What should a real Labor Budget look like?

Not only is the current taxation regime providing a super black hole in the budget it is distorting the housing market. Speculators/investors are in a commercial advantage to first home owners who are often competing in the same market. There is a risk that an uncontrollable asset bubble will develop if it hasn’t already.

Solution

Change taxation rules for future purchases so that costs associated with investment properties can only be deducted from income generated from the investment. Therefore the costs of borrowing could only be deducted from the rental income. With the exception of investment in new housing units (houses, apartments, townhouses, and so on).

The investors, therefore, if they want the same taxation benefit will create additional housing thus reducing the shortage of rental accommodation. In addition, the removal of the speculators from competing with first home buyers will increase housing affordability.

Also these changes will direct investment into other activity reducing the likelihood of an asset bubble in the housing market.

To the Nambour graduates: please deliver a Labor Budget with some imagination and vision next time.