The Albanese government will be “pitting Australians against Australians” through “divisive” tax changes expected to be revealed on Tuesday night, a leading expert warned.
Labor is expected to restrict negative gearing to newly built homes, while it will be grandfathered for current investors.
The Albanese government is also looking to replace the 50 per cent capital gains tax discount with an inflation-adjusted model.
Treasurer Jim Chalmers has softened Australians up for these changes by arguing the budget will tackle “intergenerational equity”.
But former Treasury assistant secretary David Pearl said it was Labor’s agenda that was to blame for generational inequities.
“(The) government growing and debt rising, but also net zero, which is limiting the economy’s growth potential and limiting real income growth – that’s why young people feel frustrated,” Mr Pearl told Sky News host Chris Kenny on Monday.
“But the government’s unwilling to tackle either.
“It has the fallback of blaming older Australians (and) pitting Australians against Australians.”
Mr Pearl said Labor was “scapegoating” older Australians and property owners to younger generations amid the government’s failure to better tackle the housing crisis.
“It’s a very nasty diversion to mask the fact that the government has created problems it can’t solve,” he said.
The former Treasury staffer also tore into the government for its criticism of One Nation.
“The government complains about Pauline Hanson being divisive on the question of immigration and sowing division,” Mr Pearl said.
“Well, they are doing exactly that on economic and budget policy.
“It’s really a disgrace and it’s a million miles away from responsible Labor budgets.”
Sky News on Sunday revealed the government’s negative gearing changes will mean any investors who purchase established homes after budget night will not be able to deduct their losses against income.
The Housing Industry Association warned that restricting negative gearing would not increase housing supply.
It pointed to modelling by Qaive and Tulipwood Economics that found the number of new builds would fall by 22,700 over five years if negative gearing was restricted to new builds.
This would also reduce GDP, lower construction employment and increase rents.
EQ Economics managing director Warren Hogan said large government spending, which sits at its highest level outside the pandemic in 40 years, was pushing Labor to increase its tax take.
“What we’re seeing potentially is economic reform really masking higher tax revenue,” Mr Hogan told Business Now.
“That is the need for the government to raise tax in order to cover its spending without going into further deficit.”
Many in the property sector have warned plans to roll back negative gearing will not boost housing supply.
Property Council of Australia’s CEO Mike Zorbas and Housing Industry Association’s managing director Jocelyn Martin each made this point during Sky News’ Budget Battleground.
“None of the modelling that we’ve seen … shows an increase in supply because of changes to negative gearing,” Mr Zorbas told Sky News.
Ms Martin agreed and questioned why Labor was making the tax changes now when the party “should be” focused on removing barriers to housing supply.
“At the moment, 40 per cent of new house and land packages are bought by investors for the rental market,” she said.
“If we start making adjustments to the investment landscape with housing, the chances are that those investors will find something better to do with their money.
“That will have a negative impact on rents, not just on availability, but affordability as well.”
While Labor has not confirmed these tax changes, Prime Minister Anthony Albanese said that governments made “the right decisions for the right reasons” when asked about broken promises.
“Government is about making the right decisions for the right reasons for the times that you are in,” Mr Albanese told ABC Radio National on Monday.
“That is what we’re driven by, the best outcome for the nation. If we do change our position on any policy. We will explain why it is that that is occurring.”
Mr Albanese said housing affordability had continued to deteriorate and argued that government wanted to use “every lever possible” to tackle intergenerational equity.
“People are under pressure. And the easy path is to say, oh well, we’ll just sit back and watch that occur,” he said.
“The difficult decision, but the right decision is to do the right thing with the right policies to deliver.”