Yanis Varoufakis: Australia’s negative gearing “scandalous”

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By Leith van Onselen

Former Greek Finance Minister, Yanis Varoufakis, has given an interview to The Guardian, whereby he has labelled Australia’s negative gearing a “scandalous” subsidy for the rich:

“In Australia we have a scandalous system called negative gearing, the purpose of which is to subsidise the rich”…

“There’s nothing wrong with investing in building new houses,” he says, “but there’s something profoundly wrong with being subsidised by the taxpayer in order to bid prices up for existing housing stock.

“That is inane and that has to end. It shifts money and savings away from productive investments to fixed assets.”

While it is tempting to dismiss Varoufakis’ claims as whining from somebody with a leftist agenda, his claim that Australia taxpayers are subsidising those “in order to bid prices up for existing housing stock” is grounded in fact, with Australia’s housng finance data showing that well over 90% of investors purchase existing housing rather than new construction:

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Let’s also not forget that Malcolm Turnbull once agreed with Varoufakis’ view that negative gearing “shifts money and savings away from productive investments to fixed assets”. In his 2005 tax policy paper, Turnbull claimed negative gearing was 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”.

What made Turnbull change his stance on negative gearing? Answer: he sold-out to the property lobby.

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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.