Senator Scott Ludlam from The Greens expertly debunked the Abbott Government’s lies that quarantining negative gearing, so that losses on both houses and shares could no longer be claimed against unrelated wage/salary earnings, would push-up rents, saying the following during yesterday’s debate on housing affordability in the Senate [my emphasis]:
A couple of weeks ago we introduced an initiative to phase out negative gearing. It would be grandfathered for those who already negatively gear their properties, but it would henceforth be unavailable. Over a period of 10 years or so negative gearing would effectively be wound back and taken out of our tax system. It is one of the largest tax expenditures on the books in Australia. Over a ten year period, if you get the impact of negative gearing having been almost completely unwound from the Australian tax system, the Parliamentary Budget Office estimated that it would be worth roughly $42 billion. To a government that has been cutting taxes and slashing revenue since it arrived, I would have thought that would be something that coalition MPs would be very keen—not necessarily to adopt, I understand that is not how politics works—to at least talk through the merits of it, to at least have the argument and to at least challenge it on the facts. We are seeing no such behaviour from the Australian government.
Why on earth would you [the Government] not include negative gearing and the way that capital gains are concessionally taxed in your tax review? It was meant to be open to all comers: ‘Put everything on the table. Let us have a look at the entirety of the Australian tax system and see if we can have a more intelligent and mature debate than the one that ensued after the Henry tax review.’ No such luck, because, while that invitation was made, since then the Treasurer and the Prime Minister have been busy ruling things out as too scary to even talk about, not even wanting to look at the evidence. The arguments that have been put forward serially by senior government spokespeople from the Prime Minister on down—Minister for Finance Cormann was at it again yesterday—are that, if you abolish negative gearing, you push up rents. He even sought to give us a condescending little lecture in the realities of market economics—how wonderful!—that if you abolish negative gearing you will push up rents by somehow restricting supply. Absolutely unbelievable!
If we could come out of this debate with anything at all, the one thing that I would implore is that we set this appalling unsubstantiated myth aside once and for all and just engage the debate on the facts. Instead, we have people as senior as the Treasurer and the Prime Minister just making unsubstantiated, unsupportable stuff up on the fly. Do not come in here and tell us that you have suddenly discovered the plight of renters. A third of the households in this country rent, about a third are owner occupiers and about a third are property investors. The table has been tilted by these extraordinary tax concessions that are paid out to property investors. The largest amount of those benefits accrue to those with the most wealth. Wealth inequality in this country is staggering, and it is growing, and this is one of the key levers. It has been deployed invisibly and subliminally. When we talk about winding it back, removing it or at least opening up a conversation about levelling the playing field, we are told, ‘No, let the market sort it out,’ when the market is subject to this gargantuan distortion.
A cabinet submission on negative gearing from the coalition in 1987 belied this complete untruth—this myth—that negative gearing keeps rents low. It has manifestly failed to keep rents low, and it has failed as a supply initiative. It has failed on the two criteria on which you would concessionally grant these massive expenditures to property investors. It has failed, and it is time that we dealt with it. ABC Fact Check, this April, comprehensively and quite forensically demolished the arguments that rents would be pushed up if negative gearing went. Successive reports by the Grattan Institute, by ACOSS and recently by the Australia Institute—as well as a MacroBusiness article yesterday—quite elegantly demolished this notion. Negative gearing does nothing to boost housing supply, because 95 per cent of it is going into existing established properties. It has failed as a supply initiative. If investors sold their properties in revolt, guess who they would be selling those properties to? Renters. That frees up one rental dwelling, and the net balance is zero. It will not have an impact on forcing rents up; if anything, it would be precisely the opposite.
The time period of 1985 to 1987 is wheeled out as, ‘The last time they tried to lift negative gearing, the earth almost spiralled into the sun’. The rental data and the facts from that period, 1985 to 1987, totally demolish that myth. Rents were going up in Sydney and Perth because rental vacancies were less than 1½ per cent. They stayed flat or declined in Canberra, Melbourne, Brisbane and Adelaide. The myth that negative gearing pushed rents up is a lie. All I ask senators in this debate—if you could maybe talk to your spokespeople about the talking point that they get across—is just not to put fabrications in there. At least can we have this debate on the merits? Abolishing negative gearing will not push rents up. It will level the playing field in favour of first home buyers and renters. Ultimately, that helps the people hardest hit by the housing affordability crisis in Australia, and that means homeless people…
Note the nice little reference to MB above, which has helped form Ludlam’s argument.
It’s great also to see The Greens – and someone as eloquent as Ludlam – take the leadership on housing affordability and applying some much needed heat to the major parties.
