Sussan Ley (Farrer, Liberal Party, Shadow Minister for Housing) Share this | Hansard source

I appreciate the opportunity to speak on the First Home Saver Accounts Bill 2008 and associated bills and, in doing so, to make some remarks on the very important subject of housing affordability. The opposition will be supporting these bills, while placing on record our view that they will not be as effective as the government anticipates. In response to the housing affordability crisis, the Prime Minister has proposed three measures: a Housing Affordability Fund, a National Rental Affordability Scheme and this one, the first home saver account.

Both the Productivity Commission and the Reserve Bank of Australia have recognised the difference between the demand and supply sides of the housing equation. The danger with demand side policies is that they are likely to be capitalised into higher house prices, giving people more money to spend in an already tight market. So if you act on the demand side, you need to act very vigorously in the environment we are in on the supply side. Regarding the supply side, the Reserve Bank of Australia said that efforts to improve housing affordability should be focused on policies regarding land use and improving efficiency in the supply of land and housing. The Treasurer’s response reminds me of a story. The story is told of a local police force that was chasing a criminal who had fled into a large, disused building. Their first thought was to surround the building, but they soon realised that it was too large, with too many windows and doors, and they did not have enough police to cover the exits. Instead, they surrounded the building next door, which was much smaller and had fewer exits. The government is not doing the main thing that it needs to do to address the problem with housing affordability in this country today; something that would address the supply shortage would be the most effective. Instead, this measure that Mr Swan has proposed will in all likelihood increase demand if it does what the government tells us it will. It will send more young people into the housing market to compete with everyone else for the already constrained stock of houses.

Just on that point, it is disingenuous of the Treasurer to say in his second reading speech that, for example, a couple—each earning average incomes, both putting aside 10 per cent of their income et cetera—would be able to save more than $88,000 after five years. That may well be true, but it is the government contributing in a small way to that, it is not a government creating that $88,000. The main thing that would create that saving is a change in mentality and a change in the culture of saving. Because we need a change in the culture of savings, we are supporting the bill. Any small measure that will encourage young people to save is to be supported.

We are underbuilding in Australia by 30,000 dwellings a year. The evidence is that the cost of land on the fringe of cities is much higher than it should be. The price to enter the property market has increased from roughly four times the average wage to seven times the average wage over the past decade. Thousands of young Australians are now denied the chance of ever owning their own home. Menzies said one of the best instincts within us is to build a home and bequeath it to our children, to have a little piece of ground into which we can retreat that we can call our own. In Australia our heritage is very much tied to the quarter-acre block and government policies that allowed a small population in a big country earning a modest wage to own their own affordable home. Make no mistake, government ministers, people from overseas laugh at us: ‘What? You’ve got a country this size, you’ve got 20 million people and you can’t find enough room to build an entry-level home for a first home buyer? What is wrong with you!’ Do we really believe that half a generation of Australians will never be happy to own their own home, as we in the baby boomer generation sit here with our high records of home ownership? We have a responsibility to fix this. People are used to listening to governments and oppositions talk about the problem. Sometimes I think we get too good at describing the problem, and I am sure that the Minister for Housing would describe it in similar terms.

I now move to the details of this bill. The explanatory memorandum says that it is:

… a simple, tax effective way for Australians to save for the purchase of their first home … through a combination of low taxes and Government contributions.

A government contribution is applied for up to $5,000 of personal contributions into an account in a financial year, 17 per cent for all individuals and a total cap on accounts of $75,000. I congratulate the government for listening to the opposition when we said that the government contribution should certainly not be twice as much for high-income earners as was in the original proposal. But I do note that we are already three months late with this, and I call on the Treasurer to guarantee that these accounts will be open on 1 October and to release modelling and research indicating how well they are being taken up.

As I said, we approve of the savings culture. Anything that encourages young people to save must be applauded. But in order for this measure to have its intended effect, it must be taken up by those it is aimed at—first home buyers. It must be offered by sufficient financial institutions so as to give consumers opportunity and choice. It must not distort the housing market—in other words, making houses more expensive than they otherwise would be without this measure and without sufficient additions to the supply of housing. And it must be cost-effective in its implementation and administration. We need to be careful that we do not create armies of people with clipboards and blow out our public service salaries.

But if we look at the proposal from the perspective of first home buyers, accounts belong to individuals and it is the individual’s home ownership status that matters, not that of their spouse. So if your spouse owns a home in his or her name and you have never owned a home in your name, you are entitled to open a first home saver account. You are entitled to withdraw the money after four years, during which you contribute a total of $70,750 and the government contributes $4,250. You then need to live in the house for six months within the first 12 months of purchase. You may not be the struggling first home buyer that this bill is trying to help, but you have accessed $4,250 of taxpayers’ money to help you on your way. I think we could have tightened up the eligibility criteria in that area.

I sound this note of caution, not because I believe that people on higher incomes should not have the opportunity to access this account but to remind the government of who they are trying to help and who may not need the assistance of fellow taxpayers quite so much. Remember: the first home saver account will be transformed into a product by our friends in the financial services industry. It will form part of a range of investment strategies. It will be incorporated into tax planning, retirement planning and the best way to manage your money—all good up to a point, but I remind the Treasurer that the more people who are not struggling first home buyers who are assisted by this measure or who use this measure for tax planning purposes, the worse the policy is. If it acts by putting further pressure on an already frighteningly low stock of housing supply, it is failing the Australians who need its help.

