Labor reforms to negative gearing will hinder growth, pundits say

by Julia Corderoy28 Jun 2016
Implementing Labor’s reforms to negative gearing will hinder Australia’s economic growth, particularly in light of the unexpected Brexit result on Friday. 

“Providing a stimulus to economic activity outside the mining sector, including the housing and building sectors, was amongst the main reasons for the RBA to keep the official cash rate at record low levels since August 2013,” Real Estate Institute of Australia (REIA) president Neville Sanders said.

“A change in negative gearing arrangements will put that at risk economic growth and cut the asset base of Australian households at a time when we need to facilitate further sustained growth in the housing sector.”

According to figures from SQM Research, house prices could plummet by up to 15% over the next four years under the Labor Party.

The report, which investigates the housing market effects of the Labor Party’s proposal to change negative gearing, forecasts house prices could drop by up to 3% in FR2018, up to 8% in FY2019 and up to 4% in FY2020.

Craig Gillies, sales director of Queensland-based real estate network, Coronis Realty, if implemented, Labor’s negative gearing reforms will shave an estimated $19bn from Australia’s GDP. 

“Reduced overall economic activity means more failing businesses and fewer jobs, and this affects everyone,” he said. 

This is particularly important in light of Britain’s shock referendum, voting in favour of leaving the EU, Real Estate Institute of NSW (REINSW), John Cunningham, said. 

“With Britain opting to play with fire the consequences were swift and will continue to flow. Australians now have a chance to learn from making decisions on poorly thought out strategies and not create the devastation that would be the outcome of the Labor and Green’s policies on negative gearing and capital gains tax at this election,” Cunningham said.