Labor Party

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GUEST OBSERVATION
Contrary to Labor’s claims, its policies on negative gearing and capital gains tax will not increase the supply of new housing or create new jobs in the building industry according to new independent economic modelling commissioned by Master Builders Australia.
According to modelling prepared by Cadence Economics if Labor’s policies are implemented it will mean:
1. Up to 42,000 less new dwellings being built across the country.
2. Up to 32,000 less full time jobs.
3. Up to $11.8 billion less building activity.
4. Up to $210 million less renovation building activity.
Labor’s policies on negative gearing and CGT fails its own test. “Master Builders calls on the ALP to rethink their policies in the light of this new research and a changed housing market. Australia cannot afford for housing supply, building activity and employment to go backwards.
Cadence Economics was commissioned by Master Builders Australia to test Labor’s claims that its policy to restrict negative gearing to investments in new housing and halve the capital gains tax (CGT) discount to 25 per cent all properties will increase the supply of new housing and employment in the building industry.
The results of the modelling show that within five years of Labor’s property tax policy being implemented the construction of new housing would fall in all states and territories and employment would fall over the same period.
Labor has previously stated their policies would boost new dwelling construction “by thousands of new homes each year."
On the other hand independent modelling by Cadence Economics shows that Labor’s policy would mean up to 42,000 fewer new homes would be built over the five years following the implementation of Labor’s policies, resulting in a reduction in the value of residential building activity of between $2.8 billion and $11.8 billion.
Home renovations would also be hit by an expected reduction of between $50 million to $210 million in activity over a five year period.
Inevitably this would mean a fall in employment which is expected to be between 7,200 and 32,000 less jobs across the country.
Finally, the context of Labor’s policies, namely an ‘overheated’ housing market no longer exists bringing into question the need for reforms to curb investor activity.
Denita Wawn is the CEO of Master Builders Australia
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j.ballantyne1990-6AQqhLzZaK

Labor has failed its own test on negative gearing: MBA's Denita Wawn

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Sydney and Melbourne's house prices could slide by another 9 per cent in the event of Labor's planned property tax changes, according to property consultants.
RiskWise Property Research and Wargent Advisory suggest the impacts would vary around the country, hitting the most vulnerable areas including Darwin, Mackay, inner-city Perth and Townsville, which could suffer falls of up to 12 per cent.
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<div>Labor's long planned initiative would see negative gearing limited to new rental dwellings as well as a halving of the capital gains tax discount from 50 per cent to 25 per cent. 
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<div>It took the measures to the last election amid concerns about housing affordability.</div>
The RiskWise paper utilised Corelogic data to take local factors into account, including rates of unit development, construction, and the recent price falls.
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<div id="article-inline-ad">The shadow treasurer Chris Bowen recently shrugged off suggestions the changes be scrapped because prices are now falling making homes more affordable.</div>
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<div>Bowen said that the changes are about making long-term structural adjustments rather than addressing the short-term property cycle.</div>
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<div>Brisbane-based analyst Pete Wargent, who helped write the report, noted the slide by another nine per cent under Labor's planned property tax changes which would be the equivalent of borrowing costs rising by more than 20 per cent in the Sydney market.</div>
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"It would be a defacto tightening of financial conditions for households, with potential knock-on effects from that," he told The Australian Financial Review.
"While the stated intention of the policy was to cool housing markets – at the time in 2016 that was a hot political issue as in Sydney and Melbourne markets were running away – if you were to introduce it today, it would impact markets that are already struggling."
Modelling by the firms suggest the changes would be equivalent to a sudden 1.15 percentage point hike in interest rates.
Prices in NSW and Victoria for houses would drop by 9 per cent, followed by WA and the Northern Territory with 7 per cent declines, and 6 per cent in South Australia and the ACT. Tasmania's impact would be the least, falling 3 per cent. Unit prices would drop between 10 per cent and 2 per cent.
"The report concludes that while there would be some positive initial impacts on housing affordability, these would only be sustained in the largest capital cities if appropriate policies are implemented to encourage the supply of owner-occupier suitable housing in addition to investment units," the authors say.
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Wargent noted that Sydney and Melbourne's markets would likely find a new equilibrium within two years of the changes.
"Rental yields will come up and one way or another, investors will come back to the market," he said.
"So while prices would decline, it probably wouldn't be catastrophic because demand for housing is high."
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Melbourne prices could fall by 9 percent under Labor policies 

