I actually think it’s Edmund Barton’s fault to be honest.
Wood_oye on
Him ( with costello) probably had the most single impact, but the past decade has been hard on it too, and what I’m reading about domain .com etc isn’t helping
PurplePiglett on
Howard definitely started the ball rolling – it was during his term that the link between wage growth and house prices decoupled leading to the point we’re at today. But in nearly 30 years since no govt has done anything substantial to address this so they all share responsibility for bringing us to the completely unsustainable situation we are in today.
LongjumpingWallaby8 on
here we go, must be an election coming up, time to blame….. the liberal government from 20 years ago.
don’t worry I know that the Labor party has been in power since then and is currently in power, but they will definitely fix the issue, if you elect them….
IamSando on
This is really the engine of the current housing crisis. There’s plenty of things subsequent governments have done to prop it up or shoo it along, but it pales in comparison to the impact this has had and will continue to have.
The issue is that politically, it’s also the broadest base, Howard tied almost his entire electoral career into the housing market, value goes up, interest rates low, everyone in the market votes for you. No other policy comes close in terms of ongoing impact on a voting block. Help to buy or super contributions etc help you get into the market (debatably), but once you’ve used em you no longer have any attachment to the scheme, if it’s causing issues they can be removed without much political pain.
CGT on the other hand…everyone with an investment property has benefited and continues to benefit from this and will keep benefiting from this. Hence there’s a very, VERY large group of people who are financially incentivised to oppose any reduction in this benefit forevermore.
The epitome of “got mine, fuck you”.
brednog on
So straight away I read the first part of this article and it states:
>In 1999, John Howard reduced Capital Gains Tax (CGT) liabilities by 50 per cent for individuals, after Labor had introduced the CGT in 1985.
I then searched the article for any mention of how CGT worked before this change – there is none! So the whole premise of the article (at least the parts related to CGT – which is pretty fundamental) is false.
Howard did not halve the CGT. He changed / simplified the formula.
Before those changes, the “1985” CGT was calculated using a method that indexed the cost base of the asset by CPI inflation, then calculated the after inflation gain. This amount was then divided by 5, added to your taxable income, and the extra tax owed was then multiplied by 5. This formula meant that capital gains tax was calculated on after inflation gain only, and it also ensured the whole amount was not necessarily taxed at the highest marginal rate.
The current / Howard method removed the cost base indexation, and the “divide by 5” part, and instead just took the whole gross capital gain, halved it (50% discount and only if asset was held for > 12 months), and then added that entire amount to your taxable income for the year the gain was realised – and you pay any extra tax owing. This means most of the capital gain in most cases (for any significant amount anyway) is taxed at the highest marginal tax rate.
The result of the change is that for a few situations the CGT owed would be a bit less, and in other situations it would be about the same, and some cases it was actually higher.
So Howard did not “halve” capital gains tax – that is an incorrect characterisation of the changes. They simplified the formula – that’s it.
Re the housing boom that took off in the late 90s – there were major macro-economic factors at play at the time which were the primary drivers of that. The main one being the effective locking in of a much lower interest rate environment than had been experienced in Australia during the 70s/80s and even 90s (I still paid double digit mortgage rates in the 90s). House prices to some extent act like bonds – where as the interest rate reduces, the asset values go up. This takes years to play out but it really kicked in during the 00s period and we are still dealing with the results of that economic shift today.
There are other factors of course as well – but the above is one of the major ones, and again I don’t see it discussed properly in the OP article.
Oh finally – just saw this!
>Unfortunately high interest rates are also inflationary, making it a very painful medicine.
That is simply not true. The opposite is the case!
I would also add that there will be no effective solution to the “housing crisis” until the true causes of it are properly understood and enunciated, rather than just trying to blame Howard etc.
specialpatrolwombat on
The introduction of the GST caused an inflationary spike that nearly doubled housing prices in one year.that drew in property speculators like flies to a turd. Under political pressure Howard and Costello made it even worse by introducing ever increasing first home buyers subsidies pumping the prices even further and just made speculation even more profitable.
Successive governments have done nothing to fix this and it’s not surprising because almost all members of the Australian Parliament are on the property gravy train and have a vested interest in keeping property prices up.
That coupled with record low interest rates that allowed people to borrow more has caused a price spiral that has yet to abate.
Personally I think dropping the GST for building and building services for first home builders and scrapping all subsidies would be a good place to start to take some heat out of the market but that should have been done 15 years ago. Now with so many more people in the country and not enough people in the building trade any benifits will be eaten up by wages.
spellingdetective on
The greens entrenched in our voting system has had a bigger impact on the housing crisis then John Howard.
