Federal Labor dumps negative gearing policy, backs tax cuts

Federal Labor has dumped its signature housing policy of winding back negative gearing after two election losses while putting itself on a campaign footing by ending its long-time opposition to scheduled tax cuts for high-income earners.

Anthony Albanese’s shadow cabinet settled on the position on Monday morning before Labor’s caucus formally endorsed it in a teleconference with virtually no objections. However, it has triggered blowback from within the party’s progressive membership base after more than 18 months of fierce internal debate.

Anthony Albanese says a Labor government will deliver the same legislated tax relief to more than 9 million Australians as the Coalition.Credit: Alex Ellinghausen

In a strategy to focus the next election on the government’s response to the coronavirus pandemic, Mr Albanese said a Labor government would deliver the same legislated tax relief to more than 9 million Australians who earn over $45,000 as the Coalition. He said by doing so, Labor was providing “certainty and clarity” to Australian families.

“Our focus is on making sure Australia emerges from this crisis stronger and more resilient – with an economy that works for working families, not the other way around,” Mr Albanese said.

“Over eight long years in government, the Coalition’s record is clear in the lives of everyday Australians: stagnant wages, insecure jobs, increased costs for health care and childcare, longer waits to see a GP and a trillion dollars in debt.”

Finance Minister Simon Birmingham said the position was “the most half-hearted concession in Australian politics ever” and should not be believed by voters.

“They’ve done it after months, years, of bickering and arguing inside Labor,” he said.

The opposition went to both the 2016 and 2019 elections promising to halve the 50 per cent capital gains tax deduction and limit negative gearing to new properties only, attracting fierce resistance from the government and the property and construction industries.

The policy was among many highlighted in a review of the ALP election loss as exposing the opposition to a Coalition attack that would risk the budget, the economy and the jobs of economically insecure, low-income workers.

Assistant Treasurer Michael Sukkar labelled Labor’s decision on negative gearing a “cynical” move that was “unashamedly motivated by the pursuit of power”.

“After spending years trying to sell the lie that abolishing negative gearing would benefit Australians and the housing industry, Labor have realised that the Australian people aren’t having it,” he said.

Modelling undertaken by Deloitte Access Economics, commissioned by the Property Council in 2019, found Labor’s previous policy would have reduced GDP by $1.5 billion, shrunk the construction sector by $766 million and failed to meet its stated objectives of improving housing affordability and increasing housing supply.

Property Council of Australia chief executive Ken Morrison said on Monday the opposition’s previous position on negative gearing and capital gains tax was “always the wrong policy, at the wrong time, and voters at two elections knew it”.

The stage three tax cuts are legislated to begin on July 1, 2024, and will cost an estimated $137 billion between then and the end of the decade. They will abolish the 37 per cent tax rate and apply a 30 per cent rate to all income between $45,000 and $200,000.

Labor supported the legislation for the tax cuts after the last election but, it argued, only because they were tied to the stage two tax cuts for low- and middle-income earners that began on July 1 last year.

However, there had been a fierce internal debate about whether to roll them or alter them if they won government because Labor believes they give an unfair advantage to high-income earners.

Supporters of Mr Albanese had cautioned him of the political risk involved in changing the policy, while several leading Right faction figures had pushed for a hybrid model that would give lower-income earners more and cap the cuts at $180,000.

Shadow treasurer Jim Chalmers, who once labelled the cuts “offensive”, said improving the budget was “all about growing the economy” and creating a society that was stronger than before COVID-19.

“It also means ensuring our broader tax system is fair and sustainable, especially when it comes to making sure that multinational corporations are paying their fair share of tax and we will have more to say about that,” Mr Chalmers said.

But several Labor MPs told this masthead they had received criticism from party members on social media and in phone calls to electorate offices following Monday’s decision, with several caucus members asking how Labor would justify the change in positions to voters ahead of the next election.

Greens leader Adam Bandt labelled Labor’s move the “biggest attack on equality for a generation” and urged it to reconsider. The Greens are set to target several Labor-held seats at the next poll and will use both decisions to sharpen their point of difference.

“Tax cuts for billionaires means cuts to services for everyone else. We need to get dental into Medicare, not give tax cuts to billionaires,” Mr Bandt said.

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