Alan Kohler says Labor’s tax changes probably won’t lower house prices
- Written by: Michelle Grattan, Professorial Fellow, University of Canberra
Changes to negative gearing and the capital gains tax discount on housing (and probably other assets) are now considered certain in Tuesday’s budget.
We don’t know all the details but the driving idea is to tilt the balance away from investors towards first home buyers.
More broadly, the measures will be part of the budget wider theme of intergenerational equity.
On this podcast we speak to Alan Kohler who, among other roles, is a financial commentator for the ABC. He authored The Great Divide: Australia’s Housing Mess and How to Fix It[1], published in 2024.
On why Labor is more willing to tackle negative gearing and the capital gains tax discount when it lost elections with such policies in 2019 and 2016, Kohler’s says politics has moved on:
I think now we’ve got to the point where housing affordability is that much worse than it was in 2019, and I think everyone’s ready for something to happen.
[However][…] that will not in itself bring house prices down. But it’ll make everyone feel a bit better.
Asked if there’s any reason for optimism given the multiple challenges in the housing market, Kohler says:
My optimism is simply focused on it not getting any worse. I very much doubt that house prices will go back to where they were in relation to incomes. When they started rising in 2000, house prices were about four times average incomes. And now they’re nine times roughly, maybe ten, depending where you are.
I think that the proportion of people who have to rent for their entire lives will increase. And that’s not so bad. I mean, it’s not the end of the world. A lot of people in Europe and everywhere, they rent all the time.
Kohler says continuing to make suburbs more densely populated can’t be the only solution and Australia should look at better transport to regional cities:
What’s required is better transport infrastructure through the regional centres. So fast trains to regional towns like Bathurst and Newcastle and not just fast trains between Melbourne and Sydney, but fast trains between Melbourne and Bendigo and Geelong.
There are a lot of new suburbs going up around Geelong. So a lot of housing is being built there. [But] there’s a limit to what you can do there, because it’s hard to commute to Melbourne.
On trying to recruit skilled tradespeople from abroad, Kohler points to the problem of migrants not having their trade qualifications recognised:
The countries from which the migrants come now, which is mainly India and China and other Asian countries, the trade qualifications that exist in those countries are not recognised in Australia. So the people who migrate from those countries are not allowed to work as tradies in Australia.
I think there are possibly some good reasons that the trades aren’t recognised, but it’s hard to know. I don’t know whether a lot of tradies would be emigrating from India and China if their qualifications were recognised, but you think that there’d be more of them.
References
- ^ The Great Divide: Australia’s Housing Mess and How to Fix It (www.blackincbooks.com.au)
Authors: Michelle Grattan, Professorial Fellow, University of Canberra
