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If, as an over-excited legacy media reported recently, former New Zealand PM Jacinda Ardern is seeking refuge in Australia, like an Antipodean Idi Amin hiding out in Saudi Arabia, it would be almost fitting. In the worst possible way. That’s because the Albanese government has a habit of copying failed ideas from across the ditch – almost as assiduously as they copy failed ideas from the 19th century, such as socialism.
KiwiBuild, for instance. With true socialist Pollyanna elan, Anthony Albanese government took an idea that had already conspicuously failed, and turned it up way past 11. Oh, 100,000 homes? Hah! AlboBuild will deliver over a million houses! Except that it won’t, of course. No more than KiwiBuild did. Albanese’s ‘e-Karen’ is just a warmed-up clone of Kate Hannah. And so it goes.
Never mind, there’s always plenty more bad ideas from New Zealand to copy, despite having already failed spectacularly there.
Take Jim Chalmers’ budget-night sermon on scrapping negative gearing for established properties. He assured us it was “worth breaking a promise for ‘right and justifiable reasons’”. Sound familiar? Grant Robertson, Ardern’s finance minister, said almost exactly the same thing in March 2021 when he broke his own promise not to extend the bright-line test on property. A New Zealand Herald columnist dryly noted that Robertson’s excuse – that his earlier commitment was “too definitive” – sounded a lot like “too honest”.
New Zealanders know how this story ends. And it’s not pretty.
The first thing Australians need to understand is that by the time New Zealand made its 2021 changes, it was no longer dealing with negative gearing in the Australian sense. In Australia, an investor who makes a loss on a rental property can deduct that loss against salary, dividends, or any other income. It is a broad and powerful concession that has shaped the investment behaviour of more than a million Australians for decades.
New Zealand’s system had already become narrower. By 2019, the Ardern government had formally ring-fenced residential rental losses, allowing them to be carried forward against future rental income but never offset against a wage earner’s pay packet. Cross-income offsets were already dead.
Then, in March 2021, the government went further. It removed interest deductibility altogether, even against the rental income it was incurred to earn. A landlord collecting $30,000 a year in rent and paying $25,000 in mortgage interest would be taxed as though that $25,000 cost did not exist.
On top of that, any gain on a residential investment property sold within 10 years was taxed at the seller’s full marginal rate, up to 39 cents in the dollar, with zero adjustment for inflation. A capital-gains tax in all but name and a brutally crude one at that.
In one sense, New Zealand’s reform was narrower than what Chalmers has just announced. Ardern’s government was not abolishing a generous cross-income tax break; that had already been done. But in tax principle, what it did was more radical. It denied a basic business deduction. And it still went wrong.
The timing made it worse. The Reserve Bank started hammering interest rates just seven months later. Landlords copped a triple whammy: skyrocketing mortgage costs, no deduction for those costs and a 10-year bright-line test that punished them for selling. The rational response? Get out.
Many did. Investor lending collapsed. Rental supply tightened at the exact moment a post-Covid migration boom was exploding demand. Rents shot up. Not every cent can be blamed on the tax changes alone, but the directional effect was bleeding obvious: make rental investment less attractive, reduce supply and watch tenants pay the price.
To damn them with faint praise, for once Luxon’s National Party actually did something about it.
The incoming government’s verdict was unambiguous. Christopher Luxon’s coalition took office in November 2023 and moved fast. Interest deductibility was restored in stages, 80 per cent from April 2024, the remainder from April 2025. The bright-line test was cut from 10 years back to two.
The entire Ardern-era housing tax package was put on a path to repeal within months. When a government reverses its predecessor’s signature reform that quickly, you are not watching a policy disagreement. You are watching a political system pass judgment.
At the heart of the Ardern ‘reforms’ was a single, revolting principle: taxing revenue, instead of income.
In what other line of business would a firm be taxed on revenue rather than profit? No government would dream of taxing a farmer on gross sales while ignoring the cost of feed, fertiliser and fuel. Yet that was precisely the logic applied to landlords.
Meanwhile, Auckland had upzoned three-quarters of its urban land in 2016 and a bipartisan deal in late 2021 extended medium-density housing rights nationwide. Consents hit 45-year highs. Rents started falling in real terms: not because landlords were taxed into oblivion but because more houses were actually built.
But that response comes with its own issue:
Housing affordability is a supply problem, and tax settings can shift who owns the houses but cannot conjure houses into existence.
Except that that’s only looking at the issue from the typical big business perspective of rusted-on mass immigration. Supply is only half of the affordability equation, as any economist should know. The other half is demand. You can slash prices by lowering demand, as well.
That demand, in both Australia and New Zealand, is almost entirely driven by mass immigration.
But no one in the chattering echo-chamber of the political-big business elite wants to talk about that.
