Apart from its fascinating ramifications for the tax debate and politics more broadly, Labor’s negative gearing policy — and the possibility the Coalition might also move on the issue — offers the opportunity to watch, in real time, the way industry interests and the media campaign against it.
Today’s Australian Financial Review offers not one, not two, but three separate pieces attacking the proposal. Michael Bleby warned “house prices could suffer greater falls than anything seen in the past decade under Labor’s proposed tax changes”. Larry Schlesinger has a series of anecdotes and whines from wealthy investors and property sector figures making unevidenced claims like “it would shock investors, which could turn into panic and cause the housing bubble to burst”. And right-wing commentator Jennifer Hewett opines about how “the great Australian dream of negative gearing” is under attack.
That’s on top of yesterday’s effort from Ben Potter on how Labor’s policy “could push taxpayers into riskier investments” and from Matthew Cranston on how even property developers who would benefit from Labor’s policy don’t support it.
As Hewett had to acknowledge, however, it’s under “attack” from both Labor and the Coalition. The government has attacked Labor’s policy, but is said to be drawing up its own plans to curb the massive cost (perhaps $2 billion to $4 billion in lost revenue a year) of negative gearing. This won’t be the same as the mining tax brawl, where the Coalition enthusiastically aligned itself with foreign miners and magnates, and key media outlets, to attack the Rudd government’s resources super profits tax.
Given the distortions that negative gearing creates in the economy, the way it renders housing less affordable, making it more difficult for younger people and lower income earners to break into the property market and reducing Australians’ flexibility to move to where the best economic opportunities are, you’d expect the Financial Review to provide rigorous but fair scrutiny of Labor’s announcement. After all, it proudly sponsored last year’s economic reform conference with The Australian to spark greater policy courage among politicians. But the AFR also relies on the property sector — both commercial and residential — for advertising revenue (not to forget the revenue Fairfax derives from domain.com.au).
And the property sector has gone hard. The Property Council of Australia (PCA), alarmed by talk the government might be looking at negative gearing, had already issued a warning aimed at marginal seat MPs on both sides, intended to intimidate politicians into keeping their hands off the cherished deduction. And since Labor’s announcement on Saturday, it has, according to its own website, pumped out nine op-eds or interviews attacking the policy.
The PCA is also a significant donor to both sides of politics. It isn’t the biggest donor by any stretch, but it boxes clever by targetting senior politicians. According to Australian Electoral Commission data, since 2009-10, the Property Council — which commendably discloses all of its donations, whether reportable or not — has given over $134,000 to the Coalition and around $78,000 to Labor. In the lead-up to the 2013 election, it gave specific donations to several events involving Tony Abbott, including an Abbott birthday function; it also targeted donations to Julia Gillard when she was prime minister.
Those who stand to benefit from curbs on negative gearing — younger people, lower-income earners who currently face a very unlevel playing field in competing with investors to buy housing — don’t have any powerful industry peak bodies to speak for them, and no newspapers to campaign on their behalf.
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