which allows investors to claim deductions on losses, and the capital gains tax discount, which halves the amount of tax paid by those who sell assets owned for a year or more, have incentivised property investment and tied up capital that could otherwise be invested more productively, according to the union. "Working people can no longer afford to live near where they work and young people are locked out of the housing market and locked into high rents," ACTU secretary Sally McManus said. "It's just not right and has to change." The union has proposed limiting negative gearing and capital gains tax discounts to a single investment property, though those tax breaks would be grandfathered for five years on properties that already benefit, giving investors time to adjust. Independent economist Saul Eslake, who has spent decades advocating for the abolition of negative gearing and the capital gains discount, said the ACTU's proposal was "good policy". "One of the things about our tax system is it provides enormous incentives for people to invest in residential property - not so much in building more of it but in speculating that its price will go up," he told AAP. But reforms to property tax concessions have historically been political kryptonite for Labor. A previous proposal to limit negative gearing contributed to the party's narrow defeat at the 2019 election, which may not come as a surprise given about one in five taxpayers have at least one investment property and about half of them are negatively geared, Australian Taxation Office statistics have found. While Labor won the May election in a landslide victory, Australian political orthodoxy would suggest the government may not do much with its margin and instead seek to argue for an expansive mandate at the 2028 contest when it will be prepared to take some flack. "There's a lot of votes at risk," Mr Eslake said. "But what's the point of having political capital, if you're not prepared to spend it?" Treasurer Jim Chalmers appears keen to break from the political orthodoxy in pursuit of major tax reforms. However, this will come at a cost, Mr Eslake said. Australia's last big tax reform - the introduction of the GST - came during a time when the Howard government had maintained a significant surplus that could be drawn down on to ensure everyone was better off. The current government is staring down a decade of deficit, which means some people will have to be worse off. "(But) the government can afford to alienate people who would never vote for it in the first place," Mr Eslake said. He says this is the implicit attitude behind such Labor policies as its proposal to lift taxes on super balances above $3 million from 15 per cent to 30 per cent, which will impact about 0.5 per cent of savers. Dr Chalmers will convene a roundtable later in August that will focus on lifting living standards by improving productivity, building resilience and strengthening the budget. The union has also urged the government to implement a minimum 25 per cent tax rate for individuals who earn more than $1 million and a cap on the Fuel Tax Credit Scheme for big business to ensure companies cannot claim more than $20 million in those credits. But the Business Council of Australia has hit back, calling the proposals "ad hoc tax grabs". "You don't fix Australia's lagging productivity and investment by taxing businesses more and making Australia less competitive," chief executive Bran Black said. Australian workers could be locked out of home ownership unless property concessions are reined in, but any reform would require careful manoeuvring from the government. As the federal government seeks ways to reinvigorate the nation's languishing productivity, the Australian Council of Trade Unions has urged it to reform the tax system and make housing affordable. Tax concessions like negative gearing, which allows investors to claim deductions on losses, and the capital gains tax discount, which halves the amount of tax paid by those who sell assets owned for a year or more, have incentivised property investment and tied up capital that could otherwise be invested more productively, according to the union. "Working people can no longer afford to live near where they work and young people are locked out of the housing market and locked into high rents," ACTU secretary Sally McManus said. "It's just not right and has to change." The union has proposed limiting negative gearing and capital gains tax discounts to a single investment property, though those tax breaks would be grandfathered for five years on properties that already benefit, giving investors time to adjust. Independent economist Saul Eslake, who has spent decades advocating for the abolition of negative gearing and the capital gains discount, said the ACTU's proposal was "good policy". "One of the things about our tax system is it provides enormous incentives for people to invest in residential property - not so much in building more of it but in speculating that its price will go up," he told AAP. But reforms to property tax concessions have historically been political kryptonite for Labor. A previous proposal to limit negative gearing contributed to the party's narrow defeat at the 2019 election, which may not come as a surprise given about one in five taxpayers have at least one investment property and about half of them are negatively geared, Australian Taxation Office statistics have found. While Labor won the May election in a landslide victory, Australian political orthodoxy would suggest the government may not do much with its margin and instead seek to argue for an expansive mandate at the 2028 contest when it will be prepared to take some flack. "There's a lot of votes at risk," Mr Eslake said. "But what's the point of having political capital, if you're not prepared to spend it?" Treasurer Jim Chalmers appears keen to break from the political orthodoxy in pursuit of major tax reforms. However, this will come at a cost, Mr Eslake said. Australia's last big tax reform - the introduction of the GST - came during a time when the Howard government had maintained a significant surplus that could be drawn down on to ensure everyone was better off. The current government is staring down a decade of deficit, which means some people will have to be worse off. "(But) the government can afford to alienate people who would never vote for it in the first place," Mr Eslake said. He says this is the implicit attitude behind such Labor policies as its proposal to lift taxes on super balances above $3 million from 15 per cent to 30 per cent, which will impact about 0.5 per cent of savers. Dr Chalmers will convene a roundtable later in August that will focus on lifting living standards by improving productivity, building resilience and strengthening the budget. The union has also urged the government to implement a minimum 25 per cent tax rate for individuals who earn more than $1 million and a cap on the Fuel Tax Credit Scheme for big business to ensure companies cannot claim more than $20 million in those credits. But the Business Council of Australia has hit back, calling the proposals "ad hoc tax grabs". "You don't fix Australia's lagging productivity and investment by taxing businesses more and making Australia less competitive," chief executive Bran Black said.
