Coalition launches new negative gearing liar

We truly are living in Bizzaro Land.

Following former Treasurer Joe Hockey’s admission to Parliament that negative gearing should be restricted to newly built dwellings only “so that there is an incentive to add to the housing stock rather than an incentive to speculate on existing property”, Assistant Treasurer Kelly O’Dwyer has defended the lurk and played down the prospects for reform. From The SMH:

“It’s on the table – all these things are – although I would note…there’s obviously a lot of discussion about negative gearing and a lot of people say that only wealthy Australians take advantage of negative gearing.”

“When you look at the facts that’s not the case, average income earners are largely the people who do get to take advantage of negative gearing.”

“Nurses, police men and women on an average wage, for instance investing in a property, most of them hold only one property which adds to the housing stock that’s available for [other] people as well.”

Memo to Kelly: Tony Abbott is no longer your leader, so there is no reason to persist with lies to defend his captain’s call not to reform negative gearing.

Your claim that “average income earners are largely the people who do get to take advantage of negative gearing” has been debunked by all and sundry.

The Reserve Bank of Australia’s (RBA) submission to the home ownership inquiry showed that nearly 80% of investment property debt is held by the top 40% of income earners:

While the incidence of property investment increases with the level of income, the Household, Income and Labour Dynamics in Australia (HILDA) Survey also suggests that most investor households are in the top two income quintiles. These households hold nearly 80 per cent of all investor housing debt…

The Australia Institute (TAI), using NATSEM data, has also shown that nearly one third (34%) of the benefits of negative gearing were captured by the top 10% of income earners and nearly one-half (49.8%) by the top 20% of earners:

Finally, the Australian Bureau of Statistics’ (ABS) latest housing occupancy and cost data, released earlier this month, showed that the top 20% of income earners accounted for 39% of all housing investors by number (chart from Greg Jericho):

So, there’s three different data sets from reputable organisations all showing that the distribution of investment property ownership and debt is highly skewed towards high income earners, not “average income earners”.

As for Ms O’Dwyer’s claim that these people are adding “to the housing stock that’s available for [other] people”, what bunk.

The official ABS data clearly shows that over 90% of investor mortgages are for established dwellings rather than new construction:

Hence, the overwhelming majority of negatively geared investors are not adding to housing supply per se, but rather substituting homes for sale into homes for let. In the process, the added housing demand is helping to force-up house values to the detriment of would-be buyers.

In short, Kelly O’Dwyer and her Coalition counterparts should stop lying and get with the program of reforming negative gearing or at least removing its partner-in-crime, the capital gains tax discount.

[email protected]