Speaking in his budget reply speech in the House of Representatives on Thursday evening (4 April), Opposition Leader Bill Shorten made several bold and sweeping promises for what a Labor government would do if elected following the federal election next month.
‘Stop the inter-generational unfairness in our tax system’
In relation to property, Mr Shorten stood by the Labor Party’s pledge to change capital gains tax and negative gearing.
In March, the shadow treasurer announced that, from 1 January 2020, it would “make sensible and overdue changes to negative gearing to put young first home buyers on more of a level playing field with property investors seeking their sixth or seventh property”.
Labor said it would therefore retain negative gearing for new investment properties to help boost housing supply and jobs, grandfather all existing negatively geared investment properties made prior to the 1 January 2020, and halve the capital gains tax discount for investments entered into after 1 January 2020.
The measures are estimated to raise $2.9 billion over four years or $35.1 billion over 10 years.
Speaking on Thursday night, Mr Shorten added: “We believe the Australian people are hungry for a united, stable government with a real vision for the future. One that can make hard decisions.
“We believe that government has a responsibility to leave the place better than when we found it. That is why we are going to stop the inter-generational unfairness in our tax system.”
He elaborated: “Now, if you’re currently negatively gearing, the rules won’t change. If you want to use it on new homes, you still can.
“But you cannot have property investors playing with loaded dice against our young people, Generation Y and the Millennials. And instead of patronising millions of young Australians with lectures about cutting back on smashed-avo, why don’t we tell them the truth.
“Getting together a 20 per cent deposit plus stamp duty is so much, much harder than it was 20 or 25 years ago,” he said. “And it is even more difficult when your government uses your taxpayer money to subsidise the property investors bidding against you.
“The inter-generational bias that the tax system has against young people must be called out. A government must be brave enough and decent enough to stop the bias against first home buyers and young Australians. And we will be that government,” Mr Shorten said.
The Labor party said that the negative gearing for new housing will contribute to its "massive building program" that will "reinvigorate jobs in the construction sector", along with its build-to-rent plan and infrastructure projects such as new energy pipelines, interconnectors, and hydro and storage.
Mr Shorten revealed that the party would also look to launch "the biggest affordable housing program since the Second World War, building a quarter of a million new homes".
He continued: "We will invest in safe accommodation for women fleeing violent relationships because too often, when the worst happens, people still ask, 'Why didn't she leave?' What we should ask is, 'Where would she go?'"
While housing was one part of the Labor’s shadow budget, the main calling cards were, unsurprisingly, crowd-pleasing reforms.
Following on from the Coalition government’s budget 2019-20 on Tuesday, which included a popular tax cut for those earning $126,000, the Labor Party announced that it would not only match this tax cut, but go a step further.
“If you earn between $48,000 and $126,000 – no matter who you vote for in May – you will get the same tax refund. But the Liberal tax plan does not do enough for those who earn less than $48,000,” Mr Shorten said.
“Tonight, I am pleased to say that in Chris Bowen’s first budget, Labor will provide a bigger tax cut than the Liberals for 3.6 million Australians, all-told, an extra $1 billion for low-income earners in this country.
“6.4 million working people will pay the same amount of income tax under Labor as the Liberals and another 3.6 million will pay less tax under Labor, but we will not be signing up to the Liberals’ radical, right-wing, flat tax experiment way off in the future, a scheme that would see a nurse on $50,000 paying the same tax rate as a surgeon on $200,000.
“We won’t back a plan that gives a retail worker on $35,000 less than $5 a week, while an investment banker pockets more than $11,000 a year. This is not a tax plan, it’s a ticking debt bomb,” he said.
A $2.3 billion plan for fighting cancer
However, the biggest announcement on the night came in the form of Labor’s $2.3 billion Medicare Cancer Plan, which Mr Shorten said was “the most important investment in Medicare since Bob Hawke created it”.
“We will invest $600 million towards eliminating all of the out-of-pocket costs, for diagnostic imaging. Over four years, this will mean six million free cancer scans funded by Medicare,” he said.
“What our first four years of Labor’s Medicare Cancer Plan means for Australians: up to six million free cancer scans, three million free appointments with specialists, and an affordable medicine guarantee,” he said.
“Under Labor, if you’re fighting cancer, you focus on getting well, without worrying about going broke. I can promise you that if you’re in the fight of your life, a Labor government will be alongside you every step of the way.”
Other initiatives announced in the shadow budget also included:
- Providing $1.5 billion to upgrade the Gateway Motorway from Bracken Ridge to the Pine River and the next stage of the Bruce Highway from the northern suburbs to Caboolture
- Doubling the size of the Rebuilding Tafe fund to $200 million to renovate campuses in regional and outer suburban Australia
- Guaranteeing universal access to preschool or kinder for every three-year-old and every four-year-old in Australia
- Providing an extra 20 per cent tax break for every business that invests in “productivity boosting equipment” above $20,000
- Training 150,000 apprentices
- Restoring the cuts to Sunday and public penalty rates
- Creating a living wage
Speaking out against the shadow budget, Finance Minister Mathias Cormann said: “Tonight, Bill Shorten had no plan to keep our economy strong. Instead, he put forward an agenda for over $200 billion in higher taxes. On retirees, housing, income, investments, small and family business, electricity – you name it. That would harm the economy, put jobs at risk, and hurt families.
“The truth is, Labor does not know how to manage money. That is why they are coming after yours. Labor has not delivered a surplus budget since 1989. In fact, when Labor was last in government, for six years, they delivered six record deficits totalling $240 billion,” he said.
[Related: Coalition urged to do more on housing]
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.