Finance Minister Mathias Cormann has ruled out any changes to negative gearing or stamp duty arguing they would only result in a tougher private rental market.
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Treasurer Joe Hockey last week attracted criticism for suggesting all people needed was a good job that paid well to break into Sydney's competitive housing market.
Senator Cormann said he sympathised with first home buyers but that the way to ease the property market was to look at incentives to increase housing supply.
"We fully understand the difficulty of first home buyers," Senator Cormann told Sky News on Sunday morning.
He rejected the suggestion people should downgrade their expectations of what they could afford for their first home saying "we don't think there's anything wrong with aspiration".
Labor has begun to look at the issue of housing affordability including the issues of capital gains tax and negative gearing.
However, Senator Cormann warned any changes to negative gearing could result in a tougher rental market.
"The Hawke government tried to make changes in this space and very quickly had to reverse that position because of the effect it had on rental prices," Senator Cormann said.
"Working with the states on initiatives to increase supply, that will help make access to housing more affordable."
But the former head of the Commonwealth Bank and the head of the Financial System Inquiry, David Murray, said both issues needed to be considered.
"You have to look at them all," Mr Murray told Sky News.
Housing affordability burst back onto the political agenda earlier this month after the head of the Treasury, John Fraser, warned of a housing bubble in Sydney and some suburbs of Melbourne.
The issue dominated question time before Parliament rose for a week-long break when Treasurer Joe Hockey poured fuel on the fire by suggesting people could break into the Sydney property market if they had a good job paying good money.
Labor will seek to capitalise on the Treasurer's comments when Parliament returns on Monday for its final two weeks before rising for the winter break.
Article first published SMH
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