Matusik Missive Third strike
The federal government is - and rightly so - getting battered over budget blow-outs for its green loans scheme and mismanagement of the subsidised home insulation programme. Now it seems another federal programme, the National Rental Affordability Scheme (NRAS), is looking wobbly. I am not surprised.
The $625 million scheme aimed to dramatically increase the supply of rental properties by giving investors an $8,600 annual tax break over a decade, for each new apartment or house. To get the tax perk, NRAS homes needed to be leased to eligible low to moderate-income tenants at 20% below market rents. We worked out back in July 2008, when the scheme was first announced, that the sums did not work and hence the interest in the scheme to date has been appalling.
So far, just over 10,000 NRAS incentives have been granted, yet only about 1,000 of these “affordable” dwellings have actually been built to date. This makes the original target of 50,000 new rental homes by mid-2012 seem a tad ambitious. The scheme has failed to attract large institutional investors, private developers and mum and dad investors alike. Although only last week Devine stepped into the void and has signed up to build 400 NRAS dwellings in South Australia. More may follow.
Adding insult to injury, the ATO in 2008 ruled non-profits could lose their sheltered tax status if they took part in the scheme. Making matters worse, the ATO have now scuttled the only model that attracted private money into the scheme – the $8,600 annual tax subsidy is, at present at least, not available to investors as promised. Wouldn’t you just love to be a fly on Kevin Rudd’s wall at present?
We wrote, back in early 2008 when the scheme was first discussed, that the Rudd government would have been better off trying to get home owners to better utilise their existing properties. We were one of the first organisations to talk about the 830,000 odd residential properties that lie vacant across the country. We suggested a boarding bonus, instead of NRAS and the continuation of the ill-conceived baby bonus from the Howard government. To find out more, contact us, for a copy of Snapshot 370.
When is this mismanagement going to stop? It might be funny if it wasn’t for the cost. Our gross foreign debt is $1.232 trillion and rising; on a net basis it is about $640 billion. Debt is fine if it is backed by an economically sound asset, but ceiling insulation, unnecessary school halls and $900 cheques don’t fit that bill, if you ask me. Well $900 giveaways would, if we could get the money back with interest.
Over the last two years, $90 billion worth of economic trinkets have been handed out, but did we get anything substantial in return?....something identifiable like the Snowy Mountain Scheme, an inland rail system or water infrastructure to cater for future droughts? We could have invested in a method to encourage our growing population to settle away from the east coast. But no, of course, we didn’t. What we have got is rising interest rates and an appreciating Aussie dollar.
I like to watch American baseball. I particularly like the three strikes and you’re out rule. Pity we don’t play a sport here, like say politics, with similar rules.
Michael Matusik