ABC Fact Check destroys Turnbull’s negative gearing lies again

Yet again, ABC Fact Check has caught the Coalition lying about negative gearing pushing-up rents in the 1980s:

At the first leaders debate on May 16, Prime Minister Malcolm Turnbull told an audience of 100 undecided voters that Labor’s policy would push up rents.

Asked by moderator David Speers how the Prime Minister knew this would happen, he responded:

“If you pull up to a third of the buyers out of the market, the value of property will come down and, if you say to… if you make it harder for investors to buy properties – which, of course, they buy to rent – then there’ll be fewer properties to rent, the investors that are left will have to seek a higher return and this is exactly what happened, in the ’80s, when Paul Keating banned negative gearing, for a period…”

The claim that rents increased when negative gearing was briefly abolished in the 1980s is one that has been often repeated by those who seek to maintain the status quo.

It’s similar to a claim made by Joe Hockey in 2015, when he was treasurer, which Fact Check found didn’t stack up.

It was also repeated by Property Council of Australia CEO Ken Morrison, in another zombie earlier this year

So, in spite of this undead talking point’s refusal to die, it didn’t stack up when Mr Hockey made the claim, and it still doesn’t today.

You can read the full Fact Check report here, which comprehensively debunks Turnbull’s lie.

Or you can simply look at the charts on real (inflation-adjusted) rents, with the period where negative gearing was “abolished” shown in red.

Rental growth remained either flat or fell nationally:

ScreenHunter_3791 Aug. 15 11.02

In Melbourne:

ScreenHunter_3799 Aug. 15 11.12

In Brisbane:

ScreenHunter_3800 Aug. 15 11.12

In Adelaide:

ScreenHunter_3801 Aug. 15 11.12

In Hobart:

ScreenHunter_3803 Aug. 15 11.15

In Canberra:

ScreenHunter_3804 Aug. 15 11.15

And in Darwin:

ScreenHunter_3805 Aug. 15 11.16

With only Sydney and Perth registering increases, due to very low vacancy rates at the time:

ScreenHunter_3798 Aug. 15 11.12
ScreenHunter_3802 Aug. 15 11.14

Surely, if negative gearing had any impact on the cost of renting, its abolition in 1985 would have caused rents nationally to explode? Yet, the evidence shows absolutely no impact.

Malcolm Turnbull clearly favours lying over evidenced-based policy debate.

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Comments

  1. reusachtigeMEMBER

    ABC Fact Check is a communist propaganda machine that is against free business!

  2. Interesting how the change is supposed to raise rents and this is unanimously a bad thing.

    If rents did rise then surely many people would be happy with this situation. I would expect many greedy innovative people to support any policy that raised rents.

    Where are the supporters of raising rents?
    Where is the analysis of who will gain by raising rents? How many negatively geared properties will become positively geared by the raised rents?

    Will a higher percentage of teachers and nurses collect higher rents than tax accountants and dentists?. Will bad guys and leaners like that Q&A upstart be the ones paying more? Surely these questions must be answered before deciding if higher rents are an economic bad or an economic good.

    • Bes response so far, all investors can EARN ACTUAL POSITIVE RETURNS no NEED for NG.

      A true win win !

  3. The Patrician

    Fact check this
    Malcolm says
    1. Labor NG changes will crash house prices
    Did this happen in 1985?
    2. Labor NG changes remove all investors from the market
    Did this happen in1985?

  4. Daylight RobberyMEMBER

    “Surely, if negative gearing had any impact on the cost of renting, its abolition in 1985 would have caused rents nationally to explode?”

    Wouldn’t that depend on other fundamental forces at work in each city? A city with a shortage of rentals at the time would probably experience a different outcome to another city with an oversupply? There may also be differences in the proportion of negatively geared homes from one city to the next. I’d expect bubble-central Sydney to have a lot more negatively geared speculators, as a percentage of the overall population, than somewhere like Hobart where prices are cheaper.

    • @ Daylight Robbery“Wouldn’t that depend on other fundamental forces at work in each city? A city with a shortage of rentals at the time would probably experience a different outcome to another city with an oversupply?

