Our presentation from the May meeting. Click on the image to open up the PDF of the talk.

Protest politics is on the rise in Australia, and the main cause is collapsing trust in politicians and the major parties, according to Grattan Institute’s latest report, A crisis of trust: The rise of protest politics in Australia. At the 2016 federal election, votes for minor parties hit their highest level since 1949. More than one-in-four Australians voted for someone other than the LNP, ALP or Greens in the Senate, and more than one-in-eight did likewise in the House of Representatives.

If the major parties and politicians want to rebuild trust with voters, they’ll need to change the way they do politics, explain Budget Policy and Institutional Reform Program Director Danielle Wood and Associate Carmela Chivers in this podcast discussion.

It will be a slow process, write Danielle Wood, Carmela Chivers and Grattan CEO John Daley in The Conversation. Reforming political donation laws and tightening regulation of lobbying and political entitlements could help reduce the incidence of trust-sapping scandals and reassure the public that the system is working for them. Politicians should also seek to dampen rather than inflame cultural differences, by stressing the common ground between city and country and between communities with different backgrounds.

Federal Labor has announced it will abolish cash refunds when investors, such as retirees, who pay little or no tax get dividends from companies that have paid company tax. It’s not first-best comprehensive tax reform, write Danielle Wood, John Daley and Grattan Fellow Brendan Coates in The Conversation. But in the absence of that holy grail, it is a piecemeal move towards a more equitable tax system that collects enough revenue given current spending commitments.

Scott Morrison says the policy will mainly hurt low-income earners. He says that 54 per cent of people affected by Labor’s policy have taxable incomes of less than $18,200, and that 86 per cent of the value of all franking credits refunded are received by those with taxable incomes of less than $87,000 a year. But these claims are deeply misleading, write Danielle Wood and Brendan Coates in Inside Story, because taxable income ignores the largest source of income for many wealthier retirees: tax-free superannuation.

The reporting of the Labor policy and earlier policy debates around negative gearing shows how easy it is to mislead Australians about who loses from tax changes. The full range of tricks used by vested interests and political combatants to scare and confuse was on display, write Danielle Wood and Brendan Coates in The Canberra Times.

 

 

Read the Full article here

Re-imagining the Australian Dream

Building an extra 50,000 homes a year for a decade could leave Australian house prices 5 to 20 per cent lower than they would be otherwise, and stem rising public anxiety about housing affordability, according to a new Grattan Institute report, Housing affordability: re-imagining the Australian dream.

Within living memory, Australia was a place where housing costs were manageable, and people of all ages and incomes had a reasonable chance to own a home with good access to jobs. But home ownership rates are falling among all Australians younger than 65, especially those with lower incomes. Owning a home increasingly depends on who your parents are, a big change from 35 years ago when home ownership rates were high for all levels of income. Those on low incomes – increasingly renters – are spending more of their income on housing.

It’s been a perfect storm of rising incomes and falling interest rates, rapid migration, tax and welfare settings feeding demand, and planning rules restricting supply. As a result, house prices have more than doubled in real terms over the past 20 years. The strains are most acute in Sydney and Melbourne. Since 2012, house prices have risen 50 per cent in Melbourne, and 70 per cent in Sydney.

Development in middle suburbs has increased in recent years, especially in Sydney. But today’s record level of housing construction is the bare minimum needed to meet record levels of population growth driven by rapid migration. Meanwhile a decade of accumulated shortages are forcing younger people to set up their own homes later in life.

To build more homes, State governments should fix planning rules to allow more homes to be built in inner and middle-ring suburbs of our largest cities. More small-scale urban infill projects should be allowed without council planning approval.

State governments should also allow denser development ‘as of right’ along key transport corridors. They should swap stamp duties for general property taxes. And state land taxes on investment property should be flat rate with no tax-free threshold, to encourage more institutional investors likely to provide longer-term tenancies.

The Commonwealth government can improve housing affordability somewhat – and immediately – by reducing demand. It should reduce the capital gains tax discount to 25 per cent; abolish negative gearing; and include owner-occupied housing in the Age Pension assets test. And unless the states are prepared to reform their planning systems, the Commonwealth should consider tapping the brakes on Australia’s migrant intake.

It took neglectful governments two decades to create the current housing affordability mess. They preferred the easy choices that merely appear to address the problem. The politics of reform are fraught because most voters own a home or an investment property, and mistrust any change that might dent the price of their assets. But if governments keep pretending there are easy answers, housing affordability will just get worse. Older people will not be able to downsize in the suburb where they live, and our children won’t be able to buy their own home.

Read the full report here