Monday, March 16, 2015

Hockey outclassed on Q&A, by an economist

Treasurer Joe Hockey was upstaged and shirtfronted on Q&A Monday night, but not by a member of the audience or a political opponent.

The man who cut him down to size on questions including negative gearing, tax and infrastructure spending was John Daley, the Melbourne-based research economist who runs the Grattan Institute.

Asked why he hadn't abolished the tax concession known as negative gearing that rewards property investors for recording tax losses Hockey said it might force up rents.

When Bob Hawke did it in the 1980s "you saw a surge in rents and those people who were paying rents are usually - not always, but usually - people that can't afford in many cases to buy their own homes".

Daley set him straight.

It was absolutely true that rents went up fast in Sydney, "which might have been there wasn't a lot of housing being built in Sydney in the couple of years previously".

"But look beyond Sydney and rents were dead - barely moved in Brisbane, didn't go up very far in Melbourne, didn't go up very far in Adelaide. They did go up very fast in Perth which makes you suspect very strongly that the race memory we have of abolish negative gearing, that rents will go up, is a race memory built on Sydney."

Daley said rents shouldn't go up because "by definition what happens at the auction is that the investor doesn't win the auction but someone who wants to live in the house does. Net impact, there is one less renter and there is one less rental property. Net impact on the rental market, zero."

Hockey never returned to the question, and neither did his opposite number Chris Bowen who dodged the question on negative gearing by saying Labor wanted a proper discussion about housing affordability.

Then Daley took on Hockey's claim that he was delivering the biggest infrastructure program in Australian history.

"It certainly hasn't gone up," he said. "It's probably tailed off, at least in as a percentage of GDP."

Hockey said Daley was wrong. "For a start we put $1.5 billion into WestConnex in Sydney," he said.

Daley reminded him that the project predated the Abbott government. He said not a single new project approved in Hockey's first budget had received a green light from Infrastructure Australia.

Hockey deflected the accusation by saying Melbourne's East West Link had at least been subject to a cost benefit analysis by the Victorian government. He was reminded that the former Victorian government refused to release it in part because the numbers didn't stack up.

When Hockey said the tax discussion paper wouldn't consider tax increases, Daley said that was exactly what was needed.

"We as a society have essentially decided to spend quite a lot more money on health. It's good news, it's keeping people alive for a lot longer. The bad news is someone's got to pay for it. We've agreed as a society to have an national disability insurance scheme scheme, that's terrific but somebody's got to pay for it."

"So far we've had relatively little discussion about the fact that taxes will probably have to go up, and of course no politician wants to talk about that."

Hockey was outclassed in a way he rarely is in parliament.

In The Age and Sydney Morning Herald