David Tricarico Wants Property on the Political Agenda

David Tricarico Wants Property on the Political Agenda

Amidst an uncertain global outlook, and a wobbly economy back home, our looming election is shaping up to be a contest around stability and economic management. Under this backdrop, we are seeing our politicians fight for the Aussie battler’s vote, aka middle Australia.


Both leaders seem to be doing their best impressions of relatable humans, providing humour in its disheartening occurrence. And while the race is on for each party to outspend one another on big spending initiatives, endeavouring to capture those marginal seats, the most important issue I see shaping our economy is failing to be noticed.


Property, the steam engine of Australia’s economy, for better or worse, over the past several decades has always played a role in our traditional wealth generation. We have had a knack for gearing up to our eyeballs in order to buy a house, while inflating away the debt with wage rises and massive property price gains. This is important to note, as we venture uncharted territories right now, witnessing the worst housing slump since World War II, or fourth-worst if you adjust for inflation. With so much of our wealth tied up in property, it is important we make sure the levers and incentives are in place to mitigate against any substantial drop in prices and stability.


Currently our slumping property market, coupled with an inconsistent stock market, has driven the largest reduction in household wealth in seven years. In just the final three months of 2018, wealth decreased by 2.1%. This shaky terrain we find ourselves in should be at the top of the agenda for our policymakers and regulators. The relationship between regulatory ‘macroprudential tools’ and government policy is important, and one we should be striving to make flexible yet secure. Arguably the two biggest policy options on the table within the scope of this context are Labour’s negative gearing and Capital Gains Tax reductions. Both were announced several years ago, while our market was still running hot, yet both now find themselves in the unenviable position of potentially fuelling an already dramatic down turn.


While negative gearing has received the most political weaponisation in recent months, experts are saying the CGT discount of 50% is the real fueler of run-away house prices since coming in in 1999. Incentives were geared so that investors were much more likely to leverage up into property.

Additionally, we are blessed in Australia with a sound regulatory environment, albeit one that can often seem over bearing. Yet for this to work, it must also be flexible, able to adapt to market changes such as ones we are witnessing now.

The Bank of International Settlements, and kind of central bank for central banks, has recently argued that a broad base macro-financial stability framework includes everything from lending provisions to tax policy.

What Australia needs is a levelled headed debate around the incentives and levers we have in place in our property market and how these can adapt and support home owners and investors. It is worrying when political populist policies such as negative gearing cuts in 2016 are now stubbornly refused to be addressed in an environment that may not be able to support them. This isn’t to say the other side has a clear and better position, because they don’t, but we need a more informed debate that takes into consideration the central role our property market plays in every Australians lives.