ABC 7.30 Report last night aired the final of a three part special on Australia’s budding housing bust, which is well worth watching.
The episode focussed on Labor’s policy to restrict negative gearing to newly constructed dwellings and to halve the capital gains tax discount.
The segment featured several commentators warning of calamity if Labor’s policy goes ahead:
JOSH FRYDENBERG: It’s simple: If you own your own property, under Labor’s property, it will be worth less.
If you rent your own home under Labor’s policy, you will pay more…
GEORGE THARENOU: My concern would be that if you were to make a material change to tax policy at the same time as banks are tightening lending standards, it could exacerbate what’s already a downturn to something a bit more serious.
JOHN SYMOND, FOUNDER, AUSSIE HOME LOANS: It could tip Australia to recession.
And, you know, I don’t want to throw up a big balloon here, but I’m saying you have to treat negative gearing very carefully and do your homework to work out what the ramifications will be…
I do feel sorry for young people who won’t have the opportunity to have an option of investing in home ownership.
It’s going to get tougher to jump on that bandwagon and come out as good a result as the baby boomers have.
Whereas in the interview afterwards, shadow treasurer Chris Bowen defended the policy:
CHRIS BOWEN, SHADOW TREASURER: Around the country, between 2012 and today, housing prices have gone up by 40 per cent and have fallen now by 4 per cent. Yes, there is some softening but let’s keep it in context…
The Government would have you believe that housing price falls under them are wonderful, are a Nirvana; and if it happened under Labor, it is terrible and the end of Western civilsition as we know it.
With all that as a given, Laura, the fundamentals are this: home ownership is still at record lows.
Some people in your story were indicating we should effectively give up on home ownership, that we should move to a rental society.
I’m not prepared to agree to that. I believe in the aspiration of home ownership.
If a young person doesn’t want to own their own home, of course that’s perfectly fine, but I don’t accept that we should just give up on those thousands, hundreds of thousands of young people in particular – not exclusively young people, but younger people in particular – who are turning up at auctions still, even in this environment, and are being outbid and can’t get into the housing market…
The now Prime Minister, the then Treasurer said there were excesses in negative gearing. He knows there’s a problem. He doesn’t have the political courage to deal with it…
Laura: Part of the problem is that all the pressure has been put on APRA. APRA has been given the entire job because the Government hasn’t been able or willing to deal with the tax concessions…
It [our negative gearing policy] will be a priority for me as Treasurer if we are given a mandate by the Australian people to get it legislated.
Basically, Labor views its policy as a long-term structural reform, not as a cyclical lever. This is the right approach. If 2019 or 2020 isn’t the right time to reform negative gearing and the CGT, then when is?