‘The danger is that Labor looks like it’s taking its policy cues from the Greens who want negative gearing blown up’ | Maiden

It shouldn’t really come as any surprise to learn that Treasury bureaucrats are war-gaming changes to negative gearing and capital gains tax yet again, writes Samantha Maiden.

It shouldn’t really come as any surprise to learn that Treasury bureaucrats are war-gaming changes to negative gearing and capital gains tax in Australia – again.

Like sausage rolls and sauce or toast and Vegemite, it would be a strange economist walking the halls of the public service who does not harbour barely contained urges to fantasy football these ideas.

What was interesting about the re-emergence of the debate this week was that the Prime Minister did two things. First, he refused to pretend that public servants were not examining all options when it comes to the housing affordability debate.

Prime Minister Anthony Albanese was asked about negative gearing this week. Picture: NewsWire / Patrick Gee

“I have seen those reports. And what we do is we value the public service. So from time to time, I’m sure the public service are looking at policy ideas,’’ he said.

“That’s because we value them. But we have our housing policy. It’s out there for all to see.”

Secondly, he didn’t rule it out. And while, yes, some people get very annoyed with the media asking politicians to rule things in and rule things out, there’s a reason why journalists should ask these questions. And why it is noteworthy when politicians don’t really answer them. So, is he considering making changes to negative gearing and capital gains tax concessions?

“What our government is considering is fixing housing supply by getting our legislation through the Senate,’’ Mr Albanese replied.

“That’s what we’re considering.”

That’s not exactly what you would call a firm denial.

Which is doubly interesting when you consider that Anthony Albanese really led the charge to ensure Bill Shorten’s negative gearing reforms were dead, buried and cremated after the 2019 election.

On a simple political level this will be music to Peter Dutton’s ears. If he can run a big scare campaign on new taxes at the next election that’s a huge plus. But it would be wrong to suggest that Coalition governments never flirted with the idea over the years.

Gearing up for a battle to win over young voters.

Former prime minister Scott Morrison, for example, expressed interest in overhauling housing tax concessions, including negative gearing, just days into his time as treasurer, according to official documents.

Obtained under freedom of information laws, a senior NSW Treasury official in October 2015 wrote: “The Commonwealth appears more willing to consider broader tax reform. The Commonwealth Treasurer has indicated that all options need to be considered, including superannuation, capital gains tax and negative gearing.”

Mr Morrison in February 2016 said there were “excesses” in negative gearing and that the government was considering changes. But he didn’t do anything.

There’s no doubt there’s serious thinkers who are respected by the Albanese government that think it’s not a debate that’s overdue.

Take the advice of Productivity Commission boss Danielle Wood, who shortly before taking up the role offered the observation that her reading was that when political leaders do the work of tilling the ground and explaining changes and why they are needed, then hearts and minds can shift.

“A more recent example, albeit one contrary to received wisdom, was the then Labor opposition’s 2016 policy to wind back negative gearing and reduce the capital gains tax discount,’’ she said. “Negative gearing had formerly been viewed as a political untouchable. Indeed, since the Hawke government lost its nerve and reversed its decision to wind back negative gearing in 1987, it has been considered the sacred cow of Australian politics.

“When Labor announced it would introduce these changes to improve housing affordability and contribute to the budget bottomline in 2016, just over a third of Australians supported removing or limiting negative gearing.”

But, over time, as shadow treasurer Chris Bowen and others made the case, support gradually increased, she argued. Support for limits on negative gearing climbed almost 10 percentage points, from 34 per cent in March 2016 to 43 per cent in December 2018. By the time of the 2019 election, the Australian Election Study estimated that 57 per cent of Australians supported limiting negative gearing.

“To me this is a textbook example of what some political strategists call the ‘vomit principle’ – repeat something until you feel like you are going to vomit. Only then are you cutting through,’’ she said.

“Labor has since dropped the policy, of course, and many reading the media commentary would have gained the impression that the tax reform agenda was deeply unpopular and ‘to blame’ for Labor’s surprise election loss in 2019. The reality was far more complex.”

What is needed to have a more mature debate about housing concessions is to examine whether or not making changes would really make that much of a difference to housing prices.

If any government – Labor or Liberal – was to ever tinker with negative gearing, you can expect to hear a lot about grandfathering.

In other words, the changes are more likely to affect new investors rather than existing ones. In the news reports that emerged this week, there was discussion of grandfathering and also simply limiting the number of homes an investor can use for the purposes of negative gearing.

So what’s changed that would make the ALP even consider such changes just as Bill Shorten, the man who went to an election and lost when he tried, prepares to leave parliament?

Two words – housing affordability. The question is whether or not the game has changed because of a younger bloc of voters who can’t crack the housing market.

The danger is that Labor looks like it’s taking its policy cues from the Greens who want negative gearing blown up, even though many of their own senators don’t mind the odd investment property themselves.