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EXPERT OBSERVATION
Australia’s peak body for property investors, the Property Investors Council of Australia (PICA), is urging all property owners to join a campaign against Labor’s “economically damaging” negative gearing policy by signing its new petition on change.org.
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Labor’s proposed changes to negative gearing and Capital Gains Tax (CGT) will not serve Australia well both economically and socially.
You can’t take away upwards of 30 per cent of buyer demand and expect all property values to hold up.
Ask yourself, who’s going to buy a brand-new property and run it at a loss for several years, if they know these new properties aren’t going to have the buyer demand that they once had?
According to PICA, Labor’s proposed policy changes will have a number of damaging consequences, including: 
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The vast majority of property prices will fall, affecting all property owners – not just investors. 
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Jobs will go – both directly (construction, materials, trades, etc.) as confidence in the sector drops and indirectly (retail, furnishings, finance, etc.) due to the “wealth effect” principal that follows. 
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The economy will lag significantly – and Labor could be responsible for breaking Australia’s world record of unbroken economic growth by causing our first recession in more than 27 years. 
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Rents will rise as fewer new properties are bought or built to lease – higher demand and lower supply, as our population continues to grow. 
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We would argue to not be misled by Labor’s modelling or anyone’s modelling indicating that negative gearing will only marginally affect property prices across the entire property market.
All the modelling is flawed because it doesn’t adequately take into consideration what we believe will be a big shift in buyer behaviour. A macro reform of this magnitude will absolutely impact buyer behaviour significantly, so much so that it’s very difficult to accurately forecast any realistic model. 
How we base our view on property prices is looking at what investors will do if there is uncertainty about price growth. All you need to do is ask a simple question like, ‘Would you invest in property if it didn’t grow in value, yet you had to pay all the loan interest over the years?’ We all know the answer to that question. 
According to PICA, the one exception to falling property prices in the vast majority of markets will be soaring land values for inner-city land, as well as the risk of over-development in city fringe suburbs. 
Demand for inner-city land will soar as investors opt for quality as well as for development potential as close to the city as possible, which will push up prices.
While PICA is highly concerned about the significant economic risk of Labor’s proposed changes, it wants government to introduce regulation in the property investment industry to better protect consumers.
We don’t support Labor’s proposal for changes to negative gearing or CGT, however we are open to some potential reform to CGT exemptions to encourage long-term investors and discourage short-term speculators into the market 
We want to cooperate with all political parties and regulators to help them understand the importance of the residential property market in developing good sensible and sustainable policy. This is the reason why we have created this petition, as there are many of us who are very concerned and through this petition we can show our concern.
Ben Kinglsey is the chairman at Property Investors Council of Australia.
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jrobinson-rf4aSBido9

PICA launches campaign against Labor’s "poorly constructed" negative-gearing policy

