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Peter Van Onselen: Change of Gear Would Hurt WA most

18 April 2017
Make no mistake, if Labor wins federal office and legislates its changes to negative gearing it will crush the already fragile West Australian housing market.
Since the mining boom ended, property prices have come off significantly. Equally, once-pricey rentals have been replaced with unusually high vacancy rates. Investors are offering deals to sign up tenants.
The problem for many highly leveraged property investors in Perth is they rely on rental returns to pay the interest on the loan. When rentals are vacant, pressure builds.
Given that employment is also volatile in WA, it’s not a pretty picture.
Consider what might happen to the picture painted above if Labor removed negative gearing for new investor/owners of existing properties. It would make a bad situation worse.
Perhaps WA will get lucky and two years from now when (or if) Labor wins power federally, the housing market will have turned around. More likely, however, it will be even worse.
Don’t get me wrong, generically speaking I support negative-gearing reforms. Perhaps not Labor’s model but at least it is doing something. The problem is that the changes are a necessarily blunt instrument, applied equally nationwide. It works in the Eastern States where housing markets are overheated but not here in a depressed WA market.
WA Treasurer Ben Wyatt has said he supports federal Labor’s negative-gearing policy but he might rethink that when he gets briefed on the potential impact it could have on the State’s housing market. One of the key drivers of higher State Government revenue is stamp duty receipts, which would be suppressed by federal Labor’s policy.
And, of course, finally we have the politics of this issue. There are a number of federal Liberal MPs under the pump come the next election, judging by the polls and the recent WA result.
At the top of the list is Social Services Minister and former WA treasurer Christian Porter. His seat is held on a margin of less than 4 per cent and is targeted by Labor. Porter is but one of a handful of seats Labor has its eye on in the west.
But if the Liberals in WA can isolate and condemn the impact the negative-gearing policy will have on homeowners, investment owners in particular, they can crack Labor’s polling lead and turn their fortunes around, because the policy is about solving an Eastern States problem, even if it makes WA’s housing slump worse.
Once again, a major party shafts WA. Whether it’s the GST, infrastructure funding or now housing affordability policy settings, Canberra seems to forget there is a State on the other side of the Nullarbor being let down.
On another matter, last Sunday I interviewed Premier Mark McGowan on Sky News. He ruled out any chance that Labor would put pokies into WA or pursue road tolls, for which he should be applauded.
But it does leave Labor with a funding problem. McGowan said he wanted other States penalised for using socially debilitating pokies when GST allocations are carved up, and I couldn’t agree more. Let’s get a campaign going on this very issue - WA needs such changes.
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