Michael Blythe and the argument in support of negative gearing

I used negative gearing in my younger days, when I was a well-paid academic. I doubt that I would have bothered with landlording without the facility it offered.

And if you want lower rents you need more landlords, not fewer. I specialized in offering high quality rental accomodation, using properties that were mostly in poor condition when I bought them but which I had improved. So eliminating negative gearing would chase people like me out of the rental market and hit it hard just when it is dowm.

It's moronic policy if you have the best interests of tenants at heart. But the Greens are led by the unreconstructed Trotsykite, Adam Bandt, so that cannot be assumed

“Negative gearing must be scrapped” is the clarion call from just about everyone hit by a tight property market.

The tax break is cast as the source of all problems, from spiralling prices to rental supply issues. But is this true?

As the pressure builds against this decades-old tax break, the Greens are pushing hard against the policy. There is a clear and present danger the government may up-end current arrangements — despite denials from the Albanese administration.

If you invest in property, or ever wish to do so, then negative gearing is likely to be crucial to your plan. The ability to set losses against your taxable income is the most important tax break (outside of super) for the everyday investor.

Millions of investors have used negative gearing and millions more no doubt have it in their plans, and as Michael Blythe of PinPoint Macro Analytics puts it: “in our market tax arrangements are as important as interest rates.”

As a former chief economist at Commonwealth Bank, the nation’s biggest home lender, few people know more than Blythe about negative gearing and what it means for the wider economy.

The latest wave of speculation surrounding negative gearing has prompted him to issue a case for the defence. Blythe has produced a report which in his own words will “provide ammunition in support of the status quo”.

His paper, ‘In praise of negative gearing,’ will no doubt be greeted with catcalls of derision, but it is worth reading and offers a compelling argument for keeping negative gearing in place.

In his paper, Blythe goes after some of the most common tropes set out against negative gearing — and he knocks most of them flat.

One very important takeaway is despite the understandable assumption negative gearing is only for the wealthy (and parliamentarians), the data does not suggest this is the case.

More than one in ten taxpayers claim rent interest deductions. Among this group are surgeons and dentists.

But, it also includes emergency service workers, nurses, teachers and bus drivers — it’s a tax policy for everyone.

The other key argument it loses revenue for the government is also undermined by simple economics showing investors are only negatively geared at the start of their investment — as years pass they begin paying tax as property owners.

In fact, there have been recent periods where negative gearing was contributing to budget revenue.

As Blythe patiently explains, the Australian residential property market is based on capital gain, not rental income — rental yields are low and owners accept those low yields on the basis that some day in the future they will get a capital gain.

Importantly, investors work on the assumption capital gains will be somewhere near 25 per cent — based on it being at the top income tax rate and discounted by 50 per cent (a process which has now been in place for more than two decades).

The report shows if the negative gearing system was not in place, then rents would be pushed higher. Keep in mind we already have a rental vacancy ratio of nearly 1 per cent in the major cities.

If you remain unconvinced, then Blythe goes back to the one and only example we have in history of what Australia might be like if negative gearing was removed.

The test case was in 1985 — when negative gearing was initially scrapped and then restored two years later,

If we look at what happened during the two-year interregnum: “the national experience suggested that removing negative gearing would reduce rental supply, lift rents and slow house price growth.”

As for the most recent removal attempt — the ALP move in 2019 to limit negative gearing — it “would have been a replay of 1985” says the report.

Of course, the argument for the defence of negative gearing is far from perfect, and it fails one group — first-home buyers.

The truth is if negative gearing was removed, then house prices would fall — and when this occurred more first home buyers could get a start in the market.

For now, we have the current situation where first home buyers are acting as ‘rentvestors’ — they are getting into the market by owning an investment property first and then buying a home later.

The latest ABS data clearly shows the 2 -34 year old age group has raised their share of the investment property market. The argument goes: at least they have got a foothold in the market.

This is true, but it’s a secondary experience to owning your own home.

As an economist, Blythe warns you can’t do tax reform in parts: “the playing field needs to be level,” so if the government removes negative gearing for houses, then it will also need to be removed for shares.

Certainly, investors are getting worried. Blythe’s report shows a telltale surge in google searches around negative gearing ever since the government changed course on the planned stage 3 tax cuts earlier in the year.

As Blythe suggests: “We have a Budget coming up in May, and we have this one-sided debate about negative gearing, because the people that push for changing housing taxation arrangements make the most noise and get the most attention.”

https://www.theaustralian.com.au/commentary/michael-blythe-and-the-argument-in-support-of-negative-gearing/news-story/59aaa92cfb3f6188351490d2bec62f6d

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The Albanese government is hiding many dark environmental secrets

The Albanese government is embracing some of the worst practices of dictator-driven governments to conceal controversial environmental measures. The secrecy may be necessary because the measures curb mining in Australia, hit many property developments, restrict solar farms and hurt farmers.

