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The Advertiser
09-07-2025
- Business
- The Advertiser
Australia circles wagon around drugs as US tariffs loom
One of Australia's biggest exports to the United States could be slapped with triple-digit tariffs after Donald Trump vowed to expand his trade war. The US president has laid out plans to impose 200 per cent tariffs on drug imports in a year's time, threatening Australia's third-most significant export to America. Mr Trump's proposal comes after lobbying by the powerful US pharmaceutical sector, which has long taken issue with Australia's drug subsidy scheme and wants the president to act so it can sell drugs to Australians for more. His announcement could be seen as a way for the US to chip away at the Pharmaceutical Benefits Scheme in exchange for a tariff exemption or trade deal. But Treasurer Jim Chalmers has ruled that out. "Our Pharmaceutical Benefits Scheme is not something that we're willing to trade away or do deals on," he told ABC radio on Wednesday. Mr Trump also revealed a 50 per cent tariff on copper imported to the US, but this poses less of a problem for Australia as the US accounts for less than one per cent of its copper exports. By comparison, Australia sent $2.1 billion worth of medicinal and pharmaceuticals to the US in 2024, according to the Australia Bureau of Statistics. The president's remarks are the latest in a series of new trade measures, after he unveiled an increased 25 per cent tariff on items from Japan and Korea, which are Australia's second- and third-biggest export markets. Although Australia has been spared for now, it remains vulnerable to flow-on effects, Monash University economics lecturer Isaac Gross said. One of Australia's main exports to Japan and South Korea is iron ore, which is used to make vehicles, many of which are sent to the US. But if cars sale fall off in the American market, that could mean less demand for Australian iron ore, which could also impact mining giants like BHP and Rio Tinto. "The principal way that affects the Australian economy is through a lower Australian dollar and less tax revenue," Dr Gross told AAP. "That would affect Australians as a whole ... it would definitely hurt the government's budget line and reduce economic activity, in especially the mining states." There could be some upside for Australian consumers as South Korean or Japanese goods that would normally have been exported to the US might be sent to Australia at a discounted price. But Dr Chalmers maintains the escalating trade tensions around the world were a "substantial concern" and that tariffs pose a risk to global growth. A number of countries have tried to strike trade deals with the US to get some certainty from the tariff volatility. However, many are now growing frustrated, according to University of Sydney associate professor David Smith. "They think that negotiations are going in one direction and then Trump makes a sudden announcement that takes it in another direction," he told AAP. Prime Minister Anthony Albanese has faced increasing pressure to schedule a face-to-face meeting with the US president and push for a total tariff exemption. But it is unclear if that would work. Japanese Prime Minister Shigeru Ishiba met Mr Trump in February, but by July the US president revealed his increased tariffs on the Asian nation and appeared to skip over its leader's name, calling him "Mr Japan" in a recent interview. "I can see why the (Australian) prime minister would be seeking a face-to-face meeting, but it doesn't have the same kind of certainty that it had in the past," Prof Smith said. "Now we're in a situation where the US is trying to negotiate 100 trade deals at once - it's clearly beyond the capacity of American negotiators. "Trump is getting very frustrated. Trump's blaming other countries for the slowness of the negotiations and now he's lashing out." One of Australia's biggest exports to the United States could be slapped with triple-digit tariffs after Donald Trump vowed to expand his trade war. The US president has laid out plans to impose 200 per cent tariffs on drug imports in a year's time, threatening Australia's third-most significant export to America. Mr Trump's proposal comes after lobbying by the powerful US pharmaceutical sector, which has long taken issue with Australia's drug subsidy scheme and wants the president to act so it can sell drugs to Australians for more. His announcement could be seen as a way for the US to chip away at the Pharmaceutical Benefits Scheme in exchange for a tariff exemption or trade deal. But Treasurer Jim Chalmers has ruled that out. "Our Pharmaceutical Benefits Scheme is not something that we're willing to trade away or do deals on," he told ABC radio on Wednesday. Mr Trump also revealed a 50 per cent tariff on copper imported to the US, but this poses less of a problem for Australia as the US accounts for less than one per cent of its copper exports. By comparison, Australia sent $2.1 billion worth of medicinal and pharmaceuticals to