Event: BCA Chief Executive Bran Black interview with Sarah Ferguson, 7.30, ABC

Speakers: 7.30, ABC Host Sarah Ferguson; Business Council of Australia Chief Executive Bran Black

Date: 21 October 2024

Topics: Housing, supply, economics, productivity, planning approvals

E&OE

Sarah Ferguson Host, 7.30, ABC: Bran Black, welcome to 7.30.

Bran Black Chief Executive, Business Council: Thanks so much for having me.

Sarah: How would the reform fund that you're proposing see more houses built more quickly?

Bran: Well, let's take it back a step and just look at some of the challenges that we are facing right now.

For a start, we know we need more supply, so the Federal Government together with the states has fixed on a target of 1.2 million homes over the course of the next five years. Now what that translates to per year is about nine homes per 1,000 people. At the moment, we're delivering six homes per 1,000 people, so there is a gap.

And what we've done with our report is put forward a whole series of recommendations which help address that supply gap, and one of the things that we've noted is that there is often a challenge associated with these big reform pieces, like stamp duty, and in those circumstances, it is useful to have some federal assistance.

So, we've proposed a reform fund. It is modelled on the types of reform funds that we've seen utilised in the late 90s and early 2000s, competition payments paid to states. That was $5 billion then and that has translated into $60 billion a year in uplift to our GDP. We think that's an important initiative.

Sarah: Now the New South Wales, well the Federal Government has already announced a performance-based fund for states and territories who exceed their home building targets under the National Housing Accord. What is different in your proposal to what's already on the table from the Government?

Bran: We think those are already important initiatives that have been announced but what we're saying is that the type of reforms that we are proposing, and which should be incentivised through additional federal funding, as per this national reform fund, are productivity enhancing reforms.

So, our 29 recommendations are really efficiency driving productivity enhancing reforms in the housing sector, but I would stress that we think that this is a reform fund that could apply more broadly in other areas to help drive productivity uplift.

So, it might be with respect to regulation, it could be with respect to how you manage payroll taxes and so on, but we think that it has got an important role to play in housing as well.

Sarah: Now just in housing, why is removing stamp duty, as you're talking about in this report, why is that so central in your view to solving the housing crisis?

Bran: Stamp duty is effectively a tax on mobility and think about it through the prism of a family. You might have a couple that have kids that have moved out of home. They are now empty nesters. They are looking at potentially downsizing, but they are disincentivised from doing that because they know that they will have to pay a large upfront cost associated with stamp duty if they take that critical step.

So as a consequence of that, they are going to continue occupying a larger home than what they need which means that the supply of that larger home which could be available for a young family that has that need, just isn't there. We think it is an important part of driving that type of mobility.

Sarah: So, Victoria today has announced a one-year freeze on stamp duty for anyone buying a property off the plan. Should the other states follow Victoria?

Bran: We think that this is an important initiative. We think that any step that you can take to try and incrementally dispense with stamp duty is an important step forward.

One of the things that is really interesting in undertaking this body of work that we've done is that a lot of the reforms that we are calling for have already been implemented in one jurisdiction or another.

So, you might say that Queensland has got a fantastic concierge service. You might say that New South Wales has a really good approach to data transparency on council performance. South Australia has an excellent consolidated zoning system and WA has a really decent approach around how it goes about assessing...

Sarah: Do you want all of those improvements in all states and territories?

Bran: We'd love to say wrap it up, harmonise it across the board. So, with respect to your question specifically on Victoria, we think that there probably are learnings that you could apply here and no doubt Victoria will be looking to see what happens over the course of the next year.

Sarah:Now they are talking about a freeze and part of the reason they are talking about a freeze is the income that derives from stamp duty, they are not prepared to give that away yet. That's part of the problem, isn't it? You are asking the states to give away a very large amount of income?Bran: That is one of the challenges with stamp duty. If you go from that very large lump sum payment which states have come to rely upon and you replace that with a smaller payment, a much smaller payment that is paid out over years, then particularly in the early years, that represents a real upfront cost to states. That is where we think that a national reform fund...

