Is there a more politically one-eyed newspaper in the country than The Australian?
Headlining the paper today is a one-eyed column by Sid Maher trying to attack shadow Treasurer, Chris Bowen, for proceeded with Labor’s negative gearing and capital gains tax policy supposedly against the advice of BIS Shrapnel modelling showing that it could lower house prices and push-up rents:
Labor proceeded with its controversial policy of limiting negative gearing to new homes despite opposition Treasury spokesman Chris Bowen being warned last July that such a move would push down house prices and hit economic growth.
The Australian has confirmed that accounting and financial advice firm Bongiorno & Partners last year commissioned BIS Shrapnel to conduct an analysis of the effect of limiting negative gearing to new houses and communicated key findings to Mr Bowen’s staff and then Labor financial services spokesman Bernie Ripoll.
BIS Shrapnel’s report — which found limiting negative gearing to new houses could lead to lower house prices, rent rises of up to 10 per cent, cost the budget more than it saved and cause unemployment to rise — sparked a political furore when it was publicly released last month.
The identity of the firm that commissioned the report was not released at the time, prompting Mr Bowen to claim it was by “an anonymous vested interest”.
In attacking the document, Labor did not reveal it had received the advice last year from Bongiorno & Partners while it was developing its negative gearing policy…
The BIS Shrapnel report predicted higher rents would push 70,000 households into “rental stress’’, where they are paying out more than 30 per cent of their incomes on housing costs…
The obvious question that arises out of this – but is not asked by Sid Maher – is why on earth would Labor heed the report’s advice?
BIS Shrapnel’s report is one of the worst pieces of analysis that I have ever read, chock full of erroneous assumptions and completely lacking in logic. It was debunked not just on this site, but also by a conga-line of respected economists. These include:
The BIS Shrapnel report (and a recent opinion piece by its author on these pages) asserts that rents will rise significantly and property values will fall if changes to negative gearing are made. There are serious issues with the logic of these assertions. They are internally inconsistent, fly in the face of evidence, and contradict basic economic principles…
The scare campaign against changes to negative gearing ignores key facts about the housing market, ignores the compelling available evidence, and is logically flawed.
The convoluted logic of the report, its manifestly ridiculous economic predictions and the fact that the consulting firm in question refuses to disclose who commissioned it were not enough to stop the report being the lead story of at least one national newspaper.
The report’s claims must not go unchallenged. But nor should the fact that a report that would flunk any first year economics course has been allowed a serious voice in the public debate…
But the real concern of this episode goes beyond the claims of this nonsense-on-stilts report. 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. The public, confused or frightened by the numbers, forms the view that policy change is simply too risky. That’s a pretty cheap way of buying policy outcomes, especially ones that help special interests but go against the long-term interests of the country.
The Australia Institute has called for a code of conduct for economic modelling in the wake of flawed and ridiculous BIS Shrapnel economic modelling of negative gearing…
A code would require key assumptions to be revealed, context and comparison to be provided, and the identification of who, if anyone, commissioned the work.
“Modelling results are being used to make important policy decisions that have the potential to effect all Australians,” Executive Director of The Australia Institute, Ben Oquist said.
“Today we’ve seen modelling driven into the centre of the tax reform debate by an unknown vested interest. While the startling allegations in the BIS Shrapnel report have been quickly torn apart by many economists, it has nonetheless misinformed and mongered fear among the public.
“We don’t know who this was produced for, but even more importantly, it’s not even clear how the key assumptions were selected.
“Everyone knows that when it comes to modelling; garbage in, garbage out.
Maher also conveniently fails to mention that BIS Shrapnel didn’t even model Labor’s policy, and that its chosen assumptions were different.
In mid-March, Media Watch ran a segment slamming the media’s treatment of the BIS Shrapnel modelling. But instead of letting the modelling die, as it should, Sid Maher has used it for what is clearly a partisan attack on Labor’s Chris Bowen.
Obviously The Australian has entered election mode.