Publication date: 22 Apr 21 |
Source: THE TAX INSTITUTE
SYDNEY, 22 April 2021: Delivering her Economic Outlook for Australia at The Tax Institute’s Financial Services Conference today, Danielle Wood, CEO of the Grattan Institute said “politically difficult” moves like abolishing stamp duty might be needed in order to halt the growing wealth gap resulting from Australia’s red hot property market.
Danielle said that, “Unfortunately, a lot of things that are politically easy … have negative impacts and don’t really do much to solve the problem. The things that probably make sense and will have a big impact are politically hard.”
On the tax side, Danielle said one of the biggest steps to positively impact home ownership rates is the, “Land tax, stamp duty swap, obviously motivated by economic considerations, but also, if you reduce stamp duty, you make the deposit hurdle lower, and that’s the biggest hurdle for young people getting into the market, so it gets a tick on that front.”
“We’ve also advocated for changes around Capital Gains Tax and negative gearing.”
The low interest rate environment has ensured that a property market that has been booming for years continues to run hot.
“This is the time we find out how much interest rates matter relative to other drivers of supply and demand. The verdict is in: they matter a lot,” Danielle said.
Before the huge 1990s boom in house prices in, “a 25-34 year old household, home ownership rates were about 60% regardless of how much that household earns.”
Danielle cited the most recent data from 2016 which showed that, “home ownership rates fell for all young people – but not that much for high income young people, they dropped a little bit. They fell like a stone for low-income young people. Home ownership rates fell from just over 60% to just over 20%. That is a phenomenal change.”
“That’s really quite a significant social change I would argue and it will have long-term consequences. A lot of our income support, particularly for retirement, is based on the idea that most people will own their own home. I think it’s likely that in the future that will no longer be the case as current generations get to that age.”
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