Speaker 1: I'm Daniel James and you're listening to seven AM. The
Speaker 1: Government says it wants to make it easier for Australians
Speaker 1: to buy a home. Its latest expansion of the five
Speaker 1: percent deposit scheme means almost anyone, regardless of income, can
Speaker 1: now buy a home with a fraction of the usual
Speaker 1: savings required for a deposit. It's the boldest version yet
Speaker 1: of a policy first introduced under the Morrison government. But
Speaker 1: behind the promise of affordability is a political calculation. There
Speaker 1: are far more votes to be won from rising house
Speaker 1: prices than from cheaper homes. Today, leading economists solely slake
Speaker 1: on Labour's home buying scheme while similar policies have failed
Speaker 1: in the past, and what it would really take to
Speaker 1: fix the housing crisis. It's Wednesday, October eighth.
Speaker 2: From today, more young Australians will be able to get
Speaker 2: the keys to their first home quicker, and instead of
Speaker 2: paying off someone else's mortgage, they'll be paying off a
Speaker 2: home of their own.
Speaker 1: Sol Labor's expanding Scott Morrison's five percent deposit scheme where
Speaker 1: the government backs you to buy a house with a
Speaker 1: smaller deposit than you would usually need. So how are
Speaker 1: they actually broadening who can get it. Well, what the
Speaker 1: government's proposing is that there be no income test.
Speaker 3: Second, that the price caps that set maximum values of
Speaker 3: homes that can be purchased using the scheme will be
Speaker 3: significantly increased to for example, one point five million in
Speaker 3: Sydney and one million in Brisbane down to say six
Speaker 3: hundred thousand dollars in Hobart. And thirdly, that there will
Speaker 3: be no cap on the number of people who can
Speaker 3: take up the scheme. So the government's intention is that
Speaker 3: a significantly larger proportion of first home buyers will be
Speaker 3: able to buy homes with deposits of as little as
Speaker 3: five percent months.
Speaker 2: Because we're absolutely determined to do everything we can to
Speaker 2: fast track home ownership, fast track improved number of rentals,
Speaker 2: fast track social ownership.
Speaker 1: And obviously this plan is all about getting more Australians
Speaker 1: into the housing market. Given you'll need less money to
Speaker 1: get in, it will make it easier. So if that's
Speaker 1: the goal, then will it be a success?
Speaker 3: Well, if it actually happens, then the answer would be yes.
Speaker 3: But while people will be able to access mortgage finance
Speaker 3: with smaller deposits than previously, the criteria that banks apply
Speaker 3: in determining to whom they lend and how much they
Speaker 3: are willing to lend still apply, and those rules are
Speaker 3: typically something like a maximum on the value of the
Speaker 3: loan as a multiple of the borrower's income, and secondly
Speaker 3: a ceiling on the proportion of the borrower's income that
Speaker 3: can be applied to debt service payments, that is, interest
Speaker 3: and repayments of principle, and the banks are also required
Speaker 3: by OPRA, the bank regulator, to stress test their customer's
Speaker 3: capacity to absorb an increase in interest rates of three
Speaker 3: percentage points. Now those will still apply. What their scheme
Speaker 3: will therefore do, I think is help those who arguably
Speaker 3: have the capacity to borrow anyway, to borrow more than
Speaker 3: they'd otherwise be able to, sooner than they might otherwise
Speaker 3: be able to, and thus get into home ownership quicker
Speaker 3: than they might otherwise have been able to do. That's
Speaker 3: why the government says that although on paper it might
Speaker 3: seem this is open to all commers, in practice the
Speaker 3: number of people who will be able to take it
Speaker 3: up is likely to be somewhere between about thirty and
Speaker 3: fifty thousand a year, so.
Speaker 1: It's basically fast tracking people that would eventually be in
Speaker 1: a position to buy house.