Perth Now
28-06-2025
- Business
- Perth Now
‘Un-Australian': GST change set to cost $60bn
The 'worst policy change in the 21st' century is set to blow out the national budget by $60bn and keep one state in the black for years to come. The goods and services tax (GST) carve up was back in focus this week as state treasurers came out with their budgets. Queensland, NSW, Western Australia, and the ACT all delivered budgets, with one state standing above them all. Mining-rich WA is in the black, with costs tipped to come in at $2.5bn less than predicted spending. The rest, budget deficits. Western Australia has cashed in on changing GST rules. NewsWire / Nicholas Eagar Credit: NewsWire WA Treasurer Rita Saffioti used her speech to focus on the relative strength of the economy compared with other states while warning of an uncertain global outlook. 'This budget is about fortifying WA amid global shocks,' she said. Independent economist Saul Eslake argues that WA has achieved a surplus for the last seven years on the back of soaring GST revenue. 'Between 2016 and 2025, Western Australia essentially had the country by the shorts and they squeezed as hard as they could,' Mr Eslake told NewsWire. 'I call it the worst public policy decision of the 21st century.' So what changed for the WA government to achieve seven years of surplus. WHY IS WA THE LUCKY STATE? Much of WA's success comes back to two changes. The first was a change to the GST in 2018, with Mr Eslake arguing that the then Liberal federal government wanted to appease WA where it held an overwhelming majority of federal seats. Then treasurer Scott Morrison announced a review of Australia's horizontal fiscal equalisation (HFE) system, which determines the distribution of goods and services tax (GST) revenue among states and territories. Then treasurer Scott Morrison enacted the GST reforms. NewsWire / Martin Ollman Credit: News Corp Australia After a Productivity Commission inquiry, the system changed so that all states and territories received 70c for every dollar of GST raised in 2022-23. That figure increased to 75c a dollar in the new agreement, WA's GST share was 30 cents in the dollar. High iron ore prices at the time could have meant WA got just 15.6 cents of every dollar of GST raised. 'So what Morrison did was commission the Productivity Commission to do an inquiry into horizontal fiscal equalisation,' Mr Eslake said. 'The terms of reference for that were written in Mathias Cormann's office. It was a classic example of (fictional TV character) Sir Humphrey Appleby's advice that you never call an inquiry unless you know what it's going to say.' HFE's aim is to ensure that every state and territory should have an equal opportunity to provide public services. The key word is should, as states and territories are free to raise additional revenues how they please as well as fund their own state-based services. 'That principle is they are equalising the fiscal capacity of the states and territories,' Mr Eslake continued. 'And the point of that, it matters far less where you live when it comes to the quality of schooling your kids get, the quality of healthcare that you and your family get, the quality of policy or environment you get.' The price of iron ore stayed high. Rebecca Le May Credit: NCA NewsWire Mr Eslake used the example of the US, which does not have HFE, meaning different states have varying life outcomes. 'If we didn't have it, then Victorians and NSW people would have much better public services and pay lower taxes, all else being equal, than Tasmanians or South Australians,' Mr Eslake said. 'And I would argue, and traditionally most Australians have accepted, that's something that makes Australia a better and fairer place than America in particular.' The second major change for WA was the rise of China, or as Paul Keating famously said, the state got 'kissed on the a*se by a big Chinese rainbow'. This kissing, Mr Eslake argues, turned WA from being propped up into a donor state. '(In the early 2000s) WA got a bigger share of whatever federal grants were going around than they would have got if it was distributed equal per capita,' he said. 'Because the (Commonwealth) Grants Commission recognised that when gold was fixed at $35 an ounce, and iron ore was only trading at $20 a tonne and they weren't selling much of it, they couldn't raise much money for mineral oil fees, but they had a relatively high cost of providing services.' NSW used its budget to call out WA's share of GST. NewsWire/ Gaye Gerard Credit: News Corp Australia BUDGET BOTTOM LINE To get other states to support these changes, a no one is worse off provision was added, with the federal government topping up any shortfalls in GST revenues. This policy was also extended until 2029-2030 under the Albanese government. This NOWO provision turns a $9bn budget blow into a $60bn black hole. 'This is the biggest blowout in the cost of any single policy decision ever with the possible exception of the NDIS, which as (economist) Chris Richardson says is at least set up for a noble purpose,' Mr Eslake said. 'It's what is allowing Western Australia to run a budget surplus while everyone else, including the feds, are running a deficit. 'In the longer run, what it will mean is residents of Australia's richest state, WA, will have better public services and lower taxes than people who live in the eastern states, which I say is un-Australian.'
