Parker DavidHon DAVID PARKER (Minister of Revenue): I found that intervention from the Hon David Bennett illustrative of the difference in values one side of the House to the other. He explicitly said then that he doesn't mind dominance in the housing sector as you find in every other sector. I think that shows a difference between this side and that side because for us on this side actually homes are not just another asset class and we think that it is desirable to have higher rates of homeownership. We don't see it just as another asset class to allocate like shares or steel or the other industries that he mentioned. He then also ridiculously said that we're nationalising the housing market.Hon David Bennett: You are.Hon DAVID PARKER: We're not.Hon David Bennett: You are.Hon DAVID PARKER: The Government's not purchasing these houses. These houses aren't coming into the ownership of the Government. They've been purchased by other people.In respect of another issue we certainly do not have perfect tax settings around housing in New Zealand—we don't. And it's been one of the reasons why house prices in New Zealand are amongst the least affordable in the world: it's because of the tax bias in favour of that asset class and that partly relates to interest deductibility because interest payments are not wholly an expense. Even if I was to accept the National Party logic here—and I don't—and even if I was to accept the theory that housing is like any other asset class and all related costs should be deductible that's only true of real costs and it's not true of the inflationary component of an interest payment. If members want me to go into this in more detail—David Seymour: Oh please. Second call.Hon DAVID PARKER: I'm happy to because an interest payment is not all a real cost because part of it is compensating the lender of the money for inflation and—Andrew Bayly: How much is that of it?Hon DAVID PARKER: It's roughly half. Over time if you go over a period of 20 or 30 years and you say that inflation over a longer period averages 3 percent per annum let's say for this sort of asset class there's a margin above inflation of 3 percent. The real interest rate that is being paid by the borrower is only 3 percent even though they're paying a nominal rate of 6. And they get a deduction effectively from the inflationary component of their interest payment to the lender which is compensating the lender for the diminishing value of the loan. At the end of the year the real debt of the borrower has decreased by 3 percent in after-inflation terms.At the moment—Hon David Bennett: Rubbish.Hon DAVID PARKER: What's that? Rubbish? Hon David Bennett: If that is the case then how come—CHAIRPERSON (Hon Jenny Salesa): The Minister is still in the middle of his speech. If the member would like to ask a question—Hon David Bennett: He was asking a question. I was replying.CHAIRPERSON (Hon Jenny Salesa): If the member would like to ask a question he can do so later.Hon DAVID PARKER: We know particularly for many properties that their pattern is that they experience an inflationary gain in their property they re-leverage their property to buy another property and they maintain their level of debt in respect of their property portfolio at high levels and they forever essentially for many decades get a tax deduction for the inflationary component of their interest payment which is not a real cost and they pay nothing on either the inflationary or the real gain. So there is an economic illiteracy on the part of people who say that we should persist with tax settings that reward speculative investment and to the extent that you take a tax deduction for an inflationary part of your interest payment and you pay no tax on either the inflationary or the real part of your gain you do have a distortionary tax setting which is one of the reasons why house prices are so inflated in New Zealand and one of the reasons why residential rental owners have multiple properties and can outbid a first-home buyer and that sits behind one of the reasons why over recent decades we've got declining homeownership rates.CHAIRPERSON (Hon Jenny Salsa): I call Simon Court—I'm sorry; Simon Watts.