Speaker 3: That's my interpretation office, and what that means is that,
Speaker 3: like almost every other scheme that governments have come up
Speaker 3: with ostensibly to assist first home buyers get into the
Speaker 3: property market, it has as its core enabling people to
Speaker 3: spend more on housing. Whilst the supply of housing remains,
Speaker 3: as economists say, relatively inelastic, that is, underresponsive to changes
Speaker 3: in demand in the short term, then the inevitable result
Speaker 3: is going to be higher prices. Now, the government concedes
Speaker 3: that it will result in higher prices, but says, based
Speaker 3: on Treasury modeling, that the increase will be just zero
Speaker 3: point five percent over a five year period.
Speaker 2: But already one hundred and eighty five one thousand Australians
Speaker 2: have benefited from this scheme with minimal impact on prices.
Speaker 2: Treasury did modeling. They suggest a very small increase.
Speaker 1: Do you trust that number that that modeling the suggests
Speaker 1: it's one point five percent increase.
Speaker 3: That's a good question. It's important to note that Treasury's
Speaker 3: modeling is referring to the median priced house across Australia's
Speaker 3: capital cities, whereas, of course the typical first home buyer
Speaker 3: does not buy the medium price house, he or she
Speaker 3: They typically buy a property that is less than the
Speaker 3: median priced house because the median price includes the houses
Speaker 3: bought by people who are trading up and investors and
Speaker 3: so on. So other analysis, including work done by Nick
Speaker 3: Grohman and Gene Tunney for the Insurance Council of Australia,
Speaker 3: who obviously aren't particularly happy about this scheme because it
Speaker 3: in effect is pushing them out of what has been
Speaker 3: an important business for some of their members. They argue
Speaker 3: that this scheme will push up the price of houses
Speaker 3: or apartments that typical first home buyers buy by between
Speaker 3: three and a half and six and a half percent
Speaker 3: over a somewhat shorter period, and history would suggest, going
Speaker 3: back to the first first Homeowners Grant scheme introduced by
Speaker 3: the Menzies government in nineteen sixty four, that anything that
Speaker 3: allows Australians to spend more on housing than they'd be
Speaker 3: able to otherwise, as this scheme will enable some Australians
Speaker 3: to do, results in more expensive housing, and the result
Speaker 3: of more expensive housing is that fewer people can afford
Speaker 3: to own it.
Speaker 1: Coming up, why house prices will just keep rising? As
Speaker 1: you've alluded to. So there have been many schemes in
Speaker 1: the past to assist first home buiers. Can you walk
Speaker 1: me through what we've seen in the past and what
Speaker 1: impact have had on the housing market.
Speaker 3: Yeah, I mean, it's not a coincidence that Australia's home
Speaker 3: ownership rate peaked at the first census that of nineteen
Speaker 3: sixty six after the introduction of the First home Owners
Speaker 3: Grant Scheme or Home Savings Grant Scheme as it was
Speaker 3: called by the Menzies government in nineteen sixty four, and
Speaker 3: perhaps as an interesting footnote to history, Bob Menzies promised
Speaker 3: that scheme at the nineteen sixty three election at the
Speaker 3: urging of the New South Wales Young Liberals, who's president
Speaker 3: at the time as John Howard and of course later
Speaker 3: on as Prime Minister. John Howard insisted when the GST
Speaker 3: was introduced that state governments give first home owners grants
Speaker 3: of seven thousand dollars, initially including to purchases of established homes,
Speaker 3: even though established homes were subject to the GST. So
Speaker 3: John Howard threw out his career, was always a believer
Speaker 3: in schemes that have at their heart giving cash that
Speaker 3: would be first home buyers so that they can spend
Speaker 3: more buying the home that they're going to buy. And
