(May 12): Australia’s center-left government is expected to crack down on tax concession for property investors as part of efforts to ease generational inequality and help rein in a budget deficit.
Treasurer Jim Chalmers will hand down his fiscal blueprint at around 7.30pm in Canberra on Tuesday, with the document publicly released once he begins delivering his speech to parliament. The budget is expected to show the underlying cash deficit easing to A$25 billion (US$18 billion or RM65.35 billion) in the 12 months through June 2027, according to the median estimate of economists, from an official estimate six months earlier of around A$34 billion.
The budget aims to pare back outlays to help ease inflation and is also expected to include efforts to revive moribund productivity. But the centrepiece appears to be a housing package to increase supply and fairness. While Chalmers hasn’t openly acknowledged it, a clampdown on the 50% capital gains tax discount and a scaling back of negative gearing for landlords is on the agenda.
“The status quo in the housing market and the tax system is unfair and therefore unacceptable,” the treasurer said Sunday. “Too many people locked out, not enough homes.”
Australia’s housing market has been a one-way bet for the past 30 years and was amplified during last decade’s run of ultra-low interest rates. A surge in immigration in the post-pandemic period exposed a further shortfall in new construction and gave prices another leg up, even as the Reserve Bank aggressively raised rates.
The Labor government had set a target of 1.2 million new homes by decade’s end, but is struggling to reach it. Chalmers, in his weekend comments, seemed to signal the budget would include an effort to try to rebalance the market.
“The share of owner occupiers over a very long period has come down as the share of investors has gone up,” he said. “So we’ve said for some time there’ll be a tax reform package in the budget.”
“But people know that we understand there is a legitimate concern about how hard it is for younger people to get into the market, and so the budget is partly motivated by that,” he said.
Housing has been at the heart of inter-generational angst in Australia as asset-rich baby boomers and others made huge gains on their homes and, in some cases, investment properties as well.
Yet ironically, the budget will land at a time when there are early signs of a slowdown. Preliminary auction data from property consultancy Cotality on Monday showed only 56.5% of homes listed for auction were sold last week, the second-lowest result recorded this year.
“Too few Australians, and particularly younger Australians, can get a toehold in the housing market,” Chalmers said. “And that means too few people are getting a toehold in the economy more broadly.”
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