Mark Dreyfus (Isaacs, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak in favour of the First Home Saver Accounts (Further Provisions) Amendment Bill 2008. This is a bill which, among other changes, amends the First Home Saver Accounts Act by, first, establishing a scheme for dealing with unclaimed money; secondly, making amendments to secrecy and information sharing between the Australian Taxation Office, the Australian Prudential Regulatory Authority and the Australian Securities and Investments Commission; and, thirdly, dealing comprehensively with family law situations. These amendments further implement the government’s election commitment to introduce first home saver accounts. This commitment is an innovative response to the housing affordability crisis which is besetting our country. It was a crisis which the previous government was unable or unwilling to respond to. It can be recognised that the solution provided by the First Home Saver Accounts legislation is not a complete solution. There is no single solution to the housing affordability crisis, but as part of a larger package of measures that are being undertaken by the Rudd government this measure will help reduce the impact of the housing affordability crisis on working families.

Under the First Home Saver Accounts Act, eligible individuals will be able to establish accounts to assist them in saving a deposit. These accounts will be similar to superannuation accounts in their treatment under the taxation system. Individuals will be able to contribute a maximum of $50,000 overall and up to $10,000 each year, of which up to $5,000 may be made from pretax income each year. A government contribution of 17 per cent for all individuals on the first $5,000 of personal contributions will also be paid. Government contributions and withdrawals are not taxed, and earnings in the accounts are to be taxed at 15 per cent, like superannuation. Under the scheme, savings will have to be left in a home saver account for a minimum of four years.

We have had some rather startling contributions to the debate on this legislation made by those opposite. Among them were some absurd criticisms from a number of speakers of the requirement that savings be left in home saver accounts for a minimum of four years, apparently on the basis—and this shows the perspective of wealth—that people would want to save more quickly for their deposit. It is really typical of the out-of-touch party that the opposition still is that it has missed the point entirely about the assistance that this scheme is intended to provide for people who are attempting to save a deposit. The scheme will help those who would not otherwise be able to save a deposit in four years. Those opposite should come and talk to the young people in my electorate, for whom saving for a deposit in 10 years, let alone in four years, seems at present almost impossible. The assistance that is going to be provided by this First Home Saver Accounts scheme will be welcome. There are thousands of working families out there who are unable to save a sufficient amount over any period of time, and it is precisely the special taxation treatment that is given to these accounts which is going to be of assistance.

The amendments before the House that are contained in this bill deal with four specific areas—secrecy and exchange of information collected under the scheme, the money in unclaimed first home saver accounts, taxation reporting requirements and family law amendments. As I have indicated, this initiative is part of a package of measures worth $2.2 billion that the Rudd government is undertaking to tackle the very real difficulties that the housing affordability crisis has caused for Australian families. These measures deal with issues on both the demand side and the supply side of the housing market. In particular—and a number of other speakers on this bill have mentioned this fund—the Housing Affordability Fund is a $512 million initiative that will target the planning and infrastructure costs that are incurred when building new housing developments. Thousands of new homebuyers will benefit from this fund through the targeting of holding costs brought about because of delays due to the planning process.

The government has also established the National Rental Affordability Scheme, the purpose of which is to increase the availability of affordable rental dwellings. It is envisaged that up to an additional 50,000 dwellings will be available by 2012 and a further 50,000 will be available in the period after 2012. In return for an annual $6,000 Commonwealth tax incentive to investors and $2,000 per year direct or in-kind support from state governments, these properties will be rented at rates 20 per cent below market rates. These measures, taken as a whole, will help to alleviate the very real housing affordability crisis in this country. This government is determined to bring the crisis under control. The fact that the crisis was exacerbated by the inaction of the previous government makes the actions of the Rudd government all the more important.

We have seen the former Treasurer out there this week hawking his book, despite events overtaking him somewhat. Interestingly, the former Treasurer writes about the ‘areas in which the coalition could have done better’ and he lists those as being Indigenous disadvantage, the republic and One Nation. Of course it is the case that on each of these issues the coalition failed the nation, but it was their failure as economic stewards that will leave the deeper scars on Australia. The member for Higgins, the former Treasurer, claimed that he created an age of prosperity in Australia. You cannot claim to have created an age of prosperity when the housing affordability crisis means that thousands of young families on a good income cannot afford to purchase a home. If you did nothing to fix that you cannot claim to have created an age of prosperity. You cannot claim to have created an age of prosperity when working people feel more insecure in their employment, when they have fewer rights. You cannot make that claim if you took away their rights. You cannot claim to have created an age of prosperity when you have spent half a decade pump priming the economy with reckless spending at the peak of the economic cycle; you cannot make that claim if you were responsible for that type of spending. And you cannot claim to have created an age of prosperity when you failed to invest in infrastructure, when you cut investment in education and skills, when you allowed a relative decline in Australia’s productivity and trade performance.

In July last year, the former Treasurer, on Sky News, flat out denied the existence of a housing affordability crisis. That was completely contrary to the experience of thousands of families in my electorate of Isaacs who were renting or purchasing their home—people who live in the new development areas of my electorate such as Carrum Downs, Skye, Keysborough or in other areas where new homes and new developments are being built, where many thousands of families want to get into those homes.

