Scott Morrison builds new negative gearing strawman

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By Leith van Onselen

Australia’s real estate treasurer, Scott Morrison, has used his taxpayer junket to London to build a massive strawman against Labor’s sensible policy to reform negative gearing. From The AFR:

“In the absence of negative gearing here in the UK, guess what? They have the same housing affordability problem in London we have in Sydney.

“So [for Labor] to say [housing affordability problems are] the product of negative gearing is absurd when you have a non-negative gearing market here in London and a negatively geared market in Sydney facing the same issues – that’s why the feedback I’ve had is that this is an issue that is fundamentally about supply”…

“The No.1 issue here, like in Australia, is a fundamental one of supply,” he added.

So if housing affordability is just as bad in the UK, Scott, then why have you wasted tens-of-thousands of taxpayer dollars to get tips on housing affordability from failed English policy makers?

Why didn’t you instead seek solutions from policy makers in markets where housing has remained affordable in spite of rapid population growth, such as Houston or Dallas? Answer: because you were never interested in solutions, were you Scott? Rather, you were merely seeking a new angle to defend your negative gearing lies.

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Your argument around negative gearing is also a classic strawman. Nobody ever said that these tax distortions were the only forces at work in house prices, nor is there any evidence that they are not adversely impacting affordability.

To the contrary, the housing finance data clearly shows a strong negative correlation between the share of mortgages going to investors and first home buyers (FHBs), suggesting FHBs are being crowded-out:

ScreenHunter_17146 Jan. 30 08.08
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Ultimately, there are a whole bunch of factors that influence Australian house prices. These include such things as:

  • Immigration levels;
  • Tax policies (e.g. negative gearing and the CGT discount);
  • Demand from foreign investors;
  • Interest rate settings;
  • Land-use and planning policies;
  • Rental security and tenure; and
  • Infrastructure investment.

While Labor’s policies around negative gearing and the CGT discount are certainly no panacea, they represent a material improvement over the status quo and the Turnbull Government’s ‘deny and lie’ approach.

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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.