Discussion in 'The Economy' started by Simon Hampel, 26th Nov, 2009.
Lateline Business - 25/11/2009: RBA flags long lasting economic boom
Lateline Business - 25-Nov-2009
It will be interesting to see if government really looks to act in the social interest when the property tax reviews come back and decide to help make housing more affordable by taking a few fingers out of the property pie...
If the Liberal party self-destructs before or during the next election to the point where the Labor party has an overwhelming majority (at least in the lower house, and possibly effective control of the Senate), I predict that the first budget after the election will be very nasty (for investors) and very typically Labor.
This government has already shown it is prepared to tackle what it perceives to be the big issues (although we've yet to see them really deliver anything more than tokenism - so the jury is still out on those issues I feel).
Specifically, I wouldn't be surprised if some form of modification to the negative gearing arrangements came back onto the agenda. I doubt they will look at a wholesale removal - they would be reluctant to make the same mistakes made in the past, but some serious tinkering could well be seen ... along with some big promises about affordable housing schemes etc.
That's my (rather cynical) view of this government (and the lack of conservative opposition) anyway.
Land tax is getting ridiculous in Tasmania to the point that its becoming not viable for many to invest in multiple properties down here. Its effectively a tax for being an investor or business owner. When you talk reform I really hope that land tax is one of the first things to go.
Being a state tax and an important source of revenue for state governments - there would have to be a massive sweetener from the federal government for them to be able to afford to cut it.
But that is likely to be politically untenable. What is the main source of revenue from the federal government given to the states now? A split of GST revenue! So the obvious choice when removing land tax is to increase GST to compensate.
Now, despite you and I having a reasonable understanding of consumption tax and realising that wealthy people pay more GST because they typically consume more - thus it is fair ... the less financially fortunate don't see it that way - land tax is a wealthy persons tax. If you remove that and force the non-wealthy people to pay more GST as a result (even though the wealthly people are in turn paying substantially more GST in absolute terms) ... then you will have a strong political backlash.
An ultra-strong Liberal government may have had a chance of forcing the removal land tax and justifying it by increasing GST ... but I just can't see a Labor government even contemplating such a move.
Good assessment Sim. Personally to take advantage of the new boom, I'll be investing directly in the Australian Stock market, perhaps using etfs as a way to capture growth in other nations (IBK for BRIC countries as an example). For property it looks like setting a limit to one investment property per state is the only sure fire way to limit land tax. (I'm getting out of the Navra savings plan I had, that cash would be better on the stock market with close stops to limit loss of capital)
Separate names with a comma.