Sarah: So, the money would come out of the reform fund?

Bran: Indeed, it could very much assist in that regard.Sarah: Let me just talk about the business side of this because business has a responsibility in here as well and I'm in thinking in particular about the practice of land banking, that is holding onto land that has been rezoned. Do you think that business should be looking at its own practices when it comes to not moving quickly enough on land that is available to be built on?

Bran: Well, we think it's really important to try and move forward as quickly as possible. We know that there are lots of different challenges that come into play in that regard.

Sarah: More precisely, does business have responsibility when it comes to land banking. Let me just give you figures because according to the KPMG, in Sydney alone, the approved but not commenced category has reached a five-year high with more than 12,000 projects waiting to be commenced?

Bran: Again, I say we should be moving forward as quickly as possible, but there are lots of reasons why people aren't able to move forward.

So from our members, what we get is feedback with respect to the cost of debt which has obviously gone up in the last couple of years and of course, the cost associated with supply of labour and the cost associated with the supply of materials. All of these factors are coming into play.

Sarah: They are in important business decisions but if we are in a crisis and we're asking state governments and federal governments to act, doesn't business have to act at the same time?

Bran: We have all got a responsibility to do that. I absolutely agree with you in that regard. My point is simply that there is a multiplicity of factors that are affecting decisions about whether or not developments should proceed and a lot of that right now really does come down to increased costs.

Sarah: But some of it is profit margin, too, isn't it?

Bran: You have got to make sure that developments are able to proceed in a profitable way. One of the challenges that we are seeing at the moment is that productivity in the construction sector has declined significantly.

So productivity across our economy more broadly has increased by about 10 per cent over the last decade. In the construction sector, it has actually reduced by more than 10 per cent in the last decade, and we have reports through some of our members that productivity on sites is down to about 2.5 days a week, so we've got to look at really what we can do to try to enhance the scope for them to see profitability and to see margins through their developments.

Sarah: Let's just look at some of the policies that are on offer from both sides of politics or all sides of politics. The Coalition wants to impose a 10-year freeze on changes to the National Construction Code. Does the BCA support that?

Bran: Well, we think that's an interesting policy. It is certainly worth looking at. One of the benefits associated with it is of course, that it means that there is less of a compliance burden, there is not as much change.

We also know that there are some important changes that are made to these codes over time, but it is something that we're looking at very closely.

Sarah: Where are you on that because obviously some of those codes, some of the requirements of the code are to do with energy efficiency, aren't they?

Bran: Indeed, indeed, they are.

Sarah: Blanket 10-year freeze, yes or no?

Bran: Well, at this stage we are still looking at it. It is one of those things that we have to discuss and consult on with our members, but we are very interested in what the Coalition has announced in terms of the additional assistance in relation to infrastructure. That is actually one of our specific recommendations in our report.

Sarah: Does the BCA support changes to negative gearing and capital gains tax?

Bran: Well, it is another interesting point. What I would say in that regard is that it goes directly to demand and our report that we've released today goes to supply side measures.

What we are trying to do there is address specifically that 1.2 million deficit that we need to attend to over the course of the next five years and that's why we've put forward the changes that we have.

In terms of your question specifically, though, we would say that we don't support changes with respect to negative gearing and the reason for that is that we favour simplicity in the tax system, and we see that it is a well understood principle that you should be able to deduct the cost that you've incurred in the course of reducing assessable income.

In terms of capital gains tax, what we would say there is that there is a basis for a conversation in that regard, but it's important to remember that at the end of the day, capital gains tax is paid on a whole series of different assets, so we would welcome that kind of discussion in the context of a broader discussion on tax reform which we think is necessary in any case.

Sarah: Bran Black, thank you very much indeed for joining us.

Bran: Thanks so much for having me.