In brief
- Modelling from real estate and builders groups suggested different outcomes from tax reforms to Treasury forecasts.
- Labor minister Mark Butler has said it’s no surprise that the real estate industry “is very happy with the status quo”.
The government’s proposed tax reforms, which are forecasted to have significant repercussions for renters, have been dismissed by the Labor Party as being influenced by “vested interests.”
Health Minister Mark Butler expressed skepticism over the real estate industry’s defense of current policies. This response followed the release of a report by property industry groups, which argued that the government’s tax changes would have a more detrimental effect on rent prices and housing availability than the Treasury’s predictions suggest.
The analysis, conducted by economic consultancies Qaive and Tulipwood and endorsed by the Real Estate Institute, Master Builders, and the Property Council, projects that these budgetary changes will result in 8,700 fewer homes being constructed over the next four years.
According to the report, rents could increase by $9 per week, the Australian economy could shrink by $864 million, and there could be a loss of 3,800 construction jobs compared to current projections.
This study considered the impact of proposed adjustments to negative gearing and capital gains tax discounts, along with a $2 billion initiative intended to fund infrastructure and enhance construction productivity, as outlined in the budget.
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According to Opposition housing spokesman Andrew Bragg, the modelling confirmed suppressing housing supply in a housing crisis was a deliberate design feature of Labor’s budget.
The outcomes were significantly more pessimistic than Treasury’s modelling, which found rents would only increase by $2 a week and housing supply would be 30,000 higher over a decade.
Much of the variance can be explained by different assumptions about the enabling infrastructure fund, which the property industry’s modelling found would only result in 5,300 new homes over four years compared to Treasury’s expectation of 26,000 new homes.
Butler said the government would back the modelling of Treasury officials, who were employed by the public to work in the public interest and “not in the interest of vested interests”.
“I’m not sure people will be particularly shocked that the real estate industry, for example, is very happy with the status quo,” he told Seven’s Sunrise program on Friday.
“What a surprise that they’ve got some modelling that indicates the government should do absolutely nothing.”
Butler cited forecasts from independent think tank the Grattan Institute, which estimated the changes would result in an increase in median rents of just $1 per week.
Negative gearing arrangements would be grandfathered for existing investors, which meant there was no basis for them to increase rents, Butler said.
In a post-budget address on Thursday, Treasury secretary Jenny Wilkinson said the reforms would reverse a decade of declines in home-ownership rates.
“Over the next decade, owner‑occupiers are projected to own around 75,000 more homes than they would have otherwise,” she told the Australian Business Economists lunch in Sydney.
“This reallocation of housing stock, which improves opportunities for first-home buyers, is a result of reduced investor demand in the existing housing market.”
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