Malcolm Turnbull could come up with what he considers a better version of Labor's negative gearing policy, because ruling everything out and running a scare campaign just makes him look almost indistinguishable from Tony Abbott, writes Mike Steketee.

It's good to see Tony Abbott doing everything he can to help his successor win the next election.

The advice he proffered at this week's Coalition party meeting was, in so many words, that if Malcolm Turnbull would only follow the Abbott formula, he would be home and hosed. Cut spending, don't touch any tax concessions and scare the bejesus out of voters over a Shorten government, particularly on taxation.

It worked for him in opposition, didn't it (leaving aside the cutting spending part, which he promised not to do)? Whyalla wiped off the map by the carbon tax and all that?

Abbott's period as prime minister does not inspire quite the same confidence that he has all the answers for political success. He never recovered from going for broke on spending cuts in his government's first budget. Not because there wasn't scope to cut spending - there is plenty in areas like health and defence (whatever happened to the $20 billion in savings in defence identified under the Rudd government?) Rather it was the blatant breaking of his promises on spending and the blatant unfairness of the budget cuts targeted at low income earners.

Which reminds us of one of the ways in which Turnbull differentiated himself from Abbott when he took over the leadership. In November he said:

Fairness ... is absolutely critical. Any package of reforms which is not and is not seen as fair will not and cannot achieve the public support without which it simply will not succeed.

Then there was the other distinction he drew - that between the old and the new politics. On tax reform, everything was on the table.

And I know that always means that someone can then run a scare campaign, but I'm sorry, we've got to stop (this). This is part of the political tradition I'm determined to end. We have got to be able to consider policy options in an unfettered way. We've got to have the maturity to have a debate that is not throwing things off the table ... Because what happens is politicians who get intimidated by their opponents or by the media or whatever, they say, "Oh that's off the table, that's off the table, that's off the table" and suddenly there's nothing left on the table.

Guess what? That's just about where we are: with nothing left on the table. With Labor stepping up its scare campaign, Turnbull baulked at a GST increase - not that it is the holy grail of tax reform, despite being presented as such in many quarters. Paring back superannuation tax concessions is still on the table, though significant reform looks unlikely. Changes to negative gearing are hanging by a thread.

This week Treasurer Scott Morrison brought the party room up to date on the reform agenda:

When it comes to tax policy we are dancing on the top of a pin head. We have very few options. There is no burden-free decision in the tax debate. If you choose not to act, you will nevertheless be acting by default and increasing the income tax rate through bracket creep. Let no-one think that doing nothing on the tax debate is without consequences.

Morrison's fixation is with bracket creep - the process whereby rising incomes lift people into higher tax brackets. But with wage increases at record low levels and eight successive income tax cuts between 2003 and 2010, there are much more important issues to address.

Such as moving the budget back into balance or at least heading in the right direction. And fairness which, in the Prime Minister's words, is "absolutely critical".

Here's a surprise: it was Labor that took up Turnbull's challenge not to play rule-in, rule-out politics. Admittedly, it was after they were denied their scare campaign on the GST.

Nevertheless, it released a policy on negative gearing designed to make the concession fairer and to shift more investment into new housing, thereby increasing the supply of homes.

In the spirit of his so recently expressed noble intentions, Turnbull could have agreed with the Labor policy or a variation of it. This is called stealing your opponent's clothes - a practice that has been adopted by politicians going back at least as far as Robert Menzies.

It neutralises the appeal of your opponents' policy. Most importantly, it actually makes it possible for reform to be achieved. John Howard's support as opposition leader for many of the economic reforms of the Hawke government eased the way for their implementation, including against internal Labor opposition.

Such an approach would have marked Turnbull out as a different leader - one who had successfully made the transition from opposition to government, unlike Abbott. This is what voters hoped for with the Turnbull ascension.

Instead his first reaction was to mount the exact type of scare campaign that he had so forcefully and so recently decried. There may be legitimate criticisms of Labor's policy, though Thursday's report by BIS Shrapnel, based on a policy quite different to that released by the opposition, is not a good example of them. But at least it tackles the issues of housing affordability, budget repair and the generosity of tax breaks.

If anything epitomises unfairness, then it is the negative gearing and superannuation concessions, which give hugely disproportionate benefits to high income earners. The combination of negative gearing - making a loss for tax purposes by deducting interest and other expenses from total income - and taxing capital gains at half the full rate has pumped up the housing market, making housing less affordable. Anyone who has bid for a house in competition with one or more cashed-up investors knows this.

According to the Reserve Bank last year, investors' share of housing loan approvals rose from a little over 30 per cent in 2011 to almost 40 per cent, with the increase most pronounced in NSW. It added that "the increase in investor demand is likely to have contributed to the recent strong growth in housing prices, particularly in Sydney."

It also pointed out that the top 40 per cent of households by income hold almost 80 per cent of investor housing debt. According to another analysis, this top 20 per cent receives 10½ times as much in tax benefits from negative gearing as the lowest 20 per cent of households.

The Turnbull scare campaign is based on a crash in housing prices under Labor's policy. This seems improbable, given that all current negatively geared investment housing would remain unaffected, with only that for existing houses bought after July 1 next year having their losses deducted against investment income, rather than all income.

If Labor's policy slows future double digit increases in what Reserve Bank governor Glenn Stevens, in reference to Sydney, has described as the "crazy" property market, then that would be a positive, both for first-home buyers and the long-term sustainability of house prices. The risk is that a housing market hugely inflated by continuing the present policies will burst.

The test for Turnbull is whether he is frightened out of taking any action at all on negative gearing. He has cover from Labor's policy to come up with what he would argue is a better version.

He retains enough political goodwill to do something more than freezing himself into immobility. Demonstrating that his rhetoric about the new politics means something will in itself win him voter kudos.

Or he can make himself look indistinguishable from Abbott. That should really impress voters.

Mike Steketee is a freelance journalist. He was formerly a columnist and national affairs editor for The Australian.