the US in 2024, according to the Australia Bureau of Statistics. The president's remarks are the latest in a series of new trade measures, after he unveiled an increased 25 per cent tariff on items from Japan and Korea, which are Australia's second- and third-biggest export markets. Although Australia has been spared for now, it remains vulnerable to flow-on effects, Monash University economics lecturer Isaac Gross said. One of Australia's main exports to Japan and South Korea is iron ore, which is used to make vehicles, many of which are sent to the US. But if cars sale fall off in the American market, that could mean less demand for Australian iron ore, which could also impact mining giants like BHP and Rio Tinto. "The principal way that affects the Australian economy is through a lower Australian dollar and less tax revenue," Dr Gross told AAP. "That would affect Australians as a whole ... it would definitely hurt the government's budget line and reduce economic activity, in especially the mining states." There could be some upside for Australian consumers as South Korean or Japanese goods that would normally have been exported to the US might be sent to Australia at a discounted price. But Dr Chalmers maintains the escalating trade tensions around the world were a "substantial concern" and that tariffs pose a risk to global growth. A number of countries have tried to strike trade deals with the US to get some certainty from the tariff volatility. However, many are now growing frustrated, according to University of Sydney associate professor David Smith. "They think that negotiations are going in one direction and then Trump makes a sudden announcement that takes it in another direction," he told AAP. Prime Minister Anthony Albanese has faced increasing pressure to schedule a face-to-face meeting with the US president and push for a total tariff exemption. But it is unclear if that would work. Japanese Prime Minister Shigeru Ishiba met Mr Trump in February, but by July the US president revealed his increased tariffs on the Asian nation and appeared to skip over its leader's name, calling him "Mr Japan" in a recent interview. "I can see why the (Australian) prime minister would be seeking a face-to-face meeting, but it doesn't have the same kind of certainty that it had in the past," Prof Smith said. "Now we're in a situation where the US is trying to negotiate 100 trade deals at once - it's clearly beyond the capacity of American negotiators. "Trump is getting very frustrated. Trump's blaming other countries for the slowness of the negotiations and now he's lashing out." One of Australia's biggest exports to the United States could be slapped with triple-digit tariffs after Donald Trump vowed to expand his trade war. The US president has laid out plans to impose 200 per cent tariffs on drug imports in a year's time, threatening Australia's third-most significant export to America. Mr Trump's proposal comes after lobbying by the powerful US pharmaceutical sector, which has long taken issue with Australia's drug subsidy scheme and wants the president to act so it can sell drugs to Australians for more. His announcement could be seen as a way for the US to chip away at the Pharmaceutical Benefits Scheme in exchange for a tariff exemption or trade deal. But Treasurer Jim Chalmers has ruled that out. "Our Pharmaceutical Benefits Scheme is not something that we're willing to trade away or do deals on," he told ABC radio on Wednesday. Mr Trump also revealed a 50 per cent tariff on copper imported to the US, but this poses less of a problem for Australia as the US accounts for less than one per cent of its copper exports. By comparison, Australia sent $2.1 billion worth of medicinal and pharmaceuticals to the US in 2024, according to the Australia Bureau of Statistics. The president's remarks are the latest in a series of new trade measures, after he unveiled an increased 25 per cent tariff on items from Japan and Korea, which are Australia's second- and third-biggest export markets. Although Australia has been spared for now, it remains vulnerable to flow-on effects, Monash University economics lecturer Isaac Gross said. One of Australia's main exports to Japan and South Korea is iron ore, which is used to make vehicles, many of which are sent to the US. But if cars sale fall off in the American market, that could mean less demand for Australian iron ore, which could also impact mining giants like BHP and Rio Tinto. "The principal way that affects the Australian economy is through a lower Australian dollar and less tax revenue," Dr Gross told AAP. "That would affect Australians as a whole ... it would definitely hurt the government's budget line and reduce economic activity, in especially the mining states." There could be some upside for Australian consumers as South Korean or Japanese goods that would normally have been exported to the US might be sent to Australia at a discounted price. But Dr Chalmers maintains the escalating trade tensions around the world were a "substantial concern" and