The former Treasurer has claimed in his book that the coalition were defeated because they ‘failed to renew’. He further claimed: ‘We mismanaged generational change. We did not arrange the leadership transition.’ The former Treasurer, the member for Higgins, has still failed to understand why the former government lost the last election. It was not because the former Treasurer failed to become leader; it was because those opposite lost touch. They are still demonstrating how much they have lost touch, with the contributions that those opposite have made to the debate on this legislation. The position that those opposite have taken on the First Home Saver Accounts bill is really typical of their behaviour for so much of this year and demonstrates that they simply have not learnt from their defeat at the election last year.

Although we have seen from those opposite a pretended support for this bill or, at least, a claimed support for this bill, opposition speakers, one after another, have stood up in this chamber and whinged either about the lack of action on the part of the federal government—a federal government for which they were responsible until November last year—or about the imagined shortcomings of state Labor governments. And we heard more of that today from the member for Fadden and yesterday from the member for Farrer, who went on and on about limited land supply—which of course is a matter on which the opposition attribute fault to the state governments—as if that were indeed the cause of the housing affordability crisis in this country.

What the opposition could have mentioned, but failed to mention, is the halving of the capital gains tax rate—something that the former Treasurer, the member for Higgins, was directly responsible for. That had a far more direct effect on the price of housing in this country than the imagined limits on land supply of which we have heard opposition members complaining. It is a regression to what we heard so much of from the former government during their time in office. When they could think of nothing else to say they would complain about state Labor governments. It became almost a substitute for policy. Instead of actually coming up with ideas that might grapple with the problems that were besetting this country, we had the attempt to blame state Labor governments over and over again. We have had a return to that theme in the contributions made to the debate on this bill in the chamber. This time what is picked out as a matter for blaming state Labor governments is the imagined limits on land supply, as though that were the only matter that had to be attended to in dealing with the housing affordability crisis. This is from a group of people who were members of a government which did so little to deal with the economic conditions and, in particular, the housing affordability problem that the Rudd Labor government is now dealing with.

The rank hypocrisy of those opposite is astounding. In her speech on this legislation, the shadow minister for housing, the member for Farrer, quoted approvingly the call of the Housing Industry Association for ‘a united focus and interest by all governments’. We agree that a united focus and interest by all governments is what is called for in order to grapple with the housing affordability crisis. You would think that the shadow minister for housing, the member for Farrer, would no doubt be pleased that Labor now has an outstanding Minister for Housing who is focused and is interested in this issue. I would be curious to know how the member for Farrer thought that the previous government was able to focus on the housing affordability crisis, given that it did not have a housing minister for the entire period that it was in power. Do those opposite feel no sense of shame about their wasted years in government? Don’t they feel some embarrassment for the way in which they let down Australia’s working families not just on this housing affordability issue but also on so many other issues?

The actions of the Rudd government stand in sharp contrast to the failure of the previous government. We understand why housing affordability is so important to working families. I understand it, because people in my electorate constantly tell me about it, and I am proud to be part of a government which is getting on with the job of acting on the problems faced by people in my electorate. This government is serious about housing. We have demonstrated this through the appointment of the first housing minister in 11 years. This bill, by further implementing Labor’s commitment to introduce first home saver accounts, is a further demonstration of the seriousness of this government. We believe that the struggle that working families face because of the housing affordability crisis can made easier by government taking the crisis seriously and taking action. I commend the bill to the House.

Greg Combet (Charlton, Australian Labor Party, Parliamentary Secretary for Defence Procurement) Share this | Link to this | Hansard source

I am delighted to speak on the First Home Saver Accounts (Further Provisions) Amendment Bill 2008. It represents the final parts of the First Home Saver Accounts scheme, already passed in the House in June 2008. The amendments represent the delivery of another election commitment by the government. The bill includes various provisions to make the First Home Saver Accounts scheme operational. These provisions include a system for dealing with unclaimed moneys; amendments to secrecy and information-sharing provisions between the ATO, APRA and ASIC; and also a mechanism for dealing comprehensively with family law situations. The system for dealing with unclaimed moneys will be similar to that which operates more broadly in relation to non-superannuation investments. That is, moneys in first home saver accounts that have been inactive for seven years and where the provider has been unable to contact the account holder will be paid to the Commonwealth. Individuals who are later identified as the account holder will of course be able to make a claim for that money. It is a system with which I am certainly personally familiar, having been a superannuation trustee for quite some time prior to being elected to parliament, and it is one that can work quite efficiently.

Amendments are also being made to ensure that the secrecy provisions enable agencies to access the information they require while at the same time protecting privacy. The bill will also allow relevant information sharing between the Commonwealth and the states and territories, and importantly will allow individuals to access information about their partner’s first home saver account without the need to formally commence legal proceedings. The provisions will ensure that payments under a family law obligation—for, example, payments to an account holder’s spouse—receive the same treatment as they would if they were paid to the account holder. The legislation also introduces a framework for imposing a levy on first home providers to provide funding for the Australian Prudential Regulation Authority to carry out its supervision of financial institutions that will offer these accounts. That is an important measure to ensure prudential regulation relevant to the first home saver accounts. In summary, these changes provide for the implementation of first home saver accounts and will help Australia confront the housing affordability challenge. That is an area, as I am sure people are aware, which is in desperate need of national leadership—something that has been lacking over the past decade in particular.

