Documents acquired under freedom of information laws reveal that the 2016 Labor policies seeking to alter negative gearing and CGT were assessed by the Turnbull government at the time, and if implemented, these policies would likely have resulted in a “modest” property price fall.
Government documents obtained (and reported on first) by the ABC under freedom of information laws show that the Labor Party’s proposal to remove negative gearing and reduce the CGT discount from 50 per cent down to 25 per cent could have potentially saved the Australian economy $2 billion as well as caused a relatively small impact on property prices.
These claims appear to contradict previous statements made by members of the Turnbull government back in 2016, such as Malcolm Turnbull stating that the policy was “reckless” and a “big sledgehammer”.
“Nobody wants to see that happen except apparently Mr Shorten and the Labor Party,” Mr Turnbull said at the time.
A report released in 2016 by the Grattan Institute supported Labor’s claims, but Mr Turnbull said at the time that the proposed impact was “factually incorrect”.
“Unfortunately, the [Grattan Institute] paper is littered with factually incorrect statements, claims that are unsupported by evidence and direct contradictions. And its economic analysis in many places leaves a lot to be desired,” the PM said.
Kelly O’Dwyer — Minister for Revenue and Financial Services, Minister for Women, and Minister Assisting the Prime Minister for the Public Service — denied that the Turnbull government was inconsistent between its public claims and the information contained in the documents, saying it was “completely false” that Mr Morrison lied.
“I have had a look at [the documents] and there is nothing inconsistent with what the Treasurer said, with what the government has been saying and the advice that’s been provided,” the minister said on ABC NewsRadio.
“And the idea that you would make changes to tax policy on that basis that would impact the entire country rather than taking a scalpel-like approach — that is the approach — a scalpel-like approach is the approach that will mean that more people can save for their own home, that more people can take advantage of negative gearing.”
In the recently released documents, the resulting impact that the Labor’s policy would have had on investors is described as having “some downward pressure on property prices in the short term, particularly if the commencement of the policy coincides with a weaker housing market”.
Looking to the long term, the document also stated that the policy “could have a relatively modest downward impact on property prices”.
Previous attempts to change negative gearing, the document states further, such as those between 1985 and 1987 and the introduction of the CGT discount in 1999 “had little discernible impact on the market”. The document goes as far to mention that, if implemented, the policy could have contributed to an inevitable downturn of the current property cycle regardless, as “the housing market itself has historically been highly cyclical”.
“Overall, price changes are likely to be small, though the composition of ownership may shift away from domestic investors.”
Foreign investors have been predicted to see an even smaller impact by the proposed changes, as non-residents are exempt from the CGT discount, and while they may have been affected by the negative gearing changes, “they are unlikely to have non-investment income to offset losses against”.
The documents in 2016 have only been released after the ABC’s victory in the two-year legal battle.