that tariffs pose a risk to global growth. A number of countries have tried to strike trade deals with the US to get some certainty from the tariff volatility. However, many are now growing frustrated, according to University of Sydney associate professor David Smith. "They think that negotiations are going in one direction and then Trump makes a sudden announcement that takes it in another direction," he told AAP. Prime Minister Anthony Albanese has faced increasing pressure to schedule a face-to-face meeting with the US president and push for a total tariff exemption. But it is unclear if that would work. Japanese Prime Minister Shigeru Ishiba met Mr Trump in February, but by July the US president revealed his increased tariffs on the Asian nation and appeared to skip over its leader's name, calling him "Mr Japan" in a recent interview. "I can see why the (Australian) prime minister would be seeking a face-to-face meeting, but it doesn't have the same kind of certainty that it had in the past," Prof Smith said. "Now we're in a situation where the US is trying to negotiate 100 trade deals at once - it's clearly beyond the capacity of American negotiators. "Trump is getting very frustrated. Trump's blaming other countries for the slowness of the negotiations and now he's lashing out." One of Australia's biggest exports to the United States could be slapped with triple-digit tariffs after Donald Trump vowed to expand his trade war. The US president has laid out plans to impose 200 per cent tariffs on drug imports in a year's time, threatening Australia's third-most significant export to America. Mr Trump's proposal comes after lobbying by the powerful US pharmaceutical sector, which has long taken issue with Australia's drug subsidy scheme and wants the president to act so it can sell drugs to Australians for more. His announcement could be seen as a way for the US to chip away at the Pharmaceutical Benefits Scheme in exchange for a tariff exemption or trade deal. But Treasurer Jim Chalmers has ruled that out. "Our Pharmaceutical Benefits Scheme is not something that we're willing to trade away or do deals on," he told ABC radio on Wednesday. Mr Trump also revealed a 50 per cent tariff on copper imported to the US, but this poses less of a problem for Australia as the US accounts for less than one per cent of its copper exports. By comparison, Australia sent $2.1 billion worth of medicinal and pharmaceuticals to the US in 2024, according to the Australia Bureau of Statistics. The president's remarks are the latest in a series of new trade measures, after he unveiled an increased 25 per cent tariff on items from Japan and Korea, which are Australia's second- and third-biggest export markets. Although Australia has been spared for now, it remains vulnerable to flow-on effects, Monash University economics lecturer Isaac Gross said. One of Australia's main exports to Japan and South Korea is iron ore, which is used to make vehicles, many of which are sent to the US. But if cars sale fall off in the American market, that could mean less demand for Australian iron ore, which could also impact mining giants like BHP and Rio Tinto. "The principal way that affects the Australian economy is through a lower Australian dollar and less tax revenue," Dr Gross told AAP. "That would affect Australians as a whole ... it would definitely hurt the government's budget line and reduce economic activity, in especially the mining states." There could be some upside for Australian consumers as South Korean or Japanese goods that would normally have been exported to the US might be sent to Australia at a discounted price. But Dr Chalmers maintains the escalating trade tensions around the world were a "substantial concern" and that tariffs pose a risk to global growth. A number of countries have tried to strike trade deals with the US to get some certainty from the tariff volatility. However, many are now growing frustrated, according to University of Sydney associate professor David Smith. "They think that negotiations are going in one direction and then Trump makes a sudden announcement that takes it in another direction," he told AAP. Prime Minister Anthony Albanese has faced increasing pressure to schedule a face-to-face meeting with the US president and push for a total tariff exemption. But it is unclear if that would work. Japanese Prime Minister Shigeru Ishiba met Mr Trump in February, but by July the US president revealed his increased tariffs on the Asian nation and appeared to skip over its leader's name, calling him "Mr Japan" in a recent interview. "I can see why the (Australian) prime minister would be seeking a face-to-face meeting, but it doesn't have the same kind of certainty that it had in the past," Prof Smith said. "Now we're in a situation where the US is trying to negotiate 100 trade deals at once - it's clearly beyond the capacity of American negotiators. "Trump is getting very frustrated. Trump's blaming other countries for the slowness of the negotiations and now he's lashing out."