When you consider some of the trends in housing affordability over the last decade, that point is underlined in a most stark way. We have had declining rates of home ownership, with fewer first home buyers over the last decade. We have had declining availability of rental properties, especially affordable rental properties. For example, the vacancy rate for rental properties in my region—in western Newcastle and the western area of Lake Macquarie—remains well under two per cent. The third trend that we have seen over the last decade in particular is the declining availability of social housing, and the fourth trend that has been evident is the declining availability of affordable housing more generally. This point has been made a number of times but it is worth reiterating. The last government’s commitment to addressing these trends was so insufficient that there was not even a minister for housing dedicated to addressing this problem for so many Australians.

According to official statistics it has never been harder for first home buyers to purchase a first home in Australia. To buy an average priced home you now need a six-figure salary to service the loan. In 1996 the average house cost was about four times the annual wage, and today it is no less than 7½ times the annual wage. A typical first home buyer now spends a third of their income on mortgage repayments. This compares to a figure in 1996 of less than $2 of every $10 earned. The proportion of homes being bought by first home owners has declined from 21.8 per cent in June 1996 to 17.1 per cent today. I mentioned rental vacancy rates in my region a moment ago. More generally, rental vacancy rates in all capital cities are below two per cent, with some cities now under one per cent—little wonder it is extremely difficult for people to find rental accommodation.

The National Centre for Social and Economic Modelling recently undertook new research for the government, which found that 1.1 million low- and moderate-income families are in housing stress. These families, who are in the bottom 40 per cent of all earners in Australia, are spending more than 30 per cent of their limited disposable incomes on housing costs. Last year there were 220,000 more families in this boat than there were in 2004—an increase of a quarter in just three years. You can see from these figures just how pressing the housing affordability problem really is.

Families with children have been hit particularly hard, along with the young singles who are entering the housing market for the first time. The number of older households in housing stress is also on the rise, with the number of families headed by a person aged over 70 having doubled since 2004. In recent weeks I held a forum on housing affordability in my electorate of Charlton, which over 100 people attended. It was also attended by the Minister for Housing, for which I am grateful. In people’s stories the practical, real-life effect of these trends was extremely evident.

Housing has always been a key economic factor in our society, and affordable housing is one of the most important drivers of labour mobility. It helps to determine whether people are prepared to move to take up job opportunities in areas where there are labour shortages. On homeownership in particular, there are intergenerational problems associated with declining affordability and the effect of more limited homeownership. Owning a home is an important source of economic security for working families, and most particularly for older Australians as they reach retirement age. In our community nationally, the single most important way of accumulating wealth and saving for retirement has always been to purchase a home.

We have traditionally been a country with high rates of homeownership, but the numbers are falling at the same time as the rate of homeownership in other countries is increasing. That means social inequality must be widening. When you take the experience around our society over many generations, the capacity of people to save has obviously been diminished by these trends. In fact, 69 per cent of Australians own or are buying their own home, but this is now well below the rate in the United Kingdom and, interestingly, Ireland, where the economy has been booming for some years and where 77 per cent of people are homeowners. That is a great achievement in the Irish economy.

All of these trends are why the government is taking action and why the first home saver accounts are so important. They are only a part of the picture in trying to address housing affordability but they are nonetheless an important element of it. One of the biggest barriers to becoming a first home owner is saving a decent deposit. Increasingly, first home buyers are shut out of the housing market because of their incapacity to save that deposit. To try to reverse these trends, the government has committed $1.2 billion to establish first home saver accounts. These new accounts will be up and running in the second half of this year.

On the issue of saving a deposit, traditionally the position was that mortgage-lending financial institutions required first home buyers—and, more generally, others looking for a mortgage to buy a home—to save at least 10 per cent of the house price as a deposit. However, confronted with the trend of people having difficulty in saving a deposit, and in a desire to keep mortgage lending going at reasonable levels, just about all financial institutions relaxed that requirement. Of course in recent years a number of home lenders relaxed it to the extent that virtually no deposit was required at all. So it is my belief that the new first home saver accounts are extremely important in this context and in the prudential lending context as well.

The accounts represent the biggest reform in our savings culture since the last Labor government introduced compulsory superannuation. The accounts will provide a simple, tax-effective way for Australians to save a meaningful deposit for the purchase of their first home. Since the announcement of these new accounts, the government has increased the benefits to low-income earners to try to give greater impetus to the success of this program. We have extended the scheme to provide assistance to low-income earners through the provision of a minimum 17 per cent government contribution on after-tax contributions of up to $5,000 each year. This means that a couple earning average incomes and putting aside 10 per cent of their total income for their first home could be able to save a deposit of $80,000, depending upon the returns. This is $12,600 more than if the couple had used an ordinary deposit account. That is a significant advantage for people looking to save to purchase their first home.

