Housing focus for Anthony Albanese, but door open to tax changes and bigger reform

The early expansion of a scheme that means first home buyers can get into the property market with smaller deposits offers a “quick win” but is small beans in the face of the housing affordability crisis, economists say.

Prime Minister Anthony Albanese and Housing Minister Clare O’Neil announced on Monday the home guarantee scheme would now expand to all first home buyers from October — three months earlier than promised during the election.

“We said these changes would start on January 1 next year but we want to get on with it, which is why we’ve brought it forward,” Mr Albanese said.

“Together these changes wipe years off the time it takes to save for a loan.”

Under the scheme, buyers only need a five per cent deposit and the Government acts as guarantor, meaning the buyers don’t need to get lenders’ mortgage insurance.

Treasury modelling predicts average first home buyers will save between $151,400 and $852,000, depending on where they live, through not having to pay the insurance and getting out of the rental market years earlier than if they had to save up a 20 per cent deposit.

But it also indicates the policy will push up house prices by about 0.5 per cent over six years.

About 70,000 first-home buyers are expected to take advantage of the guarantee in the first year after the income caps are removed.

Last financial year, about 45,000 of the nation’s 116,280 first home buyers used the guarantee.

AMP deputy chief economist Diana Mousina said while the policy would give first-home buyers a leg up, it wouldn’t address overall housing affordability.

“There will be some lucky people that use it,” she said.

“Today’s policy change is a win for renters who are trying to get into the market.

“But I think the problem with it is, basically, that over the long term, it’s not a good policy to address affordability issues because it just increases the price of homes over the long term.

“It will eventually just be another affordability problem for Australians.”

She said a broader reality was that Australians needed to come to terms with the fact that “housing isn’t really going to be affordable anymore in Australia”.

The only fix was house prices dropping significantly – and that was unpalatable to those who already owned home or had mortgages.

Independent economist Saul Eslake said there was more than 60 years of evidence that showed unambiguously that “anything that allows Australians to spend more on housing than they’d be able to otherwise results primarily in more expensive housing and, as a result, in a smaller proportion of the population owning it”.

“While you can argue about the extent to which this scheme will push up prices, there’s no doubt that it will,” he said, adding that lower interest rates and ongoing higher levels of immigration were also having an impact.

The Property Council of Australia said the early expansion of the scheme needed to work with supply-side policies if the Government wanted to meet its ambitious target to build 1.2 million homes by mid-2029.

“The average age of first home buyers in our capital cities is approaching 40 and we must pull every available lever to help them into a home,” chief executive Mike Zorbas said.

He also wants to see the scheme design carefully reviewed on a regular basis starting from July 2026 “to ensure key housing markets do not overheat”.

Nationals leader David Littleproud accused the Government of “tinkering around the edges” on housing policy while shadow housing minister Andrew Bragg said more had to be done on the supply side.

“This is an uncapped scheme which is available to billionaires, or the children of billionaires, if they want to use a government program,” he said.

“I think it’s bizarre and ridiculous.”

While the expansion removes income caps on buyers, the price of houses they can purchase still remains capped at levels tied to average prices in their city or regional area.

At the weekend, Ms O’Neil announced a pause in changes to the National Construction Code — something that was raised at last week’s economic round table as a way to cut some of the red tape slowing down home building.

The Coalition took a policy to the election to freeze the code for a decade, a plan that was roundly denounced by Labor and many industry bodies.

Mr Albanese insisted on Monday morning that what the Government was doing was different.

“We’re pausing it for the rest of this decade. They had a plan that was for longer, but at the same time they were slashing support for housing,” he said.

Opposition Leader Sussan Ley seized on the changing stance during question time to crow about “Labor’s partial adoption of a Coalition policy” and point out it was the Morrison government that first set up the guarantee scheme.

“Prime Minister, why did it take a three-day talk fest for you to realise Coalition policies work and Labor policies fail?” she said.

The Government continues to be under pressure to do more to address housing affordability, including scrapping or limiting capital gains tax exemptions and negative gearing for investment properties.

Ms Mousina said larger policy reforms were needed to have any big impact on housing in Australia.

She listed negative gearing caps or tweaks, reining in capital gains tax concessions and scrapping stamp duty for a land tax as policy changes that would actually make a difference.

Treasurer Jim Chalmers has committed to pursuing tax reforms that tackle intergenerational equity, encourage business investment and simplify the system.

Mr Albanese, who previously said he’d prefer to take big tax changes to an election, pointed out Labor changed its position on the stage three tax cuts last year based on changed economic conditions.

“What we are focused on, in the immediate sense, is the reforms that we took to the election, that includes a tax cut for every taxpayer next year and the year after,” he said.

Asked whether economic conditions changed again, he’d be willing to make further tax changes without taking them to voters, he said if they went “towards making the tax system more efficient and fairer, of course”.

Aruna Sathanapally, the head of the Grattan Institute, told the round table last week that people’s expectations for government services would have to be cut if taxes weren’t raised, but Mr Albanese rejected this notion.

“Academics talk in academic world, what I do is live in the real world,” he said.

“And in the real world, my Government’s focused on delivering for people.”