Previously confidential Treasury advice to the Turnbull government found Labor's negative gearing and capital gains tax policies would probably have a "small" impact on property prices.
The opposition has seized on the documents - released to ABC under freedom of information laws - to accuse the government of lying when it claimed Labor's proposals would put a "sledgehammer" through the housing market and bring the economy to a "shuddering halt".
"The ALP policies could introduce some downward pressure on property prices in the short term, particularly if the commencement of the policy coincides with a weaker housing market," the Treasury advice said.
"In the long term, increases in taxation on rental property could have a relatively modest downward impact on property prices."
Labor's policy package would see the negative gearing tax write-off restricted to new properties and reduce the CGT discount on investment property sales from 50 per cent to 25 per cent.
The opposition took the proposals, which grandfathered existing investments, to the 2016 election amid a fraught debate over house prices and how the federal government should intervene.
The Treasury advice said "returns for Australian resident investors will fall under the policy" but noted that owner-occupiers would be unaffected, which would be "likely to limit the extent to which there is an impact on prices".
Shadow treasurer Chris Bowen said the documents confirmed Labor's argument that its policies would put downward pressure on prices but not smash them.
"The Prime Minister and the Treasurer have some very serious explaining to do. For two years they have sat on this Treasury analysis, suppressed it, refused to release it. It contradicts everything they said," Mr Bowen told the ABC.
"They engaged in a scare campaign and a smear campaign against our policies which they knew - they had Treasury analysis - showing it was not true. [Treasurer] Scott Morrison today should be explaining himself."
Mr Bowen said the government knew its claims were "lies".
But acting Treasurer Kelly O'Dwyer said: "The documents released by Treasury confirm what we have been saying all along - Labor's policies would reduce house prices. Labor should come out and finally admit that their goal is to reduce the wealth of millions of Australians. After all, housing investment is around two-thirds of Australian households' net worth."
Ms O'Dwyer said the government's own housing affordability policies were responsible and "carefully calibrated".
