51 economists slam Turnbull’s negative gearing lies

From the Labor-aligned McKell Institute 50 economists trash Turnbott’s negative gearing lies:

Between 29 February and 2 March 2016, The McKell Institute surveyed 51 of Australia’s leading and most respected economists to gauge their opinions on negative gearing policy.

Respondents were asked to nominate whether they strongly agreed, agreed, were uncertain, disagreed, strongly disagreed, or had no opinion about six statements presented in the survey.

Economists surveyed were from a range of leading Australian universities and financial institutions. The statements presented to economists surveyed reflected current debates regarding proposed negative gearing reforms.

Bernie Fraser, former Governor of the Reserve Bank of Australia, was one economist surveyed, and provided additional commentary regarding the subject matter of the survey: ” From a national interest – rather than political interest – perspective, tax measures (and policy measures generally) should be assessed in terms of their contributions to four goals, namely resource allocation, economic growth, price stability, and what is too often forgotten these days: fairness.

The current negative gearing (and related capital gains) tax arrangements score poorly on all four tests – they divert savings and resources away from potentially more productive investments into (sometimes speculative) property investments to take advantage of the tax concessions ; this does nothing to improve economic growth (or the budget bottom line ) ; they can accentuate short term fluctuations in house prices and sustain long term increases in house prices which far outstrip increases in the earnings of most Australians ; this lastmentioned consequence , plus the fact that the benefits of the concessions flow disproportionately to people on higher incomes, make the current measures manifestly unfair” –

Bernie Fraser, former Governor of The Reserve Bank of Australia. The comments of Mr. Fraser broadly reflect the sentiments of the majority of leading Australian economists surveyed.

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I’ll see your BIS Crapnel poop and raise you 50 economists…

David Llewellyn-Smith

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.

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Comments

  1. Nah all lies, what would economists know. I trust MT he’s a good looking bloke and a true innovator.

    • Its a good point Gavin, Turnbott has mentioned ‘agility, innovation, creativity, nimbleness, entrepreneurship, etc’ quite a lot; we should certainly support him.

      Wow…. Isn’t the emperor’s new coat beautiful….

    • sydboy007MEMBER

      Good looking. With add many IPs that he has he’s far beyond the tasks of mere mortal good looks. On the specufestor scale he’s nearly beatified in the church of negative gearing.

    • How has French revolution affected world economic growth? Too early to say.

      Did you hear of the economist who dove into his swimming pool and broke his neck? He forgot to seasonally adjust.

      How many economists does it take to change a light bulb? Seven, plus/minus ten.

      World leaders Bill and Boris are taking a break from a long summit, Boris says to Bill, “Bill, you know, I have a big problem I don’t know what to do about. I have a hundred bodyguards and one of them is a traitor. I don’t know which one.” “Not a big deal Boris,” Bill responds. “I’m stuck with a hundred economists I have to listen to all the time before any policy decision and only one tells the truth.” “That sounds like the same situation,” Boris says. “Yes,” replies Bill. “But in my case it’s never the same one!”

      President Truman once said he wants an economic adviser who is one handed. Why? Because normally the economists giving him economic advice state “On one hand and on the other…”

      Ronald Reagan used to say that if trivial pursuit were designed by economists, it would have 100 questions and 3,000 answers.

    • Quite right Gavin. The mainstream are all over the place on taxation “reform” and unfortunately they have a healthy following compromised of simple minded folk who blindly accept the maxims of economists long dead and buried. A prime example is the call for stamp duty to be abolished in favour of land taxes because some economist in the past wet his pants over the “inefficiency” of taxes on transactions. These supporters should realise that shifting one off taxes to easily manipulated ongoing taxes are in fact a drag on real economic activity. Just look at the GST by way of example, which is really a transaction tax in disguise. It’s amazing that the proponents of zapping negative gearing quickly shift camps when moving to a debate on land tax. They haven’t really grasped they are by way of application the same beast.
      The real solution is simple. If the capital gain discount were removed, a key purpose of negative gearing would disappear overnight without any action on limiting or abolishing negative gearing. Simple minds can’t see the solutions while the debate is tied up in fairness and equity … cough! Sadly some of those people are in these blogs ……… present company excepted.

  2. Original John

    First time ever in history that a group of economists over 25 in number ever agreed on something. Perhaps this should be entered into the Guinness World records.

  3. The McKell Institute. Self-eliminating in terms of enlightening the debate 😉

    That said, many of those points are not under debate. What is has not been modelled, bounded by the ‘no trend change’ caveat and simply opinion – on that basis as valid as any other, including opinion from the PM!

    • “The McKell Institute. Self-eliminating in terms of enlightening the debate”

      What do we call your ‘enlightening’ of the debate?

      You’ve been on pretty much every single NG article for the past week. It’s as if you need everyone to know you have a view on possible reform or something…

      • What do we call your ‘enlightening’ of the debate?

        I thought the consensus term here was astroturfing? But I actually like reading 3D’s comments, always good to see the opinion of the devil’s advocate after all.

