A report released today by SQM on Labors reforms to negative gearing, supported by commentary this morning from Mr Louis Christopher, is confused and all over the shop in terms of its conclusions, assumptions and policy prescriptions.
Mr Christopher today on ABC radio alongside his report seems to be arguing:
- Labor should not fully grandfather current property investors;
- Negative gearing should be semi-grandfathered or phased-in for new investors over three years;
- Assumes bank lending becomes less restrictive under the Liberals but not under Labor why???
Federal Labors housing affordability reforms enjoy the support of many independent economists and think tanks like the Grattan Institute and Saul Eslake as well as international economic agencies like the International Monetary Fund.
SQMs Louis Christophers analysis and cataclysmic conclusions are not new, they are an update of what he released in November last year. Previously, and even this morning on ABC radio, Mr Christopher continues to walk the line of forecasting doom and gloom under Labor while saying he supports the reforms to negative gearing.
This morning Mr Christopher said on ABC radio that while he supports Labors reforms to negative gearing he thinks there should be a phase in well there is no greater transitional arrangement than having all current property investments that are negatively geared, fully grandfathered.
Federal Labor put to Mr Christopher yesterday that his report had a major inconsistency in the treatment of various hypothetical scenarios, whereby only in the scenario that models the Liberal Partys no reform option is it assumed that bank lending is less restrictive. Why is that particular to that scenario only? The availability of credit in the economy has a material impact on house prices as we have seen over the last year or so.
It also remains unclear why the SQM analysis fails to consider what has driven house prices down under the Liberals, particularly in Sydney and Melbourne, over the last year.
Interestingly, the report forecasts an increase in rents of 9 per cent under the Liberals but 12 per cent under Labors reforms to negative gearing, it then goes on to suggest that by the same token, once the market returns to equilibrium, completions would likely recover providing long term relief to rents as envisioned by Labor.
Mr Christophers analysis and conclusions about dramatic falls in house prices is contradicted by the Australian Treasury, who in documents recently released under the Freedom of Information Act, said in response to Liberal claims that house prices would fall under Labor that:
"The statement is not consistent with our advice. We did not say that the proposed policies 'will' reduce house prices.
"We said that they 'could' put downward pressure on house prices in the short-term depending on what else was going on in the market at the time, but in the long-term they were unlikely to have much impact."
At the next election theres a choice: The Liberals plan to stand up for banks and top end of town, or Labors plan to fix our schools and hospitals.
Federal Labors plan is good for the budget, good for construction jobs and fair for first home buyers.
If you already use negative gearing, nothing changes. Its not retrospective. And you can still use it for new houses.
Federal Labor is reforming negative gearing to put young first home buyers on more of a level playing field with property investors seeking their 6th or 7th property.