Yahoo
05-06-2025
- Business
- Yahoo
‘Underwhelming': Aussies cautious spenders
Australians' spending improved marginally in April, but it was not the bump many businesses were hoping for following rate cuts, falling inflation and back-to-back long weekends. Household spending rose by 0.1 per cent following a 0.1 per cent fall in March and a 0.2 per cent rise in February, Australia Bureau of Statistics figures show. Much of the spending was on recreational and cultural activities, health and dining out as Aussies took advantage of the long weekends, while spending on clothes, footwear and vehicles fell. Three of the nine spending categories rose in April, led by hotels, cafes and restaurants, up 2.2 per cent, and health, which lifted 1.6 per cent. Meanwhile, clothing and footwear fell 3.5 per cent. ABS head of business statistics Robert Ewing called it a steady result. 'Household spending remained steady in April, with a rise in spending on services being partly offset by a fall in goods spending,' he said. Year-on-year household consumption is up 3.7 per cent, which is effectively flatlining when accounting for population growth. Thursday's household spending was the latest snapshot of the economy following a weaker than expected GDP figure released on Wednesday showing that Australia slipped back into a per capita recession for the March quarter. GDP rose in the March quarter by 0.2 per cent and 1.3 per cent year-on-year. But that anaemic growth was not enough to keep Australia out of a per capita recession, with the nation going backwards by 0.2 per cent per person. Thursday's household spending data shows a similar story to separate Commonwealth Bank spending figures that show economic activity rose in April on the back of a 'super holiday' period of both Easter and Anzac Day. But even with the lift, Commonwealth Bank senior economist Belinda Allen told NewsWire at the time that spending in the month remained a 'mixed bag' and was 'underwhelming'. 'I think it's going to take time for the interest rate cuts to really see consumers boost spending further,' she said. Australians' consumer confidence remained low, Ms Allen said, leading to less economic activity. 'Households are continuing to save at a higher level than you would expect given the improvements in inflation, the income tax cuts and lower interest rates,' she said. 'I think it's pretty evident there's still a bit of caution out there and certainly a lot of the global news wouldn't help either.' Error in retrieving data Sign in to access your portfolio Error in retrieving data
West Australian
05-06-2025
- Business
- West Australian
‘Underwhelming': Aussies remain cautious spenders
Australians' spending improved marginally in April, but it was not the bump many businesses were hoping for following rate cuts, falling inflation and back-to-back long weekends. Household spending rose by 0.1 per cent following a 0.1 per cent fall in March and a 0.2 per cent rise in February, Australia Bureau of Statistics figures show. Much of the spending was on recreational and cultural activities, health and dining out as Aussies took advantage of the long weekends, while spending on clothes, footwear and vehicles fell. Three of the nine spending categories rose in April, led by hotels, cafes and restaurants, up 2.2 per cent, and health, which lifted 1.6 per cent. Meanwhile, clothing and footwear fell 3.5 per cent. ABS head of business statistics Robert Ewing called it a steady result. 'Household spending remained steady in April, with a rise in spending on services being partly offset by a fall in goods spending,' he said. Year-on-year household consumption is up 3.7 per cent, which is effectively flatlining when accounting for population growth. Thursday's household spending was the latest snapshot of the economy following a weaker than expected GDP figure released on Wednesday showing that Australia slipped back into a per capita recession for the March quarter. GDP rose in the March quarter by 0.2 per cent and 1.3 per cent year-on-year. But that anaemic growth was not enough to keep Australia out of a per capita recession, with the nation going backwards by 0.2 per cent per person. Thursday's household spending data shows a similar story to separate Commonwealth Bank spending figures that show economic activity rose in April on the back of a 'super holiday' period of both Easter and Anzac Day. But even with the lift, Commonwealth Bank senior economist Belinda Allen told NewsWire at the time that spending in the month remained a 'mixed bag' and was 'underwhelming'. 'I think it's going to take time for the interest rate cuts to really see consumers boost spending further,' she said. Australians' consumer confidence remained low, Ms Allen said, leading to less economic activity. 'Households are continuing to save at a higher level than you would expect given the improvements in inflation, the income tax cuts and lower interest rates,' she said. 'I think it's pretty evident there's still a bit of caution out there and certainly a lot of the global news wouldn't help either.'
