Question Time – Housing affordability and Childcare

June 17, 2015

Senator DAY (South Australia) (14:42): My question is to the Minister for Finance. The 2015-16 budget shows an eight per cent increase in childcare spending, or a 40 per cent increase over four years, or, in dollar terms, from $6.5 billion to over $11 billion. The reason families need child care is that both parents are forced to go out to work because of high housing costs. Then there is the $3 billion a year the Commonwealth spends on housing assistance. We all know the cost of building a basic house has not risen, in real terms, in 20 years. But the cost of land has skyrocketed. In essence, the government is spending over $14 billion a year to offset rising land costs. This is treating the symptoms, not the illness. Does the government accept this?

Senator CORMANN (Western Australia—Minister for Finance) (14:42): I thank Senator Day for that question and I also acknowledge his genuine interest in housing affordability for Australian families. In terms of the numbers he mentioned in relation to government expenditure on child care, Senator Day is broadly right. We expect to spend about $7.3 billion on government support for access to child care, in 2015-16. That is expected to rise to about $11 billion over the forward estimates. That is assuming, of course, that the Senate supports some of the spending reductions required out of the budget in order to pay for the additional investment into child care, because this government is committed to improving affordable access to child care and making access to child care simpler and more flexible, because we understand that is an important part of a strategy to help families get into work, stay in work and be in work. It is an important part of our strategy to strengthen growth and create more jobs. When it comes to housing affordability more broadly, affordability is a function of both price and capacity to pay. Price is a function of supply and demand. In markets where you have demand exceeding supply, prices will go up. In markets where you have supply exceeding demand, prices will go down. Senator Day is quite right. The housing affordability issue in Australia is principally an issue of land supply not meeting demand in the market. The principal lever to address that is at the state level, and the federal government is working, through the Treasurer, with state and territory governments to try and address that. I do not agree with Senator Day that housing building costs have not increased in real terms in Australia by international standards. Housing construction in Australia is significantly more expensive— (Time expired)

Senator DAY (South Australia) (14:45): Mr President, I ask a supplementary question. The Demographia international housing affordability survey for 2015 says the following: For the 11th year in a row … all of Australia’s five major metropolitan areas were severely unaffordable … It ranks Sydney and Melbourne third and 9th worst out of 378 cities in the world. What is the government doing to address this national crisis?

Senator CORMANN (Western Australia—Minister for Finance) (14:45): As I indicated in response to the primary question, the Treasurer is working with state and territory governments in relation to housing affordability policy issues. We do understand, of course, that the most sustainable way of improving housing affordability is by making sure that supply increases to a level where it can meet demand. Australia has a growing population. We have, in particular, a growing population in some of the larger population centres, and obviously there are cycles in the property market. Right now, in Sydney and in Melbourne, demand significantly exceeds supply. There is of course a response in the market as a result. If you look at the national accounts for the first quarter of 2015, you will see that there is a lift in investment in dwelling construction, and that is clearly a response to that upward pressure on prices. But we do need to do more. We do need to ensure that the states actually do better in releasing land so that there can be a more appropriate response. (Time expired)

Senator DAY (South Australia) (14:46): Mr President, I ask a further supplementary question. In my experience, the critical factor for healthy markets is for barriers to entry to be as low as possible. How can the Commonwealth and governments in states and territories like my home state of South Australia remove these barriers to first home ownership?

Senator CORMANN (Western Australia—Minister for Finance) (14:47): State governments, like the state government in South Australia, could decide to release more land. They could decide not to sit on the land that they currently hold and have already developed in order to try and maximise profits. They could just release more land into the marketplace. If the state government in South Australia and state governments in other parts of Australia decided to do that, it would have a material beneficial effect on housing affordability. Beyond that, we do need to have a mature conversation in Australia about why it is that in Australia it is significantly more expensive to build a house than it is in the United States, for example. Why is it significantly more expensive to build a house in Australia than in the United States? I know that the Labor Party sneered at the Treasurer yesterday in the House of Representatives when he made the point that the coalition’s abolition of Labor’s carbon tax did help bring down the cost of construction— (Time expired)