Labor’s $200 billion nightmare
BILL Shorten and Labor are facing three major policy problems.
For a while they were political sleeper issues but global and local economic headwinds, plus Scott Morrison's willingness to "go negative", have meant the Coalition will try to turn the policies into a nightmare for Labor.
The three areas are changing negative gearing rules, changing tax arrangements for retirees and its plan for a 45 per cent target to cut greenhouse gas emissions.
But at the heart of the Government's attack will be Labor's plan to whack the economy with $200 billion in taxes over a decade.
Labor refuses to concede changing its negative gearing rules will force house prices down or drive up rent. It devised this policy when house prices in Sydney and Melbourne were skyrocketing and there were concerns Australians were losing out on auction day to foreign nationals.
At the time, for some, it made sense, and Labor was congratulated for having the courage to outline a policy to tackle a real issue affecting many Australians.
But since the announcement of its plan, the economy has changed. And Labor cannot, before an election, admit it will not proceed with the policy because it has relied on the savings to pay for its other promises if it wins government in May.
This policy effects everyone who lives in a house. If you live in a tent or in a treehouse you should be fine.
Under Labor's policy, those who already negatively gear homes will be protected from the changes - so essentially, if Labor wins there will be two classes of investors; those who continue to offset their losses through the taxpayer and those who cannot.
Take away some of the incentive to invest, and it's obvious some people won't go out and buy a second or third home. "Unfair!", you scream, well a lot of those investment homes are on the rental market.
The housing market is coming off the boil and decisions made by regulatory authorities have contributed to house prices coming down - good news for first home buyers.
Highly-leveraged people do not want to face the prospect of negative equity in their properties - especially if they want to sell. Interest-only loans for investment properties are becoming consigned to the past.
Some landlords will jack-up rents not only because financially they will have to but because of supply and demand - if there are fewer people buying investment homes to rent there are fewer homes on the rental market.
If you're trying to save up for a house, some people could kiss goodbye the extra few thousands dollars they put away a year for a home deposit.
Higher rent is not something some people can afford.
For most Australians their biggest asset is their home.
And no politician will say this publicly but it is true. For those waiting for grandma or their parents to hand over an inheritance after the sale of a family home, it's possible you will get less - essentially this policy is also tax on your inheritance.