Australian Politics

Negative gearing? We are working on the wrong side of the decimal point

Judith Sloan points out that the wooden heads of the Left want to INCREASE rents -- for what?

Here we go again: changes to negative gearing and the capital gains tax discount are being floated even though Anthony Albanese rejects any proposals to do so.

Mind you, the Prime Minister had ruled out any changes to the stage three tax cuts, declaring that his word was his bond.

In the event, the Coalition’s stage three legislated cuts were junked in favour of what was seen as a politically more palatable version of income tax cuts.

Does it make any sense even to be talking about negative gearing and capital gains tax at this point? Is it a case of working on the wrong side of the decimal point? Are there much bigger issues affecting the way the economy is operating and the impact on the public?

Let’s run quickly through the facts related to negative gearing. They have been discussed at great length for far too long.

There is absolutely nothing controversial about having a tax code that provides for the deduction of expenses associated with investment. Indeed, it is essential that this provision exists lest investment and the associated capital accumulation are discouraged.

That some investors, and not just in property, lose money and are able to deduct the losses from other taxable income is also uncontentious.

On the latest figures, there were about 1.1 million negatively geared property investors claiming a total of $7.89bn in deductions, yielding a tax benefit for them of $2.7bn. (There are about the same number of positively geared investors.)

In the context of the federal budget (total receipts now close to $700bn), we are talking small beer.

Moreover, any change to the rules would almost inevitably involve grandfathering of existing investors, so any gain in revenue would be insignificant, at least for several years.

Let’s be clear on another point: negative gearing subsidises renters. If investors were unable to use the losses to offset taxable income, they would have no choice but to put up the rent.

Sure, some might sell up, but many renters are not able to buy properties.

When it comes to the capital gains tax discount, again there is nothing controversial about imposing tax on only the real (adjusted for inflation) component of the gain. When the tax was first introduced by the Hawke-Keating government, there was a complicated formula to estimate the real gains that was then replaced by the Howard-Costello government to simplify the arrangement. The discount of 50 per cent for assets held for longer than 12 months became the rule.

Now one may quibble whether 50 per cent should apply for assets held for two years compared with assets held for 20 years, but the simplicity of the arrangement is the real value.

Bear in mind that any realised capital gains must be brought to book in the year of the transaction, meaning that even investors on relatively modest incomes are often pushed into the top marginal income tax rate of 45 per cent plus 2 per cent Medicare levy.

Any change to the capital gains tax discount would have to be grandfathered, which would mean any gain in government receipts would be relatively small. It also would create a lock-in incentive as people hold on to assets subject to the old, lower capital gains tax. This itself would cause economic harm.

In fact, the biggest capital gains tax concession, if you want to call it that, applies to the exemption of the family home. Treasury estimates that the revenue forgone of this exemption plus the discount on the tax is close to $50bn a year.

This figure has been growing rapidly in recent years along with house prices.

Let’s face it, it would be a brave government that proposes a capital gains tax on the family home. Should it do so, consistency would require the deduction of expenses associated with buying and running these homes. In other words, that’s not going to happen. The only conclusion is that sweating the small stuff such as tinkering with negative gearing and the capital gains tax discount has little economic upside, if any, but potentially large negative political consequences. While it’s easy to express outrage at the small number of negatively geared, multiple-property owners, the reality is that most investors hold only one property and many of them are middle-income earners.

The often intense disapproval of negative gearing is really derived from the objections that some people, including Greens supporters, hold to the accumulation of wealth. That some people are rich and use their money to purchase properties (and other assets as well) is somehow regarded as unjust, which is then conflated with the negative gearing provisions.

What, then, are the big issues that this government should be addressing? There are two and they are related. The first is the woeful performance of productivity and the second is the rapid burgeoning in the size of the public sector.

Taking the first: according to the recent national accounts, productivity is now where it was in 2016. Labour productivity fell by 0.8 per cent in the June quarter alone. Even the downward revisions that the Treasury made in relation to productivity growth – in the Intergenerational Report, for instance – now look wildly optimistic.

Just in case you think all advanced economies are being hit with productivity slumps, take the case of the US. Between 2014 and now, labour productivity in the US has increased by close to 15 per cent. Here, the growth has been 1.5 per cent.

Given that productivity growth is the engine for higher living standards, our performance on this score is worrying. It also is why the Reserve Bank will need to delay cutting the cash rate because of the lack of supply responsiveness to demand pressures.

Public sector demand essentially has exploded since Covid. From a figure of 22.5 per cent of GDP before the pandemic, public sector demand will reach 27.3 per cent this year because of actions of the federal and state governments.

This reallocation of resources within such a short period is essentially unprecedented, although it does mimic the temporary mining boom that occurred in the middle of the first decade of this century. At least with that boom the results were more production and more privately funded infrastructure.

