Australian Politics
Wednesday, February 14, 2024
Labor is gearing up to go negative on housing investors
"Negative gearing" enables well-off people to transform more income into capital than might otherwise have been possible. And anything that rich people do is automtically suspect to Leftists.
I used negtive gearing in my time so I know exactly what it is and does. And a major effect of it is to REDUCE rents. By using other income to subsidize my property investments, I was able to accept rents that were too low to cover my mortgages and other debts.
But lower rents seem to be bad if a landlord gets some benefit out of that apparently
It’s a matter of when, and not if, Labor goes after negative gearing.
And it is the “why” that informs this view.
Labor has been historically hostile to negative gearing, and there is no evidence it has collectively changed this view.
On the contrary, the caucus is pushing hard for it.
Voters may have rejected it twice – in 2016 and 2019 when Labor first put its abolition on the table – but that hasn’t softened the party’s devotion to the principle.
Politics has remained the obstacle.
What has changed is the pressure union-dominated industry super funds have been recently applying. The industry super funds are desperate to get their claws into rental stock as a private asset class.
The best way to do that is to get mum and dad investors out of the picture.
If anything, Anthony Albanese and Jim Chalmers’ weasel words over the past week have strengthened the view that Labor is tilling the soil again to have another crack at it, at some point.
The Treasurer’s view on it is implicit in his thesis for the remaking of capitalism. He has made it his mission to leverage the wealth of superannuation to deliver on his remodelling of the economy and its institutions.
Housing is a key part of it. And having union-dominated super funds control the rental stock of the nation – which is 30 per cent of the market – fits neatly into this ideological model.
Industry funds are salivating over it because of the low-risk high-yield equation. As a private asset class, the valuations can also be manipulated.
Corporatising rental stock – quasi-nationalisation – has an obvious political attraction for Labor. The party has held a long-term aversion to mum and dad property investors, a lot of whom wouldn’t vote Labor.
The Greens understand the significance of this. It is less clear, however, why some teal independents – whose constituents are over-represented as wealthy property investors – are supportive.
Either way, this is an issue that will be revisited by Labor at some stage. This is almost a certainty.
Little that has been said over the past week should offer anyone any confidence that Albanese and Chalmers haven’t been working up options.
A question is whether it would be grandfathered – as was Bill Shorten’s model.
It is impossible to see how it could be done otherwise without forced divestiture. This would be insanity.
Grandfathering, however, produces questionable revenue gains for the government.
The motivation runs far deeper and is inherently more ideological. Labor’s inspiration is for a new class of public housing for renters. Under its model, the industry super funds would own the housing stock.
Why the Albanese government would be considering negative gearing changes in the middle of a supply crisis is confounding to industry experts.
The Henry tax review – commissioned by Wayne Swan as treasurer when Chalmers was working for him – was clear about this. It warned against any changes to taxes on housing until the supply issue was solved.
Abolishing or curbing negative gearing is an effective increase in housing tax. And if you tax something, you get less of it.
If Albanese’s aim is to not see a further two promises broken, its difficult to understand why Labor would be contemplating negative gearing changes as it seeks to build 1.2 million homes in five years.
The retail politics of negative gearing are simultaneously crude and complex. Labor seeks to sympathise with first-home buyers, using the argument that young families shouldn’t have to compete at an auction with a foreign investor or a plumber seeking to buy a 10th property.
This argument becomes impossible to sustain if the alternative is that a first-home buyer instead must compete with a pension fund seeking to buy its 10,000th home.
In the context that government on Monday reduced tax on foreign investors to help facilitate Labor’s build to rent model, which has produced close to zero new homes, it would be inconceivable they would be seeking to increase taxes on mum and dad investors.
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Frontline workers will be long-term losers under Labor’s tax cuts
Sparkies, paramedics, police officers and accountants will be long-term losers under Labor’s stage three tax changes, as a major credit rating agency says Anthony Albanese’s revamped tax cuts will likely be more inflationary than Scott Morrison’s original plan.
Under Labor’s tax changes, electricians, school principals, cops, train drivers and others will pay more tax under the proposed legislation in a decade, analysis by The Australian has revealed.