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The former Labor state government minister Carl Scully has been appointed among the community and business leaders to chair the Sydney Planning Panels that make decisions on major development proposals.
The appointments were announced by the Department of Planning and Environment’s executive director of regions, Steve Murray, who said the new chairs bring a high level of expertise to the panels.
“The decisions made by the Sydney Planning Panels will be independent and based on the merits of the proposals that are put before them.”
The four new Planning Panel Chairs are:
<ul>
<li>The Hon. Carl Scully — Sydney Eastern City Planning Panel</li>
<li>Mr Justin Doyle — Sydney Western City Planning Panel</li>
<li>Professor Helen Lochhead — Sydney South Planning Panel</li>
<li>Mr Peter Debnam — Sydney North Planning Panel</li>
</ul>
The new chair of the Sydney Central Planning Panel is expected to be determined in the coming weeks. 
The new chairs have been appointed because the roles of Sydney Planning Panel Chair and District Commissioner of the Greater Sydney Commission have been separated. 
The appointments followed consideration of 70 applications by a selection panel. 
Currently, the projects they assess are valued over $20 million but from the 1st March that threshold will be increased to $30 million.
The panels also act as the relevant planning authority in some decisions when directed by the Minister for Planning or the Greater Sydney Commission, undertake rezoning reviews, and provide advice on planning and development matters when requested.
Carl Scully — Sydney Eastern City Planning Panel
A former minister of the NSW parliament, Mr Scully’s career spans more than 30 years in the public and private sectors. He practised law for seven years before embarking on a 17-year political career. For almost 12 of those years he served in ministerial positions involved in the delivery of major infrastructure projects including the portfolios of public works and services, roads and transport, and housing. He returned to the private sector in 2007 where he has worked for WorleyParsons, most recently as director of International Business Development. In 2015, he was appointed as Chair of the NSW Mine Safety Advisory Council.
Justin Doyle — Sydney Western City Planning Panel
Mr Doyle is a lawyer focused on planning and environment law, with 11 years’ experience as a practicing barrister, and 10 years before that as a solicitor. He has been the lead counsel for a team of barristers acting for the Commonwealth Department of Infrastructure in cases on the land at Badgerys Creek to allow for the development of Western Sydney Airport. His work also includes land contamination issues and the redevelopment of the former James Hardie asbestos plant which includes negotiations with the Department of Lands and Parramatta Council.
<h4>Professor Helen Lochhead — Sydney South Planning Panel</h4>
For more than 20 years Prof Lochhead has combined university teaching with her practice as an architect specialising in complex large-scale projects. She is currently Dean of the Faculty of the Built Environment at the University of NSW. Prior to that her career focused on the planning and delivery of major projects ranging from a five-year city improvements program for the City of Sydney to major urban regeneration projects. Prof Lochhead has extensive experience on university, government and industry committees, panels and boards, most notably as the National Board of the Australian Institute of Architects, Central Sydney Planning Committee, Sydney Harbour Design Review Panel and the NSW Heritage Council.
Peter Debnam — Sydney North Planning Panel
Mr Debnam served as leader of the opposition of the NSW parliament as well as holding several shadow ministerial positions including shadow minister for planning and urban affairs and housing from 1997 to 1999. Before politics Mr Debnam had broad management experience starting with his military service followed by business development and general management in the aerospace and rural service industries. He completed an MBA in 1993. Since leaving politics in 2011, Mr Debnam has contributed to charities and not for profit organisations including as the Chair of NSW Kids in Need Foundation Limited, The Muscular Dystrophy Association of NSW, and the Advisory Board of Our Big Kitchen Limited.
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Carl Scully gets eastern Sydney planning posting from State Government

