19 November 2018
Transcript - #2018078, 2018

Interview with Neil Mitchell, Mornings, 3AW

Subjects: Labor’s property tax; and Australian embassy in Israel.

NEIL MITCHELL:

Good morning.

JOSH FRYDENBERG:

Nice to be with you, Neil.

NEIL MITCHELL:

Well, recession. Too strong?

JOSH FRYDENBERG:

Well, they’re not words that I would use, but what I would say is that Labor’s plans to abolish negative gearing as we know it and increase the capital gains tax on property investments would be disastrous for the economy, it would cost jobs and ensure that anybody who owns their home today will see it worth less and anybody who rents their home will see them pay more.

And when you talk about the State Government, Tim Pallas is out there saying that he’s only counting on the housing market to be down for 12 months or so, but his Labor colleagues federally have a policy that is designed to ensure a downturn in the housing market that is ongoing.

And you’re absolutely right to point out the fact that most people who negative gear are not necessarily rich. There’s 58,000 teachers, 41,000 nurses and around 20,000 police and emergency service personnel who have put aside a little bit each month to protect for their investment in the future and to negative gear a property.

NEIL MITCHELL:

Well, I’d welcome them to call, 96 900 693, 13 30 32. What are your projections for the housing market then? Where do you believe it’s going over the next year? Will it start to recover in a year? Well, let’s say you stay there and there’s no change to negative gearing, what happens?

JOSH FRYDENBERG:

The Reserve Bank of Australia said that the housing market is now down to a sustainable level, but one of the problems we’ve got at the moment is that the investors and the other buyers in the market are starting to price in Labor’s planned changes to negative gearing and capital gains tax and that’s having an effect.

But you’ve seen some pretty dramatic estimates and forecasts from leading economists including SQM who said that Labor’s policy could lead to a fall of up to 17 per cent over three years. You’ve seen HIA, which is the Housing Industry Association, the Centre for International Economics, BIS Shrapnel and others all point to the impacts that Labor’s policy will have.

NEIL MITCHELL:

What are the implications here for the state? Because we’re in a state election campaign, you might’ve noticed and it’s freebies at 20 paces. Everybody’s offering freebies. The Government is up to about $100 billion in promises; the Opposition is up to about $50 billion. Admittedly, some of both are for future generations.

But what are the implications for state revenue here if the housing market goes down and stays down?

JOSH FRYDENBERG:

It would be significant and you’ve already seen, in Victoria, them take a $2.4 billion hit to stamp duty as a result of the falling housing market. But you’ve seen groups like the HIA say that Labor’s policy could be $1 billion plus per year hit to state revenues around the country. So that does need to be factored in and if I was Tim Pallas, I would be getting on the phone to my Labor colleagues and saying abandon this policy, take a hit and realise that you constructed it at a time when housing prices were going up as opposed to the current market where housing prices are going down.

NEIL MITCHELL:

Well, let’s face it, I mean federally, Labor’s the favourite. It looks like they’re going to win the next election. Do you believe…

JOSH FRYDENBERG:

Don’t put your house on it too.

NEIL MITCHELL:  

Oh, well. Well okay.

JOSH FRYDENBERG:

Did you get the pun, of course?

NEIL MITCHELL:

Yeah, I do, I was just trying to think of one to answer. I failed. Do you think that what’s happening around negative gearing is part of the reason for the housing market being down now?

JOSH FRYDENBERG:

Well, obviously some economists are saying that it’s starting to be factored in. But the key point to make is that the Reserve Bank has said that the housing market has now come back to a more sustainable level and first home buyers are now getting into the market, with over 100,000 first home buyer loans being approved over the last year, which is the greatest number since 2009.

And this stability in the market shouldn’t be put at risk by Labor’s big new property tax which is designed to account for their increased spending promises.

NEIL MITCHELL:

Okay, a couple of other things. I’ve noticed suggestions today of a plastic tax. Do you think we’ll go down the line and have a plastic tax? We’ve enough taxes, don’t we?

JOSH FRYDENBERG:

On our side, we’re for less taxes. Unfortunately, that’s not what Bill Shorten’s promising. He’s got more taxes not just on property but also on you franking credits and your savings and also on your income and your business.

NEIL MITCHELL:

And I see the Malaysian Prime Minister having a go back at you. Do you still believe he’s been anti-Semitic?

JOSH FRYDENBERG:

Look, I’ve said my piece. His previous comments are on the record and I’ll leave it at that. But when it comes to our embassy, obviously that’s a decision, as John Howard pointed out over the weekend, that Australia should make free from direction from any other country.

NEIL MITCHELL:

Well, that’s true, but you’re supporting a move of the embassy aren’t you?

JOSH FRYDENBERG:

Well, what I laid out very clearly is reasons why West Jerusalem is the capital of Israel and is already recognised by Australia as such. I’ve also pointed out that Israel is an anomaly to the point that Australia doesn’t have its embassy in Israel’s capital as we do for our other high commissions and embassies around the world.

So, there is a good reason for why Scott Morrison has begun a process to look at this issue.

NEIL MITCHELL:

Thank you for your time.

JOSH FRYDENBERG:

Always good to be with you Neil.