In today’s case, the ramp-up in public spending is replete with higher recurrent payments and higher public sector wages. In political terms, this sort of spending is difficult to reverse. It is directing resources into low-productivity activities – the Treasurer likes to call it the care economy – and crowding out private sector initiatives that otherwise might be implemented.

Forget the distraction of negative gearing and capital gains tax – the issues have probably been raised only because the government has achieved absolutely nothing in terms of economic reform. There are some significant perverse developments noted above that the government is ignoring or making worse.

https://www.theaustralian.com.au/commentary/negative-gearing-we-are-working-on-the-wrong-side-of-the-decimal-point/news-story/6bf4cc48ea7b21c09d54a46c38a83a48

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Concerns over Gender Queer book dismissed by Australian classifications board as anti-LGBTQ+, court hears

OK to promote deviant sexuality to kids (?)

The Australian classifications board made a “broadbrush dismissal” of over 500 submissions calling for a ban of the book Gender Queer by labelling those submissions as anti-LGBTQ+, a court has heard.

In July last year, the Classification Board rejected calls to restrict access to a memoir about gender identity that was the target of conservative campaigns to have it banned in the US, and found the content was appropriate for its intended audience.

Activist Bernard Gaynor had applied to the board in early 2023 to review the classification of the graphic novel-style memoir about gender identity by writer Maia Kobabe.

Complaints about the book – which details Kobabe’s experience coming out as non-binary – are focused on the cartoon images of sex scenes, one of which has been described by critics seeking a ban as “pornographic” and “paedophilic”.

When the Australian Classification Board upheld its original decision to classify the book as unrestricted with the consumer advice of “M – not recommended for readers under 15 years”, Gaynor appealed against the ruling to the federal court.

In a hearing on Monday, Bret Walker SC, acting for Gaynor, said the overwhelming majority of submissions to the board on the review of the decision had called for the publication to be restricted or refused classification. He argued the classification board had erred by not taking these submissions into account, by broadly labelling them as “anti-LGBTQIA+”.

Walker said there was a “deliberately broadbrush dismissal” of those submissions, many of which he said objected to what they saw as depicting a man having sex with a minor – referring to an image portraying Plato’s Symposium. Walker said many of those objections did not refer to the gender of the image’s subjects, just that it appeared to depict paedophilia.

Justice Ian Jackman said that while by his count, about 600 submissions from among 9,000 people had been considered to be anti-LGBTQ+ by the board, on closer examination Jackman said just 52 of these expressed anti-LGBTQ+ views – less than 1% of submissions received.

Walker said the board gave little weight to the submissions, and had failed to engage with them in its review decision.

In response, the barrister for the minister for communications and the classification board, Houda Younan SC, said the law did not require the board to accept submissions as part of the review of its classification decision and that the invitation of submissions did not require the decision-maker to then consider them.

However, Younan said the board did consider the public submissions and did not dismiss them on the basis of being anti-LGBTQ+ but because they did not assist the board in its statutory task of a classifications decision.

“We say that in this case, every submission was received and considered,” Younan said.

Submissions in the decision were labelled to give their tenor, she said. Submissions were given weight based on whether they contained evidence the writer had read Gender Queer and understood its content within the context of the publication.

Those that did not demonstrate an engagement with the publication were given little weight, she said.

Younan indicated the board had considered whether a submission noted the context of the image being of Plato’s Symposium, or was a criticism of the image on its own, removed of context.

She later identified 14 additional examples of explicitly anti-LGBTQ+ submissions beyond those initially identified by Jackman.

Among the orders sought, Gaynor is seeking to have the decision remitted back to the classifications board.

Jackman reserved his decision.

In the US, Gender Queer is one of the most challenged books in libraries. Kobabe told the ABC in May that the US push to ban the book had been frustrating and that the depiction of Plato’s Symposium had been included as it was one of the few gay-themed texts Kobabe had encountered in college.

“It stuck in my mind, because it was the only one.”

https://www.theguardian.com/world/2024/sep/30/bernard-gaynor-classification-appeal-gender-queer-graphic-novel-ntwnfb

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Penny Wong’s UN speech shows Labor has abandoned Israel

Foreign Minister Penny Wong gave surely the worst speech of her life at the United Nations. It was so monumentally divorced from reality, so morally obnoxious in its treatment of Israel, so undergraduate in its pretensions of clear certainties in an issue of immense complexities, so selective in its politically convenient moral posturings, as to be utterly unworthy of her. And unworthy of Australia.

The Albanese government has revealed itself to be hostile to Israel. It’s also a government that, despite a few welcome gestures, seems to have relatively little concern for the welfare or sensitivities of the Australian Jewish community.

