Not all economists agree with Saul Eslake and when it suits his anti-negative gearing spin, Saul disagrees with many others including Dr Ken Henry.

Property is very heavily taxed and the property market is always highly distorted by that taxation and by government policies on land use, immigration and many others.

Where Saul stands out is his unerring attention to negative gearing on property (but not where it affects other asset classes such as shares), while dismissing any action to correct the known and far more serious influences on housing supply and distorting costs (and prices), such as taxation.

The observer could be forgiven for assuming that Saul still is still working for Bank of America Merril Lynch and he is trying to herd small investors money away from residential property and into asset classes such as shares where small investors are eaten alive and the fleas on fleas on fleas enjoy larger than necessary management fees and trailing commissions, because they can.

Nothing heard from Saul about minor(sic) things such as the unfairness to small property investors (especially) of not allowing them to carry their losses forward to later years. Nothing about the cumulative load of taxes on property and especially new developments, or the morass that is encountered obtaining government approvals.

The reasons why smaller investors take on the high risks and poor returns of providing rental accommodation long term are precisely because investment in other asset classes such as company shares is littered with examples of nasty, unconscionable behaviour - which is only to be expected of the crocs that infest those muddy swamps.

The trouble with neg gearing, is it is a market manipulative. The market should be allowed to find its own real worth without govt; interferance.
Because Keating backpeddled had more to do with politics than results in just two years.

Poirot,

Like all people, economists have their political allegiances, and Saul Eslake like the Kouk are firmly left whinge and as such often given to inconvenient truths. For example from SE,

"if negatively-geared investors didn't buy dwellings, then those dwellings would be bought by people who are currently unable to compete with negatively-geared investors. The supply of rental housing might drop - but so would the demand for it, and by an equal amount. So what's the problem?"

The major problem with this is that renters typically are in the bottom 30% of earners, and house prices would have to fall massively for this to occur. As 75% of houses are owner occupied, this would mean a huge loss to most families, which Labor is trying to pretend won't happen. And with the price of existing housing falling, the incentive to build will evaporate, and rents will inexorably increase.

Poirot, I don't discredit Mr Eslake, all I am asking is why is he not willing to debate this either.

Also, while I accept the previous thread was in fact 2014, we have a whole different ball game on our hands now as we are fast approaching D day for our car industries, jobs, jobs and more jobs gone.

With this unknown, now is not the time to tinker with another un known, that being negative gearing.

Why jump hurdles that may not exist. No one can predict the sort of outcomes that is going on here.

Butcher has something to protect and that being his own ars.

It would be better the govt; supported renters, than negative gearing which is supporting a false market.

SM implies neg gearing keeps house prices high, another good reason to discontinue neg gearing.

SM,

"...And with the price of existing housing falling, the incentive to build will evaporate, and rents will inexorably increase."

But...but...why would the incentive to build "evaporate" when you can still negatively gear a new build - ie use it as a strategy to reduce your taxable income?

Seems it's employed mainly for that purpose, so why wouldn't people flock to new builds?

Rehctub,

I'm sure Mr Eslake has got better things to do than debate on forums like OLO. The fact that he came here and briefly laid out his ideas to you should be taken as a plus...not a reason to whinge that he's not here now.