Sid Sidebottom (Braddon, Australian Labor Party) Share this | Hansard source

by leave—When I was speaking last time on the National Rental Affordability Scheme Bill 2008 and associated legislation, I was talking about the current rental market in Tasmania in relation to average income. I mentioned that the median weekly family income in Tasmania was $1,032, compared with $1,171 in Australia generally. Unfortunately, the figures are lower in my electorate of Braddon, where the socioeconomic status is lower than in any other major Tasmanian centre—for example, Launceston, in the north, and Hobart, in the south. The average rental price for a three-bedroom house on the north-west coast is $200 or above, which, given the figures that I have just cited and have cited previously, is about 50 per cent of an average individual’s weekly income for many people.

On the north-west coast of Tasmania there are currently 5,583 renting households. Of these, 2,035—that is 36.4 per cent—are currently experiencing rental stress, struggling to afford to pay their weekly rental costs. We know that the main factor currently driving up rental prices is a shortage of available properties, attested to by nearly every member who has spoken in this place on this important legislation. In fact, vacancy rates are at or below two per cent in all Australian capital cities. With this in mind, I am so excited about this new Rental Affordability Scheme. We need to build and make available more properties in order to make renting and indeed home purchasing more affordable again. I acknowledge that we are not going to solve the problem overnight, but we are definitely moving in the right direction, and in this I would like to congratulate the minister responsible for this legislation, the Minister for Housing, Tanya Plibersek.

This scheme alone will not fix housing affordability in Australia, but it is a component of the government’s $2.2 billion housing affordability package, which also includes our $512 million Housing Affordability Fund and the First Home Saver Account. The Housing Affordability Fund will help bring down the cost of newly built homes for many Australians, along with our recently announced increases in the home owner grant scheme, while our First Home Saver Accounts program will help young Australians in particular save for their first home.

I want to spend a bit of time talking about the first home saver accounts, because I believe they are a key in solving our country’s current housing and rental crisis by redirecting our current focus from short-term spending to medium- and long-term saving. The first home saver accounts will provide a simple, tax effective way for Australians to save for their first home to buy and then live in, through a combination of low taxes and government contributions. In the way the account is set up, the government will contribute 17 per cent on the first $5,000 that an individual contributes each year. So when we break that down in real terms, for the first $5,000 a person contributes to the account, the government will chip in $850. We recognise that $5,000 is quite an amount of money to have to save, but we are trying to encourage people to get serious about their savings if they want to own their own home and be part of what has been the traditional Aussie dream. Also, $5,000 is not the maximum contribution that can be made to an account each year. There is, in fact, no limit. For the record, account holders contribute from their after-tax salary and earnings and are then taxed at 15 per cent, which is equivalent to superannuation. All government contributions will be tax free. The accounts will be open for all those aged 18 to 65 and are capped at $75,000, which in turn is indexed. Young people, for example working part-time, are able to start off by putting as little as $20 a week away into their first home saver account—an amount that they may barely notice, at least for some. They can then increase these contributions when they gain full-time employment or start earning a bit more.

When we talk about first home saver accounts, it is clear that they are exactly that—aimed at saving for a first home. The accounts are locked-in for a minimum of four years, with a minimum $1,000 required to be contributed in each of these years in order to receive the full government incentive. So it is a savings plan for now and in the future, and it is taxed at a lower rate than would otherwise be for such income. This measure I believe is a very responsible policy by our government because we want to turn around the current trend of short-term spending and really get our next generation focused on long-term saving. And the bigger the deposit our kids can save, then the lower their mortgage repayments are going to be in the future.

The first home saver accounts are individual accounts, so cannot be shared. However, if two individuals in a relationship open individual accounts, they can then combine them once the time to purchase a home presents itself. Another advantage is that, if a couple were to spilt up, there is no issue in dividing up account funds. So this is meant to be an incentive, an encouragement, not a disincentive.

In the case where an account holder marries or moves in with their de facto, who already owns a house in which they live, the person is able to either contribute the funds from their account to this pre-existing mortgage or, alternatively, move the full amount of this account into their superannuation. I reiterate that alternatively they can move the full amount of their account into their superannuation. None of the government contributions or interest earned is lost if these account funds are moved to superannuation. This is really an inclusive incentive for people to save.

The account provisions are also aimed at purchasing a first home in which to live, so people who may previously have purchased an investment property are still eligible to open a first home saver account. However, penalties will apply if a person withdraws these funds and then does not use them to purchase a home. Again, this is a perfectly logical and responsible policy in my mind because these accounts are solely for the purpose of helping Australians to purchase their first home by encouraging medium- to long-term savings.

These accounts will also operate in addition to the first home owners grant. This grant has been in operation in Tasmania since 2000 and was a one-off grant of up to $7,000, depending on eligibility. That has now, again depending on eligibility, risen to $14,000. Having a first home saver account will not affect a person’s eligibility to receive the first home owners grant—again, another incentive.

The Treasury estimates that about $6.5 billion will be held in first home saver accounts after four years. Currently in Australia the purchase cost of the average home is 7.5 times a person’s average wage. This has risen from about four times the average wage a decade ago. Rising interest rates have also made repayments more expensive. In my electorate of Braddon, the average house price has risen from $50,000 to $80,000 a decade ago—that may not seem a lot—to more than $250,000 these days, which, compared to many other places in Australia, must seem like a dream, but everything is relative. This makes it very difficult for an average-income earner, say in their mid 20s, to pay rent and also to save for a deposit on their own home. Because of these current high rental costs and high mortgage costs, I think many young people in my electorate have fallen into the short- term spending mindset. They simple live week to week to get the bills paid, pay the rent and feed and clothe themselves and their children, if they have any, and very little is left over.

I believe this legislation and the first home saver account will turn this mindset around—or at least attempt to—because young people will be encouraged to start saving from when they turn 18. So when they first start their apprenticeship or in their first year out of uni, or even when they are just working casually or part-time, they can start putting just a small amount away each week which will then accrue interest and attract a government contribution each year. They cannot touch this money while they save, so the temptation to use it to buy that new car or take a holiday is eliminated. This is the short-term spending culture we want to change. There is nothing wrong with spending but you need to be able to afford what you spend your money on and hopefully there is an incentive to save into the future.

In addition to building up these deposits, the accounts will also encourage a habit of saving which hopefully will last a lifetime. So if they cannot touch it, then without really even thinking about it, once they are ready to make a deposit on their first home, say, eight or 10 years later—and I know that seems a long time when you are young and it is a long time to hold your breath—

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