Peter Costello demands negative gearing reforms

Via Domain:

Future Fund chairman Peter Costello has downplayed the economic impact of any future interest rate cuts, saying deep-seated or “structural” reforms were instead needed to promote growth.

With financial markets putting roughly an 80 per cent chance on an official interest rate cut next week, Mr Costello on Thursday said lowering the cash rate from 1 per cent might result in a lower Australian dollar than otherwise, but would have a limited impact on the “real” economy.

…Mr Costello backed the federal government’s position, saying he was “very, very wary” of fiscal stimulus, and pointing out Australia had posted 11 budget deficits in a row. “We’ve had eleven deficits in a row, eleven. How many do you want? 12, 13, 14?”

Instead of relying on more interest rate cuts and budget spending to boost growth, Australia needed to tackle “structural” issues in the economy, such as making it more efficient. Mr Costello said structural reforms, such as tax changes, or pro-competition changes, were “harder” because they involved legislative change.

What a terrific idea. Such reform would include:

  • scrapping negative gearing and/or ending the Costello capital gains exemption for property to end vast capital misallocation into house price speculation;
  • scrapping massive Costello superannuation subsidies for the aged;
  • hugely boosting R&D and competition reforms across an overly concentrated Costello economy to end rentier profits;
  • apply a resource super profits tax;
  • GST reforms to increase Costello inefficiencies;
  • add reforms to the broken Costello horizontal fiscal equalisation system;
  • plus sink the AUD, triggering an equally large surge in national competitiveness;
  • to enable massive Budget savings that deliver huge income and corporate tax cuts that boost profitability and participation;
  • ending in a big productivity gain shared equally by labour and business.

Great ideas Peter Costello!

Basically, do the complete opposite of yourself as Treasurer, trash the Nine businesses you now head, and turn every policy that your former party just took the election on its head.

Houses and Holes

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the fouding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

Comments

  1. He is certainly delusional and misguided, But, I don’t think he was referring to negative gearing. More likely, he meant abolishing payroll tax and other state-based taxes, and increasing GST to 15% to make up the shortfall.

      • proofreadersMEMBER

        HnH – you didn’t specifically mention in your list the greatest Howard/Costello gift that keeps on giving – excess franking credit “refunds” to zero rate taxpayers?

        • Strange Economics -

          So many gifts to ruin Australia’s finances from him – but
          Costellos greatest gift to bankrupt Australian households was halving the CGT rate by 50% discount to ADD to Neg Gearing.
          His 2nd gift was removing tax on super payouts.

          Maybe it Didn’t look so bad in the days of high inflation, now its the backbone of the housing bubble.
          Costello the

  2. proofreadersMEMBER

    Comments from the peanut gallery from Costello, whom with Howard is responsible for some of Straya’s greatest and longlasting tax inequities?