A “cartel” of vested interests is stymying crucial tax reforms which could help free up more homes, a former boss of the Reserve Bank says.
Bernie Fraser, the only person in Australian history to have served as both RBA governor and Treasury secretary, said tax concessions for property investors should scrapped to boost housing supply.
He argued the current capital gains tax discount, which applies to properties owned by an investor for at least a year, exacerbates inequality by rewarding the top end of town.
“House ownership is a very profitable investment opportunity and a wealth-creating business for people that can afford it, but it has the effect of driving houses away from the dreams of ordinary, more modest-income people,” he told a parliamentary inquiry into the issue.
Mr Fraser urged the government to stare down its critics and scrap the tax discount altogether.
“There is … a cartel of people who are against dealing with tax changes,” he said.
“(It) comprises existing homeowners, property developers, and not least lots of politicians who like to see house prices rise and go on rising because there are votes in it.”
The federal government is believed to be considering changes to the tax treatment of investment properties but is yet to make any announcements.
Top government officials have disputed claims that reforms would free up more homes, saying most research showed curbing the tax concession would do little to boost housing supply.
“When we look at the research that’s been done on this, looking at changes in the capital gains discount … the impact on the housing market seems to be relatively small,” Deputy Treasury Secretary Shane Johnson told a parliamentary hearing on Tuesday.
Dr Johnson stressed the situation was complex, but said improvements to zoning and planning rules would be a better way to get more homes built.
Officials wouldn’t say whether they had modelled changes to the concession for investment properties, saying they didn’t want to prejudice discussions in the lead up to the federal budget, which will be handed down by Treasurer Jim Chalmers in May.
Dr Chalmers and Prime Minister Anthony Albanese have repeatedly refused to rule out an overhaul of the capital gains tax discount.