IT IS certain to be a key argument in next year’s federal election.
This morning the government reignited the constantly simmering debate over negative gearing, accusing Labor of launching a “reckless attack” on the property market.
The opposition has vowed to limit negative gearing to newly built homes and halve the 50 per cent capital gains tax discount.
Bill Shorten claims the current government’s policies give investors an unfair advantage over first home buyers, and overwhelmingly benefit people with high incomes.
But writing in The Australian today, Treasurer Josh Frydenberg said two-thirds of people with negatively geared properties had a taxable income lower than $80,000.
“Those accessing negative gearing are people that the public would not necessarily consider rich,” he said.
Mr Frydenberg said 58,000 teachers, 41,000 nurses and 19,000 police and emergency service workers were among those using negative gearing.
He argued a crackdown would hurt everyone with equity in their home.
“This will punish not just the 1.3 million people with negatively geared properties, but everyone with equity in their home, as when they eventually sell their property they will do so in a market with fewer potential buyers,” Mr Frydenberg said.
“Labor’s policy couldn’t come at a worse time and be more ill-judged.
“This is not the time to give Labor a chance to roll the dice with its reckless and punitive taxation policy that puts at risk our economic growth.”
Speaking to ABC radio last week, Shadow Treasurer Chris Bowen rejected the argument it wasn’t the right time to fiddle with negative gearing.
“You make these reforms for generations. You know the market will go up and down over the next 20 or 30 years but you don’t change negative gearing very often,” Mr Bowen said.
“A number of economists have pointed out that actually this is probably a good time to reform negative gearing because the work by APRA has already taken some of the heat out of the market, some of it has already been factored in, so therefore with less people negative gearing our changes would come as less of a shock to the system.”
He said Labor’s policies were necessary to help with housing affordability and the health of the federal budget.
“This is an important reform for first home buyers. That is appropriate. We should not be providing a bigger subsidy to property investors than first home buyers. At the moment we are.
“We can do much better. The policy is carefully designed, carefully calibrated and it’s the right one for Australia’s future.”
House prices in Australia’s five capital cities have fallen an average of 3.5 per cent in the past 12 months, with the sharpest drops in Sydney and Melbourne.
First home buyers have enjoyed something of a resurgence in that period. They now account for a little over 18 per cent of new home loans.
In a recent interview with news.com.au, Prime Minister Scott Morrison pointed to his government’s First Home Super Savers scheme as one of the reasons for that change.
“I think it’s a pretty simple and constructive scheme which means that people can save for their deposit faster, simply by making the same sacrifice they’re already doing today.”
The scheme lets Australians save for a home deposit using their superannuation account, which means they pay less tax.
“You can save, with exactly the same salary sacrifice, 30 per cent faster than you could before,” the Prime Minister said.
Mr Morrison also highlighted the government’s work with the Australian Prudential Regulation Authority (APRA) to crack down on interest-only mortgages, which made up about 40 per cent of all new home loans at their peak last year.
“When you get people who can just keep borrowing more and more and more and do it on an interest-only basis, they can bid up the price, and that was fuelling the exacerbation of the problem,” he said.