The federal treasurer, Scott Morrison, has defended negative gearing on the basis it keeps rents down and attempted to paper over disagreements with the New South Wales premier, Mike Baird, over the issue.
Morrison rejected Baird’s and state planning minister Rob Stokes’ calls for negative gearing to be reconsidered but claimed Baird had backed the federal government’s position on rent.
Morrison also defended changes made on Saturday that allow foreign buyers of off-the-plan apartments to sell them on to other foreign buyers when settlement falls through, rather than require them to be sold to Australians.
Morrison said the “anomaly” needed to be corrected to protect the financial viability of some developments.
Stokes criticised negative gearing by warning it does nothing to improve supply but does help some people reduce their taxable income at the expense of other Australians.Baird backed his planning minister in a speech at the National Press Club and added that GST should also be reconsidered.
Morrison said housing affordability didn’t just affect people saving for a home in Sydney and Melbourne, but also the 30% of people who rented.
“I am not about to do something that will jack up their rents which was the result of negative gearing changes last time,” he told a press conference in Canberra.
Morrison said the risk of overheating in the investment market had been dealt with by Australian Prudential Regulation Authority measures.
But balanced against that was the need to avoid “a negative housing shock” through the tax system, he said. “I think that is quite a reckless and dangerous idea.”
Morrison noted that Baird had said the commonwealth was right to raise concerns about the impacts on rents of abolishing negative gearing.
Morrison said the meeting of treasurers on Friday would consider the $11bn spent by federal and state governments on housing policies, which he said was “not well spent” by either level of government.
The treasurer was asked why he was allowing foreign investors who purchased apartments to onsell them to other foreign investors, not just Australians, when settlement fell through.
He said the “modest calibration” to the regulation was needed to address the fact the previous requirement to sell to an Australian was threatening the “financial viability of various ventures”.
“It was an anomaly, an unintended consequence and it was important to provide surety around those projects so we didn’t allow a situation to develop that could jeopardise important business ventures.”
Asked if that amounted to saying the difference an Australian or a foreigner would pay for an onsold apartment could imperil developments, Morrison said only that the regulation change “ensured some stability in some fragile areas of that market”.
Negative gearing was one of the most contentious issues in the federal election campaign.
In the months before the election, at least six different pieces of economic modelling touched on negative gearing changes, none of them with the same conclusion.
Labor has sought to target the government for refusing to reconsider negative gearing after the intervention of Stokes and Baird.
