The level of cooperation between state and federal governments has been unparalleled during this health crisis, not to mention the level of bipartisan support. As talk moves from the pandemic to economic recovery, the cooperation that has pushed us forward so far needs to continue.
The Australian Government stated that everything is on the table and that they are looking for ways to boost Australia’s economic growth in both the short- and long-term. Welfare and productivity boosting reforms that have long been advocated for, but are too politically difficult to accomplish (which includes stamp duty), have the potential to finally be undertaken.
Stamp duty is one of the most inefficient taxes in Australia. Modelling done by the Treasury found that it costs the economy about 70 cents for every $1 of revenue raised from stamp duty on property. GST on the other hand, costs the economy 18 cents because it is a more efficient tax and is harder to avoid.
Stamp duty distorts the market since it affects the decision-making process. It is a barrier for people entering the housing market and it discourages people from moving house. This can hurt the wellbeing of Australians as some homeowners may choose not to move to a new suburb or city for employment opportunities due to costs, and as a result may not earn as much as they could. On the other side of the equation, firms may not be able to hire the best staff for jobs which reduces productivity.
Another disadvantage is older households are discouraged from downsizing. This results in the inefficient use of Australia’s housing stock as older households are often in homes too big for their needs while younger families, who would normally purchase these dwellings, are forced to look elsewhere. Affordability constraints often force younger families to the outskirts of our major cities, further away from employment hubs. Inadvertently, this can also lead to increased traffic congestion and pollution.