Negative gearing changes could help stability: RBA memo

Claudia Baxter

THE Federal Government may have resisted calls to reign in Australia's negative gearing laws, but the Reserve Bank of Australia has quietly said such changes could be good for the nation's economy.

An RBA briefing note obtained by the ABC through freedom of information laws said, "Any change which discourages negative gearing may be good from a FS [financial stability] perspective".

The process of negative gearing allows property investors to claim a tax deduction on losses from investments, bringing down the amount they pay in tax.

The same memo warned that in combination with the capital gains tax discounts, negative gearing "may encourage chasing of capital gains … as it can be purchased using higher leverage than shares for example", reports the ABC.

It also suggested that rents could go up, and negatively-geared properties could be sold off if changes affected current investors.

The Labor Opposition's policy to curb negative gearing would protect those already in the market.

It would restrict negative gearing to new housing and come into use from July next year.

Finance Minister Mathias Cormann dismissed the internal memo saying it was "unremarkable" and was not the official policy of the RBA.

Labor's shadow assistant treasurer Andrew Leigh proved it was time to change negative gearing rules.

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