Given the other initiatives that Labor is implementing in a wider government approach to policymaking, the first home saver accounts, as I indicated before, should not be seen in isolation. They are part of a much broader approach to housing policy, in particular trying to address the problem of housing affordability. The government has already announced the establishment of the National Housing Supply Council to assess current and future demand for housing across Australia. Another significant initiative is the Housing Affordability Fund, in which the government will invest $512 million to lower the cost of building new homes by working with all levels of government, particularly local government, to reform infrastructure and planning requirements.

For people who still cannot afford to buy a home or who are not perhaps at that stage of their life, there is also the National Rental Affordability Scheme. I think it is fair to say this is an ambitious scheme and an important initiative. It aims to create a new asset class for institutional investors in affordable residential housing. Taking my past experience, I was a director of Members Equity Bank, which is a significant mortgage lender, and I was also a trustee of a $30 billion superannuation fund, AustralianSuper. In my trustee role of the fund and in my directorship of the bank with others as potential investors in housing, we were always looking for ways to make the numbers work to create a better investment environment for institutions to invest in affordable rental housing. The NRAS is an important initiative that I think will help make the investment calculus work much better for institutional investors—and we have seen that in the early response to the scheme. The scheme will provide an annual incentive to institutional investors to build new homes and rent them to low- and moderate-income earners at 20 per cent below market rates. The Australian government will provide institutional investors with an annual $6,000 refundable tax credit for new buildings. State and territory governments have agreed to contribute at least $2,000 per annum in cash or in kind to match the Commonwealth’s contribution. I think it is fair to say that this initiative was unimaginable under the previous government. They did not have the ideas and did not seem to have any impetus for addressing housing affordability at all. I remember a number of comments by the then Prime Minister and the then Treasurer in which they essentially washed their hands of this problem. Also, their government was more intent on blaming the states for the problem than really working with them.

I have been pleased by the news that in recent times no fewer than 244 applications for this scheme have been lodged, proposing nearly 13,000 new dwellings in the first year of the scheme. The government plans to approve 3,500 new dwellings initially, followed by 7,500 next year and 25,000 in the following two years. In other words the scheme is so popular that in the first year of operation it will be oversubscribed by a factor of almost four. So you can see that this new initiative is affecting the investment calculus for institutional investors and will add to the supply of affordable rental housing. It is in this context that the first home saver accounts should be viewed as part of a wider package of measures to increase housing affordability. They are part of the government’s attempt to make up for more than a decade of neglect by the Howard government, in which housing affordability simply worsened for many Australian people. Housing became far more difficult and the capacity to become a homeowner was of course put out of the reach of many people. Homeownership rates declined, especially those of first home buyers. The Howard government was so relaxed about these trends that there was not a single significant initiative to address the problem. That is the legacy that the Rudd Labor government inherited when it won government in November last year—a legacy that hurt hundreds of thousands of Australians. That is why this bill is so important. I am very pleased to be able to support it in the House.

Jill Hall (Shortland, Australian Labor Party) Share this | Link to this | Hansard source

It gives me great pleasure to speak on the First Home Saver Accounts (Further Provisions) Amendment Bill 2008, and its related bill. One of the most pressing issues in Australia today is housing affordability and the ability of Australians to find suitable accommodation in which to live. There has been a chronic shortage of rental properties. Even in the electorate of Shortland, in which only a small percentage of people live in rental accommodation—which, by comparison, is unlike the electorate of Sydney—it is just about impossible for people to find rental accommodation. On the other hand, those people seeking to buy their first homes are finding that it is outside their financial means. The Shortland electorate, like most areas in Australia, has come under exceedingly heavy pressure as a result of the failure of the previous government, the Howard government, to address the issue of the chronic shortage of housing. This has led to homelessness and a shortage of rental properties, and it has increased the price of houses to such a level that young people are unable to afford to purchase them.

When the Rudd government was elected it realised that housing affordability was an area that had to be addressed immediately; otherwise, the chronic housing shortage would continue to escalate, more and more people would be unable to find rental accommodation and fewer people would be able to enter the housing market and purchase their first house. That is the background to a number of the housing initiatives that the Rudd government has introduced and will continue to introduce. It used to be practically unheard of in the Shortland electorate that a family would be unable to find rental accommodation. But, on a weekly basis, my office is assisting people to find accommodation of one sort or another.

Since the government was elected it has made it a priority to implement its commitment to create a savings culture and make it easier for Australians to save a home deposit—and that is exactly what the first home savers accounts do. They address the chronic shortage of rental properties by encouraging private sector investment in the rental market. They also improve our system of social housing and ensure that the costs that feed into housing construction are as low as possible. The Rudd government has listened to community concerns about housing affordability and is taking action to address the problem. The Rudd government is also implementing a range of new initiatives, including the first home savers accounts, which will help hundreds of thousands of potential first home buyers to save a bigger deposit through a superannuation style, low-tax savings account. The government has increased the benefits to low-income earners.

