The Commonwealth Bank has weighed in on the potential effects of altering the capital gains tax (CGT) discount and negative gearing, predicting that such changes might bring only limited relief to prospective homebuyers, with only a slight dip in house prices.
In their analysis leading up to the federal budget, economists Luke Yeaman and Harry Ottley of the major bank suggested that while reforms to these property tax benefits could result in minor price reductions and slight productivity gains, the impact might not be significant.
“The most substantial advantage will likely be an increase in long-term government revenue and a more robust budget,” the economists stated.
They also noted that the housing market could experience some short-term volatility, particularly given the current shifts in interest rate cycles and slower population growth, which are already influencing prices and market sentiment.
While the Commonwealth Bank acknowledged that changes to these policies might aid in making housing more affordable—especially as the median house price surpasses $1 million—they cautioned that such measures would not be a panacea for the housing crisis.
“Increasing supply remains crucial,” the economists emphasized, pointing out that this is the key strategy for addressing the issue effectively.
Two Labor senators endorsed the inquiry’s report.
If reformed, it would be the first time the CGT discount is rolled back since the Howard government raised it to 50 per cent in 1999 and the first time negative gearing is changed since it was temporarily limited by the Hawke/Keating government in 1987.
“Intergenerational fairness is a really important way that we address some of the substantial and understandable issues in our budget, in our tax system and in our economy more broadly,” he said yesterday.
“What we are determined to see is a fairer economy that works for more people, including for younger people.”
Chalmers told Nine’s Today that there are other changes they are making to soothe housing pressures.
”If we did go down that path, I would encourage people to look right across the board at everything that we’re doing in housing, not one or two policies in isolation,” he said.
NEVER MISS A STORY: Get your breaking news and exclusive stories first by following us across all platforms.
