Economists have panned Prime Minister Anthony Albanese’s defence of negative gearing after he pledged his party won’t close the tax concession because it will do nothing to address housing supply.
The issue made national headlines last week after Nine media reported that Treasury officials were preparing advice about paring back negative gearing and the capital gains tax discount.
According to the Australian Taxation Office, negative gearing is the term commonly used when expenses associated with an asset are greater than the income it earns, allowing the owner to deduct the loss against other income, such as salary or wages.
The Coalition seized on the moment to accuse the government of “secretly” planning to axe negative gearing, saying Labor was “at war with the dream of home ownership” and prompting questions to the prime minister about whether he will revisit the policy ahead of the next election.
A proposal to end negative gearing in Labor’s 2019 election platform is thought to have contributed to then leader Bill Shorten’s loss to Scott Morrison, as the Coalition was able to mobilise fear among home owners and investors about the risk to their investments.
Albanese spent September 26 doing the rounds to hose down suggestions Labor was planning changes to negative gearing. During one appearance on Sky News, the prime minister said his party was not considering changes to negative gearing on the basis he wasn’t “convinced it’ll make any difference that’s positive when it comes to supply”.
“I have said why I have a problem with changing, which is that it’s about supply,” Albanese said. “The problem is that all of the analysis shows that a change to negative gearing will not assist supply. And my government is focused on more supply of housing, more public housing, more private rentals, more home ownership.”
The prime minister repeated this line in a separate interview with the ABC, in which he said “the issue of negative gearing is one of supply”, before citing a 2019 Property Council report that suggested reforms to negative gearing tax concessions would “reduce supply and therefore not contribute to solving the issue”.
Economist Saul Eslake says Albanese’s reliance on the Property Council suggested he needed to “broaden his advice” instead of relying on “the same tired arguments dragged out by the same people”.
“It’s farcical,” Eslake says. “For the prime minister to be quoting the Property Council for the source of his advice about changes to negative gearing, it is as if Andrew Leigh would be quoting the Pharmacy Guild about the regulation of competition in the prescription drug-dispensing business.
“I have been advocating for the end of negative gearing longer than Max Chandler-Mather has been alive.
“The idea that negative gearing for investors in established properties is important to maintaining a supply of rental properties is, to use an English expression, bollocks. And self-interested bollocks.”
Similar thoughts were echoed in a separate response by The Australia Institute’s Greg Jericho, who maintains that the report cited by the prime minister actually said the opposite of what he claimed.
“The report pretty much demolished the argument that removing negative gearing was going to raise rents and have a big impact on housing stock,” Jericho says. “Far from it being a report that suggests we should not pursue changes, to me it’s one that confirms that we should.”
Jericho says the report, written before the pandemic-era HomeBuilder grant and the recent spike in prices, found that removing negative gearing would improve housing affordability, raise home ownership rates by 2.5 per cent, lower the total stock of housing by a negligible 0.4 per cent and have minimal effect on rents.
“I do wonder whether the prime minister was caught on the hop by the leak, which appears to have actually been a true scoop and not a kite-flying exercise by the government or the prime minister,” he says. “As a result, he was looking for a quick way to suggest it was not government policy.
“Unfortunately, this now makes it harder for them, in the future, to suggest this good policy is worth doing.”
claudius_ptolemaeus on
Ignoring Jericho’s comments here (he’s not an economist) and placing less emphasis on Eslake’s (he admits he has a bee in his bonnet), the comments from the other economists are pretty enlightening.
It wouldn’t help much but it wouldn’t hurt, basically.
> This latest debate over negative gearing suggests politicians have learnt only half the lesson on housing, says independent economist Nicki Hutley.
> “**For so long, economists have been saying ‘stop doing things to increase demand, we need to increase supply’. And the government has taken that advice to heart, but it seems they forget it’s also good if you have policies that decrease demand**,” Hutley says. . .
> “There’s pretty few economists who would say getting rid of those tax breaks, at least in some form, or at least putting a cap on properties, isn’t a good way to reduce competition in the market that pushes up prices that in turn reduce affordability.” . . .
> Dr Angela Jackson, lead economist at Impact Economics and Policy, agrees that negative gearing, broadly applied, would have little effect on housing supply, but that its impact on reducing demand could be helpful.
> “**I wouldn’t oppose changes to negative gearing. I don’t think it will solve the problems with our housing market, but it won’t make the problems worse and it will make a difference**,” says Jackson, who was deputy chief of staff to the Labor finance minister during the global financial crisis.
> Jackson says the government has to make a decision, because “if we don’t do reforms today, the market will never improve and it will just get worse and worse”.
> “Really, there’s so much wrong with the housing situation that you need reforms on both supply and demand sides of the equation to get the market delivering,” she says.
> “We need to be making tough decisions and tough calls so that in 30 years’ time we’re not still having these same conversations about the same problems which have only grown worse.”