The Housing Affordability Fund lowers the cost of building new homes by working with the levels of government, particularly local government, to reform infrastructure and planning requirements. I would encourage local government to embrace the Housing Affordability Fund and to look at the way they do things and try and make it easier for their residents to build new homes.

The National Rental Affordability Scheme will increase the supply of affordable rental dwellings by up to 100,000. For eligible tenants, rent for these properties will be charged at 20 per cent below the market rate. Once again, it is an initiative that will help people who are currently struggling to find accommodation. The government will also increase the supply of land for housing by releasing surplus Commonwealth land for residential and community development.

The government has made housing affordability a key priority for COAG. Isn’t that a contrast to the Howard government? They made it harder and harder for people to enter the housing market. They made it harder and harder for first home buyers to acquire their first house. Another priority of the Rudd government is the new Housing Working Group, chaired by the Minister for Housing, which was established at the COAG meeting on 20 December 2007. It is worth mentioning that the Howard government failed to even have a minister for housing, which demonstrates how important they thought the issue of housing was. That was once again reflected by the fact that young Australians and not-so-young Australians were struggling to purchase their first home. People were being squeezed out of the rental market and finding it hard to find accommodation. They were being forced to move from place to place, sleep in their cars and even sleep in tents. I find that inconceivable in a country such as Australia.

The government has committed to increasing the supply of affordable housing and has a comprehensive plan to achieve this. As I mentioned, for the first time since 1996 there is now a housing minister. Members might ask: what happened in 1996? In 1996 the Howard government was elected, and that is when Australia started to have problems with housing. There will now be national coordination of housing policy. It is imperative that the national government show leadership. For this to be effective, it relies on cooperation and partnerships with the states and territories, as well as local government. Instead of blaming the states for everything, the Rudd government wants to work with the states so that it can deliver to the Australian people, no matter which state they live in. The government wants to facilitate better planning and leadership. The government is working with the states and territories to establish a national housing supply council to improve the evidence base for housing policy by providing advice on the adequacy of land release and housing supply to meet future needs. Once again, it is a planned approach; it is not a reactive approach. It is looking to the future and putting in place plans to deliver to the Australian people.

The First Home Saver Accounts (Further Provisions) Amendment Bill 2008 and the First Home Saver Account Providers Supervisory Levy Imposition Bill 2008 implement the government’s election commitment to introduce first home saver accounts. They are being introduced to provide a simple, tax-effective way to save for first homes through a combination of low tax and government contribution. This is a common-sense approach to the issue of assisting first home buyers, and it is something that the previous government failed to do.

The final policy design takes into account improvements arising from the consultation process to make the account simpler and fairer—once again demonstrating a difference between the Rudd government and the previous Howard government. It probably explains a little bit why they are now in opposition. It shows that on this side of the House we believe in consultation and in developing policy in consultation with the communities that we represent. Final policy design takes into account those improvements. An additional $150 million is committed over the next four years to improve the accounts and to bring total fiscal costs to around $1.2 billion over four years—a real investment in Australia’s housing.

Key changes from the discussion paper include the government contribution of 17 per cent on the first $5,000 of contribution for all individuals; removing the $1,000 upfront contribution and the link to residency to open an account; one overall account balance cap of $75,000—and that is going to be indexed; and calculating the four-year rule from the financial year in which it was opened rather than from the date of opening, which means that minimum contributions of $1,000 need to be made in each of at least four financial years to withdraw funds; and providing a 14-day cooling-off period. Accounts may be offered from 1 October 2008—yes, we are nearly there. We need to act quickly to put in place the legislation that is needed so that young Australians and, as I said before, not-so-young Australians who are seeking to purchase their first home will have the potential to save for their homes through the first home savers account. Legislation needs to be introduced as soon as possible to facilitate product design by potential providers.

The regulator, ASIC, the ATO and APRA are working closely with the industry to minimise the reporting requirements as much as possible. The first home savers account will bring the dream of home ownership closer to a reality for hundreds and thousands of young Australians who have, for a very long time, seen it just as a dream—something that their parents and their grandparents could achieve but something that was well and truly outside the realm of possibility for them. It will provide an additional mechanism for individuals in a family to save for a first home in which to live. These are low-taxing accounts to assist young Australians realise their dreams of homeownership. The introduction of a flat government contribution of 17 per cent for all young and not-so-young Australians will give an average income earner higher benefits than those originally announced. Easing the criteria to open accounts by removing the $1,000 upfront contribution will allow Australians to open an account without having existing savings. This is especially important for parents who may want to open an account for one of their children but not to contribute $1,000 upfront. A key feature of the account is that parents and grandparents will be able to make contributions to the accounts of their children and grandchildren, with all the benefits flowing to the home savers. This legislation puts in place a very important initiative. It puts in place, and will facilitate, the ability of young Australians to get their first home and to bring to fruition their dream—the Australian dream—of being a home owner.

