With the negative gearing debate refusing to go away, former prime minister John Howard has reminded voters of where it all went wrong.
Speaking at the First National Real Estate convention last week, Mr Howard lamented that the ongoing debate about negative gearing policy – fuelled by the upcoming federal election – was not giving enough airtime to its removal in 1985.
“When negative gearing was removed by then Treasurer Paul Keating in 1985, it was quietly brought back in the 1987 budget,” he said.
“The debate needs to focus on that piece of field evidence because the experiment with negative gearing was widely regarded as a failure. That’s more important than glossy economists’ reports.”
Mr Howard stressed that the affordability of rental property is a critical element of the debate.
“As a society, we should always be conscious of the less fortunate who could be affected,” he said.
“We shouldn’t be interfering with something that has been a principle of our taxation system for a very long time.
“When negative gearing was restored in 1987, the justification was that [the] capital gains tax had been introduced, but the capital gains tax had been introduced when negative gearing was suspended.”
Mr Howard indicated that he believed the high cost of housing is largely a result of the forces of supply and demand – the product of poor planning and decisions by state governments and local councils, rather than the taxation system.
“Overall, the negative gearing debate is a triviality in terms of the real issues influencing housing affordability and home ownership,” he said.