In April last year a journalist asked the Prime Minister a plain question. Would he rule out any change to negative gearing and the capital gains discount if he were re-elected? Yes, he said. How hard is it. For the fiftieth time.

It was not a slip of the tongue. Labor had settled the matter in 2021, when the shadow cabinet resolved to leave both alone. He said it again in the campaign. He said it again in August, after the votes were counted, when he told a roundtable that the only tax policy he would implement was the one he had taken to the people.

On the twelfth of May the Treasurer stood up and changed both. Negative gearing is to be limited to new houses. The capital gains discount is to go. The measures passed the House in June.

An explanation was promised, and an explanation was given. The Treasurer said that a man who changes his mind owes the public his reasons. He then gave them. Young people cannot buy a house. The tax system is unfair between the generations. This is a budget that decides things.

All of that may be true. None of it is the question. He has explained why the policy is right. He has not explained why it was ruled out fifty times while his own Treasury was quietly working out how to do it. That work was commissioned before the last budget, which is to say before the election. Michelle Grattan, who is nobody’s polemicist, wrote that the more likely explanation is that Labor had wanted to do this all along.

Now think about who was standing underneath when the floor moved.

Last October the government widened its five-per-cent deposit scheme. It removed the income test. It removed the queue. It lifted the price limits. It put the Commonwealth behind part of the loan, so that a buyer with almost nothing could borrow almost everything without paying mortgage insurance. In the nine months that followed, more than fifty thousand young Australians took the offer.

They did not buy in a vacuum. They bought at prices that had been set in a market repeatedly assured, by the Prime Minister himself, that the tax rules holding those prices up would not be touched.

Then they were touched.

Strip out the two concessions altogether and the sums are brutal. For the investor to make what he made before, house prices would have to fall by something like two-fifths. Or rents would have to rise by about two-thirds. Those are not the numbers the government used. The government said prices would grow a little more slowly for a year or two, and that the typical rent would go up by less than two dollars a week.

Two dollars a week.

The market has already given its answer. The banks report that loan applications have fallen sharply since the budget. Investors have pulled back hardest, first home buyers not far behind. Prices are falling in Sydney and Melbourne. The Governor of the Reserve Bank has conceded that the market has softened faster than the Bank expected, and her chief economist has said plainly that the Bank will not be riding to the rescue.

Look at where the money has gone, because it tells you everything. Despite a slump, investors are still buying new houses, which keep the tax break. They have all but stopped buying established ones, which do not. That is not a market adjusting to a small change. That is a market walking away.

Of the two changes, it is the end of negative gearing that does the damage. Paul Keating tried the same thing once before. He restored it twenty-six months later.

Which brings us to the promise the whole scheme now rests upon.

We are asked to believe that new houses will keep negative gearing and the discount for good. This one carve-out, we are told, is permanent. Consider what it is. It is the last shelter left standing. It is therefore the obvious thing to knock down when the money runs short.

It is defended by a shrinking band of investors, since every grandfathered owner who sells takes his protection with him. And it is guaranteed by the same men who guaranteed the thing it replaced, in the same words, from the same seat in the same chamber. I would not buy a house on the strength of it. Judging by their behaviour, nor will anybody else.

There is a further unfairness, and it runs the opposite way to the rhetoric. A landlord who owns several properties can still set his losses against the rent from the others. He carries on much as before. A landlord who owns one has nothing to set them against. He must wait, perhaps for decades, until he sells. Large trusts and superannuation funds escape the changes entirely. A reform sold as levelling the ground for first home buyers has quietly levelled it inside the investor class as well, in favour of those who already have most.

And where prices are stopped from falling, the cost lands on tenants. Not two dollars a week.

Meanwhile, the fifty thousand keep paying. Interest rates have risen three times. Their arrears are running at nearly double the rate of other borrowers. In this country a mortgage follows you. A borrower who owes more than his house is worth cannot post the keys back to the bank and walk away. He goes on paying, year after year, for something worth less than he paid.

Behind him stands the taxpayer, who guaranteed the loan, on a market the Commonwealth then set out to bring down.

The bottom line is simple. The market has to clear. It can only do so through lower prices or higher rents, and probably through both. Which of the two does more of the work is a question about supply, and about politics. But it will be one or the other. The fifty thousand are exposed to the first. Every renter in the country is exposed to the second. There is no third way out.

They were told, fifty times, that there would be no need for one.