Getup proposed campaign against negative gearing

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In just a few days, Pros­per Aus­tralia’s pro­pos­al that Get­Up should cam­paign for a First Home Buy­ers Strike has gone from last posi­tion in Getup’s sug­ges­tion box to first. At 7.15AM this morn­ing, it had 3,113 votes–almost 500 ahead of the next-ranked pro­pos­al.

In its essence, this pro­pos­al is aimed at remov­ing gov­ern­ment inter­fer­ence in the prop­er­ty mar­ket which pur­port­ed to improve home own­er­ship, but which in essence has made it worse by feed­ing the prop­er­ty price bub­ble.

There is a relat­ed pro­pos­al on GetUp’s list–currently sit­ting at num­ber 9–to abol­ish neg­a­tive gear­ing. This is a sis­ter pro­pos­al to the First Home Buy­ers Strike, and I sug­gest that peo­ple who have vot­ed for the Strike should also vote for this one. I have just done so with the fol­low­ing com­ment:

I endorse this cam­paign, which–like the pro­posed cam­paign for a First Home Buy­ers Strike–is an attempt to remove gov­ern­ment poli­cies that were sup­posed to improve home own­er­ship and rental avail­abil­i­ty, but instead have done the oppo­site by fuelling a prop­er­ty bub­ble.

I hope that Get­Up can be per­suad­ed to take on both cam­paigns in a linked way, to get the gov­ern­ment to do what no polit­i­cal par­ty has had the guts to do on its own–to remove these dam­ag­ing social policies–because their removal sparks out­rage from influ­en­tial groups in soci­ety.

I am will­ing to work with Get­Up and Pros­per to devel­op a cam­paign that links these two ideas. Here are some sug­ges­tions about what the cam­paign could entail:

  1. A peti­tion to Par­lia­ment call­ing for the pol­i­cy changes list­ed below; in addi­tion,
  2. A “First Home Buy­ers Strik­ers Pledge” to be signed by poten­tial First Home Buy­ers who are abstain­ing from the mar­ket until the poli­cies are imple­ment­ed.
  3. Pol­i­cy points:
    1. Abo­li­tion of the First Home Own­ers Grant (FHOG)  for the pur­chase of exist­ing prop­er­ties;
    2. Abo­li­tion of Neg­a­tive Gear­ing (NG) on exist­ing prop­er­ties and shares (cou­pled with grand­fa­ther­ing of exist­ing Neg­a­tive Gear­ing);
    3. Restor­ing cap­i­tal gains tax to the same rate as income tax;
    4. Ban “cov­ered bonds”–which rank bond pur­chasers ahead of depos­i­tors;
    5. 25% of the funds saved from these two pro­grams over the next 3 years to go to the pur­chase of new prop­er­ties to expand the sup­ply of low-income pub­lic hous­ing;
    6. 5% to expand the fund­ing of pub­lic hous­ing;
    7. 25%  to con­struct and admin­is­ter new home­less shel­ters; and
    8. 5%  to Swags for Home­less so that peo­ple who are still sleep­ing rough can do so in  bet­ter com­fort.

I am sug­gest­ing only the removal of these two schemes from exist­ing prop­er­ty pur­chas­es for a cou­ple of rea­sons. First­ly, the real dam­age is done by these poli­cies fund­ing the lev­ered bid­ding war that had dri­ven up exist­ing house prices. They have done lit­tle to actu­al­ly add to the hous­ing stock, but pro­po­nents of keep­ing the pro­grams will argue that, if they are removed, the sup­ply of new hous­ing will col­lapse.

Aim­ing for the removal of the poli­cies from exist­ing home pur­chas­es elim­i­nates the main dam­age caused by the poli­cies, while not affect­ing the one area in which it could be argued that they might be ben­e­fi­cial.

Sec­ond­ly, there is a strate­gic thought behind this. If the hous­ing mar­ket plunges, you can be sure that the gov­ern­ment will inter­vene at some point to prop it up. If this cam­paign suc­ceed­ed in remov­ing the FHOG and NG com­plete­ly, the gov­ern­ment would almost cer­tain­ly rein­tro­duce both their schemes in their entire­ty to try to stop house prices falling.

If how­ev­er the schemes are redesigned so that they pro­vide sup­port only for the con­struc­tion of new hous­ing, it will be much more dif­fi­cult to extend them to exist­ing hous­ing. If this were done, it would be bla­tant­ly obvi­ous that this is a pol­i­cy to keep prices up–not to improve afford­abil­i­ty, expand the hous­ing stock, or any of the oth­er pos­i­tive spins that could be put on the scheme if it involved going from its total abo­li­tion to its total rein­tro­duc­tion.

I also pro­pose the pos­i­tive ele­ments of the cam­paign because they are need­ed, and the amounts because the cam­paign can then be seen as fis­cal­ly respon­si­ble. Yes I know the argu­ments against this from the MMT point of view; I am think­ing how­ev­er of how this cam­paign will play out in the “court of pub­lic opin­ion”. A cam­paign that elim­i­nat­ed expen­sive gov­ern­ment pro­grams that do more harm than good,  and direct­ed some of the result­ing at areas that are wide­ly acknowl­edged as need­ed, and “saved tax­pay­ers mon­ey” could get sup­port from all quar­ters, rather than being sup­port­ed from the left but attacked from the right.

I’m inter­est­ed in feed­back on these ideas, so please dis­cuss away. And please also cast your votes for the Get­Up cam­paign pro­pos­al on abol­ish­ing Neg­a­tive Gear­ing.

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About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.