Speaker 3: the result of all of this has been that the
Speaker 3: overall home ownership rate has declined by about six percent
Speaker 3: each points between the nine and sixty six census, when
Speaker 3: it peaked at seventy two percent and the twenty twenty
Speaker 3: one census, taken during the middle of COVID. That decline
Speaker 3: doesn't sound very much, but it concealed some enormous divergences
Speaker 3: in home ownership rates among age groups. And that's because
Speaker 3: the home ownership rate among people aged sixty five and
Speaker 3: over hasn't changed very much over the last fifty five years,
Speaker 3: but the proportion of the population who was sixty five
Speaker 3: and over has increased enormous. The home ownership rate among
Speaker 3: people aged under thirty has fallen to where it was
Speaker 3: in nineteen forty seven, the home ownership rate among people
Speaker 3: in their forties has fallen back to where it was
Speaker 3: at the census of nineteen fifty four, and the home
Speaker 3: ownership rate among people aged between forty five and fifty four,
Speaker 3: who were not exactly young by conventional standards, is back
Speaker 3: to where it was in the early nineteen sixties, and
Speaker 3: overwhelmingly the cause of this huge decline in home ownership
Speaker 3: rates among people under the age of say, fifty, is
Speaker 3: the result of a culmination of policies that all three
Speaker 3: levels of government have pursued over the last sixty years,
Speaker 3: which have had the effect of restraining growth in the
Speaker 3: supply of housing and inflating the price of housing.
Speaker 1: So why is that so? Why did politicians ultimately want
Speaker 1: house prices to keep rising.
Speaker 3: Politicians of all stripes know that in any given year,
Speaker 3: there's only about one hundred and ten thousand people who
Speaker 3: become first home buyers each year, and even if you
Speaker 3: assume that forever one who succeeds, there's five or six
Speaker 3: who'd like to but can't, that's still fewer than a
Speaker 3: million votes for policies that would restrain or halt escalating
Speaker 3: house prices. Whereas politicians also known that at any point
Speaker 3: in time, there are eleven million Australians who own their
Speaker 3: own home. There are more than two million who own
Speaker 3: at least one investment property, And even though those two
Speaker 3: groups overlap a fair bit, that means probably twelve million
Speaker 3: votes for policies that would keep house prices going up.
Speaker 3: Preferably at a faster rate than incomes or inflation, which
Speaker 3: is what's been happening over at least the last thirty years.
Speaker 3: So you know, on the one hand, fewer than in
Speaker 3: a million votes for policies that might actually stop house
Speaker 3: prices going up, as opposed to eleven or twelve million
Speaker 3: for policies that would keep house prices going up. Even
Speaker 3: the dumbest of our politicians can, as the Americans say,
Speaker 3: do that math, and they do at every election and
Speaker 3: between every election, which is why you see politicians keep
Speaker 3: coming up with schemes whose ultimate effect is to keep
Speaker 3: house prices going up. And I'll give both mister Albanezi
Speaker 3: and mister Dutton, the previous opposition lader, credit for being
Speaker 3: honest enough to admit that during the recent election campaign
Speaker 3: they both set in different ways that they want house
Speaker 3: prices to keep going up. Even though the election was
Speaker 3: ostensibly about the cost of living, and the biggest component
Speaker 3: of the cost of living is the cost of housing.
Speaker 3: They didn't actually want to solve the problem because they
Speaker 3: know that a very large majority of Australians don't want
Speaker 3: the problem to be solved.
Speaker 1: The government does say it's working on supply. They have
Speaker 1: a target of one point two million new homes by
Speaker 1: twenty twenty nine. So how far do you think that
Speaker 1: will go to addressing the supply side of the equation.
