David Parker
Associate Finance Spokesperson

15 July 2011

Government scaremongering over rents

Claims by the Government that a capital gains tax will push rents up and tenants out are wrong, Labour’s Associate Finance spokesperson David Parker says.

“A capital gains tax is hugely important for New Zealand, as it shows another way for New Zealand to repay debt, give a tax cut for most New Zealanders and keep our assets.

“National is being irresponsible. First John Key said that CGT would be ‘a dagger through the heart of the economy’. Then Bill English admitted on radio that admitting that ‘theoretically the right thing to do would be to have a comprehensive capital gains tax.’

“We need sensible discussion about this. Landlords were saying the same thing last year, after the Government changed property tax rules in the 2010 Budget. It didn’t happen. Average rents across the country increased 1.3 per cent last year when inflation was over 4 per cent. Rents in Auckland rose more than the average,” David Parker said.

“Similar claims of disastrous consequences were made in Australia at the time the Government introduced a capital gains tax there. Those fears were unfounded as well. In fact, over time Australia’s experience has been that while rents have increased, they have increased only by the rate of inflation, in line with pre-CGT rental increases.

“The Savings Working Group, appointed by the National Government to look at medium-term savings strategies, has itself noted that 50 per cent of the housing price bubble New Zealand has experienced could have been avoided with a capital gains tax.

“Worse, recently the $200 billion rental property sector generated a net rental loss of $500 million and a $150 million tax loss,” David Parker said.

“It astounds me that we have New Zealand investors now saying they’re going to up sticks and invest across the Tasman. That country has had a CGT since 1985. Where’s the logic?

“Rent is about supply and demand. A capital gains tax will not cause a big hike in rents. What it will do is take the pressure off house prices, making it easier for people to buy homes. Instead of home ownership rates declining, over time they will increase. That’s a good thing, not a bad thing as the Government and some landlords would have us believe,” David Parker said.

ENDS

© Scoop Media