photo credit: redjar
Renegade Economists podcast 116
As broadcast on the almighty 3CR on Wed Nov 25th
Subscribe to the podcast
Real Estate 4 Ransom: AJ discusses the 3rd I Want to Live Here report with a staggering number of houses that could hit the market if only speculators were to leave housing for humans, not captive for capital gains..
The change, effectively a halving of the headline rate of capital gains tax, benefited well-off individuals far more than any of the other more rigorously examined changes introduced at the same time.
Ralph said the cut would lead to a boom in investment in ”innovative, high-growth companies”.
Instead we rushed into real estate. It wasn’t exactly the ”better allocation of the nation’s capital resources” he said he foresaw.
Labor was asleep and waved it through with only one dissenting voice, then backbencher Mark Latham.
It would ”add to the great Australian disease of asset and property speculation, particularly in our big cities”, Latham told an uninterested chamber.
He was right. Before the change, Australian landlords actually made money. In 1999-2000 they pulled in a net $219 million from rent. By 2006-07 they were losing a net $5.37 billion.
Ralph – prodded by Howard – turned Australia into a nation of losers. He encouraged us to deliberately lose money in order to replace highly taxed income with lightly taxed capital gains.
As Macquarie Bank’s Rory Robertson told his clients at the time, ”Since September 1999 it is almost as though the Australian tax system has been screaming at taxpayers to gear up to earn increased capital gains rather than to work harder to earn increased wages or salaries.”
A Macquarie executive lost his job in 2003 when he crowed to investors about Britain’s M6 toll road: ‘‘We can put up the tolls by whatever we like and, almost as importantly, we can start the tolls on day one by whatever we like.’’