SARAH FERGUSON, HOST: Joining me now is the Prime Minister, Anthony Albanese. Prime Minister, welcome.
ANTHONY ALBANESE, PRIME MINISTER: Good to be with you.
FERGUSON: You said on multiple occasions before the election that you would not touch negative gearing or capital gains. How would you describe those statements now?
PRIME MINISTER: Well, we've changed our position –
FERGUSON: No, how would you describe those statements now?
PRIME MINISTER: We've changed our position. They were statements that were made and that's why we've been up front, that we've changed our position. And we've changed our position because we couldn't sit back and continue to watch young people being frozen out of the housing market. We couldn't continue to see a situation increasingly develop where generations, this generation and future generations, were locked out of the housing market because it wasn't fair. We couldn't also sit back and continue to see that income from labour is treated so differently from income from assets. So, for a long period of time, people have been talking about the need for tax reform. This is tax reform. It is also resilience. It is also cost-of-living measures that we're putting in place, because every single dollar raised through tax changes is being given back in the form of tax cuts.
FERGUSON: Were those statements promises?
PRIME MINISTER: They were statements and we have changed our position.
FERGUSON: Yes, but are you not able to say that they were election promises?
PRIME MINISTER: Well, we've changed our position, Sarah.
FERGUSON: You won't say it.
PRIME MINISTER: There were statements that were made and we've changed our position, just like we've changed our position on halving the fuel tax rate. We said that was an issue during the last campaign. We weren't in favour of it. We've changed our position in order to provide that support. And we want to make sure when it comes to the substance of the change, the fact that people are concentrating on the process says to me that we've got the substance right. We've got the substance right because for a long period of time people have said that we needed to do something about it. Now we'd thrown everything at housing. We took to the election the five per cent deposits. We've got five per cent deposits. We've got the Housing Australia Future Fund for public housing supply. We have Build to Rent for private supply. We have our shared equity scheme as well –
FERGUSON: So, when did this decision, when did you make this decision to include these taxes in this Budget?
PRIME MINISTER: We made the decision in the Budget very late in the process this time around because of what occurred on December 14, and the fact that the Budget processes were more uncertain this time because of the global situation, the volatility that we're seeing in the global economy.
FERGUSON: So, the discussions around this change happened last year, but you're saying the final decision was taken a few weeks ago?
PRIME MINISTER: Final decisions were taken very recently, but of course –
FERGUSON: Were they taken in relation to your decision on the export tax for gas? Was there any correlation between those two things?
PRIME MINISTER: No, not at all.
FERGUSON: But it was under consideration for months?
PRIME MINISTER: Treasury, of course, as we've said from time to time, there is a whole lot of commentary, ‘how dare Treasury look at things’. They look at things. I was convinced that we're able to do a change to position, but one that is fair. So, one that is fair because of grandfathering the changes. So, people with existing investments will be able to continue to have them. But also by having negative gearing being available for new builds, what it does is like the current system, individuals can invest to increase their assets and their wealth in the future. They can still do that. The difference is that they will also be investing in the assets and wealth of the nation because it will encourage the boost in supply.
FERGUSON: Just on that issue of grandfathering, grandparenting, I think the Treasurer said last night, how do you explain to a young person that the advantages of negative gearing enjoyed by older generations are now locked in forever entrenching that that inequity?
PRIME MINISTER: Well, the first thing that you would say to them is that they have negative gearing available to them for new builds. The second thing you'd say is that the average time in which negative gearing operates is a little bit over five years. That's because either people dispose of a property or it becomes positively geared over a period of time. Negative gearing doesn't continue off into the future unless it, there are some rather strange arrangements, in general –
FERGUSON: But those –
PRIME MINISTER: In general, that is the system. And that's why as well, fairness is making sure that we don't change the basis of people who've gone into investing in a property on the basis of arrangements that were made available to them that we don't change tax arrangements halfway through.
FERGUSON: I want to come back to you reaching the decision. There's going to be, I think 700,000 more Gen Z voters on the at the next election. In those discussions that you were having a few weeks ago, is it, were you discussing at that time, the political payoff for you, that by doing this, if the Opposition chooses to oppose all of these changes that you're bringing forward, that it will damage itself in the eyes of young voters?