      • If I’m ever unsure of what to think about an issue, I just read what 3d thinks and then go with the opposite. It’s a safe bet.

    • 3D ick! It sure is icky. And just as it was wrong on the $120 per tonne iron ore floor, and wrong on ‘Australia needs Tony’, it’s wrong on this as well. It’s wrong about everything! Ha ha ha ha ha!

    • There were two economists who were shipwrecked on a desert island. They had no money but over the next three years they made millions of dollars selling their hats to each other.

      Two economists were sitting at a nudist colony. The one said, “Have you read Marx?” The other says, “It’s these wicker chairs.”

      Economic forecasters assume everything, except responsibility.

      Economists are people who are too smart for their own good and not smart enough for anyone else’s.

      Three econometricians went out hunting and came across a large deer. The first econometrician fired but missed by a meter to the left. The second econometrician fired but missed by a meter to the right. The third econometrician didn’t fire but shouted in triumph, “We got it! We got it!”

      What’s the difference between an economist and a confused old man with Alzeheimer’s? The economist is the one with a calculator.

      Why was astrology invented? So economics would seem like an accurate science.

      On the first day, God created the sun. In response, the Devil created sunburn. On the second day, God created sex. In response, the Devil created marriage. On the third day God created an economist. This was a tough one for the Devil, but, in the end and after a lot of thought, he created a second economist.

  4. Heh. Not sure you’re going to win with raising 51 economists.

    If you asked 51 economists to change a light globe, 40 of them would reply that they expect conditions to improve over the coming months, 7 would say that there’s no point changing the globe because it’s clearly a declining market, 1 would say that the globe can be improved if the government is willing to apply more electricity to it, 1 would declare another room to be a brighter proposition, 1 would suggest to buy gold, and the last one would bundle the idea of the globe in a collateralised globe obligation and say that on average, the room will be lit for years.

    • Another would claim a shortage of light bulbs driven by Chinese demand means replacing the existing bulbs would be far too expensive and the government should focus on more efficient forms of light.

    • A central banker walks into a pizzeria to order a pizza. When the pizza is done, he goes up to the counter get it. There a clerk asks him: “Should I cut it into six pieces or eight pieces?” The central banker replies: “I’m feeling rather hungry right now. You’d better cut it into eight pieces.”

      The First Law of Economists: For every economist, there exists an equal and opposite economist. The Second Law of Economists: They’re both wrong.

      An economist, a philosopher, a biologist, and an architect were were arguing about what was God’s real profession. The philosopher said, “Well, first and foremost, God is a philosopher because he created the principles by which man is to live.” “Ridiculous!” said the biologist “Before that, God created man and woman and all living things so clearly he was a biologist.” “Wrong,” said the architect. “Before that, he created the heavens and the earth. Before the earth, there was only complete confusion and chaos!” “Well,” said the economist, “where do you think the chaos came from?”

      “You know it’s said that an economist is a man who, when he finds something works in practice, wonders if it works in theory.” – Walter Heller

      “We have 2 classes of forecasters: Those who don’t know . . . and those who don’t know they don’t know. “ – John Kenneth Galbraith

      They say that Christopher Columbus was the first economist. When he left to discover America, he didn’t know where he was going; when he got there he didn’t know where he was; and it was all done on a government grant.

      • Ahahahaha, this is so funny, made my day.

        Be careful though, I think one of HnH and LVO is an economist — you may get banned! 🙂

  5. Nah, what do these economists know? If they were any good, they’d be making a motza like us, them losers! We only trust Dr. Comical Andy, after all they say he is a doctor of property or something.

  6. Reckon MSM will pick this up?
    30 report maybe but l can’t see Trumbull turning up.

    • Timing is improving. Media is starting to understand that Labor’s only policy may not be as good as they first assumed. It has just been referred to as ‘messy’ needing ‘many questions answered’ and there is growing realisation that what makes a property more affordable for one, loses money for another.

      Malcolm’s message is getting through.

      • sydboy007MEMBER

        He’s messsaging very clearly that he has no policies. Just leading a divided government that’s more worried about keeping its bums on the treasury benches than actually doing anything of benefit for the country.

      • More meaningless obfuscatory drivel from 3D ick. 3D, give it up. We know you attend all the WA Liberal Party fundraisers, but no one really cares.

      • The issue and problem of affordability and NG is that it is ingrained in the Australian psyche. The ALP will lose the election because of this issue. I know union tradies that negatively gear and don’t want change and I know quite a few middle class person’s who get their large annual tax return. I agree that RE prices need to fall to realistic inflation levels, but the swinging Australian voter will not want their NG touched.

      • 2d,

        Did you get pissed over a long lunch? As the days rolls on it’s MT’s view that is being diminished, not Labor’s. The only support Turnball is getting is from rent seekers (your paymasters).

      • The boomers will leave the wealth to the kids – my tip, the Sydney/Melbourne markets to fall 30% to 40% by 2018 and outer markets like Adelaide & Hobart fall only 5%. It will balance itself, it has too.

