Treasurer Scott Morrison left embarrassed by radio gaffe after he claimed renters would pay $2600 more per year under negative gearing changes - but was reading from the WRONG report
- Treasurer Scott Morrison made an embarrassing blunder on Thursday
- He slammed Labor's negative gearing policy based on a forecasting report
- He said rental prices would increase by up to 10 per cent under Labor
- BIS Shrapnel revealed the report was not based on the proposed policy
- The opposition government wants to end negative gearing on old homes
- Scott Morrison said the policy is 'bad news' for the property market
Treasurer Scott Morrison made an embarrassing blunder after savaging Labor's proposed changes to negative gearing based on a report that was not linked to Bill Shorten's new policy.
Mr Morrison said the 'credible report', undertaken by financial forecasters BIS Shrapnel, indicated that rental prices could increase by as much as ten per cent under the new policy, or $2,600 annually, with employment also set to take a dive with fewer properties being built.
He went on to say the 'damning indictment on Labor's policy' found that limiting tax breaks for property investors on new buildings would cut $19 billion from the federal budget.
'It's bad news if you own a home, it's bad news if you're an investor in a home, and bad news if you're renting a home,' Mr Morrison said
However, his attack was discredited when a representative of BIS Shrapnel revealed the report was written before Labor released its policy.
'It wasn't directed at any particular policy at all,' BIS Shrapnel executive Kim Hawtrey told ABC News Radio.
'And in fact we've made no recommendations. Our job was simply to chase the effects on the economy by crunching the numbers and looking at what might happen if you did this kind of change.'
The report, which was not based on Labor's proposal to end negative gearing on established properties from mid 2017, found that limiting tax breaks for property investors on new buildings would cause a four per cent drop in new developments annually, meaning around 7,200 new homes would not be built.
Labor leader Bill Shorten's proposed plan to end negative gearing on established properties was slammed by Scott Morrison
Forecaster BIS Shrapnel estimated that rental prices could increase by as much as ten per cent, with employment also set to take a dive with fewer properties being built
This would result in 175,000 fewer jobs being created over the next ten years, a decrease in housing values and a further 70,000 households pushed into 'rental stress', according to the report.
Treasurer Scott Morrison seized on the assessment, telling ABC radio on Thursday the findings are a 'damning indictment on Labor's policy'.
'It's bad news if you own a home, it's bad news if you're an investor in a home, and bad news if you're renting a home,' Mr Morrison said.
'That's three strikes and you're out.'
The report found that limiting tax breaks for property investors on new buildings would cause a four per cent drop in new developments annually, meaning around 7,200 new homes won't be built
Mr Morrison played down the fact the modelling had been commissioned by an unknown client, saying BIS Shrapnel was a reputable firm.
The report found that limiting tax breaks for property investors could have many unintended consequences that go well beyond any tax saving to the federal budget.
'The policy change will create a `discouraged investor effect' that will dampen investor demand for housing,' BIS Shrapnel says in the report released on Thursday.
Investors under present rules would have a strong incentive to hang on to their properties in order to prolong the old regime.
While negative gearing would still apply to new dwellings, BIS Shrapnel believes it is doubtful that this would attract significant investment funds into new dwellings.
'When you later came to sell a property ... the next owner won't qualify for negative gearing and therefore you would not be able to sell it without taking a price fall,' it said.
Developers would find lower returns from developing new dwellings, relative to cost, diminishing their ability to build new homes.
'Lower rental stock means higher rents,' it says.
It estimates the policy would push 70,000 extra households into housing rental stress, and should the government decide to compensate these people, it could cost $650 million.
While negative gearing would still apply to new dwellings, BIS Shrapnel believes it is doubtful that this would attract significant investment funds into new dwellings
Developers would find lower returns from developing new dwellings, relative to cost, diminishing their ability to build new homes
While the government will save $2.1 billon a year as fewer individuals deduct losses from property, it will incur an income tax loss of $1.8 billion from lower home building.
State governments would see a fall of around $1.1 billion from a drop in stamp duty revenue and a $200 million decline in GST collections.
According to the Labor Party 'negative gearing and the capital gains discount have not achieved their aim to boost housing supply and encourage the building of more new houses.'
'This year, they will cost the budget over $10 billion. That's more than that the government spends on higher education or child care,' the party states in a fact sheet about their proposed reform.
'These tax subsidies are un-affordable, and to continue them will crowd out funding for important investments in that are required to grow our economy and jobs.'
Capital gains subsidies will drop from 50 per cent to 25 per cent with the proposed changes
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