Treasury: Coalition lying about Labor’s negative gearing policy

By Leith van Onselen

Over the past few years, senior Coalition ministers claimed repeatedly that Labor’s negative gearing policy would destroy both the housing market and economy.

For example, in February 2017, then Prime Minister Malcolm Turnbull claimed Labor’s negative gearing changes would “smash the residential housing market” and warned that “every homeowner in Australia has a lot to fear from Bill Shorten”.

In a similar vein, in June 2017 then Treasurer Scott Morrison stated on ABC’s The Business that “Changing negative gearing is not an ambitious reform, it’s a bad idea. It’s going to undermine the value of people’s homes and it’s going to crash house prices”.

Today, the ABC has released a Freedom of Information request from the Australian Treasury, which undermines the Coalition’s claims about the dire impact on the housing market from Labor’s proposed reforms:

Since 2016, the Coalition has continued to claim the plan would “smash” housing values with a “sledgehammer”.

But it can now be revealed Treasury explicitly told the Government it should not even claim home values “will” fall under the proposal…

Emails obtained by the ABC reveal that last January… the department sent back the following correction:

“The … statement is not consistent with our advice.

“We did not say that the proposed policies ‘will’ reduce house prices.

“We said that they ‘could’ put downward pressure on house prices in the short-term depending on what else was going on in the market at the time.

“But in the long-term they were unlikely to have much impact.”

Labor’s Shadow Treasurer Chris Bowen said “the Government’s been caught red-handed” misrepresenting official advice…

Treasury appears to have maintained its view about the likely impact of the ALP’s negative gearing and capital gains policy on prices in the three years since it was announced…

“This is quite a significant revelation,” Mr Bowen said.

“[The Government should] stop abusing the Treasury processes, abusing the independence of the Treasury, misrepresenting what the Treasury has said.”

MB does not agree with the Australian Treasury’s assessment that Labor’s policy are “unlikely to have much impact” over the long-term. We see it having a significant impact in Sydney and Melbourne where investors are most prevalent, but less elsewhere:

Nevertheless, neither do we see Labor’s policy as being calamitous either. Now is actually a good time to implement Labor’s policy. Since investor demand has already crashed, there is far less risk of investor flight and widespread market disruption than if investor demand was running at the extreme levels of two years ago.

What Labor’s policy will do, however, is prevent a future investor bubble, moderate the cycle, and boost the first home buyer share over the longer-term.

Finally, and related to the above, Labor’s policy should also improve home ownership rates, given the strong negative correlation between investors and first home buyers:

That is, as the share of investors in the market rises, the share of FHBs falls proportionately.

Therefore, any reduction in investor demand arising from Labor’s policy would unambiguously benefit FHBs, who would no longer be crowded-out. And by making investment in existing housing less attractive, home ownership rates should improve.

[email protected]

Unconventional Economist


  1. DefinitelyNotTheHorribleScottMorrisonPM

    People who’ve never worked for the Property Council are unqualified to give opinions on housing policy.

  2. JspitzerMEMBER

    Removing negative gearing will pulverise housing.i think the panic will be in already and Labor, with a massive portfolio of property, won’t do it. Market still keeps crashing.

    • CaptainFeatherSwordsGhost-TheHaunting3

      The more important result will be re-allocation of capital to productive enterprise and away from depreciating assets. If it also puts downward pressure on house prices then happy days.

      • Rain When I Die

        You think the percentage (whatever it is) using NG for a tax lark or to harness windfall capital gains with little (perceived) risk will re-allocate their capital to productive enterprise?

        Cool story bro. I’m off to brush my unicorn.

      • Correct cfsg-th3….this toxic property mkt has done nothing for the country, other than make some rich…why would you start a business or invent something good for the economy or take a risk in a business when you can just borrow loads from a bank and shove it into realestate and make plenty from doing nothing…just sit back and eat grapes!…The soon this gets slapped down and stays down the better it will be for the county…make Australia Great Again!!!

    • Housing is already being pulverised with no change to tax policy. Yes, the panic will be in already when Labor takes power. Which is, in my mind, the perfect opportunity to implement the changes.

      If there is some stabilisation in the market before they implement the changes, then I think it will be harder (politically) to justify.

    • Forrest GumpMEMBER

      You will know in advance if NG were to pulverize housing when you start seeing LNP MP’s offload their collective $400 Billion portfolios.

      Until then…smooth sailing….

    • JSpitz is right in this regard. A huge number of people use NG without understanding it or its benefits. Because it’s the voodoo magic used by accountants and brokers to sell them investment properties as a no-lose scenario.

      Without it, a potent method of selling lemons to dupes is eliminated. With house prices falling, the other method (“double every seven years”) is gone too.

      Bye bye to lots of demand.

      Treasury is wrong because Treasury assumes people are rational, calculate their financial decisions carefully in their own best interests, and act accordingly. Treasury is so far wrong about people it could not be wronger if it outsourced itself to a monkey.

    • BubbleyMEMBER

      Because the Coalition keeps repeating the same lie, over and over.

      If they repeat the lie often enough without it being rebutted, it becomes the truth. IE “The LNP are good economic managers” yet Oz has officially entered a recession today with 2 quarters of negative growth.

  3. Scott Morrison caught out blatantly lying to the public should not be swept under the carpet. As far as I’m concerned nothing he says can be believed after this scandal.

  4. So Bowen doesn’t think that the NG/CGT policy will have any impact on prices? Not much of a housing affordability policy then is it.

  5. BubbleyMEMBER

    The really annoying part is that Labor is going to inherit the poison chalice that is the Australian economy.

    House prices are dropping faster than pants at a B & S ball. The economy has officially fallen into recession today and the LNP is in power and has been for 6 years.

    Despite this, I expect Labor to get the blame for the economic woes when they get to 100 days in power. The punters wont remember that it was already stuffed and it happened under the LNP watch, they will simply see it as Labor screwing up the economy again and it will confirm the old furphy that the LNP are better with money – even if its not true.

    • matthew hoodMEMBER

      Scullin all over again maybe? The silver lining is that if it does crash on Labour’s watch they would do a much better job then the Libs.

      • BubbleyMEMBER

        True, Labor was in power when the GFC hit and we dodged a bullet with that one. Shame the LNP decided to double down on the mistakes the Americans made and we are about to have our own one now.

        Still I know Labor is going to get the blame for it, even though it started before they got into power.