The Mad King at work:
Malcolm Turnbull has brushed off a note from the Reserve Bank of Australia suggesting that changes to negative gearing could benefit the economy.
The Prime Minister said the two-year-old note was directed at a “different issue”, which was the amount banks were lending to investors. “That issue has been addressed by the financial regulators who, as you will recall, last year dialled back the risk weighting so that the amount of money you can borrow to buy an investment property is less,” he said.
This had resulted in house prices across Australia moderating, Mr Turnbull said.
Attacking Labor’s negative gearing policy, which will end new tax concessions on existing dwellings from mid-2017, Malcolm Turnbull said the plan was nothing more than a “tax grab”. Picture: AAP“It is purely and simply a tax grab, another Labor tax grab, and they’re now saying it is not going to cause housing prices to come down, which of course it will.”
He also cited claims from chief executive of residential property group Stockland, Mark Steinert, who has said Labor’s policy “could trigger a recession”.
“He runs one of the largest property developers in Australia so he understand the economics of the market,” Mr Turnbull said.
“What Labor is proposing is a massive experiment, a huge experiment with the largest asset class in Australia right at this time of transition.”
Actually it is proposing structural reform and we know exactly what it will achieve. This is not mad science it’s basic macro. House prices will fall versus baseline (possibly outright as well depending upon conditions at the time), rents will fall too as construction rises, interest rates and the dollar will fall triggering a tradables recovery. It’s not a disaster, it’s a shift to different, more sustainable and more meritocratic growth drivers that are not debt driven.
Of course it is an inconvenience if your governing for Wentworth, which has the highest rate of negative gearing per resident in the country, instead of for Australia.
