Labor’s housing agenda is likely to turn to new measures to turn around years of poor housing supply, which the government’s top economic adviser says could bring house price growth in line with wages.
On Friday, Prime Minister Anthony Albanese was probed about his overhaul of negative gearing and the CGT discount, justifying his decision to break promises by the need to “deliver real change for the better” and to guard against “grievance-based politics”.
The prime minister, who has been censured by the teals, the Coalition and the Greens for seeking to hold just two days of hearings into the generational reforms, said limiting negative gearing to new houses was “what drives supply”.
But Treasury secretary Jenny Wilkinson last week said the housing policies were more focused on giving first home buyers a better chance against investors rather than building more dwellings.
Against this backdrop, Productivity Commission chair, Danielle Wood, was tasked last week with leading a probe into building more homes. She said boosting supply would have a much bigger effect on prices than the tax changes.
The government is well behind on its target of building 1.2 million homes by mid-2029.
It has allowed just two weeks for groups to submit to Wood’s review. Wood will deliver Treasurer Jim Chalmers and Housing Minister Clare O’Neil recommendations early next year, displaying urgency as Labor identifies home-ownership as a social and political imperative.
This week, Labor ministers were asked whether it would be good for the economy or social welfare if house prices came down. Prices are already falling in Melbourne and Sydney due to interest rate rises and potentially the early effect of the tax changes on buyer sentiment.
Wood said in an interview with this masthead: “If we’re worried about affordability, which I think we should be, then yes, we want to see that growth rate come down to be something more in line with inflation or wages.
“The best you can hope for, through reasonable increases in supply over time, is moderating the growth rate. I think you would have to have pretty extraordinary supply outcomes over an extended period to see prices fall.”
After decades in which home values outstripped wages, Wood said productivity was likely to have suffered as people invested in housing over assets that created jobs and growth.
The commission’s review, Wood said, was about “planning controls, density limits, floor space ratios, car parking requirements, anything that goes to what you can build and the approvals processes”.
Planning laws are the domain of state governments, yet Labor has announced several different funds, including a $2 billion local infrastructure fund, to encourage states to do more.
“Putting a pot of money on the table is always pretty helpful,” she said, though she said taxes such as the land tax and stamp duty were not in the scope of her inquiry.
“[The federal government] could go through national competition policy using a mechanism they already have, which is about rewarding the states for regulatory reform.”
On the broader debate on whether Labor’s CGT changes would stymie investment in high-growth businesses, Wood said there was a fair question about the extent to which the CGT discount supported innovation.
She said Chalmers’ budget included a suite of important measures that gave businesses better cash flow as they were building up. These policies were critical to incentivising business creation, she said.
Albanese and Chalmers have been at the centre of a political firestorm since the budget. Polling has shown that the budget has been poorly rated by all groups of voters. It is opposed by all top business groups, as well as key independent MPs, such as Allegra Spender, who said they wanted tax reform but worry that Labor’s package was flawed.
At an economic summit hosted by Sky News on Friday, Albanese was confronted with difficult questions on why he walked back his election pledge not to touch property tax concessions.
“I reckon I could dig up 50 editorials over my time as prime minister and leader of the Labor Party that call for tax reform,” he said. “We’ve made a difficult decision.
“If people think the economy isn’t working for them and they’re working their guts out and they’re not getting opportunity … they will turn to more simplistic grievance-based politics.
“That is the context in which my government is saying: ‘No, no. We’re going to deliver real change for the better’. ”
The prime minister said if he capped the number of homes that could be negatively geared rather than abolishing the practice and grandfathering it, then poeple could “stack up” their losses.
“If they had 10 properties, stack up their debt onto the highest one, improve their deductions, and that would distort the market,” he said.
The housing sector, while still opposed to Labor’s proposals, is pressing the Senate to make changes.
The Housing Industry Association wants the upper house to broaden the definition of “new housing”, which under the government’s legislation can still be negatively geared by investors.
The association wants new housing to include knock-down rebuilds, granny flats and “major” renovations that bring a home up to modern building codes.
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Paul Sakkal is Chief Political Correspondent. He previously covered Victorian politics and won a Walkley award and the 2025 Press Gallery Journalist of the Year. Contact him securely on Signal @paulsakkal.14.Connect via X or email.
Shane Wright is a senior economics correspondent for The Sydney Morning Herald and The Age.Connect via X or email.
Nick Newling is a federal politics reporter for The Sydney Morning Herald and The Age.Connect via X or email.