Federal Politics

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Malcolm Turnbull caves in after flirting with capital gains tax backflip

 Close, but no cigar. Unless you're a real estate agent that is. Or a landlord, or a property developer, in which case a whole box of cigars might be in order. Who knows, you might even get away with charging the purchase price against the unit's rental income?

It was nearly different.

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In the presumed security of razor gang deliberations, it seems, Malcolm Turnbull and his team went tantalisingly close to alchemising two metals rarely seen in Canberra these days: political courage, and policy heft.

The result would have brought the short term discomfort of a significant backdown, through cutting the 50 per cent capital gains tax concession, but also perhaps, kudos for arriving at a sensible policy change.

Reform that would improve the budget, reduce a market distorting subsidy that has helped over-heat residential property, and finally, make the entry price to house ownership a tiny bit more affordable.

But like so many before him, the first whiff of grapeshot, by way of a leak to The Australian Financial Review, and the blow-torch of Parliament, was enough to cause full retreat, proving that in the race between political capital and the public good, the former always starts ahead.


The public policy case for lowering the concession is strong. But the political cost was seen as too high - not only the embarrassment of a backdown, but the loss of market differentiation, a clear line of fire at the opposition.

Labor of course, favours curbs to negative gearing too - something Treasurer Scott Morrison once supported, acknowledging there are "excesses".

But these issue are now so mired in politics such that even touching the CGT concession remains a no-fly-zone for the Coalition.

Turnbull's awkwardness on Thursday was palpable. As Labor sought to skewer him on a looming policy backflip in the May budget, Turnbull writhed and wriggled, using words which suggested the government had no "plans" and no "intentions" to alter the concession.

Political watchers had already noticed Morrison's quietness - a weekly Sydney radio spot on Thursday had come and gone with no attempt to shut down the AFR's report.

Starkly absent from Turnbull's answers was the definitive statement ruling any change out completely. But then, several questions in, it finally came.

That was a relief for Finance Minister Mathias Cormann, who'd ruled out any CGT change in the morning. It was also another win for politics over policy.


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