Speaker 3: Well, I certainly want to give the government credit for
Speaker 3: the attention it's paying to the importance of boosting supply,
Speaker 3: and they're certainly trying hard to meet the targets that
Speaker 3: they have set, including by giving the states more money
Speaker 3: for the construction of social and affordable housing. One of
Speaker 3: their election promises was to finance the construction of one
Speaker 3: hundred thousand new homes over I think it was five
Speaker 3: years for sale to first home buyers using, among other things,
Speaker 3: under or disutilized government land. And they're also offering the
Speaker 3: state's what are in effect bribes to encourage them to
Speaker 3: reform their zoning and planning laws with a view to
Speaker 3: speeding up the construction of housing. So that's all helpful
Speaker 3: to boosting the supply of housing. But it's difficult, and
Speaker 3: it would appear that the increase in housing supply is
Speaker 3: going to fall short of the government's targets. The Governor
Speaker 3: of the Reserve back made that ont specifically, so you know,
Speaker 3: as I say, I give the government credit for the
Speaker 3: efforts it's making to try and boost housing supply, but
Speaker 3: it is hard, and in the meantime, what they're doing
Speaker 3: is boosting the demand for housing. And the result of
Speaker 3: more expensive housing is that the people who already own
Speaker 3: it get richer, and the people who don't own it
Speaker 3: find it increasingly difficult to join that club.
Speaker 1: So you said, most people don't want to house prices
Speaker 1: to go down. So is it possible to solve the
Speaker 1: housing crisis without housing prizes being impacted in some way?
Speaker 3: Well, I don't think it is, and that's why ultimately
Speaker 3: I'm very pessimistic that the problem will ever be solved.
Speaker 3: You know, it's not going to be solved until one
Speaker 3: or more of three groups of people my age become
Speaker 3: a majority of voters. And that is first of all,
Speaker 3: people you know, baby boomers and the like, who are
Speaker 3: altruistically concerned at the diminishing chances of their own children
Speaker 3: or grandchildren becoming homeowners. Second again, people around my age
Speaker 3: and older who are annoyed at having to be the
Speaker 3: bank of mom and dad or to go garran tore
Speaker 3: on their children's or grandchildren's loans when they'd rather use
Speaker 3: the money they have to fund their own retirement. Or thirdly,
Speaker 3: again people my age who are seek and tired of
Speaker 3: their late twenty and thirty year old kids still living
Speaker 3: at home, expecting their laundry done, their meals cooked, and
Speaker 3: a blind eye turned to whoever they bring to the
Speaker 3: breakfast table of a morning. And all of those groups
Speaker 3: are increasing, and I think, to be fair the proportion
Speaker 3: of baby boomers who are genuinely concerned and is made
Speaker 3: at the difficulties their own children and their peers are
Speaker 3: facing becoming home otters. But nonetheless they're clearly a minority.
Speaker 3: So politicians keep saying that they want house prices to
Speaker 3: keep going up because they know that that's what a
Speaker 3: majority of voters want. And you don't get yourself altnan
Speaker 3: to government by telling a very large majority of voters
Speaker 3: that they can't have what they want.
Speaker 4: So it's like, thank you so much for your time.
Speaker 4: That's a pleasure.
Speaker 1: Also in the news, Australian politicians stopped in question time
Speaker 1: yesterday to mark the two year anniversary of the October
Speaker 1: seven attacks on Israel. Prime Minister Anthony Alberici said it
Speaker 1: was a day of pain and terror for Jewish people
Speaker 1: around the world. Adding that Australia has consistently been part
Speaker 1: of the international pressure for a ceasefire in Gaza, the
Speaker 1: return of hostages, and for aid to flow to Palestinians.
Speaker 1: And new details have emerged of allegations made by Australian
Speaker 1: activists detained by Israel after attempting to bridge its naval
Speaker 1: blockade of Gaza. Hundreds of activists, including seven Australians and
Speaker 1: Swedish climate campaign at Greteth Thumburg, were arrested and detained
Speaker 1: after they were intercepted by Israel's navy off the coast
Speaker 1: of Gaza late last week. Australian members of the Global
Speaker 1: Seward Flotilla have reportedly complained to diplomatic officials of serious
Speaker 1: mistreatment by Israeli authorities, including physical beatings in a quote
Speaker 1: dystopian prison environment. Thanks for listening to seven AM. We'll
Speaker 1: be back tomorrow.