Jason Clare (Blaxland, Australian Labor Party) Share this | Link to this | Hansard source

I am pleased to support the First Home Saver Accounts (Further Provisions) Amendment Bill 2008 and the First Home Saver Account Providers Supervisory Levy Imposition Bill 2008. I said in my first speech in this place that I want to make sure the great Australian dream still means something to future generations, where a mortgage is an investment, not a trap. It is not an easy task. The problem that confronts us has taken some time to emerge, and it will take time to fix. Ten years ago, as we have heard in this debate, the price of the average house across Australia was about four times the average income. Today, as we stand here, the price of the average home is now about 7½ times the average Australian wage, and in some parts of Australia it is worse. In south-west Sydney, the area I represent, it is more than eight times the average income. This means that the typical homebuyer now spends about one-third of their income on housing costs. That is double what it was 10 years ago. When you spend a third of your income on housing costs, you are defined as someone in mortgage stress. Today, there are a million people across Australia who are suffering from mortgage stress. As a result, many people are unable to get a foot in the door; many people are unable to buy their first home and they are forced into the rental market. As a consequence, that pushes the cost of rents up. Rental vacancy rates across Australia are now below two per cent in most capital cities. In my electorate, the vacancy rate is even lower—it is about one per cent.

The consequence of all of these things is that more people are giving up on the great Australian dream—more people are deciding that buying a home is just too difficult. You see that in the figures for the proportion of first home buyers as a subset of all the purchasers of homes across Australia. You see that the proportion of first home buyers as a subset of that group is dropping. That is why I am glad to see these bills come before the House. These bills put the finishing touches to the First Home Saver Account scheme. They establish a levy to recover the cost of regulation of the scheme. Bodies like APRA, ASIC and the tax office will be able to recover the costs of their oversight through a levy model similar to the levy model for the retirement savings accounts scheme. This legislation establishes a mechanism for the processing of unclaimed moneys deposited in first home saver accounts and allows for the exchange of information between the tax office, ASIC and APRA and the states and territories. It also allows for the interaction between the operation of first home saver accounts and family law.

In introducing these bills, the Treasurer said:

First home saver accounts are the first of their kind in Australia and will provide a tax effective way for Australians to save for a first home to live in, through a combination of government contributions and low taxes.

These accounts will make it easier for young people in my electorate to save a deposit to buy their first home. They will enable people over the age of 18 who have not bought or built a home before the chance to save a bigger deposit. For every dollar up to $5,000 saved in one of these accounts every year, the government will put in another 17 per cent. This means that a young couple on an average income putting 10 per cent of their salary into one of these accounts will be able to save a deposit of about $88,000 in five years. That is $12,600 more than they would have in a standard bank account. Earnings on account balances are taxed at 15 per cent rather than at the account holder’s marginal tax rate—a significant tax concession for many people. The account will be available from banks, building societies, credit unions, public offer superannuation providers, life insurance companies and friendly societies from 1 October 2008. That is two weeks from tomorrow. So far I understand that 17 institutions have informed APRA of their intention to offer first home saver accounts, and I hope that these are the first of many more. I am pleased to see that the government has also eased the criteria by removing the $1,000 upfront contribution, allowing individuals to open an account without existing savings.

A recent survey by the Australian Housing and Urban Research Institute found that 23 per cent of first home buyers rely on family assistance to help buy their first home. So it makes sense that parents should also be able to contribute to their child’s first home saver account. Personal contributions can also be made by grandparents, which I think is a very good thing, with all the benefits flowing to their grandchildren. In the last few months I have heard a number of horror stories from local sheriffs forced to execute repossession orders in my electorate, particularly in the area of Bankstown. The sheriffs of Bankstown have told me stories of circumstances where they have had to repossess the homes of 70-year-old grandparents who had gone guarantor on their grandchild’s home. These are really sad cases where good intentions have led to great financial loss at the worst possible time in their lives, so this is another advantage that this legislation offers. Rather than having to go guarantor, grandparents can help their grandchildren in another way—they can give them a helping hand by making a contribution to that first home saver account and make a contribution to them saving a good deposit to get off to a good start in buying their first home.

The Treasurer and the Minister for Housing deserve congratulations for bringing this legislation before the parliament. It will encourage more young Australians to save a healthy deposit, and that is a good thing because having a good deposit behind you substantially reduces your risk of defaulting on your loan. But first home saver accounts on their own are not a solution. We need to work on the supply side as well. We cannot fix the housing affordability crisis without building more homes, so I am glad to hear that the Minister for Housing has been swamped with applications to build low-cost rental accommodation under the government’s National Rental Affordability Scheme. I understand the minister and her department are now assessing 244 proposals for new developments. This represents 12,770 potential dwellings. This year I understand that she will pick the best 3,500 dwellings to be built, next year it will be 7,500 and in two years after that the government will offer tax incentives for a further 25,000 dwellings to be built. That is good news for people on low incomes. It hopefully will be good news for people on low incomes in my electorate who are struggling to attain affordable housing. It is also another election commitment kept, and it is another example of the difference that a Labor government makes to people who are doing it really tough.

