London: Treasurer Scott Morrison has rejected calls made by his own colleagues to consider curbing negative gearing, saying London's high property prices in the UK - which does not allow the tax concession - shows it is not contributing to Australia's housing affordability crisis.
And the Treasurer doubled down in the face of a fresh attack from Labor saying without negative gearing Australia's property market would "crash".
Fresh research from Demographia says Australia is a global leader in housing unaffordability with Sydney named the world's second most expensive city in which to buy a property.
The findings spurred a fresh debate over negative gearing which Labor wants curbed for existing properties, claiming that the practice protects existing, wealthy investors at the expense of those trying to buy their first home.
Two Liberal backbenchers, Andrew Hastie and Sydney MP John Alexander, have called for the government to reconsider its opposition to winding back negative gearing.
Labor's treasury spokesman Chris Bowen said the MPs had joined the "growing chorus" of those "knowing that negative gearing needs to be reined in."
"Now the Treasurer is in London studying housing affordability," Mr Bowen told reporters in Sydney.
"What he needs to do is study what they did, rein in their property tax concessions. Australia has the most generous tax concessions for property investment in the world," he said.
Treasurer Scott Morrison. Photo: Latika BourkeÂ
But speaking at a breakfast gathering of Australian business leaders in Marylebone, the Treasurer defended the government's position and said the UK showed why negative gearing was not a factor in property prices.
"Well in this economy, for 100 years there's hasn't been negative gearing...in Australia we have it and guess what we've got the same housing affordability problems and so the answer is about supply. It's just straight up old economics," the Treasurer said.
Asked why his own colleagues did not appear convinced about the government's policies, the Treasurer said he would be talking them when he returned home.
"For one hundred years there's hasn't been negative gearing...in Australia we have it and guess what we've got the same housing affordability problems and so the answer is about supply. It's just straight up old economics."
Treasurer Scott Morrison
"I'm confident in the arguments we are making...and we will have further discussions with them as we build up to the budget this year...and we'll be taking our colleagues along with us."
"What Labor has done on negative gearing has become very jingoistic when it comes to housing affordability policy," he said.
He said Labor's policy was a "blunt" macro-response which would just affect the price of housing in Sydney and Melbourne but also in cities like Hobart which is not experiencing a pricing bubble.
Treasurer Scott Morrison addresses a gathering of Australian business leaders at the Hyatt Regency London. Photo: Latika Bourke
Mr Morrison has spent the week in London, in part examining Britain's housing policies. He is expected to lay out a housing strategy in the May budget aimed at increasing affordable housing in Australia.
He has released a discussion paper about how to introduce social impact bonds into Australia, a system where private investment funds social services and infrastructure traditionally provided by the government through the taxpayer-funded welfare budget.Â
The UK has an established social bond sector but the idea has only been piloted at a minor scale in Australia.
British NGO Social Finance says it has raised £100 million (AU$166) in private investment for various social impact programs since 2007. Social Bonds have since been adopted in Europe and in the United States.
In 2013 NSW signed Australia's first Social Benefit Bond for a program to help children placed in care return to their families.
Mr Morrison, who more recently served as Social Services Minister, wants to open up a social bonds market in Australia as it shift some of the burden of paying for welfare services from the taxpayer and onto the private sector.