Saul Eslake says Treasury advice reveals extent to which government willing to ‘peddle any lie’ on tax system

A former Treasury official has written a scathing critique of the Turnbull government’s attacks on Labor’s negative gearing policies, saying the government has been creating “alternative facts” to promote its own argument.

Saul Eslake, who is also a former chief economist of Bank of America Merrill Lynch Australia, said Treasury’s advice to government, released under freedom of information in January, has revealed the extent to which the government and property industry have been willing to “peddle any lie” to ensure the survival of a tax system that privileges investors.

Writing on the blog of John Menadue, a former head of the Department of Prime Minister and Cabinet, Eslake said the freedom of information documents exposed more than the Coalition being cute with the truth.

When it comes to negative gearing, this government prefers fiction to fact | Greg Jericho Read more

“First, Treasury advised the government that negative gearing and the capital gains tax benefits disproportionately benefit high-income households,” he writes. “Despite this, the government and the property industry continue to assert that the main beneficiaries of negative gearing are ‘teachers, nurses and police officers’, or (alternatively) ‘mums and dads trying to get ahead’.

“Second, Treasury again noted that ‘previous changes to negative gearing (1985-87) … had little discernible impact on the [housing] market’.

“Yet the government, and the property industry, persist with the fiction that the temporary abolition of negative gearing for property investors by the Hawke government between 1985 and 1987 resulted in ‘rents going through the roof’, and that this ‘history’ would be repeated in the event that negative gearing were to be abolished – or even ‘tinkered with’ – again.

“This is a 21st century illustration of the saying attributed to Joseph Goebbels, that if a lie is big enough, and it’s repeated often enough, it can become accepted as the truth.”

Eslake said Treasury also advised the government that Labor’s policies “could introduce some downward pressure on property prices in the short term”, particularly if those proposals were to come into effect coincidentally “with a weaker housing market” but that “in the long term” any such downward impact would be “relatively modest”.

He said Treasury went on to note that the extent of any impact on property prices would be likely to be limited by the response of owner-occupiers.

“What this episode underscores is the extent to which the government and the property industry are willing (to paraphrase John F Kennedy) to ‘tell any lie, peddle any fiction, distort any fact, and conceal any contrary advice no matter how authoritative its source, in order to assure the survival’ of the privileged treatment which the Australian taxation system confers on investors.”

Home ownership would rise if negative gearing is scrapped, study says Read more

Last month the acting treasurer, Kelly O’Dwyer, told ABC’s AM program that the Treasury document “confirms what we have been saying all along: [Labor’s policy] would have a disastrous impact when combined with a weaker housing market”.

She cited a passage in the document that said uncertainty around the policy “could compound upon a cyclical downturn that may be under way”.

She maintained Labor’s policy would have a “significant impact” on the housing market, citing “broader advice” to government on the issue but refused to give a specific source for the claim.