Since the Coalition was elected in late 2013, they have given us many fallacious arguments about why negative gearing should remain in its current form (see here, here, here, here, here, here, here, here. and here, just to name a few!).
We were told over and over again that if negative gearing was limited, then rental supply would collapse and rents would skyrocket. This, they told us, is what happened when negative gearing was quarantined between 1985 and 1987, even though the actual evidence shows no material impact on rents (see red line below).
We were also told by the Coalition that negative gearing is important because it facilitates new housing supply, even though the actual housing finance data shows that nearly 19 out of 20 investors purchase existing dwellings (see next chart).
And we were told by the Coalition that negative gearing is primarily utilised by ordinary Aussie battlers, even though the data clearly shows that it is largely the domain of the wealthy.
With these facts in mind, it is interesting to read today the the Coalition Government has not ordered Treasury to undertake any analysis of options to limit negative gearing. From The Canberra Times:
The Abbott government never asked Treasury to do any serious analysis of options to limit negative gearing during its time in power, despite increasing calls from economists and public policy institutes to do so…
They have argued the regime arbitrarily inflates the price of homes, distorts the housing market in favour of older and wealthier Australians, and should be changed to reduce the pace of house price growth and make housing more affordable…
But Treasury’s head of revenue, Rob Heferen, has confirmed to Senate estimates that the Abbott government never asked Treasury to do any “substantive analysis” of options to limit negative gearing to specifically encourage new housing supply, including its impact on the budget.
“In the last two years, Treasury has not done any substantive analysis of options to direct or limit negative gearing to new residential housing,” Mr Heferen said in an answer to a question on notice last week.
…The Property Council has said negative gearing is a commonplace investment strategy “used by everyday Australians looking to get ahead.”
So instead of seeking input from its own economics department, the Coalition instead used the advice from the property lobby rent seekers – the Property Council of Australia and the Housing Industry Association – to craft its policy on negative gearing.
Oh well, at least former Treasurer, Joe Hockey, told us what he really thought as he left parliament, admitting 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”.
Shame Coalition politicians can only admit the truth once they leave office.
