Leading Australian think tank the Grattan Institute has joined the fight against stamp duty on property transactions (see Renovating housing policy and Jessica Irvine’s article). Grattan notes (on p.32):
Stamp duty and pension asset tests create large disincentives to households moving. Australia imposes some of the highest transaction costs in the world on buyers and sellers of housing. As a result, home owners are less likely to move than renters. This has implications both for the matching of housing to needs and for the functioning of labour markets.
By placing a large additional cost on buying and selling a home, stamp duty distorts households’ choices. To avoid future stamp duty, first time buyers may buy a larger house than they need. Similarly, older households may avoid downsizing. Both lead to the over-production of large houses, taking up more land than is necessary, limiting space for housing in the inner and middle ring suburbs and pushing cities outward.
I’ve written before about the large inefficiency associated with stamp duty and the desirability of replacing it with expanded GST revenue:
GST changes should be considered as part of wide-ranging tax and expenditure review
Productivity Commission study will highlight stamp duty impact on labour market
Queensland Economy Watch 
I’d be interested in your thoughts on replacing stamp duty with a land tax.
Land tax is a great idea. In fact I think that’s what Grattan recommends replacing stamp duty with. Will have to discuss land tax more fully in a later post. Thanks for your comment.
Couldn’t agree more. Stamp duty is a very insidious tax on home owners and investors. The worst part of stamp duty ( approx $20,000 on a $60k ) home is that it is usually wrapped into the mortgage amount, so that it is paid off over 30 years. This results in $20k to the Qld Government, and another $20k paid to the bank in interest over the 30 years of the loan.
Very good point, Katrina. Thanks for the comment.