Statesmen turns negative into positives

Do you know what we call negative gearing?

A socially acceptable way of saying “I’m losing money”.

Case in point: I got an email this week from a bloke asking me for advice.

He had what I call “property fever”, a strange affliction that comes from attending too many auctions, property seminars, or both.

He’d gone in full pelt: buying two investment properties, both negatively geared (in other words, he was able to write off his investment losses against his income).

The problem for this poor chap was that he had lots of losses but not a lot of income.

He was so negatively geared that he was positively screwed.

And that’s the problem with this policy: it encourages punters (aided and abetted by an industry of property spruikers, real estate agents and debt floggers) to buy money-draining, over-inflated property and lose money — while copping a high-five from the taxpayer.

Worse, young families can’t compete because these investors can afford to pay more for a property (the Australian taxpayer is effectively subsidising them).

Over the years, I’ve spoken to parliamentarians from both sides of the political divide, and they all agree, albeit privately, that negative gearing is a rort that distorts the property market and prevents young families from breaking into the property market.

However, they won’t do anything about it.

That’s because politicians from both sides suffer from a different kind of fever to my negatively  geared  friend.

Theirs is called “I want two flags on the bonnet of my chauffeured Holden Statesman” fever, and it’s so virulent that it takes over the rational policy-making part of their brains.

In short, the lesson here is simple: don’t get in between a statesman and a Statesman.

Scott Pape’s finance columns appear in the business section of the Herald Sun on Saturday and Sunday


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