As part of its $14.6 billion tax package announced in August, the party says it would phase interest deductibility back in over two years if elected. When fully restored, interest deductibility would cost the government an additional $650 million a year, National estimated. However, since those public costings were calculated, mortgage rates have risen sharply in response to OCR hikes from the Reserve Bank. For National, this indicates restoring interest deductibility would cost a corresponding $110 million a year more. As you identify, multiple factors impact on the cost – particularly residential investment and interest rates.