      • “Sydney/Melbourne markets to fall 30% to 40% by 2018 and outer markets like Adelaide & Hobart fall only 5%”

        If the two biggest cities fall by that much then credit will tighten so much that there’s no way the smaller capitals will escape that easily.

  7. It will be interesting with the Liberals if they continue in their aparent desperation to keep defending NG to the bitter end. I just hope the general public takes notice and doesnt get too distracted by the Kardashians or similar shit …

  8. Can someone confirm that negative gearing on property can reduce your personal taxable income while NG on other assets, like shares, can only reduce the income stream from that asset and cannot be applied to your personal income?

      • I mean, as an example, if you use a margin loan to buy shares. Your interest on the loan is $10k and dividend income is $5k. So you show $0 taxable income from you shares. Can you then use that residual $5k interest expense to reduce your personal taxable income? Because you can do that with property I think.

    • drsmithyMEMBER

      Yes it also applies to shares.

      Labor’s policy eliminates this as well, as I understand it.

      • Unfortunately, it seems that you’re right. This is where they havent thought enough about unintended consequences.
        Start-ups and small business often run at losses during their early phases. Negative gearing allows legitimate expenses, like interest costs, to be offset by future gains (quarantined, unlike it is in housing). If you eliminate this, it will have a significant impact on the cash flows of small business.

        But hey, both Labor and the Coalition are anti-small business and anti-startup (staunchly pro-monopolist though), should we expect anything different from either of them.

      • drsmithyMEMBER

        How did we get from margin loans to buy shares to starting a business ?

        Claiming business startup costs against salary are treated differently and there are conditions that need to be met for it to happen. My understand is that this is not changing.

      • Come on UE. Fair crack. You are better than that. Read what you linked in. The profit test is only one of the non commercial loss test so technically business’s DON”T need to show a profit. I have clients who never show profits in their business’s, and can claim the loss against other income, as they meet at least one of the other tests. No wonder the debates go off track when guys like yourself struggle with how tax law is implemented.
        I have a son studying Economics and I am starting to think the sooner I get him back to tax the better if what gets sprouted on here is anything like they teach him at Uni. Read the legislation properly and examine some case law before jumping on stuff like you have.

      • Therein lies the anomaly. The D8 on the personal return is different to the eqivalent on the business return – unless you’re a sole trader. What a great system!

  9. I’ll bet anyone $50 that the ‘Disagree’ in statements 1-3 and 6 was Judith Sloan.

    • Ha, probably! I’d like to know who were the nuffs in the minority. Maybe just lying bankers protecting bonuses.

  10. Um, am I missing something? Statement 2: house prices will continue to rise under Labor’s proposal – 74% either strongly agree or agree.

    How will housing become more affordable if house prices continue to rise? Especially in the current climate of wage stagnation?

    • Read the language carefully. It’s over the long-term. Nothing too much controversy there. Over the long term, nominal prices increase due to population growth / inflation / productivity etc. All that question states is that prices will increase over the long term, but by less than otherwise would be if NG were to remain.

  11. Why is no-one saying it like it is?
    Are all these mortgage holders of NG properties personally ‘afraid’ of the banks or something?
    The banks somehow manage to stay well back and out of the spotlight in media discussions-even on here in MB. Why is that?
    Most discussions point the finger at political personalities-is this a diversionary tactic?

    ….all it would take to lower housing prices (forget the politicians, the real estate agencies and associates….) is for the banks to refuse to lend on present formulas used to ascertain property values. Many ways (has been done before) this can be adopted. All sorted in a short space of time imo.

    • Beat me to it. Meh. More Daley apologia. Funny really, as Daley forecasts house price falls of 1-2%, BIS 2-3%. Both horribly sanguine I’m afraid.

      • The Patrician

        Hey 3d,
        Can you link to the evidence that proves Labor’s policy will cause a housing crash?

    • All of the current debate is preamble.
      Wait and see what spirited discussions both have in the harsh light of an election campaign. Labor doesn’t really appear to have fired a shot in public anger yet. By the time they get stuck in the Coalition will have exhausted most counterarguments, and will be the sitting duck that is being deliberately kept on the pond, for later…..

    • reply to AB ref. Here’s some more on the BIS report. It’s worse than anyone thought.

      http://insidestory.org.au/a-low-cost-way-to-derail-the-housing-debate

      Yes. I particularly see this …”The rise of consultancies churning out “independent” reports to advance the causes of vested interests has been well documented. What is alarming is the prominence these reports receive in public debate. No matter how outlandish their claims or how obscure their provenance, the media report them and politicians quote them.”…….

  12. Cynical view may be the best option here.
    When MTurnbull-shit did coup d’etat, in my cynical view I said to wait and see. And we saw.

    This could very well be a bait to lure brainShorten into an election to handover the power in the wake of inevitable earthquake (which MT saw) and NLP does not want to be the .gov when that occurs only to provoke next election with “we told you so” after the economy crashes. Labour breaks up at worst or are perpetuum opositium at best.

    Sound far fetched!?