To date, senator Nick Xenophon to date Xenophon has vigorously defended the housing bubble by:
- opposing Labor’s negative gearing policy;
- supporting rampant population growth; and
- supporting super reforms to boost property demand.
We also know that Xenophon is conflicted by his own significant property holdings.
Today, Xenophon has thrown more sand in the gears by cautioning against reforms to the capital gains tax (CGT) discount because it might hurt the house prices of markets outside of Sydney and Melbourne. From The AFR:
“I would look at it very carefully. I would take a cautious approach because it depends how you do it,” he said.
“Unless they’re done in a carefully considered holistic way, looking at the overall economy, looking at the overall housing market, it could cause some shocks to the marketplace,” he told The Australian Financial Review.“Any pulling back of CGT needs to be done in a very incremental way and in a very targeted way”…
“It’s a tale of two cities and the rest of the country almost, in the sense that you’ve got an overheated housing market in Sydney and Melbourne but our policy levers seem to be based on just an overall approach. I think that’s the sort of thing you need to look at,” he said.
Geez Nick. Part of the reason why housing has been so much stronger in Sydney and Melbourne is because these are the markets most over-run by investors:
By value, more than half of all mortgages issued in NSW (excluding refinancings) are going to investors, whereas just under half are going to investors in VIC. The other states don’t even come close.
Therefore, any unwinding in the CGT discount would logically be expected to impact Sydney and Melbourne the most, which is exactly what you want.
There are also the positive Budget implications from CGT reform that you need to consider. The Parliamentary Budget Office estimated that cutting the CGT discount to 40% would provide a four-year Budget saving of $2.3 billion, whereas cutting the discount to 25% would save $5.7 billion over four years, and removing it altogether would save the Budget $10 billion. These are crucial Budget savings in a time of deepening deficits.
Let’s also not forget the veritable conga line of ‘experts’ that have previously agreed that the CGT discount is a problem and should be unwound, including:
- the RBA;
- the Murray Financial System Inquiry;
- Audit Commission chair Tony Shepherd;
- the Australian Treasury;
- Deloitte;
- the Grattan Institute;
- Saul Eslake; and
- Shane Oliver.
Are you seriously going to stand in the way of sensible reform, Nick, because of some phantom worry over taking some heat out of Australia’s various over-priced housing markets?
The fact is, CGT should never have been touched by the Howard Government in the first place. It’s time to right the wrong.
