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In his address to the Australian Business Economists on 26 April, Mr Morrison claimed that proposed changes to negative gearing put forward by the Labor opposition would “damage the economy”.
The Treasurer noted that caps on investor and interest-only lending imposed by the Australian Prudential Regulation Authority (APRA) were effective in correcting high rates of growth in the housing market, which he attributed to the insufficient supply of housing, suggesting that tax reform would not be necessary.
“[There] were some things that were distorting housing markets from the credit point of view,” Mr Morrison said.
“I think APRA has taken the right decisions to try and remove those distortions to the extent that there were issues which were also being distorted by some of the foreign investment rules. I think we’ve addressed those as well.
“I just want to see our housing markets respond to supply and demand, not tax.”
In response to a question concerning Labor’s proposed negative gearing reforms, Mr Morrison said: “My view hasn’t changed. It would damage the economy.
“Now, when those macro-prudential measures were put in place, what they were designed to do, I think they have achieved.
“That is it has certainly slowed what had been a very high rate of growth in the housing markets, particularly in Sydney and Melbourne.”
Mr Morrison accused the Labor opposition of seeking to “get the axe out”.
“[If] the issue that they were trying to address, the Labor Party, was to remove that exacerbation of that growth, that has already been done,” the Treasurer added.
“[It] was done with what I call a scalpel, a very calibrated measure. Now, [the Labor Party] want[s] to get the axe out and then get someone else behind them with a chainsaw because these are not things that you can lightly change and reverse.”
The Treasurer warned that changes to negative gearing could expose the economy to greater risks.
“If it is [Labor’s] view, that this will have no real impact on the housing markets in Australia, then they are more stupid than I thought. I mean, this is dangerous policy and it is driven by envy; it is not driven by economics,” Mr Morrison continued.
“When people look at Australia, I think they see two broader risks.
“Obviously, our connection with Asia, and particularly China, and they want to be assured that things there are continuing to do well.
“The other one is their concern about our housing markets and the potential for a housing market shock and what that would not only mean for the housing market, but what that would mean for consumer confidence and everything that flows from that.
“If that were to occur, then we are into very, very different territory from the sort of growth story I was talking about today.
“What the Labor Party wants to do, I think, would put us in real peril.”
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