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Negative Gearing and the NSW Labor Woes

Friday, 9 June, 2006

The virtues of negative gearing a rental property as an investment for the future must be a highlight of dinner table talk in Perth at the moment. Australian Bureau of Statistics figures out today show a continuing rapid growth in commercial lending to individuals for property purchases.

In Brisbane presumably the discussions are not quite as animated as out west. Lending in Queensland has continued at the same level for some months.

But in Sydney there must be people who cannot afford the dinner parties. In NSW commercial lending to individuals for property is on the slide.

These ABS figures on Commercial Financial Commitments for Purchase of Dwellings for rent/resale (by Individuals) are just another example of the "two Australias" I have written about many times recently.

For politicians state and federal, this phenomenon presents some peculiar challenges.

For Morris Iemma and his Government they create a climate where people are becoming grumpy because NSW is not sharing in the continuing growth that federal politicians keep talking about. Many people are seeing their wealth decline because of the fall in property prices and will be looking for the opportunity to punish a politician.

Prime Minister John Howard and his Treasurer Peter Costello know that their time in the rack of NSW public opinion will come if the same conditions persist after the state election. And for them there is always the fear that continuing boom times in the West and in Queensland will result in further interest rates rises which will again hurt the people of Sydney and its surrounds.