Todays Centre for Economic Development Australia (CEDA) report on housing shows that the Turnbull governments inaction on housing affordability will have long term adverse social and economic consequences.
The Turnbull government is locking a generation of people out of secure homes, exacerbating inequality and threatening fiscal stability.
The distorted and unfair housing market, according to CEDA, will have long term implications for the Budget.
Prolonged housing affordability issues will result in more people entering retirement without owning their home and low socioeconomic households pushed to outer or regional areas where transport infrastructure is poor and job prospects are lower. In the long term this could have budget implications for governments as more people become reliant on government assistance. Professor Rodney Maddock, CEDA Research and Policy Committee Chairman.
The report backs Labors policy of curbing capital gains tax concessions. Recommendation eight says that A larger component of capital gains should be taxed. It notes that Excessively generous capital gains taxation has encouraged the flight to property and other assets.
It notes the connection between negative gearing and CGT concessions, saying:
The combination of generous negative gearing provisions and the CGT has encouraged debt financed property purchase by investors to chase speculative capital gains that are lightly taxed in comparison to ordinary sources of income. (p.82)
The report notes that Australias tax concessions for housing are among the most generous in the world.
The CEDA report comes on the back of Household, Income and Labour Dynamics in Australia (HILDA) figures that show a huge drop in home ownership for people under 40, declining living standards and flat wages.
While the Turnbull government has chosen to ignore calls to address growing housing inequality, Labor is leading the debate on housing policy, with a suite of policies that will address the problems highlighted by the CEDA report.
After claiming that there would be an extraordinarily large housing package in the 2017 Budget, CEDA has highlighted the policy vacuum left by the Turnbull government.
This is another demonstration of a weak Prime Minister, leading a divided government, too consumed by internal divisions to deal with the real issues.