I emphasise this commentary is not about the detail of what is planned — I don’t know the detail. My contribution is to reveal the extraordinary third world practices being embraced by Anthony Albanese to conceal what is planned so it can be rushed through the parliament.

I fear the designers have no regard to the revenue implications of what they plan. Their title “The Nature Positive Plan” looks to be in the tradition of George Orwell’s Animal Farm.

The secrecy measures are nothing short of extraordinary and are equally dangerous as those used by former PM Scott Morrison to conceal the fact he was taking on extra ministries.

I set out below how the truth behind “The Nature Positive Plan” is being concealed.

Representatives from leading companies and other interested parties are invited to go into a room to look at parts — not all — of the draft legislation.

But before they are allowed to enter the room, they must sign a voluminous confidentiality agreement preventing them from discussing both their entry into the room and the contents of the draft legislation they are about to be shown. I do not know the exact penalties for breaching that agreement, but the fines will be heavy and jail a possibility.

Once the agreement is signed, those allowed to enter the room are told they must not photograph any of the draft legislation on the table and cannot take it away. They are given a fixed time to take notes using blank paper and a pen.

There is some discussion allowed about the draft, but I don’t know the details. The participants are allowed to take their notes away with them. Nothing else.

I don’t know the people who were invited but almost certainly some will be international companies who later (illegally) will report back to international boards, including those in the US (our defence partner), this is a country where very strange practices are taking place.

To overseas eyes used to third world countries, it must reek of corruption, but I don’t think money-based corruption is taking place. It's all about extreme left wing agendas.

As I understand it, there have been several of these bizarre events. Only a government with something very dangerous to conceal would embrace this sort of tactic.

It is publicly known the Albanese government is planning a new tranche of legislation to replace the current Environment Protection and Biodiversity Conservation Act 1999.

The EPBC Act was a carefully prepared document. The states and federal governments set the framework and then industry groups, individual companies, environmental groups, scientists, conservationists, subject-matter experts, and the general community were consulted extensively.

The EPBC Act was developed over years before the federal government published a discussion paper, then an exposure draft, to get detailed feedback on the entire suite of changes.

The Albanese government thinks it can replace this substantial, 1,100-page legislation (plus hundreds of further pages of subsidiary legislation) in short time.

Australia as a nation spends its mining, agriculture and property revenue by providing very high levels of social services. Jim Chalmers, in recognition of this revenue source, has taken steps to make mining approvals smoother.

But, I suspect the treasurer does not know exactly what is being planned. You will remember he advocated pensioners use the gig economy to gain the extra income he was allowing them to earn without impacting pension entitlements.

He didn’t know the industrial relations legislation was going to hit the gig economy hard.

It is understandable an ALP government would seek to upgrade the environmental rules set down in the 1990s. But the right way to go about it is to bring the community together with wide consultation — just as was done in the 1990s.

I am told one version of the environmental secrecy technique was used before the industrial relations bill was put on the parliamentary table. The industrial relations blueprint was a total mess and will endanger our economy. And its “loopholes” title was also in the Orwell tradition.

https://www.theaustralian.com.au/business/the-albanese-government-is-hiding-many-dark-environmental-secrets/news-story/8da7109dd5622482b6cdd70f8a246632

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Why abolishing boys schools is an act of woke madness

Greg Sheridan

The campaign to abolish single-sex schools, especially boys schools, is a sign of the madness of ideology and the badness of groupthink.

It reflects the dreary, dull, lifeless, joyless, small “S” Stalinist bureaucratic conformity that progressive ideology routinely attempts to impose. It’s a rush to insanity, where pressure will come on every successful boys school to become coeducational.

Let’s state the obvious. Boys schools, girls schools and co-ed schools can all be extremely good, mediocre or terrible. It’s a good thing for our educational environment, and for countless families and students, that different types of schools flourish.

Gender Equality Advocate Michelle May says. “The argument is that currently it is not done on merit,” Ms May said. “It’s still very much a boys club. “As long as we’ve got More
It seems a pity that some boys schools with long, good traditions now feel obliged to go co-ed. They may be feeling cultural pressure.

Let me confess. I spent the majority of my schooling at a Christian Brothers school in Sydney that was for boys only. It was a great school, with wide socio-economic and racial diversity, and certainly taught its students respect for women and girls, and respect for everyone.

It wasn’t an exclusively male environment. There were female teachers, librarians, admin staff, mothers in the tuck shop. To be rude, much less sexist, towards any of these would have been unthinkable and would have earned draconian punishment.

