Five years ago Treasurer Peter Costello told Australians: "Work for a living and we'll tax you at close to 50 cents in the dollar; speculate and we'll only take 25 cents.
"Not only that but, as a special deal - while stocks last - we'll pay half your speculating costs."
Naturally a million Australians have started speculating on real estate. When the money ran out they borrowed more, much more. Prices doubled, so did debt.
As Professor Cameron Rider of the Melbourne Law School put it to a recent Productivity Commission public hearing into the problem: "Everyone was exuberantly rational."
Macquarie Bank's Rory Robertson, however, describes the halving of the capital gains tax rate in 1999 as "the elephant in the living room".
To quote last week's report on first home buyers by the Productivity Commission: "Like many participants [in its inquiry], the commission has concluded that these general taxation arrangements [capital gains tax, negative gearing, capital works deductions and depreciation provisions] have lent impetus to the recent surge in investment in rental housing and consequent house price increases."
Even on its own terms, cutting capital gains tax by half in September 1999 was an egregious mistake.
How tax system egged on property speculation - Alan Kohler - www.smh.com.au