Wobbles,

The tax act allows expenses incurred against an investment to be deducted. That this happens in housing is not welfare. It is an example of where an incentive creates demand for housing, and should therefore increase building of housing.

Where the costs increase is where the councils pile up to $200 000 per plot of land in "development fees"

What labor calls "middle class welfare" is in most cases incentives to drive good behaviour. For example if the state subsidises private schooling at an average of 70% of the cost of public schooling, the take up of private school places frees up more money for public schools. Similarly the health insurance incentive encourages people to self fund their health expenses and reduces the net outlay by the state. These are prime examples where the state ends up better off, and so do the public.

Means testing these incentives reduces federal costs and increases state costs by more.

Negative gearing does NOT increase the amount of housing being built.

Most rental property investors prefer to buy established properties and so it diverts funds that could have been used for new buildings. It also drives up the price of housing that may otherwise have been used for private residential purposes by creating more demand in the market.

Australia is one of the only countries in the world that still has such a scheme but politicians of all persuasions have been too scared to address it.

I also don't know where you got the idea that private schools cost the taxpayer 70% of the cost of public schools. There is a reduction in the rate-per-student but that doesn't include the massive additional amounts paid via SES funding model. I can't think of 50 public schools who shared a windfall of $62 million. I think they should replace all these schemes with a standard equivalent voucher system for every student, to be spent on either public or private schools - then see who squeals the most.

Subsidising private health funds diverts public money away from public health, not the other way round.

Finally, the term "class" - like "elitist", "politics of envy" and "socialist" - is nowadays used more often by conservatives than leftists as a way of avoiding real policy analysis in favor of creating a simple generic emotional response. The so-called "class war" has been over for a long time. The debate is more to do with people who can afford to do so, paying more of their own way. People being paid total welfare amounts greater than the amount of tax they pay isn't sustainable.

For a political party that stands for private enterprise and independence, the previous conservative administration has created the biggest welfare state in our history.

Wobbles, it would appear that you are at odds with economic theory.

Even if all the new investment went to established housing (which it doesn't, as many new developments actively recruit landlords) it would make existing housing more expensive relative to new housing, and new buyers would prefer to build as they would get better value.

Wobbles, negative gearing actually provides housing for those who either don't want to own their own home, or, can't afford one.

If you remove the tax breaks (NG), then investors, like myself, will simply invest elsewhere.

It is not rocket science.

Labor are also looking at slashing super perks.

They are simply in a desperate situation and will look at and do anything they can to return to surplus.

Remember the words AT ANY COST when things start to crumble.

BTW, I repsonded to a post from another thread,

Wobbles, the word 'dud' was the word used by Toyota, not me.

I was simply repeating what THEY said.

Sorry to post it here, but it's important you understand it's not my view that anyone who looses their job is a dud.

Negative gearing did increase investment in housing what it did though on balance weighing up pros and cons was contribute to an inflated housing market. Recent figures reveal in the not too distant future only 22% of young Australians will own their own home. The decision to allow foreign investment in the domestic property market has also inflates prices.

When the government decided to reduce the amount of social housing, in fact selling off some stocks, it meant people on waiting lists went into the private rental market with rental assistance packages. Either way the support comes from the government.

Hockey at least has the courage to stand up and say what he really believes. I wish more politicians would do it. That is the idea of a democracy. The candidates relay their beliefs and policies and the voters decide who they want. There were some good points in Joe's speech and interview but he did not criticise the Liberals own policies in voting against means testing (usually with a high income bar) and other middle class welfare.

The Liberals really need to decide what they are about and what they represent. The public still doesn't know. I hope we do know before the next election. Beazley made the same mistake in Opposition under Howard Goverment changing his party's line everytime the wind changed.

There is no clear message from the Coalition. Just more negative responses to whatever the Government does, even the good stuff. I reckon they are at risk of cutting their noses...('scuse the cliche').

Negative gearing describes the situation where the costs associated with a leveraged investment are higher than the income from it. In other words, when the project runs at a loss.

Negative gearing is a popular strategy in investment property. The word ‘leverage’ is used to describe the process whereby an investor borrows a significant percentage of the total cost of the property so as to have the funds needed for the transaction. The investment can then be described as being ‘geared’. In other words, the investor’s (small) deposit is added to the bank’s (large) mortgage loan. This enables this ‘geared’ investment to achieve far greater returns for the investor.

Mortgage costs are the highest costs a geared investor must face. When maintenance and property management costs are added to the mortgage costs, the income – in the form of rent from the tenants – can often be lower than the total costs, particularly in the early years of the project. This is then described as a project that is ‘negatively geared’.

Investors are prepared to ‘lose’ money in this way for two reasons:

The geared investment property is able to generate capital growth that history has shown has averaged at 8 per cent per annum. In other words, the capital growth is very attractive, and more than offsets the monthly income shortfall*.
The annual interest paid is fully tax deductible – along with maintenance and some other costs**. Any shortfall in income relative to the costs can be offset against income from other sources, such as the wage and salary income of the investor.

*Assumes a well-planned and well-structured investment, in a growth location, and assumes the investor has the monthly cash flow needed to cover the shortfall.

** A full list of tax-deductible costs can be obtained from McCarthy Group.

The government has structured these tax deductions to encourage private investments into the property market, which relieves it of the need to provide large-scale social housing.