The government was particularly furious about a claim by the Property Council that the levy was tantamount to a 38.8 per cent increase in stamp duty. That,the council said,would add $19,600 to the price of a new median house in metropolitan Melbourne.
For a state opposition struggling to be heard over the din created by the pandemic and federal politics,it presented a rare opportunity:it hit Labor at a crucial point in the political cycle over an issue with which many voters would identify.
Labor made a snap political judgment to cauterise the wound. Instead of fighting for its policy,it dumped the entire package of changes,ruling it out not only for this term of government but beyond.
As Treasurer Tim Pallas put it on Tuesday:“We’re not in the business of ensuring that the consumers of housing products are scared and frightened by a mischievous campaign aimed at creating fear around the cost of housing products.”
Although the decision to dump the tax package had more to do with neutralising a strategic advantage handed to the opposition,the government directed the blame squarely at the property lobby,which it accused of breaching a “grand compact” and running a campaign of misinformation by vastly overstating the impact of the tax.
According to Labor,the property sector welshed on a deal under which developers would get billions of dollars in benefits from a new streamlined planning approval process – but only if they agreed through the new tax to return a share of the “super profits” to pay for an extra 1700 social and affordable homes each year.
The reality is more nuanced. The Property Council was certainly consulted about the tax and it broadly accepted the idea that profits arising from the new planning regime would need to be partly returned to fund more social housing.