Turnbull Govt - reportedly drops Negative Gearing Model

The short answer is yes, Labor has been in power when the economy was "booming".

This dates back to the Hawke Labor Government in the early 80's.

Economic liberalisation and deregulation of the Australian economy only began under the Hawke Labor Government in the early 1980s. The government of Robert Hawke commenced the process of economic reform by concluding a wages accord with the trade union movement. In exchange for wage restraint and an increase in the "social wage" the trade union movement agreed to support economic reform and oppose industrial conflict (i.e. strikes). The success of the "Accord" allowed a Labor Government to implement economic reforms that in other nations had been implemented by conservative political parties; tariffs were progressively cut, the Australian dollar was floated (1983), and the financial system deregulated.​

It could be argued that the deregulation of the Australian economy led to the biggest boom in Australia's history. By the late 80's a housing price bubble had formed and a stockmarket bubble had formed. Inflation was out of control. This was a booming economy but not in a good way. Effectively, high inflation meant that real wages fell in every year from 1985 to the early 1990's. Unemployment averaged 8.1 per cent in the 10 years prior to the recession of the early 1990's.

The decade prior to the early 1990s recession was truly a miserable economic picture of high inflation, high unemployment and falling wages. Asset prices were surging, distorting investment away from productive uses and while many structurally important policy changes had been made in the prior few years, an active ingredient was needed to make them work.​

So yes, this was a massive boom under a Labor government but it could be argued that it was also a destructive boom.

Economic history of Australia - Wikipedia, the free encyclopedia

Keating and the recession we had to have | Market Economics

 

There’s a widely held view that Hawke and Keating’s economic policies have been hugely beneficial to Australia even to this day, in particular by laying the foundation for our uninterrupted growth.

 

Is there anyone else I can vote for, anymore right wing parties?
I vote for individuals not parties. I have voted for Tony, he got sacked. I have nobody to vote for in their camp anymore.

 

Is there anyone else I can vote for, anymore right wing parties?
I vote for individuals not parties. I have voted for Tony, he got sacked. I have nobody to vote for in their camp anymore.

 

Some. It could be argued that deregulating the economy and floating the dollar in the early 80's led to the boom of the late 80's. Then ratcheting up interest rates has been blamed for the early 90's recession. But since then, annual inflation has averaged 2.5 per cent. This could be attributed to government policy.

Howard has been credited with bringing the budget back into surplus, maintaining stable inflation etc. The other argument is that he only brought the budget into surplus by selling government assets. The Howard and Costello team have been blamed for setting the budget up for a structural deficit by overly generous "middle class welfare".

I think it would be difficult to argue that any Australian government is responsible for the mining boom mark I or mining boom mark II. However, it could be argued that various government interventions have contributed to decades of strong house price growth.

The other issue is the lag between policy implementation and economic outcome. Any government in power takes credit for a strong economy where it may have been the policies of the previous government that caused the strong economy or the strong economy may be independent of government policy. Sometimes an economy is strong despite the government, not because of it.

 

Go to the US and Vote for the Donald ?

Cliff

 

Liberal Democrats - stand for low tax, smaller government, free markets and individual liberty, which I agree with. I don't agree with winding back gun laws though.

 

Not really accurate as investors with other investment income will be able to negatively gear established homes against that.

New housing is the most affordable for new home buyers? I guess that depends on where it is. Typically a new home would be more expensive than the established equivalent in the same suburb.

Often investors are turned away from OTP or new homes on here... why do you think that is the best stock for First Home Buyers?

It has the potential to add supply of new homes if the states open up land for development.

There's room for improvement, but it's a step in the right direction.

 

Sounds like they are getting desperate for a quick fix rather then doing the hard work of analysing projects that they have on their books that are over budget, too expensive and/or no longer required.

 

BIS crapnel can't beat a monkey throwing darts at a board blindfolded when it comes to predictions.

The 'killing' of 175k jobs just sounds like total BS!

 

As someone who does not follow politics closely, I just have one question.
What is the governments end game?

Why are they proposing these changes? Is it to appease the loud? Or is it to put more money back into the government pockets? If so then how do they plan to distribute this?

