Scott Morrison just made a huge blunder by attacking Labor based on an irrelevant research report

Photo: Stefan Postles/ Getty.

The government’s assault on Labor’s negative gearing tax has suffered an embarrassing setback with the authors of a damning report saying it was written late last year and had nothing to do with Labor’s policy released just a month ago.

Just hours after Treasurer Scott Morrison used the findings to slam Labor’s policy for driving up rents and dragging the economy backwards, BIS Shrapnel associate director Kim Hawtrey made an urgent clarification.

“The assumptions were set several months ago, and the analysis done late last year, well before Labor announced its policy. Therefore the assumptions do not align with Labor’s policy,” he told The Australian Financial Review.

“The report makes no recommendations and does not purport to be an assessment of any particular policy.”

Dr Hawtrey also told ABC Radio: “´╗┐Well the report was written over the last few months before Labor released its policy and it wasn’t directed at any particular policy at all and in fact we’ve made no recommendations, our job was simply to chase the effects on the economy by crunching the numbers and looking at what might happen if you did this kind of change.”

He was not at liberty to say who commissioned the report “but I can say that it’s not a political organisation or anyone affiliated with a political organisation, it’s simply a private client.”

On Thursday morning, Mr Morrison seized on the report to claim Labor’s policy to restrict negative gearing to new homes only after July 1, 2017 would increase rents by an average of 10 per cent, or $2,600 a year, depress new home construction by 4 per cent and shrink gross domestic product by $19 billion a year.

BIS Shrapnel claims the plans will also lead to 175,000 fewer jobs over 10 years, shrink government tax revenues by $1.65 billion a year and put 70,000 households into rental stress.

A government spokesman said using the report was still legitimate because it was a broad representation of what would happen if negative gearing was restricted to new homes only.

Labor leader Bill Shorten called the report a joke.

“The report was done and researched before Labor released its policies. The report doesn’t model Labor’s policies, it models a set of fantasy assumptions,” he said.

Shadow Treasurer Chris Bowen said it was “riddled with errors”.

“I was surprised it was predicting a locust plague based on our policy this document from BIS Shrapnel is riddled with errors…We’ve found multiple errors with the document,” Mr Bowen said.

Mr Bowen said the government was sending mixed messages on whether negative gearing had excesses.

“The Treasurer has said that he thought there were excesses and now it appears he’s going to do absolutely nothing about it because he’s been overruled,” he said.

Independent think tank, The Grattan Institute, said the BIS report was “manifestly ridiculous”. Chief executive John Daley said the report and its underlying assumptions “did not pass the giggle test” and were “manifestly ridiculous”.

After the Financial Review reported on Thursday the government had dumped plans to tinker with negative gearing, Mr Morrison did nothing to suggest otherwise.

“We’ve looked at some options but you’re right to say the dangers of making changes in this area are very real,” he said.

“I’ve always been a strong advocate for those engaged in negative gearing…as I said yesterday and as Peter Costello said last night it’s a general taxation principal.”

The Property Council of Australia said the issue highlighted the need for actual modelling of Labor’s policy.

“While the BIS Shrapnel findings are consistent with the concerns we have raised about changes to negative gearing, we want to see the Opposition’s and Treasury’s economic modelling so that we can have a fact based debate,” said chief executive Ken Morrison.

This story first appeared in The Australian Financial Review. Read it here or follow the Financial Review on Facebook.

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