West Australian
20-06-2025
- Business
- West Australian
‘Crocodile tears': Home loan change could add to worsening housing crisis
It's now easier for Australians to buy a home, but a key change to credit limits could push up the price of housing, a leading economist warns. The Australian Prudential Regulation Authority (APRA) announced on Thursday that Higher Education Loan Program (HELP) debts would be excluded from the credit limit for prospective homebuyers from September 30. Independent economist Saul Eslake told NewsWire that the change's two most obvious effects would be to 'allow some people who'd buy a home anyway to buy a more expensive one and (to) allow some people who wouldn't have been able to buy a home because of their student debt' to do so'. 'The net effect of those two factors will be to increase the demand for housing,' he said. 'The likely result is that it will, along with other things that governments are doing, put further upward pressure on the prices of property.' Mr Eslake said the change meant some people would be able to enter the housing market more quickly than otherwise but 'it would come at the expense of others'. 'The primary beneficiaries of this change will be those who will already own property will be able to sell it to people at higher prices than otherwise,' he said. 'That's consistent with the 60 years of evidence that we have, going back to the first homeowners grant scheme introduced by the Menzies government in 1964 that tells us that anything that allows Australians to pay more for housing than they'd be able to otherwise results in more expensive housing and a smaller proportion of the population owning it.' Mr Eslake added it was 'obvious' the money saved on HELP debt cuts would now be going towards a more expensive house. 'The reason that governments keep doing these things despite the evidence and despite all of the crocodile tears they routinely share about the difficulties faced by would-be first-home buyers is because they know that there actually aren't very many of them,' Mr Eslake said. 'On average, 110,000 a year, whereas there are 11 million people who own their own home. There are 2¼ million who own at least one investment property. That's an awfully much bigger number of votes for policies that keep house prices going up than there are for policies that might restrain the rate at which house prices keep going up.' Mr Eslake said the reason the housing crisis continued to worsen was 'because a majority of the population do not want it to be solved and politicians know that'. 'Until enough people my age, either out of an altruistic concern for the ability of their children and grandchildren to be able to do what they did, or perhaps more likely out of being pissed off at having to be the bank of mum and dad, until enough of them really want that to change, it isn't going to change.'
Perth Now
20-06-2025
- Business
- Perth Now
‘Crocodile tears': Warning over key change
It's now easier for Australians to buy a home, but a key change to credit limits could push up the price of housing, a leading economist warns. The Australian Prudential Regulation Authority (APRA) announced on Thursday that Higher Education Loan Program (HELP) debts would be excluded from the credit limit for prospective homebuyers from September 30. Independent economist Saul Eslake told NewsWire that the change's two most obvious effects would be to 'allow some people who'd buy a home anyway to buy a more expensive one and (to) allow some people who wouldn't have been able to buy a home because of their student debt' to do so'. It's now a little easier to buy a home. NewsWire/ Gaye Gerard Credit: News Corp Australia 'The net effect of those two factors will be to increase the demand for housing,' he said. 'The likely result is that it will, along with other things that governments are doing, put further upward pressure on the prices of property.' Mr Eslake said the change meant some people would be able to enter the housing market more quickly than otherwise but 'it would come at the expense of others'. 'The primary beneficiaries of this change will be those who will already own property will be able to sell it to people at higher prices than otherwise,' he said. 'That's consistent with the 60 years of evidence that we have, going back to the first homeowners grant scheme introduced by the Menzies government in 1964 that tells us that anything that allows Australians to pay more for housing than they'd be able to otherwise results in more expensive housing and a smaller proportion of the population owning it.' Mr Eslake added it was 'obvious' the money saved on HELP debt cuts would now be going towards a more expensive house. Independent economist Saul Eslake says the government cries 'crocodile tears' for first-home buyers while introducing measures that increase housing prices. Chris Kidd Credit: News Corp Australia 'The reason that governments keep doing these things despite the evidence and despite all of the crocodile tears they routinely share about the difficulties faced by would-be first-home buyers is because they know that there actually aren't very many of them,' Mr Eslake said. 'On average, 110,000 a year, whereas there are 11 million people who own their own home. There are 2¼ million who own at least one investment property. That's an awfully much bigger number of votes for policies that keep house prices going up than there are for policies that might restrain the rate at which house prices keep going up.' Mr Eslake said the reason the housing crisis continued to worsen was 'because a majority of the population do not want it to be solved and politicians know that'. 'Until enough people my age, either out of an altruistic concern for the ability of their children and grandchildren to be able to do what they did, or perhaps more likely out of being pissed off at having to be the bank of mum and dad, until enough of them really want that to change, it isn't going to change.'