Bigger tax cuts for middle-income earners promoted by the Prime Minister and Jim Chalmers are projected to erode over time as bracket creep captures more Australians under a higher 37c tax rate. In 10 years, Australians earning the equivalent of more than $104,000 today will be worse off under Labor’s redistribution of the tax relief.
That leaves a wide pool of Australians, including essential workers, winning in the short term but having less money in their pockets in the future as their average tax rates push higher.
Ahead of Treasury secretary Steven Kennedy being grilled at Senate estimates on Wednesday, an S&P Global report said while Labor’s tax cuts would have a “broadly neutral” impact on the budget, they could be more inflationary than the Morrison government’s stage three.
“They may … be marginally more inflationary than the original tax cuts since they will provide additional funds to low- and middle-income earners,” the report, which provided an annual review of Australia’s economy and budget position, said.
The Australian can reveal school principals will be among the first to begin paying more under Labor’s plan.
A year after the introduction of the modified stage three, principals’ average incomes are expected to creep above the $146,486 annual salary threshold separating winners and losers.
By 2033-34, those earning more than $104,000 today – assuming 3.5pc annual wage growth – will leave a much wider pool of Australians, including essential workers, with less money in their pocket.
In the middle of 2027, electrical engineers, tram and train drivers will be left out of pocket as they become what Labor believes are high earners. By the end of this decade construction managers are among the occupations who will earn too much to be beneficiaries of the tax changes.
Two years later, police and crane operators will be worse off as their average taxable incomes push towards $150,000 a year. That will be followed by accountants and vets from 2032, while fire or emergency service workers, paramedics, and electricians will be worse off from mid-2033.
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Pacific Islands Push for More University Students in Australia
Going to university in Australia could become simpler for Pacific Islanders if they are considered domestic students.
The high commissioner for Samoa, Hinauri Petana, told federal politicians the crippling cost of international student fees in Australia was curbing educational outcomes in her nation.
“Our appeal is that, by all means, international rates should stay for who can afford it, but for the Pacific we'd like to see our own private citizens to send their children here at the same rates,” she told a public hearing into education and tourism in the Pacific this week.
“Australia has been one of the leading countries in the world in terms of education.”
Greater investment and assistance would help her nation in developing its own education sector, Ms. Petana said.
Australia hosts nearly one million international students each year with most hailing from China, India, and Nepal.
Pacific Islanders make up less than one percent, with 7000 to 8000 people on student visas.
Yves Lafoy, representing New Caledonia, floated the idea of a set number of people that could be considered domestic students.
“We back the concept of a quota of Pacific students to benefit from Australian fees,” Dr. Lafoy told the hearing.
A ballot visa for Pacific Islander nations was established by the Labor government in 2023 and from late 2024 will allow 3000 people per year to receive permanent residency if they’ve been offered an ongoing job in Australia.
People studying on the Pacific Engagement Visa will pay domestic fees and will be able to access Commonwealth student loans as well as Youth Allowance and other benefits.
Luke Sheehy, chief executive of Universities Australia, said scholarships from individual universities and other educational programs were all options for students from the Pacific to come to Australia.
“These are terrific and often transformative initiatives, and further consideration given to encouraging and supporting more students abroad to receive an Australian education would be welcome,” Mr. Sheehy said.
Long wait times and exorbitant visa costs for Pacific Islanders wanting to visit Australia were also holding back integration in the region, the committee heard.
‘It is very difficult, even to come be a tourist in Australia,” Ms. Petana said.
‘You have to show your sponsorships, you have to show your bank account, all kinds of things.”
Samson Vilvil Fare, the high commissioner for Vanuatu, also spoke in support of easing Australia’s visa requirements on Pacific Island visitors.
Complicated paperwork and frustrating wait times meant people were often delayed or may not end up coming to Australia, he said.
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More Groucho Marx than Karl Marx: Anthony Albanese fixing the economy
Anthony Albanese clearly believes that his turn back to the left – smashing high income earners with Stage 3 tax changes and smashing employers with new industrial relations rules – is in tune with a fundamental shift in Australian politics.
On the face of it, the polls seem to back him in.
The Prime Minister hasn’t paid any real price for the income tax flip flop, daring Peter Dutton to vote against a tax cut “for every single Australian taxpayer” even as he snatches back thousands from anyone on more than $146,000 a year.
