Opposition to Labor’s housing policy mounts as election looms

New research commissioned by the Housing Industry Association (HIA), which involved a survey of 1,500 Australians across the political aisle conducted by JWS Research, has found that only 26 per cent of voters support the Australian Labor Party’s (ALP’s) proposal to limit negative gearing to new housing, while only 22 per cent of voters support its policy to halve the capital gains tax discount to 25 per cent.

“HIA has always said that changes to negative gearing and capital gains tax for housing are bad policy,” HIA managing director Graham Wolfe said.

“This research confirms how unpopular these changes are across all political persuasions. Twice as many voters oppose these changes than support them.”

Additionally, the HIA research found that only 34 per cent of Australians understand the proposal.  

“Australians are being asked to make a decision on a policy that will harm them directly, without fully understanding the consequences or the policy objectives,” Mr Wolfe added.  

“Because of this, most people (74 per cent) believe there should be a review of the policy before any changes are made.”

Moreover, the study found that 52 percent of respondents expect rents to rise as a consequence of the changes, which Mr Wolfe believe would exacerbate housing affordability pressures.

“If these changes are made, rents will rise as supply dries up due to a lack of investment in new housing,” he said. “This will make renting a home less affordable.”

He continued: “If rents rise, renters saving for a deposit for their own home will take a backward step. These changes are anti-investment.

“We can’t solve the housing affordability challenge by taxing housing. This policy seeks to do just that.”

Industry pundits have also warned that Labor’s proposal would exacerbate the fall in dwelling values, with the latest data from property research group CoreLogic reporting that national home prices fell by 7 per cent per cent in the year to 31 March 2019.

Speaking on a panel at NAB’s annual budget breakfast on Wednesday (3 April), Jonathan Pain, economist and author of The Pain Report, observed: “I’m afraid to say that there’s only one consequence of [changes to negative gearing].

“If Labor wins and that comes in, clearly the sliding house prices are going to slide even further until we get to a new equilibrium. I’m not quite sure where that is.”

Weakening housing market conditions, along with subdued wage growth, have heightened expectations of a near-term adjustment to monetary policy from the Reserve Bank of Australia (RBA).  

NAB chief economist Alan Oster has touted the likelihood of a post-election cut to the cash rate.

“RBA doesn’t want to do it, but I think they’re eventually going to have to say, ’Post the election, unless things start to get better on the consumer side, then we probably need to do something about rate cuts to try and get something going’,” he said at NAB’s budget breakfast in Melbourne.

“People say, ‘If you [cut rates] by 50 basis points, will that matter much?’ Probably not. It might weaken the currency a bit, but it’s the policy of least regret.”

Mr Pain expects the RBA to cut the official cash rate four times in the next two years to a new record low of 0.5 per cent.

“I think the Reserve Bank is going to cut rates as soon as this election is out of the way. If we didn’t have this election in May, I think the Reserve Bank would have already been cutting rates,” Mr Pain said.

Mr Pain claimed that the RBA would decrease the cash rate by 1 percentage point (from 1.5 per cent to 0.5 per cent) because it is unlikely that the banks would pass on the entirety of their savings to their customers.

“I’m saying 1 per cent because the banks will arguably only pass on about 60 to 65 per cent of that,” Mr Pain said.

“Don’t forget, last time they didn’t pass it on for a range of reasons. Banks always want to protect their margins.”

[Related: Coalition urged to do more on housing]