There is a story running in the Australian Financial Review today by Phil Coorey suggesting that Mr Morrison is thinking about reducing or eliminating the CGT concession that has made residential property speculation such an attractive past time for oodles of higher income earners (and others just trying to ‘get ahead’) in Australia.
Believe it when you see it.
And if we do see it expect it to be served up with a large dollop of First Home buyer bonus, a side salad of foreign investor free for all and a large sprinkling of “open the gate” population ponzi. If Morrison cools the “well heeled” heels of the property speculators and tax dodgers he needs someone to replace them as props for house prices and therefore the Australian banking system.
It sounds nice – filling Mr Morrison’s budget black hole with extra tax revenue from rich speculators as they are denied one of their favourite tax dodges – but Mr Morrison’s budgetary woes will just be starting if he boots the legs out from under one of the last drivers of Australian house prices and the money supply goosing private bank household credit it generates.
As household credit growth suddenly slows then starts to contract the economy will slip into recession unless some other ‘crew’ picks up the debt gobbling slack or Mr Morrison starts running a larger deficit – which kinda defeats the point of the CGT concession exercise as a budget black hole filler
He will need a bunch of SAS veterans to protect him crossing Tom Ugly’s bridge into the Shire if he acts in a way that starts a house price deflationary spiral.
Nope this news is most likely designed to make it clear that when it comes to the budget, Mr Morrison has no choice – the poor, sick and very unwealthy need to take one for the team. Again!
The asset price speculators betting with taxpayer guaranteed private bank debt have now got the country fully by the short and curlies.
There is a simple alternative and solution to Mr Morrison’s budgetary pickle – see this Glass Pyramid special edition – but it is unlikely Mr Morrison will choose it when he can pick on people who do not usually vote for him and protect the asset price speculators he considers to be the real national heroes!.
Categories: Macrobusiness
The Glass Pyramid 
Anyone think if they reduce the 50% discount on housing……that they will still apply the 50% discount for shares and investments other than property?
(eg only 25% discount on property investments for 12-60 months increasing up to 50% on property investments more than 5+ years)
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They seem to have made it very clear that they are not going to reduce the CGT discount on housing so I would not hold your breath waiting for that. Considering there is now talk of a FHB boost of some discription in the budget it seems clear that the government is keen to do whatever it can to keep house prices going up. Getting more households buried in mortgage debt is the objective as it reduces the size of the deficit that Mr Morrison needs to run to avoid a recession. Mr Morrison wants the household balance sheet to take lots of the load off his.
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Who knows?! But I wouldn’t be surprised to see a policy that grandfathers CGT concessions, gives current property millionaires sufficient time to offload their assets, probably to the first home buyers who are subsidised to get into shedloads of unpayable debt just before everything comes crashing down.
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The grandfathering is non-negotiable. That will definitely happen.
And yes, if the policy does happen there is a good chance that FHB will be encouraged to jump into the asset price fire with a juicy bonus AND interest rate cuts by the RBA supported by unproductive capital inflows ‘green lighted’ by APRA to ensure mortgage rates are as low as possible.
A bit of population ponzi into the mix.
There is simply no way this floated CGT concession policy will be allowed to weaken house prices.
Those calling for interest rates cuts with “Macroprudential” are delusional. Interest rates will be cut to boost credit not limit it.
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