The contemporary debate is too ideological. If a particular school has a behaviour problem, that needs to be fixed. Abolishing boys schools generally would be wretched iconoclastic vandalism.

In the Financial Review last week an anonymous business executive called for ending single-sex schools and said boys schools should stop trying to make “men” out of their students.

How weird is this? What is it that boys are supposed to become if not men? Giraffes? Oranges?

The piece reflects the confused and counter-productive campaign against masculinity. Men, like women, can do terrible things. Men are responsible for much more violence than women. I agree we’re living through a plague of domestic violence that we must stop. But you won’t make men decent, respectful and successful by telling them masculinity itself is bad.

Seventeen years ago, in central Melbourne, about 7.30am, a biker, who had been on an all-night binge, was beating up his girlfriend. Two men came to her aid. One was killed in the process. In giving his life to the instinct to protect a woman under assault, that man was displaying masculinity, and it wasn’t toxic.

At the school I attended more than 50 years ago, the brothers, and all the teachers, stressed that men had certain obligations to women – politeness, consideration, respect, courtesy.

The brothers taught that when walking down the street with a girl the bloke should try to walk between the girl and the road. That’s so any danger coming from the road, such as a car crashing off the street, hits the bloke first.

That may all seem hopelessly outdated. But men and women are still different. Completely equal but different. The idea that the differences are mainly the result of socialisation is contemporary ideology waging war against human nature.

Almost no one really lives their life according to the new ideology. Is there a household in Australia where, if a married couple hears a strange noise in the middle of the night, the husband turns to the wife and says: “Now, darling, why don’t you go and see if that noise is a burglar. I’ll stay here by the phone. I would go myself but I don’t want us to be trapped in gender stereotypes.”

It’s good that women’s sport is increasingly seen as the equal of men’s sport. But it’s still different. No one argues that men and women should play rugby league together. The army for a long time included boxing in its training. It’s a tough sport. Maybe its concussion risks render it no longer fit for such training. But you can see it helped soldiers cope psychologically with experiencing a physical blow but carrying on. It has never been the case that men and women enter the same boxing ring and box against each other.

The variety of human experience is vast but boys and girls are different. Co-ed can work superbly, but so can schools that focus only on boys, or only girls. Boys and girls do tend, within all kinds of statistical variation, to learn a bit differently, so boys schools can focus on the way boys learn.

Girls tend to mature earlier than boys and in that early adolescent period a single-sex school allows a boy to remain a boy for as long as necessary. And then become a man.

Cardinal George Pell once remarked that “self-confidence, directness and an instinct for struggle and competition” characterised Christian Brothers schools. That’s pretty accurate.

But boys schools also offer boys a distinctive diversity. At a boys school, if there’s going to be a choir it has to be the boys singing.

The school I went to was exceptionally strong in sports. My one season as a junior rugby league player led to a broken shoulder; my parents decided I’d dispense with footy. I wasn’t very good at sport anyway but the school offered multitudes of other activities. I was always in the debating team, the chess club, sometimes the drama performances, sometimes music groups, briefly in the science club, in Christian youth groups and a million other things.

Even though I didn’t play football or cricket, and hardly excelled at the sports I did participate in, I never felt out of place. Books, learning, contention, energy, purpose, competition – it was a pro-life environment.

The teachers occasionally gave us the strap for our malefactions. Some of life’s antipathies are irrational. I greatly disliked one teacher, who warmly returned my sentiments. No doubt unfairly, I thought him a dogmatic smart alec. Perhaps we were too much alike.

I persecuted him with many pedantic questions and points of order while staying well within the rules and norms. One day, nonetheless, he sort of gave in and gave me the strap. I went home that afternoon immensely chuffed, feeling I’d won a moral victory.

There were times, of course, when we were louts and hooligans, and needed strong direction. The school was pretty strict. Sensibly so. And it had a great tradition. Wearing its uniform meant something. We cared about it. No doubt it struck other kids entirely differently.

But it gave me wonderful treasures. In its library, in primary school, I met PG Wodehouse, my lifelong companion.

We moved house and I finished at a co-ed school. It was good, too. Diversity is good. The urge of ideological censors to hammer everything into a single monotonous conformity is as misbegotten as their demonisation of masculinity, and of the need to turn good boys, indeed, into good men.

https://www.theaustralian.com.au/commentary/why-abolishing-boys-schools-is-an-act-of-woke-madness/news-story/e08f940cc72712c7956431ea1ae4c0eb

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Australian living standards going downhill

The news that the Paris-based OECD has confirmed that Australia has suffered the biggest drop in living standards in two decades would be unknown to most Australians, including the voters in the recent Dunkley by-election.

Nor would they be aware of the expert view that there is little hope of an early recovery.

From a world leader two decades ago, we now underperform comparable countries in the OECD by close to 8 per cent.

