Zali Steggall calls for phase-out of housing tax breaks and fossil fuel subsidies

Steggall’s economic white paper outlined an ambition to phase out fossil fuel subsidies and reform housing tax settings in a bid to promote intergenerational equity and long-term fiscal sustainability.

The 28-page economic white paper came ahead of the Albanese’s economic reform roundtable, which seeks to find solutions to Australia’s poor productivity performance.

“The Government’s Economic Reform Roundtable cannot be a stunt aimed at delivering predetermined outcomes under the guise of consultation,” Steggall said.

“If the Government is serious about economic reform, budget repair and boosting productivity then we need to be talking about ambitious reforms that phase out the fiscal framework that unfairly props up fossil fuels and boost the clean industries of the future, make it easier for young people to own a home, tackle the risks and opportunities in AI, and responsibly raise revenue from disproportionate profits in legacy industries.”

Climate and housing issues were key focus areas of Steggall’s white paper, problems she argued would be pivotal in determining Australia’s long-term prosperity.

Steggall proposed reforms to Australia’s tax and transfer system including the phasing out of capital gains tax (CGT) discounts for multiple investment properties, strengthening resources taxes including the safeguard mechanism and the petroleum resource rent tax, and introducing a carbon border adjustment mechanism.

The paper added that Australia’s dependence on fossil fuel revenue to prop up the budget would threaten its long-term fiscal sustainability amid falling commodity prices and international efforts to decarbonise.

“A shift toward sustainable alternative revenue sources and away from subsidies for harmful activities is crucial to continue responsibly raising revenue,” it said.

In line with this, the paper called for the phase-out of fossil fuel subsidies, which cost the federal budget $11.8 billion in 2023-24.

“Most Federal fossil fuel subsidies go to export-oriented industries - particularly extractives. As such, Australian taxpayers are currently subsidising consumption overseas,” the white paper argued.

It suggested these funds could be redirected towards climate resilience measures as natural disasters continue to put pressure on the budget.

To address Australia’s housing crisis, Steggall called for a greater focus on demand-side interventions, arguing that supply-side measures to encourage property investment wouldn’t address the fundamental issues plaguing the housing market.

“While investors can be an important source of capital, they are only effective at increasing supply when capital is the limiting factor. In Australia currently, land and labour are widely acknowledged as factors limiting housing supply,” the white paper said.

“In this situation, encouraging investors does little more than drive up prices as it chases opportunities in competition with owner-occupiers.”

The white paper called for the phasing out of CGT discounts for multiple investment properties, a reform that would raise an estimated $410 million over the 2025-26 forward estimates according to estimates from the independent Parliamentary Budget Office (PBO).

It also argued that negative gearing should be limited to properties that met minimum energy standards to incentivise landlords to invest in energy efficiency, solar panels and batteries for rental properties.

“People with a secure home are more likely to invest in their own education, to participate in the labour market and to innovate,” Steggall said.

“It’s time to remove demand-side reforms from the ‘too hard basket’ and begin a serious conversation about smart reforms needed to complement supply-side measures.”