Malcolm Turnbull has ruled out negative gearing changes in May budget

Photo: Stefan Postles/ Getty.

Australian prime minister Malcolm Turnbull has taken negative changes off the table for the May budget.

The announcement was made at a doorstop in Sydney this morning by Turnbull and treasurer Scott Morrison who noted that the federal government “had the common sense to leave the system as it is”.

They criticised Labor’s “reckless change, reckless housing tax” that would lead to homes being devalued and less investment.

“Labor’s housing tax plan will deliver a reckless trifecta of lower home values, higher rents and less investment,” said Turnbull. “The key to improving housing affordability is more houses, more dwellings.”

“Labor is taking a sledgehammer to the ambitions of mums and dads who want to invest — whether it’s established houses and apartments, commercial property, shares in listed companies, or shares in their own business,” he said.

The announcement confirms comments made earlier this morning by government minister Michaelia Cash.

“We have made a determination that based on where the housing market in Australia is at the moment, and it is unfortunately looking at prices dropping, we will be making no changes to negative gearing,” Cash told Sky News.

“We are going to back the Australian people every step of the way and not impose a tax.”

Shadow treasurer Chris Bowen said that the Turnbull government was determined to run “a great big scare campaign” noting that “the level of first home buyers is at its lowest, the number of investors buying is at its highest”.

Earlier this year, opposition leader Bill Shorten proposed to limit negative gearing to new housing from July 1 2017 and to reduce the capital gains tax discount from 50% to 25%.

The aim he said, was to save the federal budget $32.1 billion and to help working and middle-class Australians who had previously been priced out of the housing market.

The budget will be held on May 3.