Media Watch slams BIS Shrapnel negative gearing farce


By Leith van Onselen

Media Watch has ripped apart the media’s reaction to BIS Shrapnel’s dodgy economic modelling of negative gearing in a segment aired last night (video above).

The key extract from the transcript is below:

So … Who had commissioned this prophesy of doom? And why had BIS Shrapnel handed out copies to the Canberra press gallery to ensure it made news?

Treasurer Morrison couldn’t help:

SCOTT MORRISON: I don’t know. I mean, you’d have to ask BIS Shrapnel.

— ABC, AM, 3 March, 2016

But Dr Kim Hawtrey of BIS Shrapnel, who’d written the report, was not prepared to tell:

KIM HAWTREY: I’m not at liberty to say that.

— ABC, News Radio, 3 March, 2016

So why did it matter?

Well, for starters, if it was modelling Labor policy as the media suggested one of the report’s key assumptions was wrong.

This was that property would become a much less attractive investment, because Labor would retain negative gearing on everything else.

But other experts were also soon ripping into it:

Grattan Institute chief executive John Daley said the report and its underlying assumptions “did not pass the giggle test” and were “manifestly ridiculous”.

— Australian Financial Review, 3 March, 2016

And the Grattan Institute was soon joined by others:

Consulting economist Saul Eslake, a former chief economist for ANZ Bank and Merrill Lynch, told The New Daily that Labor’s policy on negative gearing was unlikely to result in a fall in house prices.

— The New Daily, 4 March, 2016>

Other economists predicted Labor’s policy would in fact increase the supply of housing.

An embarrassed BIS Shrapnel tried to defend itself by insisting no political motive was involved:

The name of the client that commissioned this report remains confidential: we can however confirm it was not a political party, or lobby group, or industry group.

— BIS Shrapnel, 3 March, 2016

But ask yourself this. If you had no vested interest in negative gearing.

Why would you commission such a report?

Why would then you be so keen to have its findings made public?

And why would you not own up to who you are?

BIS Shrapnel has now admitted to Media Watch that the negative gearing report was actually produced last July.

And that:

The client then elected to have the report made available to the media on March 2 …

— Kim Hawtrey, Associate Director, BIS Shrapnel, Response to Media Watch Questions, 11 March, 2016

The unnamed client, that is.

So, did BIS Shrapnel tell the media straight up that the report was not modelling Labor’s policy, and that its assumptions were different, and that it was produced last year?

No, no and no. Although they assured us that those facts were made clear to journalists:

… if they asked …

— Kim Hawtrey, Associate Director, BIS Shrapnel, Response to Media Watch Questions, 11 March, 2016

One can only assume that they did not … to judge by all those headlines about Labor’s policy.

So what are the lessons?

Well, BIS Shrapnel tells Media Watch it won’t be making this mistake again.

But journalists also need to beware.

Because ‘economic modelling’ often involves someone pushing a barrow.

And the media need to ask who it is … and tell the public … or chuck the story in the bin, where this one should have gone.

The Australia Institute is right to call for a code of conduct for economic consultants. Firms like BIS Shrapnel should not be allowed to produce such dodgy politically motivated reports under a shroud of secrecy for the client paying for the report.


And the mainstream media should do its bloody job and not merely report modelling results as if they were fact.

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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.