Labor’s negative gearing savings to fund pre-schools

By Leith van Onselen

Labor has directly linked the Budget savings from its negative gearing and capital gains tax (CGT) reforms with its announced $10 billion package to boost preschool access for three and four-year-olds. From The Australian:

From 2021, three-year-olds will get access to 600 hours of subsidised preschool, at a cost of $1.75bn over the forward estimates. The scheme, which will cost $9.8bn over ten years, would see the existing 15 hours a week of subsidised preschool for four-year-olds extended to three-year-olds under a Shorten government.

Mr Shorten Labor would pay for the promise with changes to negative gearing and the capital gains tax.

The Opposition Leader pointed to Australia’s poor performance in international education rankings.

This is very clever politically. It paints the Coalition as favouring property speculation over investment in public services, whereas Labor favours services and affordable housing over property speculation.

It is also another important indication that Labor will not budge from its negative and CGT reform policy, despite growing pressure from the property lobby and the Coalition.

Good job Labor.

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Unconventional Economist


  1. Yes. These are the real policy alternatives we face and this is a trade off that builds rather than divides society. I’m beginning to really like Bowen. He might just be the real deal.

  2. truthisfashionable

    I feel like labor need to get out there and front run the real estate media.
    -prices are falling now so evidence that neg gearing doesnt ‘support’ prices
    -Negative gearing current implementation overwhelmingly went into existing housing and not new supply
    -its an $8bil welfare check to failing investors
    Etc etc.

    If they start highlighting this now then the domainfax’s won’t be able to spin it back before the election.

    • ^THIS. Labor need to front run the crash and pin it squarely on the actual policy causes rather than just blame the Liberals. They need to be seen to have the more intelligent and reasoned case otherwise its just finger-pointing.

      • There’s also been nothing stopping the LNP from doing the same thing. If they were as fiscally responsible as they’ve claimed to be they would have been leading the charge to get rid of a lot of these rorts. As Gunna often says, the first of the majors to be honest about where we are, how we got here and provide a set of policies that resets our course in a fair manner will romp in. It looks like Labor is having a go at it.

  3. ChristopherMEMBER

    Not going to be voting Labor first in the upcoming election, that will be saved for my protest party PHON but and it pains me to say it they will be ahead of the coalition for myself the first time in many years.

    I’m hoping for a PHON presence in the senate to dent the ability for the Labor party throwing open the floodgates any further.

    • You probably summarized what is really wrong with today’s societies.

      Even with common sense policies, it will never deter an angry voter from self destruction.

      It kind of assures that extremism is equivalent to”Angry from the status quo”

      And I have wondered how the middle east reached that point of extremism…now I can observe it morphing in slow motion in the west.

      Hope it doesn’t end-up the same with totalitarian extreme right wing governments as the middle east now swim in.

      • But surely that’s how democracy is meant to work — if the alternative to the status quo is someone extreme then people will lean that way. It’s a signal to the mainstream they won’t tolerate them and if they do want to maintain / retain power then they need to listen to the will of the people.

        Comparisons with the Middle East are inappropriate: that region has been poisoned by extremist religions – the thinking there is anchored in the Stone Age: Iran was pretty secular under the Shah and Lebanon has always leaned to toward secularism. Once religion dominates, it’s game over.

      • Dominic, I agree….but look at the world’s history…you will see a pattern…great wars erupting always after economic depressions…WWII was the most recent examples…the reason was the anger , and it made the public susceptible to leaning towards Nazism which is an extreme even though it wasn’t religious ideology……
        Look today and you will see the exact same happening again.(look further than the above comment by Christopher).

        I see it everywhere, in media, Facebook, social media…etc…

        I don’t know but I see a pattern

    • @Christopher: I find myself in exactly the same position and will be doing the same at the ballot box.

  4. Great politics from Labor!

    If they only promised an immigration cut the would shred and be locked in for at least two terms.

  5. This is not empty populism. The greatest gains and ROI in educating our kids are to be made at the preschool level. There is good data on this on the interweb for anyone willing to sift through educator-speak.

  6. SchillersMEMBER

    Everyone seems to be forgetting the details of Labours “reform” to NG…

    (1) They will still allow negative gearing on every new build that hits the market. So no change from existing policy there.
    (2) They will still allow grandfathering NG tax deductions on every IP that is currently negatively geared, new or established, ad infinitum. We are talking almost two million investment properties that now have a clear incentive to remain as IPs and not “churn” back into the RE market: hold your existing negatively geared investment property or sell it…and lose your tax deductions forever.

    Labour’s policy is little more than smoke and mirrors. It gives the appearance they are really cracking down on the billions of tax $ gifted to negatively geared investors, while actually allowing every specufestor to continue claiming their tax deductions, as per usual.

    • If we are talking ‘investor grade’ used sh$te stock that no sane person would buy as an OO, then the other incentive not to sell will be the collapse in price. How much is the next fool going to pay if he/she cannot NG the joint?

      If you were going to press on, you would want to be sure of your finances, have an A grade tenant, and not be 6 months out from an IO reset. But even then – what the hell do you do, wait out the Government for a change in policy while the cladding and other repair bills stack up and hope that ‘rents rise 30% overnight’ as they allegedly did last time NG was tinkered with? I would be heading for the exits …

    • Here we go again!!! Labor spending money that isn’t there!!!!
      As pointed out by others the negative gearing abolition is grandfathered and doesn’t apply to new builds. Unless we get into a very high inflation situation (which I’d presume is indexed) then if RE doesn’t move much for the next decade. which must be a near certainty, there is NOT going to be any extra income flowing from the changes.

