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Interest groups are preparing for a bruising election battle over housing, following the Turnbull government’s confirmation that it will leave negative gearing untouched in the upcoming federal budget.
Advocates on both sides of the debate responded vehemently, if predictably, as they jostle for position in a decades-old debate that will cloak the marathon campaign in class politics and generational warfare.
ACOSS chief executive Cassandra Goldie Photo: Nic Walker
„I’m surprised that younger people in Australia are not throwing bricks at auctions,” said Adrian Pisarski, executive officer at housing lobby group National Shelter. „They are being locked out of the opportunity to get a foot on the property ladder.”
Prime Minister Malcolm Turnbull and Treasurer Scott Morrison used Sunday’s announcement to tear into Labor’s proposed reforms, which would limit negative gearing to new housing and halve the capital gains tax discount to 25 per cent from 50 per cent.
Cassandra Goldie, chief executive of the Australian Council of Social Service, said she was „deeply disappointed at what she labelled „a big mistake” by the government. ACOSS is calling for negative gearing income tax concessions to be removed and partly ploughed back into concessions for institutional investors, who tend to be less interested in short-term speculation and more open to long-term tenancies.
Prime Minister Malcolm Turnbull and Treasurer Scott Morrison announce there will be no change to negative gearing. Photo: Michele Mossop
„We have to change the profile of who is investing in rental properties,” Ms Goldie told Fairfax Media. „It’s extremely important that we keep the debate about housing tax policy on the table, that it survives through this election period.”
The Urban Taskforce, which represents property developers, welcomed the government’s commitment. Chief executive Chris Johnson said it was a bad time to rock the boat, with Sydney failing to meet its housing requirements and more people wanting to rent instead of buy. It was necessary to encourage investors in order to keep producing apartments that people can rent, he said.
„We’ve got a very good combination now,” Mr Johnson said. „To start now destabilising that situation I think would be a dangerous thing to do. If we start changing the levers … it could be quite damaging for the market itself.”
But Ms Goldie pointed out many people only remained renters because housing has come so unaffordable they cannot get a foot in the door. She denied changes to negative gearing would put upward pressure on rents, as Mr Turnbull claimed on Sunday.
„For every person who finally can afford to get into home ownership, that’s one renter out of the market,” she said.
Mr Pisarski said slowing the growth of property prices should be the aim of sensible government housing policy. „Nobody wants to see a crash,” he cautioned, but added it was „reckless” for the Turnbull government to ignore the need for price moderation.
„It condemns us to house price inflation and locks generations X, Y and Millenials out of the possibility of home ownership,” he told ABC Radio National. „You need six or eight times the average yearly household income to afford a property. That is ridiculous and it’s robbing Australia of money that could be invested in other productive areas.”
The argument over who wins and who loses from negative gearing is certain to continue over the course of the campaign. Mr Turnbull has characterised his case as a defense of „mum and dad investors” and aspirational voters. However, Reserve Bank data showed the people most likely to negatively gear were those earning more than $500,000. About 30 per cent of that group used negative gearing, up from 20 per cent a decade ago, compared to 10-15 per cent of those investors with an income less than $100,000.
But Deloitte Access Economics director Chris Richardson said the debate over who was the biggest beneficiary was a moot point.
„If you get the policy right, then it doesn’t matter who benefits,” he told Fairfax Media. „How bizarre that we’re arguing the merits of a policy based on who uses it. Economics is a toolkit – get it right and get on with our lives.”
Mr Richardson urged the government to reduce the CGT discount to 33 per cent from 50 per cent, close to Labor’s policy. The CGT concession was „the real problem”, he said, while negative gearing was „a symptom rather than itself a cause”.
„We’re in this silly world where Labor’s probably going a bit too far and the government’s not going anywhere,” Mr Richardson said. „The Labor policy genuinely will not cause the world to end, or save it from ending.”
