In the long term Chalmers, O’Neil and Albanese will want to own any improvement in intergenerational equity, so maybe it’s better to start now
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Getting caught telling the truth can be dangerous in politics.
This week, as Labor struggled to explain a growing downturn in Australia’s property market and copped anger at falling house prices, assistant minister Matt Thistlethwaite was more frank than most of his colleagues about the contributing factors.
Thistlethwaite conceded on ABC TV that Labor’s budget changes to negative gearing and capital gains tax were “part of a suite of reasons” for a noticeable drop in house prices.
The comment came as the government felt the pressure, including from pointy data released by analytics firm Cotality on Tuesday showing prices had fallen in 95% of Australian suburbs in August.
Commonwealth Bank expects national dwelling prices to drop by as much as 9% in a larger and faster adjustment, expected to last until April next year. After that prices should begin to recover, rising by 2% over the course of 2027.
The housing minister, Clare O’Neil, and the treasurer, Jim Chalmers, were among ministers trying to explain that the drop in values was due to factors broader than just the budget, in part to limit political pain from voters angry that their biggest financial asset is worth less now than before the May budget.
A better approach might be taking credit for their policy doing what was intended.
Labor’s reforms were designed to free up space in the market for first-time buyers, including by making conditions less generous for cashed up investors, and the policy has the potential to do just that.
In the long term Chalmers, O’Neil and the prime minister, Anthony Albanese, are certain to take credit for improving intergenerational equity and dealing with a sustained housing crisis, so why not start now?
The answer might be based on just how big the falls turn out to be, and whether Labor pays a high price politically.
In its analysis of market conditions released on Tuesday, CBA said the prices of homes in all Australian capital cities except Darwin had gone down for the fifth month in a row. The 0.9% national drop was blamed on Donald Trump’s war in Iran, interest rate hikes and Labor’s tax reform package – described by the government on budget night as the most important and ambitious changes in decades.
Combined, these factors had taken some sting out of house prices and were “providing opportunities for first home buyers with the means to enter the market”.
Speaking on Wednesday, Chalmers stuck by Treasury budget forecasts suggesting the tax changes would reduce home price growth by only about 2%. That assumption, he stressed, was based on changes over the next couple of years and not just the three months or so since the budget. Economists are sceptical about the forecast.
