Fairfax’s Peter Martin has done a good job today describing how the Howard Government’s short-sighted decision to halve the rate of capital gains tax (CGT) in 1999 ignited the investor orgy that is now helping to price young Australians out of home ownership:
Tax is an awfully big part of it. When the Howard government halved the headline rate of capital gains tax at the end of the 1990s the price of a typical house jumped from two to three times household disposable income to four times disposable income. At no other time in Australian history have prices jumped so far so quickly. Negative gearing (making losses on rent to offset against other income in order to enjoy a barely-taxed capital gain) became mainstream.