      No, no, no!

      The house does not disappear when the investor sells. When an investor sells a current renter will buy it. So 1 less house for rent, but also 1 less renter. The net outcome on rental market is zero – no matter what the current state of the market is.

      • Daylight RobberyMEMBER

        Not sure about that. How many renters suddenly discover the money to buy a house, just like that, just because an investor is selling one? More likely if an investor sells, the house will be bought by an upgrader, or by another investor.

        But what if investors don’t even sell? What if they hold on (because the changes are grandfathered) but new investors just stop entering the market and stop building new dwellings. Then as the population grows, the supply of rentals doesn’t.

        I don’t buy the idea that renters are all sitting on a huge pile of cash just waiting to snap up any homes that investors decide to sell. Most renters will still need to rent.

        Australia has always had about 30% renters, even before the bubble when house prices were cheap in the early 90s. Cheaper prices didn’t enable all the renters to snap up the homes back then.

      • drsmithyMEMBER

        If it’s bought by an “upgrader” then they leave another empty residence behind.

        If it’s bought by another investor, then it’s (almost certainly) still available to rent.

        Net position: no change.

        But what if investors don’t even sell? What if they hold on (because the changes are grandfathered) but new investors just stop entering the market and stop building new dwellings. Then as the population grows, the supply of rentals doesn’t.

        Well, that’s the logic behind Labor leaving in place negative gearing for new builds.

  5. That’s simply ridiculous. “Mum & dad” “investors” must be the ones standing fiercly against Negative Gearing as it stops rents and therefore their yields from rising. Yet they are so generous and aware of their social mission that they continue to provide affordable accommodation to lazy folks spending their savings on coffee to everyone’s satisfaction. Dear mums and dads! Please stop suffering: vote for abolition of NG and start making some money from these lazy wasterful tenants.

  6. This has been a Ponzi scheme from the beginning. Rents can only go up to a certain limit, as it gets cheaper for tenants buy their own property. The main problem I can see is demand for property will subside resulting fall in property prices, something entire country is standing upon. This is a bubble economy.
    Labor is supporting –ve gearing to get votes, but I am sure if they are in power they will be forced to backtrack from out lash.

  7. Surely, if negative gearing had any impact on the cost of renting, its abolition in 1985 would have caused rents nationally to explode? Yet, the evidence shows absolutely no impact.

    Similarly, if negative gearing had any impact on house prices, it’s existence would have cause house prices nationally to explode. Yet, the evidence shows absolutely no impact.

    • Yes – until the fissile material is mixed in the beaker there is no reaction.

      Negative Gearing (eye of newt) +
      High leverage (wing of bat) +
      CGT discount (hair of dog) +
      RBA ‘bait rates’ (cicada claw) +
      APRA mortgage credit facilitation (cane toad sweat) +
      population ponzi (shrunken head dandruff)
      + supply shortage (toe nail clippings)

      = bubble, bubble, boil and trouble

    • Mining BoganMEMBER

      Q&A, Media Watch, Four Corners. St Mal has a commune full of ABC types to get rid of. No wonder his election campaign is a shambles. Who’s got the time?

    • moderate mouse

      Unbelievable! Eat your heart out North Korea!! Soon they’ll be locking up ‘rogue’ journalists….watch out MB!! (Might have to change the headline for this article to ‘Turnbull destroys ABC Fact Check’)

  8. LNP policy is on the ropes. They need to change the narrative before it continues to slip away from them and the party implodes. The opposition just needs to hold the line while the Government message falls into the gaping holes. It’s still going to be decided in NSW and QLD imo.

  9. SupernovaMEMBER

    God I hate the unbias-BIAS of the ABC. Fact check (1) Is the Australian and Global economic climate of 1985 identical to 2016? Derrrrrrrrrrrrrrrrrr….

    • You have eloquently explained why the differing economic climates will lead to different outcomes this time.

  10. MediocritasMEMBER

    I would really love for the Libs to explain what’s so bad about low house prices beyond: “I’d lose money on my specufesting”

    What are all these specufestors complaining about anyway? Don’t they know how to trade short?