The Daily Telegraph has today penned the following drivel in relation to Labor’s policy to restrict negative gearing to newly constructed dwellings:
Labor will end negative gearing and a halve the capital gains tax concessions from 50 per cent to 25 per cent.
This would drive up the cost of holding an investment property and result in rents rising. BIS Shrapnel modelling of Labor policy has shown rents would increase by 10 per cent per year, 4 per cent fewer new homes would be built and 70,000 families would be pushed into housing rental stress…
Treasurer Scott Morrison said… “Labor reckless decision to abolish negative gearing will not only bring on a hard landing for Australia’s housing market, threatening jobs and economic growth, but will put even more stress on Australia’s renters as mum and dad investors, who provide around a quarter of the country’s rental stock, are forced to walk away.”
The Daily Telegraph should have done its homework before publishing the widely discredited BIS Shrapnel modelling.
This BIS modelling was debunked and ridiculed far and wide. For example, the Grattan Institute described the modelling as “manifestly ridiculous”, whereas economists Saul Eslake and Richard Holden comprehensively dismembered the modelling, noting it is “internally inconsistent, fly in the face of evidence, and contradict basic economic principles”. Meanwhile, The Australia Institute called for a code of conduct for economic consultants following the BIS’ misleading modelling.
And let’s not forget that the BIS’ modelling was the subject of a Media Watch investigation for misleading the public (the modelling didn’t even model Labor’s policy, but something different).
As I noted yesterday, there is absolutely no logical reason to believe that Labor’s negative gearing and CGT policy would reduce housing supply and push-up rents. If anything, it would have the opposite effect.
The fact remains that 9 out of ten investors purchase established dwellings:
Therefore, the overwhelming majority of investors are not creating new housing stock, but merely substituting homes for sale into homes for let. Even if investors sold their rental homes, it would merely turn renters into owner-occupiers, leaving the supply-demand balance largely unchanged.
Besides, Labor’s policy would redirect investors towards newly constructed dwellings, thereby adding to supply and lowering rents (other things equal).
Labor’s negative gearing plan adopts exactly the same approach as the Coalition’s policy on foreign investment, which aims to boost dwelling supply and lower rents. Here’s what Treasurer Scott Morrison said in February regarding Australia’s foreign investment regime:
“The Government’s policy to channel foreign investment into new dwellings creates additional jobs in the construction industry, increases housing supply and supports economic growth”.
Which follows Kelly O’Dwyer’s explanation in 2015:
“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”.
How is Labor’s policy with regards to negative gearing any different to the Coalition’s policy on foreign investment?
Both policies seek to channel “investment into new dwellings”. Therefore, both should create “additional jobs in the construction industry”, “increase the housing stock for Australians to build, buy or rent”, support “economic growth”, and increase rental availability and affordability.
Heck, even Master Builders Australia admitted that Labor’s policy would boost dwelling construction by 5,000 homes, but complained that it did not go far enough to boost supply.
The Daily Telegraph has been caught red handed misleading the public in order to push its anti-Labor agenda. Maybe it, too, should be subject to a Media Watch investigation?
