There has been wall-to-wall coverage and commentary on proposed changes to negative gearing and capital gains tax (CGT) leaving the average punter dazed and confused.
Does Australia need reform and what impact would currently proposed changes have?
The McKell Institute surveyed 51 of Australia’s leading and most respected economists between 29 February and 2 March 2016, the key results were:
• 90% of respondents think that negative gearing and the capital gains tax are major tax distortions that lead to an inefficient allocation of resources in the economy
• 73% of respondents think that housing prices will continue to grow under Labor’s proposed negative gearing and capital gains tax reforms
• 92% of respondents believe negative gearing and capital gains tax benefit rich Australians more than poorer Australians
• Only 22% agreed with the common conception that rental prices increased under the Hawke government limited negative gearing reforms.
• A clear majority of respondents (80%) disagreed with the notion that investors would disappear from the housing market if negative gearing was removed from existing housing stock
• 88% of respondents believed that investors would continue to purchase property under Labor’s reforms
Read the full survey here.
Should negative gearing be scraped?
My personal opinion is no, but it needs to be reformed in order to tackle housing affordability (supply) and inequality.
There is middle ground and other alternatives that should be publically debated regarding negative gearing policy. This article covers six interesting options – particularly focused on affordability for low-income tenants.
McKell Institute previously considered five policy options for negative gearing, ranging from the status quo to immediate abolition of the current system. The report from June 2015 is worth a read in full, as well as the additional research released in February 2016.
The myths sprouted by those with vested interests?
One of the main frustrations with the coverage of this issue is the complete myths sprouted and lack of accountability of some of the economic modelling being released. Here are three articles I would strongly recommend reading:
I am all for a policy environment that encourages investment in the property sector, but it needs to be sustainable and equitable. Reforms can be a positive for the property sector, particularly if it was tied to increased supply. It would be refreshing to see the discussion on this topic backed by real data and analysis, which is currently sorely lacking in the majority of media pieces and views of our politicians.