It’s Groundhog Day once more with the Treasurer for the Property Council of Australia, Scott Morrison, making misleading claims that Labor’s plan to unwind negative gearing would force-up rents. From The AFR:
Treasurer Scott Morrison said cutting negative gearing tax breaks was a “reckless” policy that would hurt the 30 per cent of people who rent.
He was responding to pressure from state Liberal colleagues in NSW, who have heaped pressure on Canberra to reassess housing tax breaks…
Mr Morrison said the last time negative gearing was changed, rents skyrocketed.
“It is not just about whether people who are saving up to buy a home in Sydney and Melbourne,” the Treasurer told reporters on Wednesday.
“Thirty per cent of people in this country live in homes that are rented.
“I am not about to do something that will jack up their rents which was the result of negative gearing changes last time.”
Seriously, that Scott Morrison can continue to run the lie that Labor’s temporary abolition of negative gearing between 1985 and 1987 triggered soaring rents beggars belief.
In case you have been living under a rock, here are the charts showing the impact on real (inflation-adjusted) rents at that time (shown in red).
Rental growth remained either flat or fell nationally:
In Melbourne:
In Brisbane:
In Adelaide:
In Hobart:
In Canberra:
And in Darwin:
With only Sydney and Perth registering increases in rental growth, due to very low vacancy rates at the time:
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.
And why would it when 9 out of ten investors purchase established dwellings:
Hence, the overwhelming majority of investors are not creating new housing stock, but merely substituting homes for sale into homes for rent.
Besides, Morrison’s comparison of Labor’s policy with the 1980s experience is misleading given Labor’s plan would redirect investors towards newly constructed dwellings, thereby adding to supply and lowering rents (other things equal).
In fact, Labor’s negative gearing plan is exactly the same approach as the Coalition’s policy on foreign investment, which aims to boost dwelling supply and lower rents. Here’s the chair of the foreign investment inquiry, Liberal MP Kelly O’Dwyer, explaining the benefits of this ‘new homes only’ policy:
“Currently the framework seeks to channel foreign investment in residential real estate into new dwellings in order to increase the housing stock for Australians to build, buy or rent. Foreign investment is encouraged in new dwellings whether they be apartments, units or homes because in addition to creating more supply, it also creates more jobs for the building and construction sector – all of which helps to grow our economy”.
Swap the words “foreign investment” for “negative gearing” and the arguments are identical.
In other words, stop lying Scott.