Another supply-side measure is the Housing Affordability Fund, and the Prime Minister spoke at length about that in this place yesterday. This is a half-billion dollar fund that will cut the planning and infrastructure costs involved in the development of new housing. I am glad that these grants will be targeted to areas where there is high demand for new entry-level housing. I will certainly be looking at new developments in my electorate that might benefit from this, and I encourage those that are proposing those developments to apply for funding. One that immediately stands out in my mind is the Potts Hill redevelopment near Bankstown. That development will provide mixed housing for up to 12,000 new residents. In an electorate like Blaxland, the mortgage stress capital of Australia, where more people are struggling to keep up with the cost of paying their mortgage and where more people are having their homes repossessed than anywhere else in Australia, I can think of no better place to invest the money that will become available from the Housing Affordability Fund. I look forward to that with interest.

For anyone who has a mortgage, the thing that really counts is interest rates. The cut in interest rates two weeks ago was very welcome for the people of my electorate. It was very welcome because it will make life just a little bit easier for them. If you have a mortgage of about $300,000, that equates to a cut of about $50 a month in your repayments. That is an extra $50 in your wallet or purse and that goes some way to making things a little bit easier. That was the first rate cut in seven years and it was the first rate cut for 740,000 mortgage holders, many of whom are first home buyers. So the rate cut is a good thing. When rates are going the other way, when they are going up and up, they just put people under more and more pressure.

We talk a lot in this chamber about 10 interest rates rises in a row. In real terms, for someone on an average mortgage that equates to $400 less a month in their purse or their wallet. Imagine having $400 less a month. Imagine people on average incomes with an average mortgage with $400 less a month in their purse or their wallet and what it means for them. For many people it means that they have to give up the things they would like to do with their children, it means changing their lifestyles. For too many people it means losing all hope of the great Australian dream and it means having their home repossessed.

The fact that we have interest rates going down and not up is a good thing. When the Deputy Governor of the Reserve Bank appeared before the Senate Select Committee on Housing Affordability back in April this year, he estimated that there were about 15,000 families 90 days or more in arrears on their mortgage and another 30,000 more than 30 days in arrears on their mortgage. That is 45,000 families behind in their repayments—45,000 families sinking in debt, 45,000 families where the great Australian dream is rapidly becoming a bit of a nightmare.

Earlier this year the Sydney Morning Herald published a list of the top 10 suburbs in Australia where households were 30 days or more behind in their repayments. Nine of the suburbs were in New South Wales; four of them were in my electorate. I have said that my electorate is the mortgage stress capital of Australia and I have said that more people lose their homes in my electorate than anywhere else. In real terms what does this mean? It means that last year 300 families lost their home for good. Three hundred families had to hand the keys over to the sheriff—never to return. As we speak today, I know that the Bankstown sheriff’s office has had to repossess three more homes in Bankstown, and three more families tomorrow and the next day and the day after that will lose their homes.

It is not just Bankstown. At the other end of my electorate, in Fairfield, the eviction rates have doubled in the last few years, up from 113 in 2005 to 259 last year. This is the real cost of rising interest rates. It is not just a debate that we have in this chamber where we throw insults across the chamber at each other about who is the best economic manager. These are the real implications. I am not here casting blame; I am just saying what the real consequences are. The obligations are on us as legislators to do everything that we can to try and make life a little bit easier for people. The obligation is on us to act responsibly to try and create a situation where it is easier for people to live, easier to sustain the mortgages that they have and easier for people who want to get involved in the great Australian dream to get a foot in the door and get into the market in the first place. That is what this legislation does.

The 2006 census gives you a glimpse of why families in my electorate are doing it tougher than most. Median weekly family incomes in Blaxland are almost the lowest in Australia, and those families live in the most expensive city in the country. Median monthly mortgage repayments in Blaxland are in the top 40 of electorates in the country. That is why we are the mortgage stress capital of Australia. The residents in my electorate earn less but they pay more than the average Australian to keep a roof over their heads. The evidence from the Deputy Governor of the Reserve Bank to the Senate inquiry helps to fill out this picture. The surge in prices during the boom was comparatively higher in Western Sydney than the rest of Sydney. More households bought towards the peak of the market than anywhere else and incomes grew more slowly than in other parts of Sydney. It was ‘the perfect storm’. A disproportionately large share of loans were sourced also from non-deposit lenders and these loans are responsible for a disproportionate share of defaults. The arrears rate with non-deposit lenders in Western Sydney is three times the rate with the major banks. Many of these first home buyers were caught in the vortex of housing stress from the very start. Research from the Canberra university indicates more than 60 per cent of new home buyers are in mortgage stress—many of them signing up to low-doc or no-doc and low-deposit loans. That is why this First Home Saver Accounts legislation is important. It gives young Australians the chance to get off on the right foot with a deposit.

The evidence before the Senate committee also points to the need for industry reform. I take this opportunity to pay tribute to the work of the House of Representatives Standing Committee on Economics last year, led by the former member for Cook, Bruce Baird, who conducted a report and made certain recommendations about reform to our financial system, financial services and credit. That, I am sure, will lead to good and positive legislation that will come before this parliament later this year. I am very hopeful that it will address the issue of mortgage brokers. Mortgage brokers are responsible for part of the pain that new home buyers are suffering, and they account now for something like 40 per cent of all mortgages that are now set up.