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Economists have panned Prime Minister Anthony Albanese’s defence of negative gearing after he pledged his party won’t close the tax concession because it will do nothing to address housing supply.
The issue made national headlines last week after Nine media reported that Treasury officials were preparing advice about paring back negative gearing and the capital gains tax discount.
According to the Australian Taxation Office, negative gearing is the term commonly used when expenses associated with an asset are greater than the income it earns, allowing the owner to deduct the loss against other income, such as salary or wages.
The Coalition seized on the moment to accuse the government of “secretly” planning to axe negative gearing, saying Labor was “at war with the dream of home ownership” and prompting questions to the prime minister about whether he will revisit the policy ahead of the next election.
A proposal to end negative gearing in Labor’s 2019 election platform is thought to have contributed to then leader Bill Shorten’s loss to Scott Morrison, as the Coalition was able to mobilise fear among home owners and investors about the risk to their investments.
Albanese spent September 26 doing the rounds to hose down suggestions Labor was planning changes to negative gearing. During one appearance on Sky News, the prime minister said his party was not considering changes to negative gearing on the basis he wasn’t “convinced it’ll make any difference that’s positive when it comes to supply”.
“I have said why I have a problem with changing, which is that it’s about supply,” Albanese said. “The problem is that all of the analysis shows that a change to negative gearing will not assist supply. And my government is focused on more supply of housing, more public housing, more private rentals, more home ownership.”
The prime minister repeated this line in a separate interview with the ABC, in which he said “the issue of negative gearing is one of supply”, before citing a 2019 Property Council report that suggested reforms to negative gearing tax concessions would “reduce supply and therefore not contribute to solving the issue”.
Economist Saul Eslake says Albanese’s reliance on the Property Council suggested he needed to “broaden his advice” instead of relying on “the same tired arguments dragged out by the same people”.
“It’s farcical,” Eslake says. “For the prime minister to be quoting the Property Council for the source of his advice about changes to negative gearing, it is as if Andrew Leigh would be quoting the Pharmacy Guild about the regulation of competition in the prescription drug-dispensing business.
“I have been advocating for the end of negative gearing longer than Max Chandler-Mather has been alive.
“The idea that negative gearing for investors in established properties is important to maintaining a supply of rental properties is, to use an English expression, bollocks. And self-interested bollocks.”
Similar thoughts were echoed in a separate response by The Australia Institute’s Greg Jericho, who maintains that the report cited by the prime minister actually said the opposite of what he claimed.
“The report pretty much demolished the argument that removing negative gearing was going to raise rents and have a big impact on housing stock,” Jericho says. “Far from it being a report that suggests we should not pursue changes, to me it’s one that confirms that we should.”
Jericho says the report, written before the pandemic-era HomeBuilder grant and the recent spike in prices, found that removing negative gearing would improve housing affordability, raise home ownership rates by 2.5 per cent, lower the total stock of housing by a negligible 0.4 per cent and have minimal effect on rents.
“I do wonder whether the prime minister was caught on the hop by the leak, which appears to have actually been a true scoop and not a kite-flying exercise by the government or the prime minister,” he says. “As a result, he was looking for a quick way to suggest it was not government policy.
“Unfortunately, this now makes it harder for them, in the future, to suggest this good policy is worth doing.”
Ignoring Jericho’s comments here (he’s not an economist) and placing less emphasis on Eslake’s (he admits he has a bee in his bonnet), the comments from the other economists are pretty enlightening.
It wouldn’t help much but it wouldn’t hurt, basically.
> This latest debate over negative gearing suggests politicians have learnt only half the lesson on housing, says independent economist Nicki Hutley.
> “**For so long, economists have been saying ‘stop doing things to increase demand, we need to increase supply’. And the government has taken that advice to heart, but it seems they forget it’s also good if you have policies that decrease demand**,” Hutley says. . .
> “There’s pretty few economists who would say getting rid of those tax breaks, at least in some form, or at least putting a cap on properties, isn’t a good way to reduce competition in the market that pushes up prices that in turn reduce affordability.” . . .
> Dr Angela Jackson, lead economist at Impact Economics and Policy, agrees that negative gearing, broadly applied, would have little effect on housing supply, but that its impact on reducing demand could be helpful.
> “**I wouldn’t oppose changes to negative gearing. I don’t think it will solve the problems with our housing market, but it won’t make the problems worse and it will make a difference**,” says Jackson, who was deputy chief of staff to the Labor finance minister during the global financial crisis.
> Jackson says the government has to make a decision, because “if we don’t do reforms today, the market will never improve and it will just get worse and worse”.
> “Really, there’s so much wrong with the housing situation that you need reforms on both supply and demand sides of the equation to get the market delivering,” she says.
> “We need to be making tough decisions and tough calls so that in 30 years’ time we’re not still having these same conversations about the same problems which have only grown worse.”