Perth Now
05-06-2025
- Business
- Perth Now
‘Underwhelming': Aussies cautious spenders
Australians' spending improved marginally in April, but it was not the bump many businesses were hoping for following rate cuts, falling inflation and back-to-back long weekends. Household spending rose by 0.1 per cent following a 0.1 per cent fall in March and a 0.2 per cent rise in February, Australia Bureau of Statistics figures show. Much of the spending was on recreational and cultural activities, health and dining out as Aussies took advantage of the long weekends, while spending on clothes, footwear and vehicles fell. Three of the nine spending categories rose in April, led by hotels, cafes and restaurants, up 2.2 per cent, and health, which lifted 1.6 per cent. Meanwhile, clothing and footwear fell 3.5 per cent. Australian spending remains subdue despite back-to-back long weekends. NewsWire / John Appleyard Credit: News Corp Australia ABS head of business statistics Robert Ewing called it a steady result. 'Household spending remained steady in April, with a rise in spending on services being partly offset by a fall in goods spending,' he said. Year-on-year household consumption is up 3.7 per cent, which is effectively flatlining when accounting for population growth. Thursday's household spending was the latest snapshot of the economy following a weaker than expected GDP figure released on Wednesday showing that Australia slipped back into a per capita recession for the March quarter. GDP rose in the March quarter by 0.2 per cent and 1.3 per cent year-on-year. But that anaemic growth was not enough to keep Australia out of a per capita recession, with the nation going backwards by 0.2 per cent per person. Aussies are spending less at the shops. NewsWire / John Appleyard Credit: News Corp Australia Thursday's household spending data shows a similar story to separate Commonwealth Bank spending figures that show economic activity rose in April on the back of a 'super holiday' period of both Easter and Anzac Day. But even with the lift, Commonwealth Bank senior economist Belinda Allen told NewsWire at the time that spending in the month remained a 'mixed bag' and was 'underwhelming'. 'I think it's going to take time for the interest rate cuts to really see consumers boost spending further,' she said. Australians' consumer confidence remained low, Ms Allen said, leading to less economic activity. 'Households are continuing to save at a higher level than you would expect given the improvements in inflation, the income tax cuts and lower interest rates,' she said. 'I think it's pretty evident there's still a bit of caution out there and certainly a lot of the global news wouldn't help either.'
ABC News
02-05-2025
- Business
- ABC News
How housing affordability policies could shift votes at the federal election
Jason Cox has become skilled at flipping property. Since 2001, the Queensland resident has been buying properties, making improvements to them to increase their value and then selling them for a profit. Flipping homes, Mr Cox says, is a five-year strategy. "You buy a property year one, and then you operate that property for five years, and then you can flip it out," he says. " Our method is to have around about five [investment] properties, and flip one out every year. " Even as a serial property investor, Mr Cox is concerned about housing affordability and the implications for future generations. As Australians head to the ballot box on Saturday, the lack of affordable housing is front of mind for many. But the debate about how to constrain house prices remains a sore point because millions of Australians are home owners and many of them have built their wealth through property. "They [home owners] want governments to do things that keep house prices going up, and as both major political party leaders have said, they want house prices to keep going up," says veteran economist Saul Eslake. Saul Eslake says the major parties are "shedding crocodile tears" for first-time buyers because the reality is that many of their policies will keep house prices rising. ( ABC News: Daniel Irvine ) Home owners a far bigger voting base than first-time buyers Mr Eslake notes that there are 11 million home owners, and 2.25 million who own at least one investment property in Australia. Each year roughly more than 1 million of them are negatively geared. Negative gearing occurs when the cost of owning a rental property — such as interest payments, property charges and maintenance — outweighs the income it generates each year. This creates a taxable loss, which can normally be offset against other income, including a person's salary, to provide tax savings. Photo shows Aerial shot of dozens of houses in neat rows in a new outer-suburban housing estate. New data shows national house prices trended higher in April, and are expected to keep rising as interest rates fall. Meanwhile, first home buyers are a much smaller voting group — Australia Bureau of Statistics lending data shows there are typically 110,000 people who succeed in becoming first home buyers each year. "Even if you allow that, for everyone who does [get into the market], there are five or six who don't, that is at most 750,000 votes for policies that would restrain the rate at which house prices keep going up," Mr Eslake notes. "So, on the one hand, 750,000 votes for policies that might restrain the rate of house price inflation, but somewhere