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Labor MPs might be <a href="https://yalebooks.yale.edu/book/9780300122237/nudge" target="_blank">rubbing their hands together with glee</a> at a Treasury memo that shows the federal opposition’s negative gearing policy will have a “small” impact on the property market. But insights from <a href="https://www.propertyobserver.com.au/http://www.abc.net.au/news/2018-01-08/govt-negative-gearing-claims-contradicted-by-official-advice-foi/9309736" target="_blank">behavioural public policy</a>, as highlighted by the 2017 Economics Nobel laureate - Richard Thaler and his colleague Cass Sunstein, tell us that how people respond to this policy will be more about how the government frames it.
<a href="https://static.treasury.gov.au/uploads/sites/1/2018/01/FOI_1876_Documents_for_release.pdf" target="_blank">The Treasury memo</a> showed the Labor policy of limiting negative gearing to existing homeowners will have a limited impact as the changes are unlikely to encourage investors to sell quickly. Also, owner-occupiers dominate the housing market and the costs of selling are high.
However, this assumes that people are forward-looking, well-informed, good with numbers and perfectly responsive to new information. <a href="https://global.oup.com/academic/product/behavioural-economics-a-very-short-introduction-9780198754992?cc=au&amp;lang=en&amp;" target="_blank">Behavioural economics</a> shows us that people do not always think so deeply and logically about their choices.
How any changes to negative gearing are sold to us – as a loss or gain, as a one-off or ongoing, in terms of short versus long term costs and benefits – will impact how Australians react.
Most of us aren’t whizzes with mathematics. As Nobel prize winner Herbert Simon <a href="http://diva.library.cmu.edu/webapp/simon/index" target="_blank">has shown</a>, in place of complex mathematical algorithms we use heuristics. These are simple rules of thumb that draw on our intuitions, experience and gut feel.
<h2>Heuristics and biases</h2>
One common example of a heuristic is the <a href="http://psiexp.ss.uci.edu/research/teaching/Tversky_Kahneman_1974.pdf" target="_blank">availability heuristic</a>. This is when we make decisions based on easily available information such as recent events and highly emotive experiences. Our brains work better with narratives and stories than with facts and figures.
Nobel economics laureates George Akerlof and Robert Shiller <a href="https://www.propertyobserver.com.au/https://press.princeton.edu/titles/8967" target="_blank">have applied</a> a similar insight to analyse people’s perceptions of housing market fluctuations. They noted that we hear lots of stories about how house prices are on an upward trend. Via the availability heuristic, we easily remember these emotionally engaging stories, much better than we can remember the dry facts about the history of house price instability and housing market crashes.
This leads us to overestimate the chances of continuing house price rises, and to underestimate the chances of a fall, driving unsustainable house price increases – as witnessed, for example, in the American sub-prime property markets before the global financial crisis.
While heuristics can help us to decide quickly, they sometimes lead us into systematic mistakes – “behavioural biases”. This does not mean that we’re all hopelessly irrational. But for negative gearing it matters how a potential change is <a href="https://www.propertyobserver.com.au/http://science.sciencemag.org/content/211/4481/453" target="_blank">framed</a>, and how that fits into our heuristics and biases.
Most economists (including those at Treasury) <a href="https://www.investopedia.com/terms/f/fungibility.asp" target="_blank">assume</a> that one dollar is a perfect substitute for any other dollar. Whether we save A$100 via a tax break, win A$100 from a scratch card or earn A$100 from working overtime, it makes no difference.
Contrary to this view, behavioural economics <a href="http://faculty.chicagobooth.edu/richard.thaler/research/pdf/mentalaccounting.pdf" target="_blank">has shown</a> that the way we treat money is different depending on the contexts in which we earn and spend it. We have different “mental accounts” for consumption, wealth, regular income and windfalls. We are more likely to splurge money we’ve won from a scratch card than money we’ve earnt doing overtime.
This is another reason why framing is important. How the government frames a negative gearing change will determine the mental account to which we assign it, and therefore how we respond.
If negative gearing changes are considered a one-off hit – the opposite of a scratch card windfall – then property owners won’t worry so much. On the other hand, if the change to negative gearing is seen as an ongoing drain on our incomes, then they will worry a lot.
Another factor that will come into play is <a href="https://www.propertyobserver.com.au/https://academic.oup.com/qje/article-abstract/106/4/1039/1873382" target="_blank">loss aversion</a> – people are much more likely to worry about losses than gains. <a href="http://www.nber.org/papers/w8143" target="_blank">Evidence from behavioural experiments</a> shows that home-owners over-estimate the value of their properties. This makes them reluctant to sell at reduced prices in a falling market.
It also means that Australians will resist negative gearing changes if these are framed as a loss, creating political pressures for a policy u-turn. It is difficult to predict how people might respond, but behavioural economics shows that any ructions might be avoided if the negative gearing change is framed as a gain.
For instance, Treasury <a href="https://static.treasury.gov.au/uploads/sites/1/2018/01/FOI_1876_Documents_for_release.pdf" target="_blank">predicts</a> that the additional revenue raised from restricting negative gearing could be up to A$3.9 billion. Therefore, the negative gearing changes could cover more than 80% of <a href="http://budget.gov.au/2017-18/content/bp2/download/bp2.pdf" target="_blank">federal government expenditure</a> on veterans and their families.
<h2>In the long and short term</h2>
Treasury’s <a href="https://static.treasury.gov.au/uploads/sites/1/2018/01/FOI_1876_Documents_for_release.pdf" target="_blank">modelling</a> notes there might be downward pressure on house prices in the short term from changing negative gearing, but that this will be small overall.
But <a href="http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.699.7719&amp;rep=rep1&amp;type=pdf" target="_blank">a range</a> of models and experiments have shown that people are disproportionately focused on tangible, short-term outcomes. For example, most of us find it hard to persuade ourselves to go the gym: the short-term costs are inconvenience and discomfort and the benefits seem intangible and distant. This is called “present bias”.
Recent work in behavioural economics confirms that framing (alongside a range of other socio-psychological influences) has a strong impact on our choices. Framing will determine how we perceive the policy, which mental account we will use to process it and how the various heuristics and biases identified by economics and psychologists will play out.
<img src="https://counter.theconversation.com/content/89765/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">In the debates around negative gearing policy changes, these behavioural insights have not been highlighted. So perhaps Treasury could have added some psychology, alongside the economics, in arguing that house price falls are likely to be limited.
<a href="https://theconversation.com/profiles/michelle-baddeley-434298" target="_blank">Michelle Baddeley</a>, Research Professor at the Institute for Choice, <a href="http://theconversation.com/institutions/university-of-south-australia-1180" target="_blank">University of South Australia</a>
This article was originally published on <a href="http://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/treasury-memo-misses-the-real-impact-of-labors-negative-gearing-policy-89765" target="_blank">original article</a>.
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Gain or Loss: Treasury misses the behavioural impact of Labor's negative gearing policy

