24
Feb
2016

government-priorities1

The property industry’s mining-tax-style negative gearing campaign is a test for democracy

by John Daley and Danielle Wood


Published by The Guardian, Wednesday 24 February

The property industry had plenty of media space to put its view on negative gearing in the past week. It had no shortage of sympathetic headlines, either, such as “Investors to lose under negative gearing plan” or “Bill Shorten would take an axe to housing investment”. And yet, it seems to be losing ground in the public debate, as opinion polls reflect. Why else would it be launching a month-long advertising campaign?

And this poses a serious test for Australian democracy. Does our system work in the public interest? Or is it ultimately hostage to vested interests adversely affected by any policy change?

Vested interests have three main levers to influence policy: advocacy for media coverage, access to decision makers, and paid advertising. When change really threatens they call on all three.

The property industry has been rewarded for its effort in media coverage. Reporting of Labor’s negative gearing policy has been almost wall-to-wall comment from property developers, real estate agents and mortgage brokers punctuated by the occasional cameo from a disgruntled negatively geared investor. One paper even featured a married couple, both nurses, with a $2m negatively geared property portfolio, although it glossed over their combined income of more than $200,000, which is hardly typical of “middle Australia”.

As we showed in our article for The Conversation, Three myths on negative gearing the housing industry wants you to believe, the industry has consistently misrepresented the statistics and arguments to support its dubious claims that negative gearing promotes housing supply, keeps rents low and primarily helps middle income earners. But many articles, particularly those in the property sections, repeated the property industry’s lines with very little in the way of reporting opposing views, let alone sceptical analysis of the claims being made.

The second prong of the campaign is largely invisible to the public, but is likely to be even more strenuous. It is a good bet that every minister or shadow minister in an economic portfolio has had a visit from the Property Council and the big developers over the past few weeks. In the last five years, the Property Council has donated $124,000 to the Coalition and $58,000 to Labor. Political donations might not guarantee access but they certainly help to open doors.

The campaign to influence backbenchers has been more overt. Two weeks ago a Property Council press release featured tables showing the number of investors that negatively gear in each marginal seat compared to the number of votes needed for the seat to change hands. This had nothing to do with the policy principles at stake. But MPs in marginal seats could not have missed the implied threat.

The third way to defend vested interest is through aggressive paid advertising. It is inherently more expensive. And therefore it’s a tool primarily for vested interests. Those who have something to lose inevitably have deeper pockets than the supporters of public advocacy campaigns.

Paid advertising campaigns funded by vested interest groups have become a feature of the political landscape in Australia and overseas. Ever since the Rudd/Gillard government capitulated on the resource super profit tax in the wake of a $22m mining advertising blitz, every vested interest group facing an adverse policy change has threatened a “mining-tax-style” campaign. But few have the budget or brazenness for a campaign of that scale.

Enter the Property Council, which represents Australia’s largest developers and property owners. It has the cash needed to run a high profile advertising campaign. It claims that its “house of cards” campaign shouldn’t be equated with that run by the mining industry because it is an attempt to “win the debate on the strength of our arguments”. But the fact-light advertising campaign is a naked attempt to buy victory when arguments have failed in genuine debate that has already received column-metres of coverage. And of course the advertisements studiously avoid mentioning one of the biggest impacts of negative gearing changes: they would reduce the value of the land banks held by property developers.

This raises broader questions about the weight of the well-resourced few relative to the public interest.

Policy changes have winners as well as losers. So far we’ve heard a lot less from the potential winners – the 90% of taxpayers who don’t negatively gear but pay more tax to support people who do, and the would-be home owners crowded out of the property market by investors. These people don’t get much face time with politicians and can’t afford advertising campaigns. In this, as in many other areas, the “public interest” has few powerful friends.

This is the essential concern. If the squeaky wheels become too influential, then policy making will no longer be about balancing competing considerations in the public interest but all about who can shout the loudest (read: pay the most). If the Property Council succeeds with a public advertising campaign, then other industries in the firing line, such as the superannuation industry, will be emboldened to follow suit.

There are few checks to the power of vested interests. Politicians can stare them down. Most politicians are in politics to make a difference. Occasionally they have the courage to do what is right, rather than expedient. Labor’s call on negative gearing is one example. Another is the stand against unnecessary public subsidies for pathology tests taken by the health minister, Sussan Ley.

But politicians are easily spooked by public advertising campaigns. The media can report the viewpoints of those who have something to lose with appropriate and overt scepticism. This can help voters to understand the issues. Voters can then remind their representatives about what’s in the interest of the quiet majority. Ultimately, if politicians advance policies to appease vested interests at the expense of ordinary Australians, the ballot box is the only way to get their undivided attention.