Gearing down
The New South Wales Treasury has modelled the impact of Labor's proposed negative gearing and captital gains tax changes.
They found that changes to negative gearing would cut growth in the economy across a 4-year period.
It's hard to imagine the Senate passing legislation that will slow an already lacklustre national economy.
The claimed Federal Budget savings were already dubious given that investor credit growth has been squeezed to the lowest level on record by macropruduential measures and some already implemented tax changes.
But a cut to growth in final demand makes the savings even less likely than they already were.
The ALP proposals were made in 2016 when the housing market was booming, driven by property investors, but that dynamic is no longer in place.
The NSW Treasury modelling also found that housing turnover would be reduced, so stamp duty take would fall by close to $200 million over three years, damaging the State's bottom line.
Social and labour force mobility has already been stymied by record low housing turnover, so this is the last thing the market needs.
The modelling found that there would only be a marginal change in housing prices resulting from such changes, so there would be no meaningful improvement to housing affordability.
The elephant in the room is that buyers of new property generally lose money on resale, and Labor's policy almost assures this for investors given the two-tier nature of the proposed tax changes.
This problem was previously exported to Chinese investors, but people didn't like it.
