Victorian Treasurer, Tim Pallas, has urged the federal government to use all tools at its disposal to tackle housing affordability, including demand-side measures such as unwinding negative gearing and the capital gains tax (CGT) discount, From The AFR:
In his letter, Mr Pallas says “the Victorian government is using all the levers available to it in tackling the issue of housing affordability”.
“We believe it is time the Turnbull government followed suit, and properly considered all the levers available to it, including reforming negative gearing and capital gains tax.”
But Treasurer Scott Morrison has fired back, claiming that supply-side policies such as land supply and zoning are primarily behind Australia’s housing affordability woes, and will reportedly “ask his state colleagues today to give updates ‘on recent steps they have taken to improve housing outcomes for their residents'” in his upcoming meeting with state treasurers.
Clearly, the housing dysfunction is set to continue, with the federal government refusing to undertake measures to curb demand – through policies like unwinding tax lurks or slashing Australia’s mass immigration program – while conveniently pinning the blame on the states for failing to boost supply enough to keep up with the immigration ponzi bestowed on them by the federal government.
The sad truth is that Australia’s housing woes have been caused primarily by the federal government. It is they that control the tax settings that have encouraged speculative investment into residential property. It is they that have refused to properly regulate foreign investment into existing Australian housing (and refused to implement global anti-money laundering laws). And it is the federal government that has chosen to open the immigration spigots, leading to strong inflows of new residents into Australia’s cities (especially Sydney and Melbourne), placing undue pressure on housing and infrastructure.
Given the massive vertical fiscal imbalances present in the federal system, whereby the Commonwealth receives around 80% of total taxation revenue, it is no surprise that the states have attempted to prevent growth of their urban footprints in a bid to save on infrastructure costs. They simply cannot afford to fund such rampant population growth without federal government financial assistance.
Therefore, if Treasurer Morrison was serious about housing affordability, not only would he put the clamps on speculative demand, and moderate population pressures in the cities by reducing Australia’s immigration program, but he would also provide the states with funding to cope with growth.
For example, Morrison could commit to providing incentive payments to the states in return for them freeing-up land-use and planning, as well as providing housing-related infrastructure. Alternatively, he could commit to providing the states with funding per new migrant, which would ensure the Commonwealth wore some of the costs of its mass immigration program, rather than palming these off to the states.
The states need to stand up for themselves, too. If they had any cajones, they would lobby hard for funding along these lines, rather than letting the federal government get away Scott free and wrongly deflect the blame for Australia’s housing woes onto them.