The party built on nimbyism. Doesn’t want bush land cleared for new housing estates nor do they want high rises apartment complex ruining a neighbourhood and causing gentrification.
If we can get rid of the red and green tape we can speed up development approvals but society needs come to terms that cheapening the price of land (by making more available) means Joey the kangaroo or Blinky the koala might unfortunately be the collateral damage
NoLeafClover777 on
In short, yes. The implementation of the modern CGT discount happened under Howard’s watch in 1999, which lead to an initial spike in property prices that lasted through to ~2005, when prices then started to plateau/flatten out.
Then, immigration was greatly increased which contributed largely to the next ongoing spike. For the previous 20 years of government prior to Howard taking office, net immigration to Australia averaged around 90,000 per year. In the second half of Howard’s tenure (2006-2007 onward), that was increased to ~190,000 per year & continued to grow higher every subsequent year up until Covid.
So yes, Howard was largely responsible for kicking things off, with all following governments on both sides of the aisle happy to continue perpetuate the same trend.
MentalMachine on
analysis: “CGT changes had a role in changing housing in Australia for the worse (from the view of ensuring homes are affordable and not investment assets), but due to the chaotic nature of housing and taxation and such, it is nigh-impossible to quantify the exact % this impacted the sector…”
The usual crowd: “BUT WHAT ABOUT THESE OTHER THINGS??? HENCE CGT CAN’T BE TO BLAME AT ALL AND THE LNP AND HOWARD DID NOTHING WRONG AT ALL EVER LOL LOL”
See y’all next month.
AncientExplanation67 on
Has anyone mentioned Kholer’s piece on Howards 50% reduction on capital gains?
ImeldasManolos on
Does it matter? That was the 1990s. How many governments of both sides have we had since who could have made _any_ improvements.
LongDongSamspon on
Ffs, even if this is all true are we really meant to believe nobody in power since the 90’s could have taken any action to better the situation or change course? After all of Howard changed policy which caused this, why can’t Albo change policies to improve it?
Howard is irrelevant and blaming him for anything at this point because current politicians won’t do their fucking jobs is asinine deflection.
VET-Mike on
Lol. Let’s face it, The ALP ain’t and won’t fix it.
Dawnshot_ on
Dumb question (on housing as an investment generally)
For an existing home is there any good reason why an investor should be able to bid against a potential owner-occupier?
15 Comments
I actually think it’s Edmund Barton’s fault to be honest.
Him ( with costello) probably had the most single impact, but the past decade has been hard on it too, and what I’m reading about domain .com etc isn’t helping
Howard definitely started the ball rolling – it was during his term that the link between wage growth and house prices decoupled leading to the point we’re at today. But in nearly 30 years since no govt has done anything substantial to address this so they all share responsibility for bringing us to the completely unsustainable situation we are in today.
here we go, must be an election coming up, time to blame….. the liberal government from 20 years ago.
don’t worry I know that the Labor party has been in power since then and is currently in power, but they will definitely fix the issue, if you elect them….
This is really the engine of the current housing crisis. There’s plenty of things subsequent governments have done to prop it up or shoo it along, but it pales in comparison to the impact this has had and will continue to have.
The issue is that politically, it’s also the broadest base, Howard tied almost his entire electoral career into the housing market, value goes up, interest rates low, everyone in the market votes for you. No other policy comes close in terms of ongoing impact on a voting block. Help to buy or super contributions etc help you get into the market (debatably), but once you’ve used em you no longer have any attachment to the scheme, if it’s causing issues they can be removed without much political pain.
CGT on the other hand…everyone with an investment property has benefited and continues to benefit from this and will keep benefiting from this. Hence there’s a very, VERY large group of people who are financially incentivised to oppose any reduction in this benefit forevermore.
The epitome of “got mine, fuck you”.
So straight away I read the first part of this article and it states:
>In 1999, John Howard reduced Capital Gains Tax (CGT) liabilities by 50 per cent for individuals, after Labor had introduced the CGT in 1985.
I then searched the article for any mention of how CGT worked before this change – there is none! So the whole premise of the article (at least the parts related to CGT – which is pretty fundamental) is false.
Howard did not halve the CGT. He changed / simplified the formula.
Before those changes, the “1985” CGT was calculated using a method that indexed the cost base of the asset by CPI inflation, then calculated the after inflation gain. This amount was then divided by 5, added to your taxable income, and the extra tax owed was then multiplied by 5. This formula meant that capital gains tax was calculated on after inflation gain only, and it also ensured the whole amount was not necessarily taxed at the highest marginal rate.
