Labor fires back at Master Builders Australia’s criticism of plan to end negative gearing
Labor has slammed research commissioned by Master Builders Australia that argues its proposed reforms to negative gearing and capital gains tax would result in fewer new homes and prompt a serious decline in building jobs.
Modelling by Cadence Economics released by Master Builders Australia (MBA) today concluded that Labor’s policy to restrict negative gearing to new housing would mean as many as 42,000 fewer new dwellings, an $11.8 billion hole in building activity and 32,000 fewer full-time jobs across the country.
However, Labor has highlighted an admission by MBA that the research fails to consider that the Opposition’s policy “grandfathers” existing negative gearing arrangements and that investors currently using the mechanism will not be affected by the proposed policy.
Shadow Treasurer Chris Bowen said the MBA research does not model Labor’s negative gearing policy and assumes that all investors would lose access to negative gearing.
“Labor’s policy is to limit negative gearing to new properties going forward, but to fully grandfather all existing investments,” Mr Bowen told the ABC.
“It’s a fatal flaw in the modelling and it’s a very fundamental issue. You can’t claim that you’ve modelled Labor’s polices when in fact your own document says you haven’t.”
Builders urge Labor policy rethink
MBA chief executive Denita Wawm conceded that the research did not include Labor’s grandfathering of negative gearing, while still maintaining that Labor’s policies around negative gearing and capital gains tax fail its own test.
“We’re aware of their grandfathering policy. We didn’t need to model it because this economic modelling is about future activity not current or past,” Ms Wawm said.
“Master Builders calls on the ALP to rethink their policies in the light of this new research and a changed housing market.
“Australia cannot afford for housing supply, building activity and employment to go backwards.”
Pressed on whether the research was scaremongering given falling house prices in Sydney and Melbourne, Ms Wawn confirmed the results were based on the worst-case scenario.
“We looked at both minimal and worst-case scenario,” she said.
“The scenarios we’ve highlighted are worst case but, nevertheless, the minimal impacts are still significant.”
Labor has maintained a policy to limit negative gearing to new homes and cut the capital gains tax discount from 50 per cent to 25 per cent.
MBA argues Labor’s negative gearing policy will exacerbate softening housing conditions and that the real estate sector is now more vulnerable than ever to shocks.
Ms Wawn confirmed MBA had met with Labor to discuss the negative gearing policy and denied the research was commissioned as a kite-flying exercise.
“We were open, to be honest. There were overtures from the ALP to us that we really needed to take their policy seriously. So we tested their policies and unfortunately the results came back the way they did,” Ms Wawn said.
In a statement, Treasurer Josh Frydenberg said Labor’s negative gearing policy was ill-conceived and would punish 1.3 million Australians.
“The MBA report joins a growing list of experts saying that Labor’s policies would have a significant impact on Australia’s economy and property market, particularly at a time when the housing marking is softening,” Mr Frydenberg argued.
Labor has again cited Treasury advice released under freedom of information legislation stating that the impact of the proposed negative gearing reforms would be “modest”.