23 November 2018
Transcript - #2018080, 2018

Interview with Chris Kenny, Money News, 2GB

Subjects: Victorian state election; Labor’s housing tax; and Labor’s energy policy.

CHRIS KENNY:

Thanks for joining us, Treasurer.

JOSH FRYDENBERG:

Nice to be with you, Chris. And it looks like footy weather is here in November in Melbourne, with the rain pouring down.

CHRIS KENNY:

Yeah, don't mention footy, don't mention footy to a Crows supporter until next season.

Of course, you will be up early ready for the election first thing in the morning. The polls are not looking good for Matthew Guy, what chances do you give him?

JOSH FRYDENBERG:

Oh look, he is in there with a fighting chance. Obviously, you are right, the polls have him behind. But he has a good suite of policies and the last couple of weeks of the campaign have seen a real focus on law and order. And the Coalition have a set of policies in that area, which are superior to what is being offered by the Labor Party, because on their watch, we have seen real failures in our justice system.

CHRIS KENNY:

The main reason I wanted to speak to you as Treasurer is because of the negative gearing and capital gains tax policy that the Labor Party has put out. Now, they've had this policy around now for a couple of years now. It was designed when we had a bit of a real estate boom, an overheated real estate market. It was specifically designed by Labor, a pretty sensible policy, it was accepted as at the time to take the heat out the market perhaps, take investment out of the market. But now, of course, we've got a severe downturn in Victoria, in Melbourne and in Sydney and less so in South East Queensland. It's just the wrong time to be trying to penalise investment, or reduce investment, in the housing sector, isn't it?

JOSH FRYDENBERG:

Well, it is the wrong policy full stop. And it is the wrong time even more so, because as you indicate, prices in the housing market have come down now for more than twelve consecutive months. For any of your listeners who own their home, it will be worth less under Labor's policy. And for any of your listeners who rent their own home, they will end up paying more under Labor's policy. And that's because when you take out from the market a quarter of the buyers, the investors, what you will be doing is sending housing prices down. And Bill Shorten and Chris Bowen are proudly saying that is the goal of their policy, to send housing prices down. And we know that people who negative gear often are prepared to offer lower rent, in the hope that they will make an after tax capital gain. And this policy has been badly criticised by a whole range of economists and we've heard the Master Builders Association who know a thing or two about the construction industry, say that Labor's policy, Chris, will cost 32,000 jobs and see 42,000 fewer homes being built. So, it is a bad policy, at an extremely bad time.

CHRIS KENNY:

Yeah, what really concerns me about it is that I know so many people from all walks of life, people who are not making a lot of money, but people who are thrifty and want to get ahead, they're the sort of people who often aspire to have a rental property. Buy a cheap property, negatively gear it, try and put something aside for a rainy day. I reckon it is one of those areas of investment people without a lot of money don't go buying into the share market or fancy, but real estate is something they feel is something they can really invest in and negative gearing helps them get started.

Now, John Symond of course from Aussie Home Loans, well known to many Australians, because he's made a lot of money out of mortgages of course, but, he doesn't need to make any more money now, I suppose. He just says very strongly, very strong comments this week in The Australian, says, to quote him: "I appreciate that they'll say grandfathering of existing investors will protect people, but the unintended consequences could be astronomical. I am concerned it could do so much damage, unemployment, higher interest rates, it could tip us into recession."  Could it be that bad?

JOSH FRYDENBERG:

Well, it certainly will affect employment levels and it will certainly affect economic activity and the international credit rating agencies have warned against a major drop in investor demand in the housing market. And that could flow from the policy that Labor is being put forward. 

And you're absolutely right, to point out that the people that usually negatively gear are not necessarily rich. There are 1.3 million Australians who are negatively geared at the moment, including 48,000 teachers, 21,000 nurses and about 20,000 police and emergency service personnel. And about 70 per cent of the people who negative gear are people who claim less than $10,000 a year in their tax deduction. And the same number of people, about 71-72 per cent of people who negative gear, have no more than one property. And two-thirds of the people who negative gear have a taxable income under $80,000. So, Chris, they are not the multi-millionaires that Bill Shorten likes to talk about in his class warfare, they're the mums and dads, they're the young professionals, they are the emergency service personnel who put aside a little bit each month in a nest egg to protect them for their future. 

CHRIS KENNY:

Yeah, Treasurer Josh Frydenberg, I think this issue is starting to bite and I think it's going to keep biting all the way up to the election. I want to get you just briefly on energy, though. You were the Energy Minister under Prime Minister Malcolm Turnbull. You were promising the National Energy Guarantee. We have now seen Bill Shorten announce his policy, all sorts of extra renewable energy targets, doubling virtually of our emissions reductions targets as well. I've been through those over the past two hours. But, crucially, he is adopting your old policy, the National Energy Guarantee. Doesn't that show that it was either a bad policy or maybe you should support it now?

JOSH FRYDENBERG:

Well, look. The Labor Party have a disastrous record when it comes to energy policy, Chris. We know that when they were last in Government at a federal level, energy prices doubled. They ignored the warnings about the gas export industry, which has seen as a result, gas prices go up here in Australia, and we had the dreaded carbon tax. So, what we have seen in this recent announcement is a lot of virtue signalling without understanding the true economic cost. And the real issue at play is not the National Energy Guarantee. The real issue at play here is what Labor's emissions reduction target is. And it is a 45 per cent emissions reduction target and a 50 per cent renewable energy target. And this will be disastrous, because what it will do is it will force the rapid closure of coal-fired power stations and other thermal generators…   

CHRIS KENNY:

Indeed, that is what it is designed to do. Sorry to hurry you up there, Treasurer, but we are right up against the clock. So, thanks so much joining us at late notice.

JOSH FRYDENBERG:

Good to be with you, Chris.