A week ago, it was a “not terribly clever” question. Now, it’s the only question.

Negative gearing and capital gains tax rules have sat in Labor’s bottom drawer since the party’s bruising 2019 election defeat. In the five years since, that drawer has been cautiously looked at from time to time, but never prised open.

Careful language has regularly been deployed to shut down speculation. That included the Prime Minister dismissing questions from the ABC’s Patricia Karvelas last week as “not terribly clever”.

But the bottom drawer was never nailed shut.

In the lead-up to the last election, Labor vowed to keep both the Coalition’s Stage 3 tax cuts and “maintain the existing regimes for negative gearing and capital gains tax”. It was, to be sure, an election promise. But it wasn’t exactly a “dead, buried and cremated” commitment for all time.

It took nearly two years for an about-face on Stage 3. Rejigging the tax cuts to put more money in the pockets of more people proved popular. This inevitably kicked off speculation negative gearing would be next. Albanese again played it down.

Now, with Labor’s primary vote slipping in the polls and some of the party’s elder statesmen chipping the Albanese government for being “mired in mediocrity”, the bottom drawer is ajar.

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Treasury looking at ways to ‘scale back negative gearing’

As the Nine newspapers first reported yesterday, Treasury has “started work on options to scale back negative gearing and capital gains tax concessions, preparing the ground for a bold new housing policy that could define the federal election”.

The official line is there’s nothing to see here.

“That’s what Treasury do,” said the Prime Minister, suggesting this is all very routine.

He denied asking Treasury to undertake this work but was less certain as to whether Treasurer Jim Chalmers did. “I don’t know, I’m not the Treasurer. He’s on his way to China as we speak,” Albanese told ABC Radio Sydney.

The Treasurer, for his part, appeared slightly frustrated at the distraction from yesterday’s improved monthly inflation figures. Before boarding his flight to China, he talked up what were the best inflation figures since the election and played a dead bat on negative gearing. “Treasury looks at all kinds of policy options all the time,” he said.

This may be true, but until Labor clears up whether it will or won’t take negative gearing and capital gains tax reforms to the election, the questions will continue.

The kite, as they say, is now flying. The pundits, pollsters and backbench politicians are busily discussing where this might land.

What might any policy look like? Would it limit the number of properties that could be negatively geared? Would existing investors be “grandfathered”? Will changes apply to property and shares? How will this impact housing affordability? What will this mean in different seats?

One thing we can be sure of is the government won’t want to do anything that damages housing supply. Labor keeps saying its “highest priority” is boosting supply.

Any change, therefore, would need clear Treasury advice showing supply won’t be damaged.

And Treasury’s numbers will only be one factor. Ultimately this decision will come down to a political judgement on the electoral risks and rewards.

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Labor would be ‘nuts’ to take on negative gearing: Coalition MP

The immediate political reaction has so far carried all the nuance one might expect.

The Greens, emboldened, claimed vindication. “Greens pressure works,” declared housing spokesman Max Chandler-Mather, who has long called for negative gearing reform and now has every incentive to keep pushing.

The Coalition called any change to existing rules “Labor’s housing tax”, flagging the campaign slogan to come. Even if Labor were to only target wealthy investors with multiple properties, the opposition will warn ordinary mum and dad investors, planning for their retirement, are next.

“Whatever they do, we’ll run a scare campaign saying they’re after you next,” says one Coalition MP, who reckons Labor would be “f****g nuts” to go down this path again.

Within Labor, views are mixed.

Some still nurse the bruises of 2019 and are wary of another Coalition assault over negative gearing. They want to keep the focus on fighting for existing policies.

Others are itching to show more boldness on housing. Something that will make voters pay attention and shift the trajectory they’re on. They argue the 2019 defeat had more to do with other issues and support for action on negative gearing has only grown as the housing crisis has worsened.

“It’s really tough and housing is not affordable,” says Labor MP Josh Burns, who’s trying to fend off the Greens in the inner-Melbourne seat of Macnamara. “We will always look for ways to make it easier and better and I’m open to solutions if it helps my community.”

“I want my government to consider any changes necessary to make our community a better community,” says Labor MP Sam Rae, who told ABC radio negative gearing was an “important conversation” already underway in the community.

It’s the same sort of backbench front-running that came before the Stage 3 tax changes.

Labor was happy with its efforts last week to push back at against the Greens over housing. It believes voters are increasingly frustrated at the minor party’s hardline refusal to cooperate on policies like the “Help to Buy” scheme.

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Indeed, Redbridge polling shows while the Greens have gained ground since the election amongst Gen Z voters with its demands for rent caps and negative gearing reform, the party is losing support amongst older Millennials.

“The latter group is numerically larger in key seats,” Redbridge director Kos Samaras says. The results of the recent NSW local government elections back this up. The Greens lifted their vote in the outer suburbs, presumably amongst younger voters, but not so well in parts of the state where they typically contest federal seats.”

Labor, however, must fend off both the Greens and the Coalition if it wants to hold onto a majority. Whatever it takes to the election on housing will need broad appeal.

It’s now awaiting Treasury’s advice and until it lands on a definitive position, those “not terribly clever” questions will only multiply.

David Speers is national political lead and host of Insiders, which airs on ABC TV at 9am on Sunday or on iview.