The expected Phelps victory in Wentworth and the likely expectation that we’ll see PM Bill Shorten in 2019, led me to shine the spotlight on the policies that this current misguided Government failed to play up in what some might call the grand central of property markets in Australia — the eastern suburbs of Sydney!
I live in the East and saw the campaign. I saw that Dave Sharma was a good guy, as both Kerryn Phelps and Tanya Plibersek pointed out on ABC radio 702 on Monday. However, he didn’t talk about what might worry every homeowner in these expensive real estate postcodes in this former PM’s seat.
I did that yesterday and argued that Bill’s negative gearing policy will be good for homebuyers but not home sellers. My simple argument was that when you take away negative gearing on existing homes, meaning that less property investors will be interested in the property because on resale, there’ll be fewer prospective buyers.
I interviewed John McGrath of McGrath Estate Agents on my radio podcast show yesterday (you can listen to that interview on Switzer today). He too was perplexed why campaigning didn’t seem to deal with this big issue for residents in the Wentworth electorate. A friend of mine, who has never voted Labor, was set to vote for Kerryn, when I told her about Bill’s property policies. Even though she though Phelps was a good candidate and wanted to send the Libs a message, she looked worried about her major assets — real estate.
(In the end she didn’t vote because last Thursday night, out of the blue, she was offered a kidney and will no longer have to do dialysis at her local hospital four days a week!)
The point is that voters need to know the truth, even if they can’t handle it. Australia is made up of very different Aussies and what should eventuate at an election should be the best representation of who we are, as a majority, and what we want.
I know there are minorities who think they know better (and there are some who do) but it’s dangerous to give them power and let them run the show. Germany learnt that lesson in the 1930s under that villain Hitler. Russians and the Chinese learnt similar lessons.
I’ve always loved the John F. Kennedy observation on US democracy that goes: “Freedom has many difficulties and democracy is not perfect, but we have never had to put a wall up to keep our people in…”
At the risk of sounding JFK-ish, some commentators look at the world and make their comments to influence readers. Others, like me, try to illuminate the economic truth in a confusing area of thought called economics, so voters can make better decisions.
That’s not to say I’m the sole purveyor of economic truth. That’s the beauty of twitter — if the tweeters are there to get to the truth rather than tribally castigate someone for not believing what they believe. These people try to build psychological walls to hold people’s thoughts captive. They are either radio shock jocks waiting to be discovered or just second-rate thinkers.
I was forced to think about what I do following a tweet from a tweeter — I won’t call anyone a ‘twit’ without proper analysis and one tweet isn’t enough to make a call on someone’s soundness of mind.
To counter my argument that Bill’s negative gearing policies will reduce the number of property investors at home sale showings and auctions, one ‘true believer’ (as Paul Keating might call him) replied, via twitter, with the single word: “grandfathering.”
He seemed to think I ignored this part of Labor’s policy but I hadn’t. Grandfathering means current users of negative gearing keep it on their current properties. OK, that’s fine. But if they come to sell the property, the only investors who might want to buy the property will be those who are renovators with great vision, knockdown and rebuild merchants or people who haven’t been give good tax advice.
The garden variety property investor, who buys to make capital gain, using the tax system to receive rental income and provide digs for tenants to live in, won’t be seen as existing properties in Bill’s world.
This tax ‘dodge’ was meant to save the Government building accommodation for less well-heeled Aussies, which they did ‘big time’ until the 1970s. Bill’s policy would be more acceptable to me if he had a supply of housing innovation but, to date, we haven’t heard much about that.
Also his reduction of the capital gains tax discount looks good on paper for reducing the budget deficit but this too could reduce the number of punters prepared to borrow from banks to be a property investor to make capital gain. This is especially so when banks are being forced to be hard on these investors.
And all this when house price Armageddon stories in the press are more plentiful than revelations about the Kardashians, Rebel Wilson and the Australian cricket team!
Right now, the fund manager, Geoff Wilson from Wilson Asset Management, who was on my Money Talks TV program last night, has a petition complaining about Bill’s policy on tax refunds for retirees. That’s what we’ve done in the past to influence governments and political parties with unacceptable ideas and well-meaning and even misguided commentators get out there and comment.
With well-meaning commentators (which I strive to be), the hope is that it encourages the national debate and smart politicians decide that their first ideas might need tweaking. And I bet Bill’s policy and retiree tax refund ideas will be altered, either by Labor before the election or by the Parliament after the election, which will have a tribe of independents, because the current crop of pollies of mainstream parties aren’t much chop.
If you liked this article you'll love the Switzer Report, our newsletter and website for trustees of self-managed super funds. Click here for a FREE trial and to hear more of Peter’s expert commentary and advice.