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Another popular claim made by the property sector is that removing negative gearing will reduce housing construction, leading to an even worse housing shortage, and thus do nothing for affordability.
Aside from the fact that Labor's policy maintains the negative gearing deduction for newly built homes, thus actually incentivising investors to buy new dwellings over old, there is strong evidence that negative gearing has done precious little to add to housing supply.
In response, the property lobby's well-worn campaigns against such changes (modest as they are) predictably roared into life.
The problem is, like the religious zealots who refused to accept that the Earth wasn't the centre of the universe, they are demonstrably wrong.
This gives economists a unique opportunity to make observations to test their logical hypotheses against.
On the weekend, Labor unveiled its policy to limit negative gearing to newly built properties from July 2017 onwards, and Treasurer Scott Morrison said the Government would consider some restriction of negative gearing.The latest housing finance figures from the Bureau of Statistics show that less than 10 per cent of investor loans went to people planning to build or buy newly built dwellings.Unlike many of the natural sciences, economics is a far less certain field.However, there are certain economic and financial phenomena that are clearly observable, and thus some hypotheses that can be tested against observation, akin to the scientific method.
One area where this is the case is negative gearing.
The ability of property investors to deduct losses against income other than the rent they collect has existed in the tax code for decades - with the exception of a brief period in the mid-1980s when then-treasurer Paul Keating removed it.