      Prudent people, especially if they are already deeply in debt for some reason. wait till they’ve saved or made a bit of money before they spend it – you just can’t be sure what is going to happen.
      The way this country is run is just BS.

      P.S. Note as well, the spivs must be already rubbing their hands with glee at this one

  7. DefinitelyNotTheHorribleScottMorrisonPM

    These 3 year olds may get some worthless education, but how will they be able to join the property market as rent-vestors 40 years later without the help of negative gearing? No one in this country ever built proper wealth through “education”.

  8. Don’t be surprised if some of those private preschool service providers start offering high-paying “jobs” to ex-Labor politicians.

  9. When we are having trouble providing enough resources for the existing, ever expanding student population, not to mention other pressures on the health system etc, is this really the best possible use of the savings?

    Follow the incentives. Labor want one thing.

    If your interests coincide with theirs it is just good luck.

  10. labor has have replaced its 100k free university degrees in massively oversupplied areas like science idea with 100k free tafe positions, 10k of which are going to the massively oversupplied area of pre-k ‘education’

    cant wait for the inevitable femist uproar after this happens asking “why women in early education getting paid so little”, then when anyone points out how supply and demand works they’ll get accused of being a misogynist

  11. UE I know you truly believe that labor will reform NG and CGT. CGT maybe, I’ll cede on that, but I’m up for a friendly wager – $50 to the charity of your choice if Labor do actually change NG in any meaningful fashion. $100 if they abolish it. You on?

  12. This is clever politics but terrible policy. More degree qualified people changing nappies. Finland is often held up as an example in education but as I understand kids start school at SEVEN there. 6 months of age can mean an enormous difference in development at this age. ‘Teaching’ is very much dependent on psychological development in small children. If they are not psychologically ready they simply cannot learn it. Is there actually any evidence that shoving kids barely out of nappies into an education environment will help them in later life? It looks more like a Labour voter job creation scheme to me.

    • Yep. Seven is a better age for starting school. And most of the stuff that schools teach is irrelevant to real life anyway. Shakespeare? He died over 400 years ago! How about teaching kids about real estate bubbles and how preferential voting works.

      What they should do is allow private schools to have their own curriculum where schoolboys are not forced to read fiction.

    • This is clever politics but terrible policy. More degree qualified people changing nappies. Finland is often held up as an example in education but as I understand kids start school at SEVEN there.

      The present education system in Finland consists of daycare programmes (for babies and toddlers) and a one-year “pre-school” (or kindergarten for six-year-olds); a nine-year compulsory basic comprehensive school (starting at age seven and ending at the age of sixteen);


      In Finland, high class daycare and nursery-kindergarten are considered critical for developing the cooperation and communication skills important to prepare young children for lifelong education, as well as formal learning of reading and mathematics. This preparatory period lasts until the age of 7.


      Finland has had access to free universal daycare for children aged eight months to five years in place since 1990, and a year of “preschool/kindergarten” at age six, since 1996. “Daycare” includes both full-day childcare centers and municipal playgrounds with adult supervision where parents can accompany the child.

      Given teachers for basic primary and secondary school require a Master’s degree, I’d hazard a guess their early childhood care and learning people are also degree-qualified.

      • Given teachers for basic primary and secondary school require a Master’s degree, I’d hazard a guess their early childhood care and learning people are also degree-qualified.

        If they are it would seem unnecessary. According to this article from the Guardian:

        Central to early years education in Finland is a “late” start to schooling. At Franzenia, as in all Finnish daycare centres, the emphasis is not on maths, reading or writing (children receive no formal instruction in these until they are seven and in primary school) but creative play.


        Indeed the main aim of early years education is not explicitly “education” in the formal sense but the promotion of the health and wellbeing of every child. Daycare is to help them develop good social habits: to learn how to make friends and respect others

        Maybe they don’t see education as way to indoctrinate kids from an early age? Or to reward the extreme Left university sector? Or to win voters by indoctrinating young people during a pointless (and expensive) four year degree? Or maybe they don’t want nappy changers asking for the same pay as computer programmers and then claiming discrimination when they don’t get it?
        Or maybe they are just rational and realize that some kids don’t even learn to talk until 2 and at 3 are barely out of nappies. Sorry if I sound cynical but the whole concept of formal education at this age is just absurd. It smacks of socialist countries who want to get the kids out of the family at the earliest opportunity so they can shape them.

      • LOL.

        Keep raging against the boogeyman. You do realise Finland is an “extreme Left” and “socialist” country, right ? That their education is built from those principles ?

      • Not all socialists are fake left. But I appreciate the ad hominem. Always a sign that you got nothing.

      • Not all socialists are fake left. But I appreciate the ad hominem.

        Pretty funny from someone who had just laid on the ad hominem.

        Always a sign that you got nothing.

        Well, when faced with nothing but fallacies, there’s not really anything other than fallacies to respond with, is there ?

  13. Don’t have an issue getting rid of CGT exemptions and the NG reforms, but feel that it could go further.

    The issue I see is that 3 and 4-year-olds aren’t developmentally ready for “pre-school.” What this will turn out to be is actually a childcare subsidy so that families can quickly move towards two incomes to prop up the ponzi a little longer.

    While the Liberals are completely dysfunctional, unfortunately the left wing of the Labor party is also all for opening the immigration floodgates – recently ran into one of the guys in a senior role involved in developing policy for a local branch, and they seriously struggled to relate the lack of services like growing hospital waiting lists, traffic congestion and high property prices to immigration numbers. This guy was all for increasing immigration as a default position, but did not have any idea what the current numbers were or how that compared to historical levels.