After a reshuffle of Labor’s shadow cabinet on Friday ousted long-term incumbent Mark Butler from the climate change portfolio, pressure is mounting on Anthony Albanese to resolve party tensions over emissions reduction.
But climate isn’t the only policy tussle Albo will need to adjudicate ahead of a rumoured spring federal election. Another is negative gearing and the capital gains tax discount.
Some MPs and commentators blame such redistributive tax proposals for Labor’s unexpected election loss in 2019. Such concerns culminated in Labor officially dropping its controversial franking credits policy in January.
Recent pieces in The Australian and the AFR have put pressure on Albanese to cave on housing-related tax concessions too. While he insists a decision is yet to be made, there is a “developing view” among Labor insiders that these policies will also be dumped.
Get Crikey FREE to your inbox every weekday morning with the Crikey Worm.
But just like on climate policy, Labor’s leadership team should ignore the proponents of capitulation, who remain unconvincing on both the political viability and economic imperative of taming the exponential growth in capital city house prices.
Negative gearing did not lose Labor the election
First, reforming taxation of valuable assets is not the electoral poison some make it out to be.
Labor announced its plan to end negative gearing tax concessions for future property purchases and halve the capital gains tax discount in early 2016. A few months later the party almost toppled the first-term Coalition government, picking up 14 seats and reducing Turnbull’s majority to one.
But after Labor’s 2019 election loss, some hypothesised its negative gearing position might have produced a delayed backlash among voters. However, statistical analysis commissioned by Labor for its official election post-mortem “had not been able to identify either [negative gearing or franking credits policies] as significant vote changers in their own right”, and found higher-income urban voters most likely to be affected by those policies had swung towards Labor.
The real problem, it concluded, was that the slew of complex policies confused and frightened some voters, and Shorten’s flaccid leadership failed to allay their suspicions. The policy substance was not the issue; the strategic communication was.
Property market in unstoppable death spiral
Labor has changed its leader and pared back the size of its agenda (indeed many argue it is now too “tiny”), but the moral imperative to find room in its platform for tackling housing inequality has only increased.
The Domain house price index, released last Thursday, shows prices grew last year despite our economy experiencing the deepest recession since the Great Depression and the steepest decline in population growth in decades.
Median house prices hit a record $852,940 by year’s end, with Sydney’s median surging to a staggering $1.21 million.
Some wishful reports in early 2020 predicted a golden opportunity for young people to snap up homes during the pandemic. Indeed first-home buyers have hit their highest level since the GFC, suggesting some did leap at the initial opportunity presented by fewer and less confident competitors at auctions.
But housing experts argue this is likely to be a short-lived reprieve that mainly benefited high-income earners who had almost saved enough for a deposit anyway.
“For essential workers and aspiring first-home buyers, the hurdles are harder than ever,” University of Sydney urban planner Professor Nicole Gurran told Domain.
Australia was not the only country to see rapid property price growth last year. Investors across the globe threw cash at assets with relatively stable futures amid an uncertain business environment.
Federal government must wind down the gravy train
The Victorian government’s recent social housing commitment, and the NSW government’s transition from stamp duty to land taxes and fast-tracked metropolitan construction, will help modestly slow the spiral.
The biggest driver of Australia’s unsustainable house price growth remains the decades-long crowding out of owner-occupiers by speculators and rent-seeking investors.
Any political party serious about tackling inequality across classes and generations must commit to restraining investors’ involvement in the fundamental human necessity of housing. Removing our uniquely regressive tax concessions is an obvious place to start.
Albanese grew up in public housing so knows intimately the importance of the government ensuring a roof over citizens’ heads. Hopefully he recalls its impact when the usual cynics argue the price of winning over working- and middle-class voters is dooming their children to perpetual rental stress.