A Reserve Bank memo written before the release of the Federal Opposition’s negative gearing policy raised concerns about the impact of changing negative gearing on renters.
The 2014 memo was released as part of an FOI request. In a section entitled “Potential negatives from changes that make negative gearing less attractive?”, the question is raised by the bank “Potential increase in rents?”.
We accept that the Reserve Bank were not modelling the Federal Opposition’s policy – but this memo clearly flags that changing negative gearing would impact rents.
This memo confirms that policy makers have real concerns about how renters would fare under policies that make negative gearing less effective.
We again call on the Opposition to release its modelling on the impact of its proposed tax changes on rents and the property market.
Since the memo was written in 2014 levels of property investment had fallen substantially. Since 2014 ATO figures show the cost to the budget of negative gearing has halved and the level of investor loans has fallen to 29 per cent.
The incoming Governor of the Reserve Bank comprehensively argued in his March speech that supply is a major determinant of house prices. We agree.
Australia has a shortage of housing and negative gearing encourages investment in supply. Increasing supply is the key to addressing issues of housing affordability.
Adding $32 billion of tax on property investment is not a housing affordability plan.
The concerns of the RBA that were stated in 2014 related to the interaction of negative gearing and capital gains tax.
It should be noted that since this memo was written, APRA has made changes to deposits on loans. As well, the Reserve Bank’s recent financial stability report noted the possibilities of risk associated with foreign investment in property “there is little evidence of either occurring so far."