north of 12 million for policies that would keep the rate of house price inflation going up. " Even the dumbest of our politicians can, as the Americans say, do that math. And they do it at every election. " Mr Eslake says while the major parties are "shedding crocodile tears for the difficulties faced by those young aspiring home buyers", the reality is that many of their policies will keep house prices rising. Those who own homes worry their children will never afford one This election, It wants to limit negative gearing and the CGT discount on property, which cost the federal budget tens of billions of dollars each year. Greens leader Adam Bandt whose party wants to limit negative gearing and phase out the CGT discount for property. The CGT exemption allows Australian residents that sell an asset (such as property or shares) to reduce their capital gain by 50 per cent if they owned the asset for at least 12 months. Under the Greens' policy, existing investors would be allowed to continue negatively gearing and receiving capital gains tax benefits for one investment property, but new investors would not be allowed to utilise the tax breaks. The Greens' CGT policy only applies to property, not other assets. Photo shows A red sold sticker across a for sale sign outside a house with a large front yard on a sunny day A moderate fall in home values may be just what Australia's economy needs in the long-term. Queensland investor Mr Cox says he is a swinging voter and he won't vote for the Greens, as their policy would force him to have to sell his existing investments. He and his partner currently have three investment properties they rent out, all negatively geared. "I don't have a problem with them [political parties] abolishing the 50 per cent [CGT discount] or getting rid of negative gearing — but you can't go backwards. You can't leave investors like me and potentially millions of others in the lurch," Mr Cox says. Mr Cox says if there are future changes to property tax breaks, he and his partner will stop investing in property, and he fears others may do the same and that it could push rents up. But he also understands the dire need to address the lack of affordable housing. Jason Cox says if there are future changes to property tax breaks, he and his partner will stop investing in property and fears that could push up rents. ( ABC News: Russel Talbot ) "I've got a daughter, and I am concerned about rising house prices, so we need to do something," Mr Cox says. This generational concern is a sentiment shared by Brisbane home owner Laurent Heymann, who is also looking to invest in property. "I'm worried for our kids — we're at risk of a [property] bubble — where people just can't afford to live," Mr Heymann tells ABC News. " It saddens me. It feels like the country has changed, and not for the better, by making the poorer, poorer and [the] richer, richer. " Laurent Heymann is disappointed that both Labor and the Coalition have steered away from making any changes to property tax breaks this election. ( ABC News: Nickoles Coleman ) Mr Heymann is disappointed that both Labor and the Coalition have refrained from announcing any changes to property tax breaks this election. He says that may steer him to vote for an independent. He and his partner were able to pay off the family home mortgage due to an inheritance left to him when his father passed away. They now have about $400,000 left to invest in another property, and even though they would benefit from having housing tax breaks, he believes the cycle that's fuelling house price growth needs to stop. "I feel that the Australian public and the housing market would be much better served if the money that was used towards negative gearing would instead be used to build new homes," he said. ELECTION HOUSING POLICIES LABOR Allowing first-time buyers to get into the property market with Committing Extending Speeding up housing construction and Mirroring a Coalition policy to impose a COALITION Making the interest payments on the first $650,000 of a mortgage for a new Easing lending standards Allowing first home buyers to Allocating Giving businesses employing apprentices Scrapping Two-year ban on the purchase of existing Australian homes by foreign investors GREENS A two-year rent freeze followed by capping rent increases at 2 per cent every two years Landlords required to renew all fixed term leases unless they have a good reason not to A Grandfather Will policies aimed at first-time buyers make housing affordability worse? Mr Eslake says changes to property tax breaks are "not a magic bullet", but that restricting negative gearing to investors who buy new dwellings and reducing the CGT discount would help boost the supply of new dwellings. He says current lending data shows in 2024 investors bought 154,600 established dwellings as opposed to 37,800 new dwellings. About a fortnight ago, Housing Minister Clare O'Neil and her Opposition Michael Sukkar pitched their parties' policies on housing at the National Press Club. Loading YouTube content Both stayed away from property tax breaks and instead spoke about policies that they argue will help increase housing supply, as well as measures to help first home buyers break into the property market. Mr Eslake argues major party policies aimed at helping first time buyers break into the market "They [some major party election policies] enhance the capacity of those who are able to take