This is not just bad luck.

This is the result of the agenda of the political class and other elites who first handed over manufacturing to Beijing, and who are now targeting both agriculture and mining.

They will never be satisfied until, as a result of their efforts, we follow Argentina into third-world status.

At Federation, Australians were, per capita, the world’s second-richest people. This wealth was shared more equally than in most countries. We are now the 20th, our ranking in constant decline.

Contrast Singapore. From an impoverished colony within living memory, Singaporeans are today more than twice as wealthy. With low taxes and widely available housing, their disposable income is double ours.

But instead of such truly crucial news, Dunkley electors and Australians at large, were informed in excruciating detail about Taylor Swift, including the fact she was watched from a free place by a dancing Prime Minister, who then flew on a CO2-emitting RAAF jet to an exclusive concert by Katy Perry in a Melbourne billionaire’s mansion, before flying back to Sydney to decide whether to appear at Sydney’s Mardi Gras.

Nor was there much in the news about funding terrorism or the careless handing out of visas to potential supporters of terrorism and even terrorists.

Macrobusiness.com.au and the Australian Financial Review excepted, there was even less news about the collapse in living standards, a matter unconventional economist Leith Van Onslelen discussed in detail on ADH TV on the Thursday evening before the election.

The election campaign also coincided with the news, played down in the political world and much of the media, that the climate catastrophist chickens have at last come home to roost, at least in relation to our nickel industry. As our leading geologist Ian Plimer pointed out recently on ADH TV, whenever he asks science apologists for the learned articles proving CO2 causes global warming, now ‘boiling’, he never receives them, not once.

Net zero is unattainable and pointless.

The news which exposes the futility of adjusting for climate boiling which does not exist came from Indonesia. It would seem that their politicians are smarter than Australia’s.

Through a clever operation of banning exports until investment was attracted into the nickel industry and by using high-quality and cheap Australian coal to produce electricity for the extensive necessary processing, the Indonesians have effectively replaced our entire nickel industry.

The major reason for ours becoming un-economic is the Albanese-Bowen policy of burdening Australia with probably the Western world’s most expensive and unreliable electricity.

That buyers will pay a so-called ‘green premium’ for this the sort of infantile fiction pushed by Albanese and Bowen.

The reasons people buy goods or services are quality, efficient delivery and price.

When Australians realise that because of the elites’ agenda our GDP is falling towards a mere proportion of today’s, let us hope they do not seek salvation in some Juan Peron as the Argentinians did. While electing sound people rather than career politicians, let us hope they require fundamental reform to make our politicians accountable 24/7, just as they are in Switzerland.

As Ian Plimer jokes, the best politician is a frightened politician.

In the meantime, Leith Van Onselen points to a range of factors which explain Australia’s declining living standards and associated poor labour productivity.

Australia, he says, is unique in that it pays its way in the world primarily through the sale of its fixed mineral endowment.

A drover’s dog would realise that importing huge volumes of people through immigration distributes these mineral riches among more people, resulting in reduced wealth per person.

That is exactly what the Albanese government is now doing.

In fact Australia’s population has ‘ballooned’ by 8.1 million people (43 per cent) this century alone, with business investment, infrastructure investment, and housing and hospitals failing to keep pace.

Like so many New South Wales and Victorian state politicians, rather than standing up to Canberra, Premier Minns is acting as its lackey, planning to ruin Sydney by turning vast parts into canyons of high rise slums with hopelessly congested transport, roads, schools and hospitals.

Another factor is that the Reserve Bank, having kept interest rates very low, has significantly increased them in a highly concentrated mortgage market now more sensitive to such changes.

(There was a time when, with the presence of, for example, mutually owned building societies and government-owned banks, there was some protection against Reserve Bank variations.)

Leith Van Onselen argues that the biggest cost consequence of concentrated markets is in the energy market, especially on the east coast, which operates through a cartel which exports 80 per cent of the gas. There is little effective regulation over this and, unlike Western Australia, there is no domestic gas reservation policy requiring a certain amount of gas to be sold at fixed prices.

As we all know, we cannot depend on the much-vaunted so-called renewables, when the wind doesn’t blow and the sun is not shining. We need a backstop. And gas has the great advantage that it can be turned on very quickly.

So without a sensible reservation policy, when the international gas price goes up, Australians’ electricity prices go up and this is why we’re seeing such massive increases in household bills.

Among other factors for our declining living standards are the amount of bracket creep in personal income tax which is not indexed, as well as the increased excise on petrol and diesel.

This is notwithstanding the specially designed cosmetic change to taxation for the by-election, which involved the Prime Minister breaking innumerable promises.

https://www.spectator.com.au/2024/03/biggest-drop-in-living-standards-in-two-decades/

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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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