Bowen economic manager vs Morrison bubble manager

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By Leith van Onselen

If you want a prime example of how the two major parties differ on the economy, look no further than the below exchange between Liberal Treasurer Scott Morrison and Labor Shadow Treasurer Chris Bowen:

“If Labor were elected and introduced negative gearing changes that would obviously have an impact on the value of homes and therefore confidence and consumption,” he said.

“Whilst there are plenty of reasons that’s a daft idea, the key economic impact on consumer confidence alone should be good enough reason not to go down this path.”

Mr Bowen said the lack of non-mining investment should make reducing major tax distortions, such as negative gearing a primary objective.

Citing the Murray Financial System Inquiry recommendation that reducing gearing would lead to a better allocation of funding across the economy, Mr Bowen said Labor would ensure tax concessions led to more housing supply and construction jobs.

As shown above, Treasurer Morrison wants desperately to maintain Australia’s over-investment in non-productive (existing) housing, build-up of private debt, and ever-rising home values, which he sees as the key foundation of confidence, spending and the economy. In other words, he is managing a giant property bubble, not an economy, and wants to continue to kick the can down the road.

Shadow Treasurer Chris Bowen, on the other hand, wants to remove the property tax distortions so that investment flows into productive purposes, like genuine business investment, in order to engineer sustainable growth and jobs. In other words, he wants to deflate the property price bubble and manage a real economy.

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In short, a vote for the Coalition is a vote for maintaining the grotesque housing bubble and build-up of private debt that has badly distorted resource allocation and the economy, gutting trade exposed industries, and enriching the older generation over the young. Whereas a vote for Labor is to begin to unwind these imbalances, restoring the economy’s competitiveness, and creating greater equity between the generations.

As I keep noting, before he sold-out to the property lobby, Prime Minister Malcolm Turnbull once subscribed to Labor’s view, arguing in his 2005 tax policy paper that negative gearing and the capital gains tax discount were a “sheltering tax haven” that had contributed to Australian housing being a “bubble”, and is “skewing national investment away from wealth-creating pursuits, towards housing”.

The choice is yours on Saturday 2 July 2016.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.