"The ALP policies could introduce some downward pressure on property prices in the short term, particularly if the commencement of the policy coincides with a weaker housing market," the Treasury advice said.

"In the long term, increases in taxation on rental property could have a relatively modest downward impact on property prices."

Shadow treasurer Chris Bowen seized on the advice to accuse the government of lying all along when it claimed Labor's proposals would put a "sledgehammer" through the housing market and bring the economy to a "shuddering halt".

Labor's policy would confine future negative gearing to new homes only. The 50 per cent capital gainst tax exemption for investors who held an asset for at least 12 months would be halved to 25 per cent.

Following Mr Morrison's revelation on Tuesday, Mr Bowen said:

"This latest outburst is a reminder of how much Scott Morrison has sought to politicise the Treasury over the last few years, selectively leaking and releasing Treasury advice if it supports his attacks on Labor policy, but burying any analysis that doesn't."

Mr Morrison said he respected Treasury's advice "but I'll make my own decisions and based on my experience and based on consulting widely".

"I absolutely respect the Treasury and I think John Fraser's done an outstanding job as secretary. And they're a fantastic organisation," he said.


"I love working with them but from time to time, the Treasurer is going to have his view and I'll have my reasons for that which are based on my own experience and understanding of these issues and I do think that what Labor proposes would be damaging to the interests of the Australian economy and, particularly at a time when we're in resurgence."

He said if Labor held Treasury in such high regard, it would accept its advice and support company tax cuts.

He said that when Treasury gave him the negative gearing advice in 2016, house price growth was running at around 13 per cent in Sydney.

"Today, it's growing at just over 1 per cent."

Additionally, the number of first-home buyers in the market was increasing.

This, he said, was due to the regulator putting limits on investor loans.

"(It) principally happened in response to this government taking action by putting faith in the regulator and working with the regulator APRA to limit access to interest-only loans and to put a speed limit on investor credit growth," he said.

"So what's the point of Labor's negative gearing policy? It's not for housing affordability, unless they actually want to cause a housing price crash, when you're at 1 per cent growth in Sydney and that's as a result of a very careful change to investment credit access."