All this has to be set against a global crisis of anti-Semitism, of which the Albanese government has no grasp. This is the most ancient and terrible hatred of all. It’s so powerful today partly because it’s fuelled by diverse but converging streams. There’s the hangover of traditional Christian anti-Semitism, though all mainstream Christian groups have now repudiated that. There’s the anti-Semitism of white race nationalists. Both these forces are fairly minor compared with the two big engines of anti-Semitism today.

These are the irrational and wild hatred of Israel on the left in Western societies, which applies completely different standards in its judgments of Israel compared with any other nation, and which sees Zionism and the existence of an Israeli state as inherently racist and an outcrop of Western colonialism. This hatred of Israel is so intense and irrational that it frequently and easily becomes a hatred of Jews.

And there is the long established Islamic and Arab tradition of anti-Semitism. This is much at work in the contemporary Middle East. The Houthi movement of Yemen, which, like Hamas and Hezbollah is a proxy force of Iran, has a slogan it displays at many gatherings. It reads: “God is Great, Death to America, Death to Israel, A Curse upon the Jews, Victory to Islam!”

The original Hamas charter was full of almost caricatured and obscene anti-Semitism. Hezbollah, entirely a creation of Iran, is similarly full of such hatred of Jews. Iran’s government frequently repeats its determination to “wipe Israel off the map”.

All these four distinct sources of anti-Semitism co-mingle in grotesque fashion and weirdly reinforce each other. In that environment, you might think a government claiming its foreign policy is driven by the highest morality would make countering anti-Semitism a major plank of its rhetoric.

At the very least, you’d expect any adult Australian government to be acutely conscious of this environment. While our government is certainly not in any way anti-Semitic itself, it fails dismally in confronting one of the greatest moral evils of our time.

In her speech, Wong did repudiate both Hamas and Hezbollah as terrorist organisations. However, she directed the bulk of her criticism at Israel. Yet nowhere was there a recognition that Israel is taking the action it’s tragically forced to take in Lebanon because Hezbollah has fired something like 9000 rockets, drones and other projectiles at Israel since the Hamas atrocities on October 7 last year. Wong says Israel has the right to defend itself but opposes any action it could possibly take in self-defence.

Wong also called for the UN Security Council to determine an independent Palestinian state should be declared very soon. And no one should be allowed to prevent this.

She declared, with sublime and fatuous undergraduate certainty, this would lead to “peace and security” for Israelis and Palestinians. At best, that’s an absurd attempt to ignore history.

Much of the Arab movement using Palestinian nationalism is motivated by religious and ideological anti-Semitism. The Palestinian leadership has non-negotiable demands that make a Palestinian state inconceivable in present circumstances. One is that every descendant and relative of any Arab who ever lived in the territory that is now Israel should be allowed to return and live in Israel itself. Not in the new Palestinian state, but in Israel.

This is millions of people and is obviously completely unrealistic. This so-called “right of return” is really an excuse never to negotiate compromise seriously. Wong understands that Australia has no influence at all on these matters but, bizarrely, decided to make it the centrepiece of her contribution at the UN. So now as an expert on the Middle East, and a foreign policy leader impelled by principle to speak out, could Wong show us the speeches she’s made urging the Palestinian leadership to abandon the right of return and other completely unrealistic positions?

For that matter, every analyst of the Middle East has been pointing out for months that Hezbollah’s increased tempo of rocket attacks on Israel would likely eventually trigger an Israeli response. Could Wong point us to the line of speeches she’s made denouncing Hezbollah for this and demanding it desist?

Similarly, any realistic analyst of the Middle East knows, as the Gulf Arabs certainly know, that the chief source of instability and conflict in the Middle East is Iran. Iran supplies weapons to Russia to attack Ukraine. It also bankrolls and directs all the region’s main terrorist groups, Hamas, Hezbollah, the Houthis in Yemen and numerous others. So, as a Foreign Minister urgently concerned with peace in the Middle East, and impelled by the highest moral principles, can Wong direct us to her many speeches denouncing Iran for this behaviour and mobilising maximum diplomatic pressure on Tehran?

Quite the reverse. The Iranian ambassador to Australia posted on social media his hope that “the Zionist plague” will be “wiped out” by 2027 and was subject to the mildest imaginable rebuke by a mid-level DFAT official. The ambassador himself later claimed this was no rebuke at all. When taxed over this shameful cowardice, the Albanese government leaked the explanation that the Americans valued Canberra having an embassy in Tehran and if we did anything remotely sensible like expelling the ambassador our diplomats would be expelled from Tehran and we’d lose this priceless dialogue.

What an apathetically unconvincing rationale for cowardice that is. We should happily sacrifice this entirely worthless dialogue if keeping it means we sacrifice our basic principles.

