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Treasury snubs negative gearing

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Treasurer Joe Hockey has not asked his department for any work on the impact of negative gearing on house prices.

Mr Hockey and Prime Minister Tony Abbott have strongly argued that getting rid of negative gearing would push up rental prices and hurt the poor.

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The argument about rental prices rises has been refuted by welfare groups and some economists who argue that it would have a neutral or downward impact on prices.

The Greens have gone so far as to advocate its abolition, to save the budget $3 billion over four years, while Labor is considering a policy change.

A senior Treasury official told a parliamentary inquiry on Friday the treasurer had not sought any advice to back up this argument, nor had any work been done on it independently.

Treasury acting deputy secretary Jenny Wilkinson said the department had not been asked by the treasurer to do any specific work on the impact of negative gearing on housing prices.

However she said a range of government policies were being considered as part of the tax white paper “in relation to the design of the tax system more generally”.

Labor MP Jim Chalmers told the hearing he found it “extraordinary” that the treasurer had not asked his department for the work to be done to inform his public comments.

Another committee member, Labor MP Pat Conroy, asked Ms Wilkinson at the hearing what was Treasury’s analysis of the impact of a possible negative gearing policy change.

Mr Conroy said the argument against a change in policy by Mr Hockey was largely based on an isolated episode in the 1980s when the Labor government made changes to the system.

Ms Wilkinson said although the department had not provided any advice, it was true that the impact on rents across the country could not be solely blamed on one policy.

“There are lots of different things that are happening in the economy at any given point in time, lots of things will be affecting different outcomes in different states,” she said.

“And you have to think very carefully to work through and disentangle the impact of one particular policy compared with other policies.

“So I think we would be very cautious in drawing any conclusions.”

Ms Wilkinson agreed with comments by the department’s secretary that there had been a period of very strong house price growth which could be described as a “bubble”.

However she said there was a “general sense” that some pressure was coming out of the market in Sydney and Melbourne.

The hearing continues.


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