Scott Morrison’s attacks on Labor’s negative gearing policy are spluttering.

This week he’s been pointing to two new pieces of economic modelling to warn about house prices falling and rents soaring under a Labor government, and both of them contradict parts of his argument.

We’ll get to why in a minute.

But first, something must be said about economic models.

We’re at that point in the election cycle where everyone’s feeling economic modelling fatigue.

There are at least six different pieces of modelling floating about that touch on negative gearing changes, and none of them have the same conclusion.

The two papers that have been released this week – from Adept Economics, and from SQM Research – are two of the most credible, and they say roughly similar things.

But Morrison’s attempt to use them to discredit Labor’s policy is complicated by the fact that their authors are not wholly critical of Labor’s plans.

And no one has forgotten that earlier this year Morrison tried to use modelling from BIS Shrapnel to besmirch Labor’s policy without realising that the modelling had been produced months before Labor’s policy had even been announced.

It was an egg-in-the-face moment that has haunted every subsequent attempt of his to creditably use economic modelling to criticise Labor’s policies.

The latest chapter in his modelling wars occurred on Wednesday.

On ABC radio, Morrison was asked about a report from SQM Research, released on Wednesday morning, that suggests Labor’s negative gearing proposals will cause house prices to decline moderately over three to four years.



“A 3% to 8% [decline] is what this report says,” Morrison said.

“Yesterday’s report that came out said it was around 4%, and all of these reports, whether it’s this report or earlier [reports], all of this, no one’s saying that rents will go down as a result of [Labor’s policy]. They’re saying there’s upward pressure on rents and all these reports are saying it will have a negative impact on the value of peoples’ homes.”

There’s a lot to unpack from that statement, but let’s have a go.

The SQM Research report suggests Labor’s policy will produce a price correction in the housing market, of -3% to +1% in 2018, then -8% to -3% in 2019, and -4% to -2% in 2020.

It says the price declines are different each year because it will take time for Labor’s policy to work its way through the economy.

Morrison picked the worst year to talk about.

He also ignored the conclusion from the paper. The author of the report, Louis Christopher, believes negative gearing reform would be “a good thing”, but says such reform “should be done as part of a wider property tax reform that should include a broad-based land tax and the elimination of stamp duties.”

The second report Morrison explicitly referred to, released on Tuesday by Adept Economics, has been the first modelling exercise of the six papers floating around to fully model Labor’s twin policies of restricting negative gearing to new properties and cutting the capital gains discount from 50% to 25%.

Morrison ignored the conclusion of that paper, too.

The paper’s author, former treasury official Gene Tunny, thinks Labor’s policy will see house prices grow more slowly, leading to prices being up to 4% lower over a decade than they otherwise would be.

“The rate of [price] growth would ease over a few years and then the market would absorb the policy change,” Tunny told Guardian Australia, adding that the estimated reduction in house prices would “probably happen over time, not immediately.”

He did warn that Labor’s plan to restrict negative gearing would have “undesirable risks” and come at a “precarious time” for Australia’s property market, but he also agreed in principle with Labor’s argument that a reduction in the capital gains discount could help make housing more affordable.



See the problem here?

Both papers are nuanced. They’re critical of parts of Labor’s policies and supportive of others. They show any downward pressure on house prices, and any upward pressure on rents, are nowhere near as bad as Morrison has been claiming.

And they say reforms to either negative gearing or the capital gains tax discount would be a good thing.

But Morrison still says Labor’s plan would be a “sledgehammer policy” for the property market, and a “reckless” thing to do when the economy’s so fragile.