The Albanese government is much more hostile to Israel than our friends and allies. Unlike the US, UK and even politically correct Canada, we didn’t criticise the absurd International Criminal Court prosecutor’s request for arrest warrants against Israeli government leaders. No Australian cabinet minister has visited the site of the Hamas atrocities against Israeli civilians. And so on and so on.

The Albanese government is completely out of its depth in this Middle East crisis, its words and actions only decipherable through the most tawdry of domestic politics. It’s unworthy of Australia.

https://www.theaustralian.com.au/commentary/penny-wongs-un-speech-shows-labor-has-abandoned-israel/news-story/b688ffe41df54344532ad93845fd01e9

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The growth of Queensland’s public sector under Labor must be reversed

Queensland’s October 26 election bears some resemblances to that of 2015. True to the maxim that oppositions don’t win elections, governments lose them, the gormless Steven Miles’s regime is on track to lose after a single term, as the abrasive but effective LNP former premier Campbell Newman did in 2015.

At that election the little-known Annastacia Palaszczuk, who began her term as opposition leader with a caucus of seven, became premier, leading a government in which many ministers had no political experience even as MPs. She won because she wasn’t Mr Newman, because voters rejected his policy of asset leases to reduce debt and public service cuts. In office, Labor struggled to formulate a plan, ordering a new review or inquiry every three business days for 2½ years – 213 reviews by August 2017. In Ms Palaszczuk’s first two terms, Queenslanders warmed to her homely, approachable style. But it speaks volumes about Labor’s lack of a substantial legacy that Mr Miles is not running on his party’s record. Its record of service delivery has been ordinary. In nine years, Labor has achieved little apart from almost completing Brisbane’s Cross River Rail project, first mooted in 2010. It secured the 2032 Olympics, which desperately need leadership and should be an election issue.

Queensland Premier Steven Miles says he is “excited” about the state election campaign because it is “unlike anything else”.
LNP leader David Crisafulli and some of his colleagues were ministers in the Newman government. They have more experience than the first Palaszczuk team and are slightly better known. Their strong suit, which has lifted their profile, is their commitment to tackling the state’s youth crime crisis with tougher, more effective penalties for offenders. But many of their other important policies remain a mystery.

Chief among these is debt reduction, the elephant in the room for both major parties. In his budget in June, Cameron Dick abandoned plans to pay off the state’s mounting debt, preferring to increase borrowings to fund billions of dollars in cost-of-living relief measures such as $1000 energy rebates and 50c public transport fares. “The focus of what we have to do is to support Queenslanders in a time of need,” the state Treasurer said. In Mr Dick’s haste to spend, the government opted to borrow, increasing the general government sector net debt to $27.4bn in 2024-25, rising to $59.8bn in 2027-28.

Mr Crisafulli says taxes and debt will be lower under an LNP government but the Opposition Leader has yet to release his plan. It will be one of the most important points of the campaign. Both he and Mr Miles have promised to keep the cheap public transport fares. While fuelling inflation, soaring state borrowings, an EY analysis showed last week, are a threat to living standards. The analysis showed state governments would exceed federal borrowing this year, collectively needing to issue more than $100bn in new debt in the 2024-25 financial year. Almost 60 per cent of that new debt will be issued by Victoria and Queensland, disproportionate to the size of their economies which amount to just over 40 per cent of the nation’s GDP.

If Mr Crisafulli is to lay the foundations for effective government with a mandate for change, which Queensland needs, he must use the campaign to show how the LNP would improve on the efforts of Labor, which has disillusioned voters badly. Before Labor’s state budget he recklessly promised to adopt it holus-bolus for four years – before he read it. If he honours that silly commitment he will saddle 5.6 million Queenslanders with a blueprint for ongoing big government dependency starkly at odds with encouraging self-reliance and enterprise. Because Labor’s ruinous coal royalty scheme, with the highest taxing rates in the world, funds spending across the forward estimates, Mr Crisafulli has ruled out overhauling it until 2027, leaving coal companies at a competitive disadvantage.

Should it win, the LNP must curb the influence of public sector trade unions. Their power has expanded exponentially under the Palaszczuk and Miles governments to the point that United Workers Union boss Gary Bullock levered Ms Palaszczuk out of office, replacing her with Mr Miles, his ally from Labor’s Left. Public sector nurses, teachers and police unions have signalled their intentions to squeeze the government elected on October 26 for nation-leading pay rises, piling pressure on the budget bottom line. In promising not to emulate Mr Newman’s public service sackings, a Crisafulli government could and should deflate the overblown public sector through natural attrition.

In one vital area the major parties need to be on a unity ticket. Preferential voting is compulsory and the LNP has said it has no intention of preferencing the economy-wrecking Greens. For the sake of Queenslanders, Labor should do the same.

https://www.theaustralian.com.au/commentary/editorials/wanted-plan-to-fix-failing-state/news-story/1701b82e01a98fce13b43ed3a3c71294