James Campbell: It’s crunch time on negative gearing

THE Coalition intends to go large on negative gearing before next year’s election but the wisdom of this move is debatable, writes James Campbell.

WEDNESDAY’S headlines around the country, which sat above stories describing the seat-by-seat impact of opposition leader Bill Shorten’s proposed changes to negative gearing, make it clear the Morrison government plans to go big in this space at the next election.

The stories, based on an analysis of ATO data across electorate maps, showed that the number of people who negatively gear properties is spread pretty evenly between seats held by Labor and Coalition MPs.

It’s findings were seized upon by Treasurer Josh Frydenberg, who told The Australian it showed Labor was “smashing its own” people.

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He later doubled-down on Sky News calling Labor’s position “shambolic” because its MPs can’t agree on whether the policy would cause house prices to fall.

As long as Labor makes it clear to negative gearers they will continue to get their refunds each year, I suspect they will not worry too much about that when they come to vote next year. Picture: AAP

But when asked if the government was happy to take credit for the recent falls in house prices in Sydney and Melbourne he waffled.

There is confusion on both sides here.

Labor doesn’t want to admit its policy might cause prices to fall further — even though that is clearly the whole point of its plan — while the government wants to argue that we don’t need to take any action to cool the property market because it’s cooled quite enough already, thank you, while at the same time refusing to say if this was something it intended to do.

Which side is going to win this battle of ideas? On present form you’d have to argue that Labor will prevail.

For a start, the policy — which would see negative gearing abolished for existing properties, with grandfathering to allow all the existing negative gearers to keep doing their thing — is not new. Labor took it to the previous election and still came within an inch of winning.

Yes, the property market has cooled down since then but these falls are not exactly the sort of stuff that takes older readers back to Joan Kirner’s Victoria.

You could argue that what Scott Morrison and his Treasurer need now are cudgels to belt the Labor Party over the head. Picture: AAP

Population, that is to say demand, is still going gangbusters. And these falls — so far anyway — come at the end of a long period in which the growth in house prices has outstripped the growth in wages.

In other words, while housing affordability has improved a bit, it is still atrocious compared with the conditions which prevailed in the 1960s, 70s and 80s.

As has been pointed out time and again, home ownership rates among the working-age population have plummeted since then. Between the 1980s and 2016, according to a recent Grattan Institute report, it fell from 61 per cent to 44 per cent, while for those aged between 35 to 44 had it dropped from 75 per cent to 62 per cent over the same period.

I would invite any Liberals reading this column to reflect on those number while we have a look at the most recent breakdown of voting intention by age as revealed recently in The Australian.

I’M SORRY to keep going on about this, but when your share of the vote among 18-34-year-olds is 27 per cent, your party has an existential problem on its hands. Especially when the share of the vote among the 34-49-year-olds is only 31 per cent.

Thinks about it: two thirds of people under the age of 50 — actually a lot more than two thirds of the people under the age of 50 — are planning to vote against the government at the next election.

Do you think there is a chance that the Liberal Party’s diabolical predicament on this front and the falling home ownership rates among the under 45s that I mentioned before could possibly be connected?

If they think the answer to that question might well be yes, Liberals need to ask themselves whether it is a good idea to be treating negative gearing as though it is a sacred part of our national settlement which, like the recipe for Vegemite, can never be changed?

Is this, as John Le Mesurier used to ask in Dad’s Army — a show most Liberal voters are old enough to remember — wise?

You could argue I suppose that the home ownership rates of the under 45s are a problem for another day and what Scott Morrison and his Treasurer need now are cudgels to belt the Labor Party over the head. The 1.3 million people who made use of negative gearing are votes they think they can win here. But how many of these votes are really up for grabs? How many negative gearers probably vote Liberal already?

Can’t they see that hugging negative gearers alienates people who are sick to death of coming second at auctions to investors buying their second, third or fourth property — and that there are lot more of them up for grabs?

Moreover by grandfathering its plans, Labor has surely quarantined itself from a negative gearers’ backlash. Yes, Labor’s changes to capital gains tax will have some impact on these people’s investment returns and yes, the abolition of negative gearing on existing homes will probably have some — how much is debatable — effect on property prices.

But as long as Labor makes it clear to negative gearers that they will continue to get their refunds each year, I suspect they will not worry too much about that when they come to vote next year.

Whereas I suspect the young who detest negative gearing are going to mind a great deal.

James Campbell is national politics editor

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