Sky News AU
04-06-2025
- Business
- Sky News AU
'Un-Australian': Western Australia's $60 billion sweetheart GST deal safe under Coalition, despite massive budget blowout
The Coalition has confirmed it will not propose any changes to the controversial GST arrangement that disproportionately benefits Western Australia. It comes amid renewed calls from NSW, Queensland and Victoria to revisit the national carve up of GST revenue, which hands WA better services despite lower taxes. Shadow treasurer Ted O'Brien and shadow finance minister James Paterson told Sky News the Coalition's position would not change the existing arrangement. 'The Coalition will not be proposing changes to the current GST settings with respect to Western Australia,' the shadow economic team said. The statement reinforces the Coalition's acceptance of the 2018 GST deal, which guarantees WA at least 75 cents for every dollar of GST raised in the state. NSW, Victoria, and Queensland typically receive less than 75 cents per dollar of GST raised within their borders and do not have a guaranteed minimum. The arrangement also includes a 'no worse off' guarantee designed to protect other jurisdictions from losing funding, but critics say it has come at a heavy cost. Independent economist Saul Eslake was scathing in his response to the Coalition's decision, telling Sky News it shows they were 'not serious about returning the budget to balance'. Mr Eslake has previously described the WA GST deal as the 'worst public policy decision of the 21st Century', citing two key reasons. Firstly, he argues the deal fundamentally undermines the purpose of the GST system, which is meant to ensure states and territories have the capacity to provide similar public services while imposing comparable tax burdens. Instead, the deal allows WA, Australia's richest state, to enjoy better public services while paying lower state taxes. 'The 'WA GST deal' which Albanese champions means that residents of Australia's richest state, WA, will get better public services whilst paying lower state taxes than other Australians,' he said. 'It is giving WA $7 billion in 2025-26, and at least $8 billion per annum in 2026-27 through 2029-30. 'More than WA needs in order to be able to provide the same standard of services whilst levying the same burden of taxes as the average of all states and territories. Which I think is 'un-Australian'.' Secondly, Mr Eslake said the massive cost blowout of the deal, which has surged from $9 billion over eight years to nearly $60 billion over eleven years, marks it as one of the most expensive policy failures. 'That's the biggest blow-out in the cost of any single policy decision, ever, with the possible exception of the NDIS, which was at least for a noble purpose," he said. Calls to revisit the GST carve-up have intensified from the eastern states which argue the current system is unfairly weighted in WA's favour. NSW Treasurer Daniel Mookhey and Queensland Treasurer David Janetzki have both urged the federal government to reconsider the arrangement and pursue a model based more on population. WA Transport Minister Rita Saffioti accused eastern commentators of being 'obsessed with wanting to tear WA down' on Tuesday. 'If you're a true economic commentator, you would realise that WA is driving the national economic agenda,' she said. Prime Minister Anthony Albanese has likewise stood firm on the deal, saying he supports the position on WA GST given he did not propose changes in the election campaign. 'We support the position on WA that I took to the election, that I took the 2022 election, and that were enshrined at the National Cabinet,' Mr Albanese said on Tuesday. 'Importantly, as well, part of that is that no state's been worse off (under) that guarantee—and that guarantee is in place.' The deal was originally set to expire in 2026-27 but has been extended until 2029-30 as part of a broader agreement with states on the National Disability Insurance Scheme. Mr Eslake has urged bipartisan cooperation to end the costly arrangement, proposing the Productivity Commission be tasked with designing a simpler, more transparent system for distributing GST revenue. 'If the Coalition were to offer the government bipartisan support for reversing the 2018 changes… then the government would have absolutely no valid reason not to accept that," he said.
