Doddering Gotti blames pension reforms for housing bubble

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By Leith van Onselen

Robert Gottlebsen (“Gotti”) has truly drunk the Kool Aid today, blaming recent sensible changes to superannuation and the Aged Pension for further inflating housing values:

Over the Christmas break two groups of people made the same decision—-that Australian housing was one of the best places in the world to invest.

And the rest is history.

Housing prices are exploding once again.

…in November 2016 Morrison poured kerosene all over the housing market. All that was required was a match to reignite the boom.

Traditionally Australians have chosen between two ways of saving for retirement in a tax effective way — superannuation contributions or borrowing to buy dwellings and deducting the interest against salary or other income — so called “negative gearing”.

The government changed the superannuation rules in November to limit contributions and increase superannuation uncertainty…

By November it was all systems go and the market was given an extra nudge by foolish asset test pension changes that made it crazy for those in certain asset brackets to downsize their house and encouraged them to spend their money on cruises.

Both the superannuation and asset test measures will help the bottom line in the next couple of budgets but will boost the deficit in later years. Simply bad government.

Instead of conflating the issue and using rising house prices as an excuse for jettisoning sensible (and modest) reforms to superannuation and the Aged Pension, why doesn’t Gotti instead explicitly lobby the Turnbull Government to:

  • Unwind negative gearing and the capital gains tax discount;
  • Tighten means testing of the Aged Pension by including one’s principal place of residence in the assets test, accompanied by an expansion of the Government’s Pension Loans Scheme (explained here);
  • Tighten restrictions on foreign buyers (which Gotti himself admits has powered the Sydney and Melbourne markets), as well as implement the second tranche of anti-money laundering rules targeting real estate gate keepers; and
  • Cut the immigration intake in half?
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Reforms to the above areas would clearly dampen house price growth by removing housing’s status as a preferred destination for tax-effective saving, as well as by dampening demand. It would also save the Budget significant money.

Of course, the hidden objective of Gotti’s ranting is not to achieve genuine and equitable Budget reform, which spreads the burden across the community (and across generations). But rather to derail superannuation and pension reform and protect the tax-free status of his dying reader’s retirement savings.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.