Malcolm Turnbull has attempted to paper over the government’s mixed messages on tax reform, insisting the opposition’s negative gearing policy would deliver “two contradictory, massive shocks” to the residential housing market.
Facing a third day of parliamentary questions about his claims of property prices being “smashed”, the prime minister went on the attack, denouncing “the most ill-conceived, potentially destructive policy ever proposed by any opposition”.
But the prime minister had to correct the parliamentary record after he made outdated claims about the property holdings of a Labor rival.
Negative gearing is the practice of investors deducting net losses on their rental properties from other income on their tax returns.
Labor, which is promising to rein in negative gearing by restricting it to newly constructed homes, accused the government of running an incoherent, Tony-Abbott style scare campaign.
In question time on Wednesday, Labor seized on a comment by the assistant treasurer, Kelly O’Dwyer, that the opposition’s policy would “increase the cost of housing for all Australians”. Turnbull previously said the opposition was “smashing home values” and would “cut the value of your home”.
Dismissing “childish word games”, O’Dwyer told parliament the impact on established and new homes would differ.
Turnbull also rejected claims of a discrepancy. “What the Labor party proposes to do is to administer two contradictory shocks, massive shocks, to the residential housing market,” he said.
“They are proposing to remove from the market for established dwellings one-third of demand. All investors would be gone – and when I say all investors, I mean all investors ... The reality is the Labor party policy does not simply apply to net interest losses, it applies to all net rental losses ... This will eliminate all investors from the established property market, and that naturally will cause prices to fall. How can it not? The market is subdued.
“And at the same time they then want to pour all of that investment into new properties, which can only be designed, presumably, entirely contradictorily to drive those prices up.”
But, later in question time, Turnbull made a blanket statement that the Labor policy was “designed to reduce the value of every single home in Australia”.
He also said the manager of opposition business, Tony Burke, “owns two investment properties, both of which are geared”.
“I don’t know whether they’re negatively geared or not but he is very well aware of the economics of this matter,” Turnbull said.
Burke, who is also Labor’s finance spokesman, immediately challenged the claim, saying it was “completely wrong and made up”.
Burke’s register of interests, filed on 10 December 2013, indicated he owned three properties, two of which provided him with rental income, but subsequent updates in 2015 indicated these had been sold.
Turnbull owned up to the error a few minutes later. “I should just add in fairness to the honourable member for Watson: he is quite correct to pick me up,” the prime minister said.
“When the parliament began he did record three properties, one of which was a residence and two of which were investment properties, and he has subsequently sold them all, so I missed the honourable member’s amendments.”
The Labor leader, Bill Shorten, said the prime minister’s failure to mount an effective scare campaign showed the government was “in complete and utter chaos” on tax reform.
The shadow treasurer, Chris Bowen, said Turnbull had abandoned his pledge to pursue evidence-based policy to adopt a campaign befitting Abbott.
Turnbull replied that the principles of supply and demand were “economics 101”. It was, he said, “fundamental common sense” that a decrease in buyers would trigger a drop in prices.
Labor announced its policy to rein in negative gearing and capital gains tax concessions nearly two weeks ago, saying the measures would raise $32.bn for the budget over 10 years.
Negative gearing would be limited to newly constructed housing from 1 July 2017, but all investments made before this date would retain access to the deductions.
Labor would cut the capital gains tax discount from 50% to 25% for assets purchased after 1 July 2017.
The opposition’s policy measures have dominated parliamentary question time this week, with the government yet to announce its own detailed policies apart from ruling out an increase in the goods and services tax.
On Monday, Turnbull told parliament that “increasing capital gains tax is no part of our thinking whatsoever”, but he later clarified his pledge applied only to capital gains tax for individuals and did not extend to superannuation funds.
