Why economists want to see the end of negative gearing
THE McKell Institute has released a new report on negative gearing, arguing the recent fall in house prices has done nothing to change the economic rationale for reforming the policy to apply to new properties only.
In fact, the Institute says reform is "even more urgent" now than it was in 2015, when it released its previous report on the subject.
That contradicts the government's assertions that Labor's proposed negative gearing changes will have a severely negative impact on the market.
There are five key findings in the report:
The economic rationale "remains unchanged despite recent developments in the housing market";
The recent drop in median house prices reflects "the centrality of variables other than negative gearing in dictating prices";
Property prices are still growing faster than wages;
Housing affordability has worsened "on most indicators" since the 2015 report;
Banks have raised their interest rates since 2015, increasing the government's tax expenditures on negative gearing by $1.6 billion.
All of that adds up to an argument supporting the restriction of negative gearing.