Former Prime Minister John Howard yesterday told 350 delegates at the First National Real Estate convention in Cairns he was intrigued that the national economic debate about negative gearing had made very little reference to the experience of its removal in 1985.

“When negative gearing was removed by then Treasurer Paul Keating in 1985, it was quietly brought back in the 1987 budget,” said Howard.

“The debate needs to focus on that piece of field evidence because the experiment with negative gearing was widely regarded as a failure. That’s more important than glossy economists reports," he said.

When negative gearing was removed in 1985, rents rose strongly.

“Affordability of rental property is a critical element of the debate and, as a society, we should always be conscious of the less fortunate who could be affected. We shouldn’t be interfering with something that has been a principle of our taxation system for a very long time,” Howard said.

“When negative gearing was restored in 1987, the justification was that capital gains tax had been introduced, but the capital gains tax had been introduced when negative gearing was suspended.”

Howard said he believes the high cost of housing is fundamentally a product of the forces of supply and demand, and poor planning decisions by State Governments and local councils, not the taxation system.

“Overall, the negative gearing debate is a triviality in terms of the real issues influencing housing affordability and home ownership,” said Howard.

See also:

The Opposition and negative gearing