THE Treasurer handed down his Budget with the theme of correcting the intergenerational imbalance on housing.
He used this excuse to introduce new taxes in order to reduce his government’s borrowing crisis.
The theory is that the older generation invests in housing by adopting legal methods of ownership such as negatively gearing their finance, then collect tax-discounted capital gains on the profit when the asset is sold.
The introduction of increased taxes on negative gearing and capital gains are supposed to greatly reduce the profit margin available to investors, to the point where it is better for them to sell these properties.
If that happens, then first home buyers should be the purchasers of those properties from the increased supply caused by investors selling housing.
It sounds possible and allows the government to be seen to be doing something to provide increased supply for the younger generation.
To my way of thinking, this logic is little more than intergenerational spin.
It doesn’t provide more housing, just a possible change of occupiers of the deckchairs.
Surely the major reason why the younger generation isn’t able to purchase housing is because the price of housing is far too high.
They are unable to save more capital because their cost of living is increasing so rapidly.
In fact, many of those trying to save are actually going backwards with increasing interest rates for borrowings plus the increasing rate of inflation.
One downside is for the renters of these investment properties.
Once investment properties are sold to new residential owners, where do the renters live?
Demand for housing is still great, with the government continuing to allow new families to enter permanently into Australia at high rates.
The plight of our first home buyers is further diminished by this Budget rather than improved.
It doesn’t make rational sense economically and is just spin in order to create the illusion of our political fathers trying to help out the younger generation.
By John BLACKBOURN
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