PRIME MINISTER: No, we were discussing the merits of the policy and whether it stacked up. That was our sole focus, was, is this good policy? Will this advance the nation's interests? I've spoken about resilience. Resilience means the Fuel Security Plan that we've put forward, our defence security, $53 billion of increased investment there. Making sure we're less vulnerable to global events. That's what a Future Made in Australia is about. But resilience is also about social cohesion, about having an economy that works for people, not people thinking like they're working for the economy, but they just can't get ahead. And more and more, not just young people, but their parents and grandparents saying, ‘I just think my kid, young Johnny or young Mary's locked out of the housing market’. That's not the Australian way. I want the Australian dream of home ownership to be available for this and future generations.
FERGUSON: But at the same time, you were able to walk and chew gum. You, at that time, I assume there were considerations and conversations or in the lead up to that, about the political payoff for you. How much of a draw for you was the benefit this brings in terms of that very large number of Gen Z voters coming on the rolls at the next election?
PRIME MINISTER: If you concentrate on good policy, the politics will look after itself. What we are concentrating on here is good policy in the interests of young Australians, but also in the interest of that social cohesion in the national interest as well. And we have concentrated, we've said when it comes to housing policy, supply, supply, supply. This is another measure that will help to drive supply, but it will also mean that young people get a fair crack.
FERGUSON: Do you want to see house prices fall?
PRIME MINISTER: The indications from these changes is that house prices will continue to increase, but they'll increase at a slightly slower rate.
FERGUSON: And that's what you want to see happen?
PRIME MINISTER: What I want to see is increased supply. And I want to see young people have the opportunity to get into home ownership.
FERGUSON:: Did you ask for any modelling on how many homes could be made available to young home buyers if the grandfathering conditions were less generous?
PRIME MINISTER: No, because I was never interested as Prime Minister in not having a system in which grandfathering operated.
FERGUSON Australia is now one of the highest taxing capital gains regimes in the entire world. How is that a Budget working for Australians?
PRIME MINISTER: A Budget working for Australians is a capital gains tax system that taxes based upon real gains, that is for the gain less inflation. That's what a real gain is, and that equalises it with income. And so you're changing the system so that it's fairer in the way that it treats income from assets and income from labour.
FERGUSON: Is that how you expect investors in Australia to look at your change in capital gains?
PRIME MINISTER: These are changes – before 1985 there wasn't any capital gains tax at all. In 1999, John Howard made this change. And what has happened is the distortion in the investment market towards housing and away from areas such as equities, for example that can help business to grow and can help the productive side of the economy. So, one of the things I expect to happen here is a productivity bonus, because investment won't be distorted by the way that the tax system operates so that people will be taxed on the real gains. That is a common sense solution.
FERGUSON: Just to come back to the impact this is going to have on the investment community in Australia. With negative gearing, you have allowed other forms of negative gearing to continue. Why not just make the capital gains taxes apply to housing? Why make it across the entire asset?
PRIME MINISTER: Because we wanted to make sure that there weren't distortions in the investment market. The advice was very clear about that.
FERGUSON: Well then why are you getting such a strong reaction from the investor community today saying investment dollars will go elsewhere?
PRIME MINISTER: Well, some of the comments haven't been based upon the policy. We will go out, we'll continue to consult, we'll engage. I believe this is a common sense change. As I said, it goes back to the system, in a range of the changes that were put in place under the Howard Government came in because there were rivers of dollars coming in because of what was happening in international markets. And changes were made that frankly have made a difference in terms of distorting markets and distorting investment decisions going forward. This will help to drive productivity.
FERGUSON: Just briefly, we're expecting Angus Taylor's Budget in Reply tomorrow. We are expecting a focus on housing and migration. Net overseas migration is going up in the, that was, that's clear in the Budget. That must work against your housing targets?
PRIME MINISTER: Net overseas migration has fallen by 45 per cent on our watch –
FERGUSON: Against post-Covid numbers. It's important people understand that.
PRIME MINISTER: Well, that is important. They were growing when our, when we came into office. That is just a fact, and what we’ve done –
FERGUSON: But you accept that the numbers that we saw in the Budget papers yesterday showing that net overseas migration is increasing will work against your housing targets?
PRIME MINISTER: No, it actually shows 295,000 the current year, falling to 245,000, and then falling to 225,000. And we have a range of measures in place to make sure that that occurs.
FERGUSON: Prime Minister, thank you very much indeed for joining us.
PRIME MINISTER: Thanks very much, Sarah.