Why are we talking about negative gearing?
The simple answer is Bill Shorten released Labor's negative gearing policy. (For better or worse, this is how you control the media cycle. Release policies.)
The more complicated, more worrying answer is that the economic debate is so empty — that the range of acceptable discussion is so narrow, that big picture ideas are so thin on the ground — that changing negative gearing is the boldest economic reform the political class can reckon with.
Removing negative gearing has been done before. Where in 2016 negative gearing changes counts as a courageous barbecue stopper, the Hawke government's abolition of negative gearing barely rates a mention among the great regulatory upheavals of the era. It's a sad illustration of how our vision of the range of possibilities has shrunk in three decades.
An even more depressing thought is how disconnected the negative gearing discussion is from the big economic challenges we face. There are two reasons one might consider negative gearing changes. We might want to gather more revenue for the Commonwealth budget. And we might want to ease pressure on the housing market.
That Labor has a more-tax-revenue approach to budget repair and favours negative gearing as an explanation for high house prices is well-known.
On the other hand ...
But it's a worry that the Treasurer, Scott Morrison, while defending negative gearing in general, believes that the "excesses" of negative gearing need to be tackled.
First, this goes against Morrison's apparently rock-solid belief that spending needs to be reduced, rather than revenue increased.
Second, it implicitly concedes the view that the house price boom is caused by demand — too many investors — rather than supply — restrictions on land release and NIMBYism.
Third, and most importantly, changes to negative gearing have nothing to do with economic growth. Nothing.
It's true that you could make a creative, complicated, multi-stage argument that lower house prices might eventually lead to growth benefits. But all else being equal, it is hard to see why removing money from the economy — as any proposal that increases government revenue would — might help the economy, rather than hinder it.
The unfortunate conclusion is that both the Government and the Opposition are talking about negative gearing because they have so few ideas of what to do next.
Just look at Morrison's speech to the National Press Club last week. As a generic political speech it was perfectly adequate — an outline of the economic climate and reiteration of previously announced policy positions. But as an attempt to articulate the economic direction of the Turnbull Government it was empty.
On the question of budget balance Morrison only managed to demonstrate that very little had been done to reduce the deficit — as his 7.30 interview made perfectly clear, the Coalition has spent $70 billion of the $80 billion it has saved.
Perhaps the problem is that the bank of reform ideas is empty. Property commentators have been hyperventilating about negative gearing for ages. Maybe it's only being talked about because the political class has run out of other things to talk about.
Yet the Australian policy community is rich with ideas: big bang ideas and small marginal ideas. The Abbott government commissioned the production of many of them. We've had the Harper review into competition policy, the Murray inquiry into the financial system, and the encyclopaedic audit commission report. These reports offer hundreds and hundreds of pages of policy discussion, recommending everything from intellectual property law changes to returning some income tax powers to the states. So where is the shadow of that formidable ideas production in our federal parliament?
Morrison has given a partial answer. From a growth point of view, cutting the company tax rate could get the biggest bang for our reform buck. This would be hard politics, especially if the revenue loss was compensated with a GST rise. As the Treasurer explained, "the proposition that you tax mums and dads more so companies can have a tax cut has an obvious problem." Yet that problem has been surmounted before. Company taxes were cut in 2000, and again in 2001, at the same time as the GST was introduced.
It seems clear that politicians feel more hemmed in than they were in the past. That's either because they lack courage — or because they lack the stable foundations on which to be courageous. Australian politics has now experienced half a decade of leadership instability, brought about by the fractious decision to roll Kevin Rudd in 2010.
Our policy debate is more shallow, limited and parochial than it has been for decades. Yet at the same time the need for major changes — changes that would spark economic growth — is as pressing as it has been since the 1970s. That changing negative gearing is the best that Labor and the Coalition can come up with is a condemnation of their failure to lead.
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