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Federal Labor's negative gearing policy would likely have a modest downturn impact on home values, official Treasury documents have revealed.
Contradicting Turnbull Government claims the policy would "smash" Australia's housing market, the previously confidential advice to Treasurer Scott Morrison from his department has been obtained by the ABC under Freedom of Information.
The ALP's plan to restrict the tax deduction, along with halving the capital gains tax (CGT) discount, was an policy difference issue at the 2016 election campaign.
The documents suggest "in the long term, increases in taxation on rental property could have a relatively modest downward impact on property prices."
It also noted as the after-tax returns for Australian investors in shares and property would fall due to the reduction in the CGT discount, households may increase their investment in owner-occupied housing which remains exempt from CGT which "would tend to counter any downward pressure on prices."
After winning a two-year FOI fight, the ABC revealed Treasury officials in early 2016 gave advice to Scott Morrison.
"The ALP policies could introduce some downward pressure on property prices in the short term, particularly if the commencement of the policy coincides with a weaker housing market," they wrote.
The department warned the price impact would be greatest if "uncertainty arising from the policy change itself" compounded any housing market "downturn that may be underway at the time".
The documents also noted Labor's proposal "runs the risk that more wealthy investors will continue to enjoy the same tax incentive benefits they get now, while more modest mums and dads will have to look elsewhere."
The papers advised previous changes to negative gearing (1985-1987) and the introduction of the CGT discount (1999) had little discernible impact on the market, though the housing market itself has historically been highly cyclical and it is "possible that uncertainty arising from the policy change itself could compound upon a cyclical downturn that may be underway at the time."
"Overall, price changes are likely to be small, though the composition of ownership may shift away from domestic investors."
"In the longterm, increases in taxation on rental property could have a relatively modest downward impact on property prices" and "returns for Australian resident investors will fall under the policy," Treasury advised. 
There were <a href="https://www.propertyobserver.com.au/http://www.abc.net.au/news/2018-01-08/govt-negative-gearing-claims-contradicted-by-official-advice-foi/9309736" target="_blank">18 pages in the FOI release</a> obtained by ABC political reporter Dan Conifer and ABC FOI editor Michael McKinnon.
Senior bureaucrats threatened to stop giving honest advice to the Federal Treasurer if negative gearing documents were not kept secret from the ABC.
 
 
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jchancellor-FAypfDUnLy

Labor's negative gearing will impact more in a weakened property market: Treasury

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GUEST OBSERVER
The SMSF Association remains supportive of Limited Recourse Borrowing Arrangements (LRBAs) in the wake of today’s announcement by the Labor Party to recommend their abolition in line with the Financial System Inquiry (FSI) final report. 
SMSF Association Managing Director/CEO Andrea Slattery says the right decision was made when this FSI recommendation was rejected in late 2015, and there is no compelling argument to suggest anything has changed since regarding LRBAs.
“The fact remains there’s little or no convincing evidence that the use of LRBAs by SMSFs is playing a significant role in affecting housing affordability.
“The most recent Australian Tax Office statistics show that SMSFs hold $24.3 billion in LRBAs, with these financial instruments being predominantly used to invest in residential and non-residential property in an almost 50-50 split. 
“That estimated $12 billion where SMSFs have used LRBAs to invest in residential housing has to be put in the context of a $6.43 trillion housing market. In other words, LRBAs comprise only 0.18% of the market. On these figures, it’s hard to argue LRBAs are a ‘market mover’.
“SMSFs investing in residential property, whether through borrowing arrangements or not, should not be singled out from other investors when looking at policy solutions to improve housing affordability.
“The idea that SMSFs have plunged into property investment in recent times also is not borne out by the statistics, with SMSF residential property holdings (both geared and ungeared) being consistent between 4-6% of total SMSF assets in recent times.
“In addition, there is scant evidence to support the notion that the use of LRBAs by SMSFs pose a systemic risk to superannuation or the broader financial sector.
“Consistent with our view submitted to the FSI, we still believe that the clear majority of SMSFs are using LRBAs appropriately to build their retirement savings and therefore should remain an investment option.”
In a recent speech given at the 2017 SMSF Association National Conference, Andrea suggested SMSFs are integral to our superannuation system.
<h1>Andrea Slattery is managing director and chief executive officer, SMSF Association, and can be contacted <a href="https://www.smsfassociation.com/" target="_blank">here</a>.</h1>
 
