From the overnight AFR interview:
AFR: The Murray review of the financial system released this week suggested that there was a tax bias in the system that is encouraging investor housing. Is that something, do you think, that needs to be looked at in terms of making it easier for you to conduct your own monetary policy?
MR STEVENS: I think, without wanting to get into tax policy, he would not be the first person, or the committee would not be the first group, to make the observation that there are aspects of the tax system that could be seen as somewhat in this space. So plenty of people have said that. It’s a matter for the government whether they’re prepared to address that concern, if they share it. And, presumably, in the forthcoming tax [white paper] – that’s an appropriate location in which to have a further discussion about that. But even in the event that there was to be some change in the tax rules here at some point, I would see that as a structural change. Isn’t it, really? It’s not a kind of countercyclical device – or at least I haven’t thought of it in that way. And I’m not sure that – even if there was the prospect of changes to negative gearing or capital gains tax or whatever in several years time, how big a bearing that has on what we do in the next few months. I’m not that clear.
AFR: But isn’t it when you’re pushing monetary policy to the limit here in the Australian sense, you find that that’s causing problems in a volatile section of the economy which could rebound on you later.
MR STEVENS: Well, to the extent that tax things have some bearing on the issue of how much cheap money pushes up prices as opposed to activity, to the extent it has a bearing on that then, obviously, that’s probably of more than passing interest to us. But, you know, I can’t get into the discussion of what they should do about that. Even if something is done to change that in welcome fashion, it’s not going to be any time really soon, is it? So I’m not anticipating there’s going to be a major help to us in finessing this in the next year.
AFR: You’re taking it as a given over the forecasting horizon?
MR STEVENS: I think you have to.
AFR: But David Murray’s report also suggested that the tax bias is injecting – and it’s a point that the IMF has made – through high prices a potential systemic risk into the entire banking system.
MR STEVENS: Well, presumably, their point is that it could be a contributing factor. But we’re quite – I don’t want to get into this in much more detail, you know if the AFR prints, “Governor calls for negative gearing to be abolished”, how many minutes will it take someone in Canberra to have to come out and deny that. So that, I don’t think, will be helpful. The right way to talk about this structural taxation matter is in the Taxation White Paper, I think it’s called, that’s forthcoming.
In Stevens’ halting, laconic and frustratingly bureaucratic circumlocution, that is an endorsement of negative gearing and/or CGT reform.
It’s not good enough. He’s paid over the odds and we $1 million worth of arse-covering.
