Why did the PM rule out changes to negative gearing last week?
Imagine you were the PM and you could choose right now to:
- knock housing construction down another 4.1 per cent
- reduce GDP by $1.5 billion, and
- end 7000 jobs.
Choose that while the next two years will see:
- apartment production at one fifth to one quarter of 2018 levels
- detached dwelling approvals continue to deteriorate, and
- a much-needed skilled immigration surge of 715,000 people.
The numbers up top are Deloitte modelling from 2019. With rising capital costs and labour challenges the impacts would be worse if modelled now.
You just wouldn’t do it.
Imagine making that change while you’ve promised one million new homes by 2029 and successive state government decisions, including harmful foreign investor surcharges, will continue to diminish apartment supply.
For the disruption it would cause you might change house prices by one to four per cent in a healthy market, one with high rental vacancy, buoyant new supply and modest immigration. That is not the market we are looking at and those price changes will be swept away in months.
You just wouldn’t do it.
Further reducing housing supply aside, even if your sole concern is the most efficient way to raise government revenue, would you still choose changing negative gearing and CGT?
You just wouldn’t. You would boost and broaden the GST and add a safety net while removing inefficient stamp duties, as contemplated at the turn of the century, and ditching foreign investor surcharges which undermine new apartment starts.
No wonder the Prime Minister took the time to spell it out on 16 May: “the government’s position is very clear, and it’s a position for which we received a mandate at the 2022 election – and I’m someone who keeps the commitments that we made”.
Meanwhile, we must continue to return to our national housing challenge.
Governments and parliaments at all levels have spent decades avoiding responsibility for systems that will deliver future housing supply deficits and for tax settings that actively repel new housing.
Those housing deficits are coming home to roost across the country.
There are a lot of elected representatives who are directly responsible for reducing the potential supply of new homes.
- Those whose governments and councils preside over those underperforming planning systems.
- Those who don’t consider their yearly new tax imposts in the context of federal, state and local government taxes that are an average of 30 per cent of the cost of new housing supply across Australia.
- Those who directly encourage a view that our cities should reverse the trend of the last 5,000 years of global urbanisation and stop growing, or at least in their patch.
Get distracted from these facts while the nation needs more homes?
You just wouldn’t do it.