The current / Howard method removed the cost base indexation, and the “divide by 5” part, and instead just took the whole gross capital gain, halved it (50% discount and only if asset was held for > 12 months), and then added that entire amount to your taxable income for the year the gain was realised – and you pay any extra tax owing. This means most of the capital gain in most cases (for any significant amount anyway) is taxed at the highest marginal tax rate.
The result of the change is that for a few situations the CGT owed would be a bit less, and in other situations it would be about the same, and some cases it was actually higher.
So Howard did not “halve” capital gains tax – that is an incorrect characterisation of the changes. They simplified the formula – that’s it.
Re the housing boom that took off in the late 90s – there were major macro-economic factors at play at the time which were the primary drivers of that. The main one being the effective locking in of a much lower interest rate environment than had been experienced in Australia during the 70s/80s and even 90s (I still paid double digit mortgage rates in the 90s). House prices to some extent act like bonds – where as the interest rate reduces, the asset values go up. This takes years to play out but it really kicked in during the 00s period and we are still dealing with the results of that economic shift today.
There are other factors of course as well – but the above is one of the major ones, and again I don’t see it discussed properly in the OP article.
Oh finally – just saw this!
>Unfortunately high interest rates are also inflationary, making it a very painful medicine.
That is simply not true. The opposite is the case!
I would also add that there will be no effective solution to the “housing crisis” until the true causes of it are properly understood and enunciated, rather than just trying to blame Howard etc.
The introduction of the GST caused an inflationary spike that nearly doubled housing prices in one year.that drew in property speculators like flies to a turd. Under political pressure Howard and Costello made it even worse by introducing ever increasing first home buyers subsidies pumping the prices even further and just made speculation even more profitable.
Successive governments have done nothing to fix this and it’s not surprising because almost all members of the Australian Parliament are on the property gravy train and have a vested interest in keeping property prices up.
That coupled with record low interest rates that allowed people to borrow more has caused a price spiral that has yet to abate.
Personally I think dropping the GST for building and building services for first home builders and scrapping all subsidies would be a good place to start to take some heat out of the market but that should have been done 15 years ago. Now with so many more people in the country and not enough people in the building trade any benifits will be eaten up by wages.
The greens entrenched in our voting system has had a bigger impact on the housing crisis then John Howard.
The party built on nimbyism. Doesn’t want bush land cleared for new housing estates nor do they want high rises apartment complex ruining a neighbourhood and causing gentrification.
If we can get rid of the red and green tape we can speed up development approvals but society needs come to terms that cheapening the price of land (by making more available) means Joey the kangaroo or Blinky the koala might unfortunately be the collateral damage
In short, yes. The implementation of the modern CGT discount happened under Howard’s watch in 1999, which lead to an initial spike in property prices that lasted through to ~2005, when prices then started to plateau/flatten out.
Then, immigration was greatly increased which contributed largely to the next ongoing spike. For the previous 20 years of government prior to Howard taking office, net immigration to Australia averaged around 90,000 per year. In the second half of Howard’s tenure (2006-2007 onward), that was increased to ~190,000 per year & continued to grow higher every subsequent year up until Covid.
You can see both events play out on the chart here – [https://i.imgur.com/03LA33b.png](https://i.imgur.com/03LA33b.png)
So yes, Howard was largely responsible for kicking things off, with all following governments on both sides of the aisle happy to continue perpetuate the same trend.
analysis: “CGT changes had a role in changing housing in Australia for the worse (from the view of ensuring homes are affordable and not investment assets), but due to the chaotic nature of housing and taxation and such, it is nigh-impossible to quantify the exact % this impacted the sector…”
The usual crowd: “BUT WHAT ABOUT THESE OTHER THINGS??? HENCE CGT CAN’T BE TO BLAME AT ALL AND THE LNP AND HOWARD DID NOTHING WRONG AT ALL EVER LOL LOL”
See y’all next month.
Has anyone mentioned Kholer’s piece on Howards 50% reduction on capital gains?
Does it matter? That was the 1990s. How many governments of both sides have we had since who could have made _any_ improvements.
Ffs, even if this is all true are we really meant to believe nobody in power since the 90’s could have taken any action to better the situation or change course? After all of Howard changed policy which caused this, why can’t Albo change policies to improve it?
Howard is irrelevant and blaming him for anything at this point because current politicians won’t do their fucking jobs is asinine deflection.
Lol. Let’s face it, The ALP ain’t and won’t fix it.
Dumb question (on housing as an investment generally)
For an existing home is there any good reason why an investor should be able to bid against a potential owner-occupier?