The fight over Labor's property tax changes moved onto new ground on Tuesday. As the Reserve Bank prepared to lift rates for the fifth time this year, the opposition blamed the Capital Gains Tax and negative gearing overhaul for collapsing confidence, while the Treasurer stood by Treasury's house price assumptions. With values falling and the changes not starting until July 2027, the argument is now about cause and effect.

Two readings of the same slump

Liberal Senator Andrew Bragg said on Tuesday morning that the CGT and negative gearing changes had "destroyed" confidence in the housing market.

"No one has won from these taxes," he said.

The opposition's argument is that the changes, announced in the May budget, have pushed investors out of the market and dragged prices down well before the rules take effect.

Shadow Treasurer Tim Wilson took a broader line, blaming government spending for persistent inflation. He said a Coalition government would cut public service jobs where "bureaucracy exists and it's not serving a purpose".

On the other side, Treasurer Jim Chalmers defended the assumptions Treasury used when it costed the package.

He said those assumptions cover "the next couple of years, not the last couple of months".

The point of that distinction is that Treasury's forecasts are meant to capture the medium-term path of prices, not month-to-month movements. Critics say the recent falls are too large to dismiss as short-term noise.

Chalmers also said a rate rise "will make things much harder", and that the full effect of earlier rises "hasn't been felt yet".

Prime Minister Anthony Albanese described interest rates as a "blunt instrument". He also pushed back on the spending critique, saying: "My government has made savings in every single economic statement."

The exchanges came as the Expenditure Review Committee, the government's budget cabinet, met on Monday and again on Tuesday ahead of the December update. Chalmers did not say what savings it would contain, saying only: "We know that there is more work to do to make the budget as tight as it can be."

What the price data shows

Cotality figures show home values fell 1.2 per cent in October and are now 6.7 per cent below their March peak. That equates to about $63,400 off the median dwelling value.

Commonwealth Bank now expects national dwelling prices to fall about 14 per cent from peak to trough. In September, CBA had forecast a 9 per cent fall.

The RBA's own statement on Tuesday said "housing prices have fallen significantly and the Unemployment rate has risen". It also flagged "uncertainties about the extent and economic effects of the downturn in the housing market".

The Central Bank did not attribute the downturn to the tax changes. Its statement pointed to Inflation that "remains elevated" and is "broadly based", and it lifted the cash rate from 4.60 to 4.85 per cent on a six to three vote.

Notably, the RBA statement did not mention fiscal policy, despite the political fight over whether government spending is fuelling inflation.

What the law actually changes

The changes at the centre of the row are already law. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received assent on 26 June 2026.

From 1 July 2027, the 50 per cent CGT discount is replaced by cost-base indexation and a 30 per cent minimum tax for gains accruing from that date.

Negative gearing is limited to new builds for properties bought after 7:30pm AEST on 12 May 2026, from 1 July 2027. Properties held before that cut-off are grandfathered.

The law passed the Senate in June with Greens support.

Follow-up measures, including the definition of a "new residential dwelling", are in the Tax Reform No. 3 Bill, which passed the House on 29 October and is now before a Senate committee.

Hypothetical example: what a 14% fall would mean

Hypothetical example: consider a property worth $900,000 at the March peak.

The 6.7 per cent national fall recorded so far would take it to $839,700, a drop of $60,300.

If CBA's forecast 14 per cent peak-to-trough fall played out in full, the same property would be worth $774,000, a total drop of $126,000. That would mean a further $65,700 still to come from today's level.

Those figures use national averages. Individual properties and cities will vary, and CBA's forecast is a projection that could change again.

For an investor, the tax consequence of a fall depends on whether and when they sell. A loss on sale can generally only be offset against capital gains, not wages. Owner-occupiers selling their main residence generally get no tax effect at all.

The political stakes

The property tax changes are emerging as an election issue. One Nation pledged in October to restore the 50 per cent CGT discount and negative gearing capped at two properties.

A commercial survey published on 30 October found 66 per cent of 1,018 respondents would vote for a party promising to unwind the changes. It is not a conventional opinion poll. Support was 68 per cent among Gen Z, Millennials and Baby Boomers and 63 per cent among Gen X, according to the survey, suggesting the issue is not confined to older property owners.

For the government, the risk is that falling prices and rising rates become linked in voters' minds to the tax package, whatever the economic evidence on cause.

What to watch

  • 5–6 November: Senate Economics Legislation Committee hearings on the Tax Reform No. 3 Bill, with a report due 13 November.
  • 25 November: The next monthly CPI figures. September's annual rate was 4.3 per cent.
  • December: The mid-year budget update, which may include revised Treasury assumptions on housing.
  • 1 July 2027: The CGT and negative gearing changes start.

Whether Treasury's assumptions hold will be tested in the December update, when Chalmers has to publish updated forecasts against a weaker market.