Stamp duty dissuading downsizing while throwing up barriers to job mobility, says Bullock
Reserve Bank of Australia (RBA) Governor Michele Bullock (pictured) referred to stamp duty as “a tax on mobility” during The Daily Telegraph’s Future Sydney: Bradfield Oration held at the Sydney Opera House on Friday.
While the event was primarily focused on modernising Australia’s payments system, host John Rolfe also grilled Bullock on her thought on the Australian housing marker.
The RBA’s mandate does not stretch to housing and house prices, but Bullock noted that interest rate changes do have a direct influence on the housing market.
“The best thing I think we can do as the Reserve Bank is to keep inflation low and stable because that keeps building costs… not increasing too much.”
Bullock touched on the supply crunch, calling it “a very knotty problem”.
She highlighted the positive effect of Labor’s changes to planning laws, but stressed that issues at the input stage – namely materials and skilled workers – need to be addressed in order to stimulate the supply side.
“We need to make sure we’ve got all those resources available, and if the economy is running too hot, then sometimes… those resources aren’t available,” said Bullock.
She also drew attention to declining household sizes – a trend that has escalated since the Covid-19 pandemic.
“As the average household size declines, then the given housing stock, there’s less of it.” Members of the older generations who are deciding not to downsize are also contributing to housing shortages.
While these are decisions made at the individual level, Bullock criticised certain tax policies that are discouraging habits that are more conducive to freeing up housing stock.
Host John Rolfe suggested stamp duty as a “considerable barrier” to downsizing, which Bullock agreed with, calling it “a tax on mobility”.
Bullock said: “It’s not only a barrier to downsizing, it’s a barrier to people moving to find jobs. So it’s also a barrier for dynamism in the economy.”
Bullock was pressed on whether she believed more skilled migrants are needed to help build houses.
While largely skirting the question, Bullock said: “We are seeing… that there is a shortage of skills in the housing industry, and some of that is contention for resources for all the other projects that are going on.”
She cited a need to promote the trades industries to people coming out of high school alongside encouraging people with the requisite skills into the industry.
Broking industry calls for stamp duty reforms
Under chief executive Anja Pannek, Australia’s peak broking association the Mortgage and Finance Association of Australia (MFAA) has called for stamp duty and payroll taxes to be abolished in place of higher consumption taxes.
“A higher and broadened GST will deliver greater revenues to the states and territories as distributed by the Commonwealth Grants Commission,” read the MFAA submission to the Economic Reform Roundtable held earlier this year. “This would boost state and territory revenues and support them to phase out inefficient taxes, such as stamp duty, without compromising service delivery.”
Removing stamp duty would make housing more attainable for first-home buyers, argued the MFAA.
Brokers such as Andrea Svenson, director and finance broker at New South Wales-based Empire Finance Co., have also called for reforms.
“One of the primary concerns with the existing system is its outdated structure,” Svenson said in an interview with MPA. She said that stamp duty is a substantial upfront cost that can add tens of thousands of dollars to the purchase price of a property.
“This not only discourages homeownership but also reduces mobility within the property market,” Svenson said, adding: “Many homeowners who would otherwise consider moving – whether to accommodate a growing family or to downsize after retirement – are deterred by the excessive financial burden.”
