Jim Chalmers says housing supply the Government’s ‘North Star’ but negative gearing not completely ruled out

Building more houses is the government’s “North Star” but the door to adjusting negative gearing remains ajar - so long as it helps, not hinders, supply.

On Monday, the question of who commissioned the Treasury department to model options for changes to negative gearing and capital gains tax concessions continued to dog Treasurer Jim Chalmers, who ultimately conceded it was “not unusual” for him to ask for such work.

Appearing to confirm the modelling work was ongoing, Dr Chalmers admitted the acuity of the housing crisis meant the Government was willing to “seek advice on the various proposals that are in the public domain”.

“But our focus is on supply... And that should be the whole Parliament’s focus,” he said.

Prime Minister Anthony Albanese last week said changing the tax breaks was “not our policy” but didn’t rule out potential future changes to them.

Mr Albanese did say, however, that he wasn’t convinced touching negative gearing would make a “positive difference” to supply, unlike the Help to Buy and Build to Rent schemes currently stalled in the Senate.

“The issue with negative gearing is one of supply,” Mr Albanese said on Thursday .

“Will it add to supply or will it decrease supply? The figures and research that has been produced by organisations like the Property Council indicate that it would reduce supply and therefore not contribute to solving the issue.

“And that’s the issue. We just want to get on with our plan of building more homes.”

A number of proposals to change negative gearing have been put forward by parliamentarians, past and present, including Bill Shorten’s 2016 and 2019 election pitches of restricting future negative gearing to new homes only.

Labor’s former policy proposals would have grandfathered existing negatively geared properties, and halved the CGT discount from 50 to 25 per cent for new assets.

Former Liberal treasurer Joe Hockey used his 2015 final speech to present a similar idea, calling for negative gearing to be skewed towards new housing as an “incentive to add to housing stock”.

At the National Press Club last week, Mr Hockey again suggested incentivies around new builds.

Asked if he could conceive of changes to negative gearing that would boost supply, Dr Chalmers on Monday said the Government’s existing housing agenda best targeted the issue.

“One of the reasons why the changes that you’re asking me about are not part of our policy, and as the Prime Minister said last week, is that he is unconvinced and we are unconvinced of the impact on supply,” he said.

“Building more homes for Australians to make it easier for people to find somewhere to rent or buy, that is our North Star here.”

Dr Chalmers and Finance Minister Katy Gallagher on Monday announced a second consecutive budget surplus, which the Government says it’s been able to achieve while also delivering in cost-of-living relief — including housing support.

The final Budget outcome for 2023/24 showed the surplus for the year was $6.4bn higher than previously thought, coming in at $15.8b.

Lower than anticipated government spending accounted for twice as much of the boost as changes in revenue.

“One of the reasons we are proud of the consecutive surpluses that we’ve delivered for the first time in almost two decades is we haven’t done that or cost of living relief. We’ve done that and cost of living relief,” Dr Chalmers said.

Looking ahead, the forecast deficit for this current financial year has been downgraded from $47bn to $28bn.

“So even where we’ve got a currently forecast deficit for the third year, it is a much smaller deficit than what we inherited from the Liberals and Nationals,” he said.

“Clearly, a $28 billion deficit is hard to get rid of in one whack, but we will continue to make the right decisions for the right reasons and manage the Budget and the economy in the most responsible way.”