Prime minister malcolm turnbull condemns labor policy for lowering prices but then says he wants lower prices

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ANALYSIS

THERE is a central policy question which has thousands of frustrated home buyers most of them young keen for an answer.

How would the Coalition and Labor encourage greater access to housing markets where $1 million properties are fast becoming the metropolitan norm?

The Budget could provide an answer which will see the Government untangle its proposals and give hope to those struggling with high rents when they would rather be paying off a mortgage.

Essentially the Government believes housing prices are already in gradual decline and that all it needs do is ensure this continues. Plus, the tax element in this problem is minimal, it argues.

Still, there is considerable policy untangling to be done.

Prime Minister Malcolm Turnbull and Treasurer Scott Morrison have condemned Labors plans to limit negative gearing, a move the ALP says would save on foregone income tax revenue and would lower prices by discouraging many investors and increasing the number of owner-occupiers.

Surely the Government wants prices to fall? Otherwise it will be seen protecting the cosy tax reduction measures enjoyed by people who own more than one house and deserting those who are yet to buy their first.

Labor is pushing this interpretation.

When Mr Turnbull says he wont reform negative gearing he is locking in taxpayer subsidies going to the lucky few, Opposition Leader Bill Shorten said today.

Mr Morrison today said they were not tax concessions, but the simple application of tax principles which have been around for 100 years. He called limits to negative gearing a housing tax.

It wont make any meaningful contribution to housing supply and it creates unfair distortions particularly the Labor proposal because of its muddled composition, Mr Morrison said.

The truth is that no one can say with great certainty how the variety of negative gearing proposals would affect prices.

The Government argument is that the Labor policy wouldnt just lower prices, it would cause them to tank. The crash in prices would shred the investments of thousands of negative gearing mums and dads, who Mr Morrison says make up two-thirds of those using the tax offset scheme.

And it would prevent these hypothetical parents from buying houses to pass on to their children.

Further, the Government argues taxation isnt the cause of high prices.

Other, more important factors include the current tight supply of housing land and over-regulation of developers by local and state governments.

Addressing these points would see a gradual fall in prices, rather than a Labor-induced collapse, the Government argues.

It is steady price reduction versus an abrupt tanking, according to the Government. Or, methodical versus risky, the Turnbull considered approach.