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jonathanchancellor-7SQnKwU6yx

SMSF Association rejects Labor proposal to ban LRBAs

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The Urban Taskforce suggest that the latest proposals by the Labor Party on housing affordability are likely to create problems for recent home owners and for renters.
Urban Task Force CEO Chris Johnson says that despite trying to help with housing affordability, the end result of Labor's proposals could reduce supply which will drive rents and home prices upwards.
“By restricting self-managed superannuation funds investment into new housing and increasing foreign investor fees the result will be to lessen the supply of new homes,” Chris said.
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“It seems the intent of the packages is to reduce the value of existing housing which for those people who bought in recent years could mean that their mortgage is excessive relative to the value of the home.” 
“The vacancy tax will be very difficult to implement as many people travel for long periods particularly after retirement or have a holiday house. The extent of the empty home syndrome has been blown out of proportion to reality.” 
“The proposals relative to the National Affordable Housing Agreement and the National Housing Supply Council may be useful proposals for a national focus on this area.” 
“The Urban Taskforce is concerned that popularist moves that appear to help those wanting to get into the housing market may result in reducing the supply of new housing significantly with the result that house prices escalate further. 
Great care must be taken in the levers that are pulled in the name of housing affordability to ensure that the major investment most families make in owning a house doesn’t become destabilised.” 
It was announced that under the new Labor tax system, vacancy tax will become nationwide.
The tax was recently imposed by the Victorian government to curb investors buying properties and leaving them vacant.
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Labor housing plan could create problems for renters and recent home owners: Urban Taskforce

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Following Labor’s thumping win in Western Australia, the new government could introduce a four percent surcharge for foreigners buying residential property in the state, a move which has met with criticism from a leading industry body which says it could hurt the market’s hopes of a recovery. 
Others are more optimistic, saying a clear election win would stimulate the property market as buyers usually hold off major financial decisions till the election outcome.
Other moves by the Mark McGowan government could be changes to stamp duty and formation of an independent infrastructure body, according to an article in the Australian Financial Review.
The previous Liberal government had promised to shave up to $15,000 from the stamp duty for seniors downsizing into a property valued up to $750,000. What Labor does now, the industry will just have to wait and see.
It it introduces the surcharge for foreign buyers of residential property, similar to Victoria, NSW and Queensland, it would do more harm than good, says the Property Council of Australia because of the low foreign investment in the state compared with other states.
"We have the lowest level of foreign investment in property in Australia and putting an extra tax on foreign buyers will make it much harder to get the investment we need to grow the state," the council's WA executive director, Lino Iacomella, was cited as saying by the AFR.
Labor says it will use the funds to put a freeze TAFE fees for the first four years of a McGowan Government.
Among the popular moves, however, Labor has said it will create Infrastructure WA, an independent body long called for by the property industry, to assess and prioritise infrastructure projects.
Before the election, on the common agenda for both Liberal and Labor was strata title reform, such as the creation of community title, which would allow more flexible mixed-use structures with strata properties under different management.
It would also mean owners with plots as small as 1000 square metres, would have flexibility to develop their site in stages, rather than all in one go as happens under current practice, and potentially get better outcomes, said sustainable housing developer Eugenie Stockmann.
Real estate firm Acton chief executive Travis Coleman was cited by www.domain.com.au as saying that there were signs the WA economy was recovering, with the latest economic growth figures for the December 2016 quarter showing positive economic growth for the first time since mid-2015.
“If we have a clear result on Saturday (for whichever major political party), this will give people confidence of a clear political direction for the State over the next four years,” he said.
“So this state election could be the last obstacle towards a noticeable recovery in the Western Australian property market.” 
Be that as it may, the property market is still struggling from the end of the mining boom. House prices in Perth fell 2.4 per cent in February to a median $500,000, while apartments are down 2.8 per cent to a median $400,000, according to CoreLogic data.
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Foreign property investors in WA could face new tax after Labor win

