Westpac CEO pushes Labor on housing, tax, defence

Anthony Miller says Labor should start tax free zones, end bracket creep and expand investments in defence that boosts housing supply and economic activity in regional cities.

Westpac CEO Anthony Miller. Picture: John Feder

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Westpac chief executive Anthony Miller says Labor has the opportunity to win over voters in ­traditionally conservative areas if it introduces tax-free zones, ­indexation and expands investments in defence that boost housing supply and economic activity in regional cities.

Meeting with Jim Chalmers in Canberra on Tuesday, Mr Miller made a submission to the Treasurer’s upcoming economic reform roundtable that proposed GST distribution based on a state’s investment in regional areas, smoother approval processes, tax-free zones, and the indexation of tax brackets to help younger people own a home and close the generational wealth gap in Australia.

“There are a lot of constituents and interests impacted by tax reform, but one that we think is very practical and has been discussed and seriously considered, and closer to being implementable than almost any other, is to address the challenges of bracket creep by having that 2.5 per cent increase per annum,” Mr Miller said.

While removing bracket creep would help the demand for buying homes, Mr Miller said Westpac, whose mortgage book was now more than $500bn, only had the capacity to lend about $600,000 for a median household income of about $100,000. At that level most people were priced out of the main housing markets.

“The median house price in ­regional Australia is approximately $600,000, compared to the median house price in capital cities of over $1m,” he said.

“That’s the cornerstone to the idea of building more properties at the right price point, and regional Australia is part of the solution in terms of solving for more houses for more Australians.”

Touting the benefits of tax free zones to encourage investment in regions, he added: “What's needed is to have a first-year schoolteacher or nurse who (goes) to the regions with reduced income tax.”

Mr Miller said the regions were a focus for the government in terms of defence spending and political influence so it made sense for them to extend it to housing.

“There’s a lot of motivation and focus on how we grow northern Australia which is critical to Australia’s aspirations from a defence and geopolitical perspective, and (Westpac’s ideas) align with that agenda,” he said.

Labor might hold few seats in regional Australia, but Mr Miller said there was an opportunity for the government to meet its ambitious housing policy of building 1.2 million new houses in the next four years – a target that was shot down by Treasury as unlikely to be achieved.

Key regional seats that are closely contested include Capricornia, Herbert and Leichhardt in Queensland and Cowper and Calare in NSW.

Mr Miller’s push for tax incentives to grow the regions is already partly in effect but is ripe for reform. The Zone Tax Offset (ZTO) provides a deduction worth between just $57 and $1173 a year in recognition of the limited ser­vices provided by government and was established in 1945 with few changes to boundaries.

A review of such tax concessions and payments in remote areas undertaken in 2020 by the Productivity Commission said the ZTO was “outdated” and “poorly targeted”. It recommended the scheme’s abolition. “There is no compelling justification for a zone tax offset in contemporary Australia,” the report read.

Mr Miller suggested other key reforms to boost housing supply including the use of GST distribution to reward states and their local governments in investing in housing infrastructure.

“Distribute GST revenue to reflect the investment made by state governments in services for regional and remote communities, with a higher proportion where states support the needs of a growing population in regional centres,” Mr Miller said.

Former Reserve Bank official Peter Tulip, now Centre for Independent Studies chief economist, has pushed for GST distribution to be made based on the speed of building new homes.

“Incentives could be further improved, in a revenue-neutral manner, if the (Commonwealth) Grants Commission allocated a larger GST distribution to states that build more,” Mr Tulip said.

The federal government’s $3bn New Homes Bonus, which pays states $15,000 for each dwelling completed within certain thresholds is already in place.

Mr Miller also pushed in his submission for smoother planning regimes such as Queensland’s “deemed approval” model for some applications that drive timely decision-making.

“(A) national shift towards a consistently applied deemed approval model would hold councils accountable, reduce delays and give developers greater certainty, essential for improving productivity,” he said.

Westpac’s submission also called for “broader consideration of wholistic tax reform” by Treasury. “This may include consideration of a range of federal and state taxes including stamp duties, capital gains tax concessions and company taxes to determine if these taxes remain appropriate and effective,” it said.