Documents acquired under freedom of information laws, which reveal Labor policies in early 2016 to alter the CGT discount and the removal of negative gearing, were assessed by the Turnbull government internally at the time, and if implemented, those policies would have likely resulted in a “modest” property price fall.
Government documents obtained, and reported on first, by the ABC under freedom of information laws show 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 cause 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” as published in 2016.
“Nobody wants to see that happen except apparently Mr Shorten and the Labor Party,” he said.
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, as well as 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,” she said, speaking on ABC News Radio.
“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 Labor’s policy would have had on investors is described as having “some downward pressure on property prices in the short-term, particularly of 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 documents 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 mentioned 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 were 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 said.
The documents in 2016 have only been released after the ABC’s victory in a legal battle, which took two years.