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Democrats the only low interest rate party on housing tax reform.



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DEMOCRATS

MEDIA 04/864

MONDAY, SEPTEMBER 6 2004

SENATOR JOHN CHERRY AUSTRALIAN DEMOCRATS HOUSING SPOKESPERSON

Democrats the ONLY Low Interest Rate Party on Housing Tax Reform The Australian Democrats are the only party genuinely trying to prevent a large rise in home loan interest rates by calling for major changes to taxation of housing investment loans.

Democrats Housing spokesperson Senator John Cherry said reports today that the banking sector, in July, enjoyed the biggest monthly surge in home lending in a decade, makes it inevitable that interest rates will be on their way up after the election.

"The Reserve Bank will be forced to push up interest rates after the election, because Labor and the Coalition are too gutless to take on the real estate industry and act to curb negatively gearing property speculation," Senator Cherry said.

"The only question remaining is how much interest rates go up by, and how much more unaffordable housing will become for first home buyers.

"The simple fact is that without reform of the over-generous tax treatment of investment housing, there will be too much money sucked into the housing sector from speculators, making it too expensive for everyone else.

"Only last week, the AMP/REIA Home Loan Affordability Index reported housing was less affordable now than at any time in the last 14 years despite low interest rates. The reason that housing prices have risen so fast is that they are driven hard by negatively geared property investors.

"In the six months to June, a whopping 37% of new home loans were for negatively geared investment housing. That is up from 28% of loans before the Howard Government halved the capital gains tax rate in 1999, and more than double the 18% of new loans during the last housing boom in 1994.

"The Reserve Bank and the Productivity Commission both recognised that overgenerous breaks are driving too much speculative money into investment housing and pushing prices up way beyond the reach of first home buyers.

"Britain and the United States reformed their tax codes to remove negative gearing tax breaks, while leaving generous tax breaks for investment in affordable housing projects.

"It is time for Australia to do the same," Senator Cherry concluded.

Media contact: Pam Hose 0408 752 750