If the end result is something meaningful like let's say a full fiber network to every home then scrap away! That would bring more to Australia and opportunity to so many more people than what negative gearing ever will.
If it's to propose multi million dollar projects and then scrap them (east west link anyone?) then leave it alone.

 

The biggest hinderence to first home buyers isn't the price point, it's coming up with enough deposit to cover stamp duties, a minimal deposit and other purchase costs. Buying into new home markets goes a long way to mitigating this through stamp duty reductions and the $10,000 grant (which doesn't otherwise apply).

I see this all the time in my business. Many young people have the income to afford the debt, but they struggle to get a deposit together and end up getting gifts from parents, using equity loans or simply waiting until they can save more money.

I'm not really talking about inner city OTP developments, but the first home buyer market in outter suburbs is huge. Price points are still reasonable in these areas, it's where the majority of first home buyers that I see end up purchasing.

Favorable price points, stamp duty reductions and negative gearing benefits would send a lot of investors to the same market, especially when the factor in the depreciation benefits as well. This simply adds more competition. This increases prices and the only ones who really benefit are the developers who release estates in stages.

At the same time I don't see how it'll make established housing significnatly more affordable. Grandfathering will mean existing investors won't be compelled to sell. There'll be less demand from new investors, but realistically this isn't as larger market as people perceive it to be. People who are selling and can't acheive their expectations often simply hold the property for a while longer. It might cause a 10% dip in the market, but for those waiting for a 40% crash, they'll be disappointed.

If you want to make housing easier for first home buyers, state governments need to increase the price points for stamp duty reduction cutoffs and possibly make the reductions larger. At the same time they need to reduce the red tape and various taxes (through direct tax & permits) on construction.

There's numerous causes for housing unaffordability but a lot of it has to do with state governments. They determine stamp duty levels and administer various grants. They also are responsible for local infastructure planning which has a direct impact on the centralisation of employment and population density which increases local demand.

Negative gearing is a bit of a scape goat for housing affordability. Removing it will probably reduce housing costs in some areas whilst increasing it in others. Within a few years markets will stablise and the same affordability complaints will resurface. The best way to address affordability is simply to reduce real barriers to entry which include a lack of supply and government related costs.

 

No argument from me. What I (having 30+ years experience of the UK tax regime) have a problem with is allowing those expenses to be offset against income from another source. The UK system - if you make a loss on rental properties you carry it forward against future rental profits - is IMO the fair way to do it. The wild claims from the Libs that changing NG will cause house prices to fall by 10% is another way of saying that its existence inflates them by 11%. Not that I believe this.

 

My theory, simply to win votes and gain power in a short term news cycle. You don't need to look far to find evidence of policy based on polls.

Seems fair to me. The strange thing is this has been suggested as a solution by investors for years. Why isn't it the core of any proposals we see?

 

Which would add to supply. It's not in most investors favour. But it would make the purchase price of existing housing more affordable.

Wrong. New housing is currently far more expensive than used housing.

So FHBs will move to used.

No they are not.

No one is proposing that.

So? No party is suggesting that these costs will not be deductible against the income that incurred these costs.

No one is suggesting that they wouldn't be.

 

I don't think this is necessarily true. Negative gearing exists now for new buildings and the write-offs are generally much larger that in established houses due to depreciation yet over 90% of investors choose to buy established. A bad investment will continue be a bad investment doesn't matter how much benefits you attached to it.

What I can see is a reduction of property investment in general..

 

Does anyone actually think that demand in new developments would drop? I'm not suggesting that all investors would look to new developments, but quite a few would.

I agree that people pay a premium for a new property but price isn't most people's barrier to entry into the property market.

 

Agree, there is more to be done than a single policy change to improve affordability (& there has been more, see the recent crack down on foreign investors, APRA reigning in investors through more prudent lending standards). This should be tackled from both supply and demand sides given government has a strong influence over both. Changes to supply will take time, changes to demand can be much faster (which is why it should be started there). It's not reasonable to expect that investor demand can take up the share of new finance and purchases it has recently without government taking action.

 

The other way to reduce housing prices is to restrict the supply of money. APRA is taking credit for slowing down the housing market. The new modelling has reduced borrowing power for everyone, but most of all for those who are already have a lot of debt. The biggest benificiaries of the last 8 months has been the owner occupier market, but they don't appear to have noticed it much.

 

Well reasoned