Among the backdrop of growing budget deficits, the government struggling to fund Gonski and the National Disability Insurance Scheme (NDIS), the Australian Taxation Office (ATO) yesterday released figures showing negatively geared property investors lost a cool $13.285 billion in 2010-11 with much of this loss funded by the taxpayer. It wasn’t good timing for the government, but it has help propelled the issue to the forefront for more debate.
An article featured today on Fairfax online portals titled, “Negative gearing losses a key drain on revenues” is glowing hot with 248 comments. It reports on comments from Bank of America economist Saul Eslake saying “I have to translate the words ‘negative gearing’ to people overseas because it just sounds crazy to have a system that rewards people for losing money.”
According to the tax office, Australia had 1,811,174 property investors in 2010-11. Of those, 1,213,597 made losses totalling $13.285 billion.
But any debate is likely to be fruitless. Simply, Australia is experiencing the largest property bubble in its history. Any government which abolishes negative gearing is likely to instantly pop the bubble and be blamed for plunging Australia into a severe recession. Throw in a slowing mining boom, and a manufacturing sector decimated by the high Aussie and it could easily turn into a depression. It’s a lot of blood to have on your hands for $13 billion.
Should Negative Gearing be an election issue?