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Author Ross Guest - Professor of Economics and National Senior Teaching Fellow, Griffith University
Australia’s AAA credit rating was under pressure even before the election and is now looking decidedly shaky. Ratings agency Standard &amp; Poors has moved Australia’s rating outlook from “stable” to “negative”, due to debt and a poor chance of budget repair.
This follows warnings from the other major credit rating agencies – Moody’s and Fitch Ratings. The problem is budget repair will only become harder over the coming years, whatever the final numbers in the parliament.
On the parties' approach to budget repair, the Coalition and Labor are virtually indistinguishable as far as the credit agencies are concerned. The May budget projected a deficit (in underlying cash terms) of A$37 billion in 2016-17, gradually falling to $6 billion over the four-year forward estimates.
Labor’s plan is to reduce the deficit from $39 billion to $11 billion over that time. Both Coalition and Labor forecast a return to surplus over the subsequent years and indeed quite large surpluses ten years from now. Budget repair on this scale was utterly implausible before the election and is fiction now.
The government’s so-called “zombie” budget measures were baked into its projections over the forward estimate period. These were mainly the cuts to university funding, family payments and the Pharmaceutical Benefits Scheme. None of these had any prospect of being legislated with the past Senate, never mind with a larger, more powerful set of crossbench senators.
The Parliamentary Budget Office estimates these “zombie” measures to be worth $8 billion in total over the forward estimates. This accounts for roughly half of the difference between the total projected deficits of Coalition and Labor over the same period.
In short, there is little or no prospect of achieving the budget repair that is a pre-requisite for maintaining Australia’s AAA credit rating. Both sides of politics need to spell out to all Australians what this means. The effect of a credit downgrade is like an income cut to households, businesses and government.
It’s similar to the effect of a decline in the terms of trade (relative prices of our exports), and also similar to a loss of national productivity. All of these things effectively reduce our national disposable income. We become poorer as a nation.
Foreign lenders use Australia’s credit rating to set the interest rates that they charge Australian borrowers, mainly governments and businesses. A lower credit rating triggers a larger foreign risk premium in the interest rate that they charge borrowers.
This flows through to the general level of interest rates in the economy, so all firms and households with debts face higher borrowing costs. This can lead to less spending and hiring of workers by firms, and less disposable income for those households.
The major credit agencies are huge private organisations entrusted with capital of shareholders. They make calls about credit ratings not for political purposes but on the basis of what is in the best interests of investors.
The credit agencies are simply making rational assessments. The probability of Australia eventually defaulting on its debt is extremely low, but it is not zero and it is rising, which is important.
The slightly higher risk of default would result in a small downgrade from AAA, as occurred in the 1980s, by the major credit agencies. In turn this would imply higher interest rates, as it did back in the 1980s.
Higher interest rates are definitely bad news for those borrowing. It’s not necessarily good news for those saving either because rates on saving do not increase as much as rates on borrowing.
Also, when rates on overseas borrowing go up because of a larger foreign risk premium in our interest rates, the Australian dollar is likely to fall, as it did dramatically in the 1980s, from US 72 cents to 60 cents in the space of three months. When the Australian dollar falls for this reason our international purchasing power is reduced.
This is quite different to what happens when the Reserve Bank raises interest rates through its control over the official interest rate. In that case the Australian dollar is likely to rise, in the short term at least, which increases our international purchasing power – we can buy more from overseas with our income.
The parliament is like the Roman emperor Nero: “fiddling while Rome burns”, an apt analogy since Europe is where we are slowly headed economically and that won’t be pretty.
To read more from The Conversation <a href="https://theconversation.com/australia-could-be-about-to-lose-its-aaa-rating-and-heres-why-62039?utm_medium=email&amp;utm_campaign=Latest%20from%20The%20Conversation%20for%20July%208%202016%20-%205190&amp;utm_content=Latest%20from%20The%20Conversation%20for%20July%208%202016%20-%205190+CID_873f6ecd844c932714a88a74d5931324&amp;utm_source=campaign_monitor&amp;utm_term=Australia%20could%20be%20about%20to%20lose%20its%20AAA%20rating%20and%20heres%20why" target="_blank">click here.</a>
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