ELLEN RANSLEY: Labor’s attempt at floating negative gearing changes ended tangled in knots

Kite flying is a common political tactic. It’s a good way to gauge public temperature on policies, especially those that come with risk.

Labor have done it before, and they appeared to try it again this week with the politically fraught negative gearing and capital gains tax.

They’ve had “no plans” to touch the reforms since the last election, but it was revealed this week modelling work was being done by the Treasury department, assumedly to prepare options for Labor to take to the next poll.

After Treasurer Jim Chalmers jetted off to China, Prime Minister Anthony Albanese was left with the kite in his hands.

It wound up tangled in knots, stuck up a tree — but the jury is still out on whether or not it was a worthwhile exercise.

After days of Albanese providing vague, and sometimes contradictory, answers reminiscent of the language he used in the lead up to the stage three tax cut overhaul, Chalmers on Friday appeared to confirm the Government had asked for modelling on scaling back negative gearing and capital gains tax.

All week, neither had denied the controversial ideas were being examined, but had been vague when pushed on whether the advice had been a Government request.

Albanese, heaping praise on the public service this week, said he had not requested the modelling and it was not part of his agenda.

He said the Department could have done the work of its own volition because bureaucrats were not “school children with teachers up the front of the class telling them what to do”.

But on Friday, it was Chalmers’ turn from Beijing to do some verbal gymnastics.

“When it comes to negative gearing changes, it is not unusual at all for governments or for treasurers to get advice on contentious issues which are in the public domain, including in the Parliament,” he said.

“It is not unusual for treasurers to do that.”

Not a yes, but not a no, either.

He went on to repeat that the Government’s housing agenda was one focused on supply, and that changing negative gearing and capital gains tax “aren’t part of it”.

“Our policy is to boost supply,” he said.

It’s not unusual for Treasury to do modelling, but if it was the Government that requested it, that would be significant as it suggests Labor is prepared to set up a third negative gearing election.

Asked repeatedly this week if he was considering tinkering with the tax breaks, Albanese left the door ajar as he said time after time it was “not our policy”.

“I talk about what we’re doing, not what we’re not doing,” he said, making reference to the two pieces of legislation in a stalemate in the Senate.

Asked for “clarity” around his position at a press conference on Friday, Albanese baulked at the chance to clear things up.

“Just for clarity, what we are doing is what we have before the parliament,” he said.

“So I talk about what we’re doing, not what we’re not doing, and what we’re doing is trying to get our legislation through the parliament as part of our $32 billion Homes for Australia Plan.”

Asked if it was “still not ruled out”, Mr Albanese was no clearer.

“I have said what we’re doing, and I have said what we’re not doing,” he said.

With no clear answers, backbench Labor MPs came out of the woodwork this week to throw their support behind reforming the tax concessions.

They were joined by some Coalition parliamentarians — although Opposition Leader Peter Dutton has hosed down supporting any reforms.

“This will drive up rents, and it will distort the housing market, at a time when young Australians have lost the dream of home ownership,” Dutton said on Friday.

Labor had a chance this week to float the idea of putting guardrails around negative gearing, which wouldn’t harm the average investor, but could limit tax breaks for those with more than one, or five, or 10 properties, for example.

It’s what Independent senator David Pocock has called a “sensible middle path to reform”.

His proposal would “grandfather existing arrangements, and then limit negative gearing to one interest going forward, and only have a capital gains tax discount for new builds”, which he says would incentivise supply, not throttle it.

He said it would save the budget $15b over 10 years to invest in supply.

“We are in a housing crisis, and I’m concerned politicians aren’t quite clocking just how bad this is across the country,” Pocock said.

The Government is under intense pressure to find solutions.

For all of Albanese’s careful vagueness this week, there’s still a chance Labor could detangle the kite from the tree and fly it in some form at the next election.