March 1, 2016

Editor’s Note

Editor’s Note March 2016

By Nick Feik

In 2014, Malcolm Turnbull said Australia’s tax system was “too tough on people earning income, i.e. the entrepreneurs, the people who are growing and driving, younger people in jobs, working hard, making money in their businesses. It is too tough on them. But it is incredibly concessional to older people who have made their money.”

The public appreciated Turnbull’s candour, and statements like this raised expectations for his leadership. As prime minister, however, he attacked Labor’s proposed changes to negative gearing and capital gains tax discounts – the very policies that entrench the generational unfairness at which he hinted – with the kind of aggression associated with his predecessor.

The prime minister “seems not to be himself at all”, as Don Watson writes in his comment this month. Climate change, the republic and same-sex marriage were only the start.

When Labor laid out its proposal to crimp negative gearing, Turnbull had a golden opportunity to show bipartisan leadership, host a mature policy discussion, and enact genuine and necessary reform. Instead, he chose hyperbole and scaremongering, claiming that Labor had set out smash the residential housing market. “Bill Shorten’s policy is calculated to reduce the value of your home,” he said.

Negative gearing is not, as Treasurer Scott Morrison absurdly claims, the province of nurses, teachers and “everyday mum and dad investors just trying to get ahead”. Along with capital gains tax discounts, it overwhelmingly favours the older and richer. These concessions have exacerbated a generational wealth divide in Australia. They have inflated housing prices to the benefit of the property-investor class, locking out younger Australians. “Does the prime minister think it is fair that … an investor buying their seventh home will receive more taxpayer subsidies from his government than a first-home buyer?” asked the Opposition leader in Question Time. Turnbull had no useful response.

Once again, the prime minister had sided with his party colleagues, against his own better judgement. As it stands, we have no clear idea what his party intends to do about negative gearing, or indeed about tax reform generally, but the opportunity for a major overhaul seems already lost.

As Richard Cooke writes in his essay this month, it is hardly unusual for political leaders to protect the wealth of the baby-boomer generation. Labor has long done it too, which is why it was refreshing to hear Turnbull speaking plainly against the consensus in 2014. There’s no shame in changing policy, of course (as Labor has since done). Right now, the danger for Turnbull is that he risks becoming better known for selling out his beliefs than acting on them.

Nick Feik

Nick Feik is the editor of The Monthly.

@nickfeik

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