Australian Government coat of arms

Prime Minister of Australia

The Hon Malcolm Turnbull MP


19 February 2016


Prime Minister



Well, we have just finished some great meetings with the business community, the Trans-Tasman business community and some good, very, very good discussions as you have seen with John Key.

Both of our economies are doing well. In each case we are transitioning into a new era. A new era of much more diversified growth, responding to the phenomenal demand that is coming out of East Asia and the opportunities there.

So, we have very similar views on economic growth and the drivers of it – innovation, technology, investment, diversity in your economy so that you are not solely dependent on one sector or another.

So, it is very good. John has done, John is a very successful Prime Minister, a great role model. Incremental reform, over time, achieving really great outcomes for New Zealand.


Prime Minister, can I ask you about negative gearing? Is the government open to any potential changes similar to what Labor are suggesting?


Yeah, well thank you.

The Labor Party's negative gearing policy and its wind back on the capital gains discount, or its increase in tax on capital gains, is a very dangerous one. It has been very, very poorly thought out. The consequence of it will be a decline in property prices.

Every homeowner in Australia has a lot to fear from Bill Shorten.

Just let me explain. What Bill Shorten is saying is that from 2017 you will not be able to negatively gear any residential real estate unless it is brand-new, unless you are the first purchaser.

So what that means is that you will take out, he will take out of the buyers, of all of those buyers at an auction on a weekend, he will take out all of the investors. So there will only be home buyers, people who are buying it as a residence. And he has a very ill thought out view that because the investors, negative geared investors, will be going into new property, that means there will be more new developments.

Well the value of a new development is obviously directly connected to what it can be sold for to the second buyer and the third buyer and so forth. So he is taking out what, at different times, has been about 30 per cent of the demand.

If you do that, obviously, prices will come down. Now, that is very damaging for homeowners and it puts enormous risk – it is a very ill thought out, poorly considered policy.


The Treasurer has said, on morning radio, that there are some excesses within negative gearing. Are there some parts of it that your government would consider changing?


Well if you are going to look at an issue like this, at negative gearing into residential real estate, you have to look at it very carefully. You need to apply great care and great attention. You need to use a scalpel, if you like, rather than an axe.

And what Bill Shorten has done, he has set out to smash the residential housing market. Just think about this, think about a typical auction in Sydney or Melbourne. Think of all, someone selling their house, they’re doing that and there are a group of people, there are homebuyers, there are young homebuyers, there are older homebuyers. And there's plenty of investors.

Bill Shorten will take them all out. What will that do? That will lower the price of property. So, if you are sitting now in your home with a mortgage, and you have got some equity between the value of the home and the mortgage, Bill Shorten is going to gnaw away at that equity. His policies will make your home worth less.

He will put, and what that will do, let me just finish on this point. This is critical. People's confidence and their preparedness to invest, their preparedness to spend, their preparedness to give some money to their kids, to take a holiday, to buy some new appliances. All of those things are based in large part on their perception of their own asset position.

If you have a decline in housing values, a serious decline in housing values, then you put the brakes on consumption and you put the brakes on the economy. Bill Shorten's approach is very blunt, is very crude, it’s totally political and it will have a very negative impact on housing values and on the economy overall.


Putting the axe to one side, is there the ability for the scalpel, small changes to negative gearing to be considered by the government?


We are not going to run our tax reform agenda in a political way. What we are looking at is a whole range of measures across the board.

But I can tell you, the big difference between our approach and Bill Shorten's is that we will think the consequences through. I just ask you this, this shows you how poorly considered this approach was.

If you accept the fact that investors are a big part of demand for residential housing, because clearly they are. Bill Shorten is saying from 2017, no more. They will be out. You will not be able to borrow money and run an interest loss on residential housing, unless it is brand-new.

And what that does is takes out such a big part of demand, that has to have a negative impact on prices. And that should put concern into the minds of every single house owner.

Bill Shorten's policy is calculated to reduce the value of your home.

Thanks very much