Housing tax reform shows how strongly tax settings shape behaviour. Australia should now shift more of the tax burden from work and employment towards consumption.

Australia is now seeing perhaps the starkest example in recent history of how tax changes affect human behaviour and the economy as a whole.

Since May’s budget announcement of changes to capital-gains tax and negative-gearing concessions, housing prices have fallen 5 per cent. Various industry predictions say they will fall up to 15 per cent.

It is a massive butterfly effect caused by tax changes which have not even come into effect yet.

Humans flock from higher-tax environments to lower-tax environments. It is just fear and greed.

We knew that the tax system was causing people to ‘invest’ vast amounts of money in housing, driving up prices and shutting young people out. And simple logic says that to make houses more ‘affordable’, the price of them had to come down.

At last, the government did the obvious after everything else and every other explanation for the housing crisis fell short. It was good policy even if the government did not sell it well.

But as I wrote at the time of the budget, “The political question is whether people buying are more appreciative than sellers are angry. My guess is yes because there is another element to the equation. Many people have expressed disquiet for a long time about the way many home-buyers have been shut out by investors subsidised by the taxpayer.

“These people........

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