Senate debates
Monday, 15 June 2015
Questions without Notice
Taxation
2:28 pm
Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Hansard source
I thank Senator Ludlam for his question and I am pleased to confirm again that the government has absolutely no plans to make any changes to negative gearing. The reason is that this government understands about market economics. We understand that the price of anything is a function of supply and demand. If you are going to reduce the supply of private rental properties, you will push up the cost of rents and you will reduce housing affordability for those Australians who are currently renting. That, of course, was the experience of the Hawke government: even the then Treasurer, Paul Keating, after having pressed ahead with a change in this space, had to pull back. Of course, at various times, various Labor politicians, who tried to make a name for themselves, popped up and tried to suggest that they would make a change. Mark Latham, when he was the shadow Assistant Treasurer, said he was going to make changes to negative gearing until he was called back by the then leader, Simon Crean. I notice there is another view that perhaps the Labor Party wants to go down again into this negative-gearing space but, when I was listening to Mr Shorten the other week, I was finding it very hard to understand what Mr Shorten was actually saying. Was he in favour of a change to negative gearing or was he in favour of the status quo? This led to his answer in the press conference last week, but I did not have a clue what he was talking about.
Tibor Majlath
Posted on 5 Mar 2016 12:14 pm
The senator says"We understand that the price of anything is a function of supply and demand. If you are going to reduce the supply of private rental properties, you will push up the cost of rents and you will reduce housing affordability for those Australians who are currently renting. That, of course, was the experience of the Hawke government: even the then Treasurer, Paul Keating, after having pressed ahead with a change in this space, had to pull back."
In 1985, Hawke/Keating government stopped rental property losses from being used to reduce tax on other sources of assessable income. To quote "However, losses could be carried forward to offset against future rental profits and reduce taxable gains made from other rental properties." Hawke reinstated the earlier form of negative gearing in 1987.
The simplistic claim is that rents increased because of this. Yes and no. Do rents depend only on negative gearing drawing in the investors? So if only Perth and Sydney experienced strong growth in rents but not elsewhere during that period, can one claim it was due entirely to changes to negative gearing? Perth and Sydney had the lowest vacancy levels at the time. Does that not push up rents as well?
Remember the high interest rates under Labor at the time. Did this make investments in housing less attractive and have driven away investors reducing rental stock and increasing rents? Did that make renting more attractive than buying which in turn pushed up rents?
It is always so simple when a politician explains it. How can one naively imply that the changes to negative gearing were mostly responsible for rents going up when there are more salient factors at play? Yes, even supply/demand and availability of money.