Treasury privately warned Australian Treasurer Jim Chalmers that the government's changes to negative gearing and capital gains tax would push up rents and lower house prices, according to a Cabinet document obtained under freedom of information laws. The warning came ahead of the May budget, in which Labor scrapped negative gearing for new builds and altered the capital gains tax discount from 50 per cent to a flat 30 per cent rate indexed to inflation, prompting fresh criticism from the Opposition that the government has worsened Australia's housing crisis.

Treasury estimated the reforms would push rents up by about 0.25 per cent shortly after implementation and modestly reduce housing supply, though it said this could be offset by other supply-boosting measures and stressed the effects would unfold gradually over roughly a decade. It acknowledged "significant uncertainty" in its modelling. Since the budget, Cotality data shows capital city dwelling values have fallen 3.83 per cent over 90 days, with Sydney down 4.72 per cent, while national advertised rents rose 3.1 per cent to a record $670 a week. Opposition spokesman Andrew Bragg cited falling first-home buyer loan applications, down as much as 15 per cent, while Housing Minister Clare O'Neil defended the Treasury figures, noting the price fall was small compared with a 400 per cent rise since 2001.