At the same time, new French-style right to disconnect rules have also landed well with, tellingly, Greens MPs sending out media releases touting their popularity on Tuesday.
The man who in 2022 portrayed himself as a safe and moderate economic manager has gone all-in bashing bosses and the big end of town.
In doing so, the Prime Minister has revealed himself as more Groucho Marx than Karl: “Those are my principles and, if you don’t like them, well, I have others.”
This has the potential to be a massive mistake, both politically and for Australia.
Time and time again, commentators have declared the end of Australia’s fundamentally centre-right politics only to be caught out, most recently in the wake of the failed Voice campaign.
And while Albanese’s political bet has, for the moment, paid off, it is also putting the rest of the Australian economy at grave risk of serious long-term damage.
Sure, we may not be in a technical recession, inflation is moderating and employment remains strong.
The threat of multiple interest rate rises has, for the moment, passed.
But household income, real wages and productivity are all going backwards, while failure to do anything about the tax system means an increasingly bloated government will continue to rely on the lazy tide of bracket creep.
Instead of moving to reform and actually grow the economy in the tradition of Hawke and Keating, the government is pushing Whitlam-era bash-the-boss rhetoric and putting handbrakes on business.
But the government, and many of its media enablers, are misreading the room if they think that Labor and its effective junior partners in the Greens are on to a winner with this new class warfare.
People are anxious, absolutely. Particularly in already crowded cities like Sydney, people are looking to blame others for traffic and expensive housing and a million other houses.
This explains the regular two-minute hates on Twitter (or X, if you will) against Balmain and Fitzroy “boomers” and NIMBY councils who are supposedly preventing benevolent developers from throwing up tons of affordable housing.
But deeper down, people sense that a country – their country – that has more or less dodged recessions for 30 years is suddenly faced with the prospect of not just a few quarters of backwards growth but a sustained fall in living standards.
People who grew up with the expectation of a quarter acre block (or California bungalow or inner city terrace) are now being told they will have to leverage themselves to the hilt for a train-line apartment that may or may not come with bankruptcy-inducing defects.
And while no one ever voted for it (now there would be a referendum) both sides of politics have long adhered, more or less, to a Big Australia immigration policy.
Huge arrivals keep overall GDP in the black, depress wages and push up property prices – though whether these are good or bad things depends on whether you’re a suburban commuter on the one hand or a politician or property developer on the other.
Those big numbers will also impact social cohesion in ways we cannot even begin to predict, though it surely sends an odd message to those who came here seeking a better life to have their children go to school and learn how awful Australia Day is.
Meanwhile, we don’t yet know the full details of the Albanese Government’s IR deal but we do know that unions and troublemakers are about to have a whole new set of ways to turn the screws on productive enterprises, particularly small and medium-sized ones.
And this is before we get to the nightmare of the rushed renewables transition, which promises lower energy prices but never seems to deliver, and which in the process is forcing the country to deindustrialise.
A devastating report out of Victoria in The Australian on Tuesday showed the direction this is heading.
There, the Government’s anti-gas policies, taxes, regulation and the cost of doing business generally led to a net decrease of more than 7600 businesses in the last financial year in that state. This, rather than real reform, is what the Albanese Government’s new policy settings will replicate nationally, making them so dangerous.
To return to Keating, then as now Australia is in danger of becoming what he called a banana republic.
“If this government cannot get the adjustment, get manufacturing going again, and keep moderate wage outcomes and a sensible economic policy, then Australia is basically done for,” Keating told John Laws in 1986.
“We will end up being a third-rate economy ... a banana republic.”
Hard choices and real reform made sure that didn’t happen then.
Now, though, it’s looking like back to the future.
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Also see my other blogs. Main ones below:
http://dissectleft.blogspot.com (DISSECTING LEFTISM -- daily)
http://antigreen.blogspot.com (GREENIE WATCH)
http://pcwatch.blogspot.com (POLITICAL CORRECTNESS WATCH)
http://edwatch.blogspot.com (EDUCATION WATCH)
http://snorphty.blogspot.com/ (TONGUE-TIED)
http://jonjayray.com/blogall.html More blogs
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