Governor takes aim at tax barrier to economic mobility

A century-old tax that keeps empty-nesters in big homes while young families squeeze into apartments has raised the ire of frequent critics.

Successive Central Bank governors have criticized stamp duty, the tax paid on property purchases.

“My predecessor called this a mobility tax,” Michele Bullock said Friday.

“It’s also an obstacle to people taking action to find work… an obstacle to dynamism in the economy.

“It basically keeps people pretty much where they are instead of allowing them to get up and move.”

Australia’s average household size is in long-term decline, and this decline has accelerated during the COVID-19 pandemic.

“So the same housing stock provides housing for fewer people because there are fewer people in each home,” Ms Bullock told the News Corp business forum.

He suggested that stamp duty could deter people from downsizing flats.

But it has been difficult to rid states of the stamp duty, which was first imposed 160 years ago and can cover up to a quarter of their annual revenues.

Economists propose a land tax model in which all land owners pay an annual fee, rather than a one-time payment when acquiring property.

NSW Premier Chris Minns fought for an extension to stamp duty when taking office and scrapped the short-lived option for first home buyers to pay land tax instead.

Mr Minns described the other option as a “permanent tax on the family home” and instead raise the eligibility threshold for stamp duty relief.

On Friday his government rebutted Ms Bullock’s attack, saying exemptions and discounts had saved more than 73,000 first home buyers an average of $20,000.

Mr Minns appeared on stage before Ms Bullock at Friday’s event and told the room he was “praying” for further rate cuts.

This week’s data showed Sydney’s median house price reached $1.75 million, while the average unit price exceeded $840,000.

“Most young people’s first home will be an apartment building,” Mr. Minns said.

“We need to build more of them.”

“The number of new homes completed in Australia’s most expensive and the world’s second most expensive city is not good enough.”

Queensland and Victoria have been outpacing NSW in building new housing for years.

But recent reforms have focused on high-density development and planning reforms that will enable homes to be built faster.

The Prime Minister is confident the state can do this “with a little help from Michele”.

Ms Bullock acknowledged that although house prices were outside the central bank’s remit, interest rates had an impact.

“The best thing I think we can do is keep inflation low and stable because that keeps construction costs from rising too much.

“We hope that as interest rates come down, people will be able to afford to build more homes.”