Anthony Albanese concedes negative gearing reform will hurt supply as economists call for building boost

Economists have called for Labor to focus on bolstering housing supply as Anthony Albanese walked back any enthusiasm for an overhaul of negative gearing and capital gains tax deductions for property investors.

Anthony Albanese faces the media in Tasmania on Wednesday. Picture: NewsWire / Patrick Gee

Economists have called for Labor to redouble it focus on bolstering housing supply over tax concessions on investment properties, as Anthony Albanese wound back any enthusiasm for an overhaul of negative gearing and capital gains tax deductions.

While the Prime Minister flirted with possible changes to property tax breaks on Wednesday, by Thursday morning Mr Albanese sought to reset Labor’s message, undertaking a media blitz to warn that housing shortages could be exacerbated by the measure.

“The issue with negative gearing is one of supply,” he told the ABC, citing Property Council modelling which showed Labor’s proposed overhaul of property tax concessions, which it took to the 2016 and 2019 election, would reduce housing supply by 0.4 per cent over a decade.

“We just want to get on with our plan of building more homes,” the Prime Minister added.

Contained within the changes proposed by Labor, investors were only allowed to deduct rental losses against their personal income on newly built homes. However, existing investment properties were exempt from the policy.

Under its then-leader Bill Shorten, the ALP also proposed to halve the existing 50 per cent discount on the capital gains tax deductions, levied on the appre­ciation of an asset’s value when it is sold. Existing investments were again exempt.

But former RBA economist turned Centre for Independent Studies chief economist Peter Tulip said the tax treatment of investment properties had been cast as a “villain” and altering them would have a negligible effect on housing supply and affordability.

“They want to find a bad guy to punish, and so a lot of people pick rich investors who seem to be getting something that if you don’t think about it closely might look like a tax rort,” Dr Tulip said.

“There are reasons for looking at the tax concessions from an ­equity point of view or a revenue point of view, but they don’t belong in a discussion of housing ­affordability,” he said.

“The government is allocating very little money towards increasing housing supply, despite it being at the very top of voter concerns.”

Nick Garvin, research manager at the e61 institute, an independent think tank, said reducing tax breaks for property investors could ultimately support home ownership, but agreed boosting supply remained critical.

“I wouldn’t discourage any policies that are going to improve affordability … but I think we do need to acknowledge nothing’s really going to have as much of a dent as building more housing.”

Speaking at the National Press Club, former treasurer Joe Hockey, who previously agitated for negative gearing to be skewed towards boosting supply, said the government risked “putting its dead hand right into the market”.

“I’ve always believed – and it applies in our foreign investment and residential real estate – you want to try and skew the system towards new real estate,” he said.