Garnaut calls for MP, negative gearing reform

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From Professor Ross Garnaut over the weekend:

“We needed a lower real exchange rate 18 months ago,” Professor Garnaut said.

“There may be excessive price inflation in housing, and if that is the case it is very important that we deal with that problem with specific measures rather than running our whole monetary policy to suit the housing sector.”

Professor Garnaut said problems in Australia’s overheated housing market could be fixed by removing the “privileged position” of housing for capital adequacy purposes.

“It is ludicrous to be worried about lending risks in the housing sector on the one hand while at the same time requiring banks to put more capital aside when they are lending to BHP,” he said.

“And there are several reasons to do something about negative gearing. There are budget reasons, and reasons to do with keeping within reach the old Australian dream of widespread home ownership.

RBA, Government meet no-brainer: someone needs to give us either or both of negative gearing reform or macroprudential policy.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.