Back to the operative provisions of the bill: I must make a contribution of $1,000 in four financial years. The government will provide a contribution of 17 per cent of what I pay in, up to a maximum of $5,000, which equates to a maximum government contribution in any year of $850. So that is 17 per cent; $850 a year. It is not an automatic government contribution. For example, if you only saved $1,000—and for some young people, my gosh, that is difficult!—you would get $150 from the government. You must wait a minimum of four years before you can access your money for a deposit on a first home. In fact, it will be longer, because you have to wait till the end of the financial year in which you make your final contribution and you lodge your tax return for that year, before the commissioner processes your tax return and is given 60 days after receiving both the income tax return and the first home saver account contribution statement from the account provider. It is a long way in. What if your plans change? How easily can you access your money? Not very easily at all. In fact, I cannot withdraw the money even with a penalty. I think it was the consumer organisation Choice who recommended that you be able to take your money out if you wanted to. Yes, you could give up the tax advantage that you have had, but you should be able to take your money out. Well, you cannot. The only thing you can do is transfer your balance to superannuation and then rely on the early release provisions, and we all know how complex and inflexible they are.

Payments can only be made to purchase a first home if personal contributions of at least $1,000 have been made in respect of the first home saver account holder in each of at least four financial years. I refer again to page 19 of the explanatory memorandum. But what if I am in a position to contribute $10,000 one year and zero the next? Maybe my job is one of the 134,000 Mr Rudd says will be lost over the next 18 months. It appears that I then do not meet the criteria. Do I forfeit the right to the money I have deposited, so that it gets rolled into superannuation and I have to battle with the trustee to get it out or wait until I retire? Make no mistake; there is considerable inflexibility surrounding these accounts. It is an area that I have concerns with. Also, I have not seen enough in there to indicate what happens if joint account holders separate. What happens in the case of family breakdown? I think there might be some nasty tax twists if that does happen.

The level of financial literacy among young people is low. ABACUS, in its submission to Treasury, raised this concern. They said it would be unfortunate if the standing of the First Home Saver Account policy came to be tarnished by evidence that large numbers of young Australians had stumbled unwittingly into these products that had gone backwards in capital value terms, exacerbating for them the very disadvantage that the First Home Saver Account policy was designed to address. This might happen if deposits are made into these accounts which cannot be withdrawn and which have low earnings. Remember that the bank is setting the earnings rate on the accounts. Through no fault of the depositor, they cannot keep up with this requirement of $1,000 for four years. The depositor struggles, the account stalls and the holder is left much worse off than if they had just used an ordinary savings account or had scraped together the money for a home deposit on day one. If the first home saver account is offered by a registrable superannuation entity—for example, a life insurer or a friendly society—and the product is investment linked, it is not capital guaranteed. I say to the Treasurer: these should not be a vehicle for the first home saver account. An ordinary, plain, simple deposit account, capital guaranteed in a financial institution, would work in the sense that you want it to work, but I do not think that superannuation entities with investment linked funds should be offering these accounts. We all know that your superannuation can go backwards. It is a long-term investment and this is a short-term exercise.

As I said, you may well be better off saving for your deposit, making the deposit and not putting your money into the account. The Senate Select Committee on Housing Affordability has heard a great deal of evidence on this subject in the last few weeks, and the transcript makes very good reading. Organisations have expressed the view that the savings plan could be outstripped by price rises, so, by entering into a first home saver account, you are in fact worse off than if you had put the money up-front, because your house price would have increased by more than your earnings and the government co-contribution. In terms of those who would provide these accounts, I note that there has not been a stampede of financial institutions rushing forward and putting up their hands. I am sure there will be one or two by 1 October, three months after the due starting date, but there needs to be many providers in order to offer a robust product that competes well in the marketplace and gives the best value to consumers. On that subject, I will say that the portability between first home saver accounts needs to be sorted out, because, in line with the Treasurer’s statements about portability of your home mortgage account, this has not responded to consumer concerns. I make the point that, for any financial institution, there are quite a few hoops to jump through with this legislation. ADIs and life insurance companies must, of course, notify APRA before they offer first home saver accounts. They must obtain relevant licences and, in many cases, establish whole separate trusts. Financial institutions need to keep detailed records, because earnings are taxed to the account provider at 15 per cent, rather than to the individual account holder. This means more detailed reporting requirements, particularly to the Commissioner for Taxation, who administers the government co-contribution.

This leads me to the next point: to remind the House that this is a measure targeting the demand side of the housing equation. It does nothing for the supply side. What is the most popular consumer item for sale in Australia today? It is a plasma TV. In 2001, a plasma TV cost $16,000. By 2003, the cost of a plasma TV had gone down to between $12,000 and $14,000. Today, I ring up my local Harvey Norman and I can get the same plasma TV for $1,500. There is a very high demand for plasma TVs, but we have kept up with the supply and that has made the difference. It has not meant a tightening of demand whereby I cannot get my plasma TV. We also need to mention cost and compliance. The Commissioner of Taxation is required to undertake the compliance work. I think that might be considerable, given that you only need to live in the house for six months after its purchase or construction. I am not sure how that gets monitored and audited by the ATO, but we need to know what the cost will be to administer that part of the scheme.

I believe that serious concerns were raised during the public consultation process for the first home saver accounts and that these have not been addressed. If young people ignore this product, there is no harm done, but, as I said, if they are trapped into putting what little money they have into an account that does not help them save for their first home then this will be a tangible example of this government failing to make the tough decisions that would ease the mortgage pain for families. There will be no opposition to this bill for opposition’s sake, but I remind Mr Rudd that everything we do in connection with his announcements about reducing petrol, mortgage and grocery costs and easing the squeeze on the family budget will be aimed at one thing: to hold him to account for the false dawn he has promised Australian families. We do not want to give up on the great Australian dream of owning your own home, and we have a responsibility to future generations of Australians not to give up on that dream for them.

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