advantage of these [first-time buyer] schemes to borrow more than they otherwise would, so that they can spend more on housing than they otherwise would be able to do," Mr Eslake notes. Would prices fall and rents rise if tax breaks changed? The property industry has long argued that changing property tax breaks could drive down house prices and push up rents. Photo shows A house frame being constructed with timber. Builders take out insurance designed to cover clients' costs in the event they go bust. But some people are waiting for years for a payout and facing potential bankruptcy. Mr Eslake says he's not advocating governments do things deliberately with the intention of forcing a big fall in house prices, "as that could get out of control". " But if house prices were to fall by, say, 5 to 10 per cent over a three-year period, that would do more to improve the chances of younger people becoming home owners than anything that any government has done in the last 60 years. " The Grattan Institute, which also wants to see the CGT discount reduced from 50 per cent to 25 per cent and negative gearing wound back, found that under such a policy, property prices would fall by about 1 per cent. But the institute says it would boost the budget bottom line by about $11 billion a year. The Grattan Institute estimates changes to property tax breaks could boost the budget bottom line by about $11 billion a year. ( ABC News: John Gunn. ) Its estimates account for a 20 per cent reduction in net capital gains from sale of investment properties due to carry-forward of rental losses. And it suggests, that "contrary to urban myth, rents wouldn't change much, nor would housing markets collapse". "We estimate that if implemented in full, our proposals could decrease the number of new homes being built by about 16,500 over the five years to 2030," it says. " That would result in a tiny — around $1 per week — increase in median rents across Australian capital cities. " Costs saved could boost social housing The Grattan Institute says this impact on housing supply, and rents, could be offset if even a small portion of the proceeds from the reforms was used to fund a further boost to Australia's social housing stock. Loading Other research from the Australian Housing and Urban Research Institute suggests that if the CGT discount were halved from 50 per cent to 25 per cent, "landlords' costs would increase, as would the probability of high-income landlords selling their rental investment properties". The probability of landlords selling their rental investment property over time would rise the most among high-income landlords: average rents would rise by 3 per cent, and rental cost burdens would rise slightly across all income groups. Cotality's head of research Eliza Owen says major party policies on housing affordability could have focused more on addressing issues such as property tax breaks. Eliza Owen believes Australians can withstand modest price falls in housing values, noting one-third own their home outright. ( ABC News: John Gunn ) She thinks "They've made lots of gains on their property already, so the vast majority of Aussies could cop a bit of a hit to housing values," Ms Owen contends. "For example, we looked at resales data in the December quarter of last year and found that if we reduced across the board sales prices by 10 per cent, you'd still have almost 90 per cent of Australian home sellers making a gross profit, and the median gross profit was strong at $260,000. "If you ask me, personally, as someone who has dedicated their professional career to researching and looking at the property market, I think it is fair to say that something needs to be happening on the demand side to relieve pressure on property prices." Calls to relax planning restrictions and allow more building Peter Tulip, chief economist at the Centre for Independent Studies, has long argued that property tax breaks have minimal impact on housing affordability. Peter Tulip says increasing housing supply through reformed planning restrictions is crucial for affordability. ( ABC News: Daniel Irvine ) His view is that increasing housing supply through reformed planning restrictions is crucial for affordability. "What we need to do, which is what national cabinet agreed to some two years ago, is to increase the supply of housing like any market, extra supply drives down prices," he argues. " We need to reform planning restrictions. We need to allow more building. " Photo shows Sold With negative gearing and capital gains tax back on the national agenda, experts say such reforms would be unlikely to lead to a major fall in property prices. Dr Tulip also criticises demand-side measures like first home buyer incentives, arguing they could raise prices. "The lucky recipients will go to auctions and bid up prices — so they may benefit, but everybody else will face more expensive housing," he said. Dr Tulip says both major parties' policies are mixed, with some supply-side measures like infrastructure investments outweighing smaller demand-side initiatives. The Grattan Institute also wants to see planning restrictions eased, noting in its paper that "Australia's land-use planning rules are highly prescriptive and complex". It points out that Australia has among the least housing per person of any OECD country and is one of only four OECD countries where the amount of housing per person went backwards over the past two decades.