In 2003, a report from ASIC identified the increasing use of mortgage brokers and the associated problems that they have caused—poor advice, inadequate disclosure of fees and commissions, inconsistent documentation, uncertainty about the nature and price of the service, in a small number of cases fraudulent activity such as manipulating loan applications, and a need for clarity as to whether brokers were acting for consumers or lenders. Time does not permit me to go into this in any more detail tonight, but I will say more about mortgage brokers and the problems they have caused when the legislation comes before the House later this year. Suffice it to say that this is another area where we need to act.

We also need to make sure that banks and other lenders act in the interests of their customers, not against them. What I am talking about here is banks lending money responsibly. I hear a lot of stories from financial counsellors in my electorate of situations where people have multiple credit cards and debts that run into the tens of thousands of dollars. Many of them are pensioners and many are people who are unemployed. I do not think a banking system that is a responsible banking system should allow this to happen. I think it is important that we also look at what we can do in this area. Despite the growth in the problems of people repaying home loans, it is credit card debt that is responsible still today for the overwhelming majority of calls to consumer debt hotlines across the country.

I am also concerned about the recent behaviour of some banks pushing mortgages over the counter. A few months ago my local newspaper, the Fairfield Advance, did a special report on the growing practice of upselling home loans when customers visit their local bank for simple transactions. The report said:

A local bank teller who wanted to remain anonymous said they were not only encouraged to sell home loans but required to. The teller said she was required to sell 2 home loans a week.

This is not something that should be foreign to many people in this chamber. If you have been into a bank recently, you may well have spoken to a teller, exchanged your banking of the day across the counter and then found the teller offering you a mortgage. I have no problem with banks being able to promote their products, but the evidence suggests that they are giving some loans to people who are not able to make repayments.

If you want to buy a home, it is a lot safer to do it with a deposit and not get into one of these no-deposit or low-deposit home loan deals. This sentiment is shared by a reader of the Fairfield Advance and a resident in my local area, Rose Buontempo, who wrote:

People need to have a decent deposit saved and they need the knowledge to know how to save.

This is what this legislation helps to do. It allows first home buyers to save up for a deposit and get a firm footing to buy and then pay off their home.

There is something else that we can do as local members to help people that are being consumed by mortgage stress. Earlier this year I spent a lot of time talking to financial counsellors in my area to learn about the problems that people were confronting. I spoke to a gentleman called Tony Devlin, who runs financial counselling for the Salvation Army, to get a better understanding of the problem. He told me that they appreciated all the additional money they received in the budget for financial counselling but they were run off their feet. Ten years ago, 10 per cent of the people who walked through their door had mortgage problems. Now it is about 35 or 40 per cent. Tragically, many people leave it too late to get help. Usually, they come to the Salvation Army or the Smith Family when the bank is about to foreclose or the sheriff is at the door.

I have spoken in this chamber about the housing stress information night that I held in my electorate in July. I brought Paul Clitheroe along to see 250 local Bankstown residents, who filled up the Bankstown Town Hall on a cold winter’s night. We gave them some practical and free advice to help them keep their head above water. People like the Smith Family, Legal Aid, the Consumer Credit Legal Centre and the Banking Ombudsman all came along to help provide that advice. I think we did a good thing that evening. I think we helped to provide people with some practical advice that worked. One example is a woman called Sophia Helene. She came to the forum because she was just about to start as a real estate agent and was curious to find out about the issues that families in the area were facing. The more she listened to what people on the panel were saying that night, the more she realised that she was struggling with her own financial circumstances. She approached the Smith Family that evening and signed up for some free financial help and to get some more information about financial literacy. Sophia and her husband have been working with the Smith Family to improve their situation. I am glad she came along, but there is more work to do. That is why I will be holding another one of these forums in October at the other end of my electorate, in Cabramatta.

In the time I have left, I want to thank my staff for all the work that they did in putting together the event in Bankstown and the work that they are doing to do it again. This is the sort of thing that members of parliament should do. It helps people in a practical way. It is also the reason I have put together a debt relief information kit—to give people some practical advice. (Time expired)

Jim Turnour (Leichhardt, Australian Labor Party) Share this | Link to this | Hansard source

I welcome the comments of the member for Blaxland. I know that he is a passionate advocate for his local community and that he has many young families struggling in his community to meet the mortgages that they have, particularly given that inflation is at 16-year highs and we have, by international standards, very high interest rates in this country. It is a result of 12 years of irresponsible economic management by those opposite. Sadly, the member for Blaxland has many constituents struggling under mortgage stress at the moment, as I do in my electorate. There are those out there tonight who are trying to balance the family budget and looking at how they can meet the needs of their kids going forward while they have to pay off significantly large mortgages.

The First Home Saver Accounts (Further Provisions) Amendment Bill 2008 and the First Home Saver Account Providers Supervisory Levy Imposition Bill 2008 are part of our overall plan to tackle housing affordability in this country. First home saver accounts were a very important election commitment that the Rudd Labor government made in the lead-up to the election late last year. We are delivering on this commitment as we deliver on all of our election commitments.

These bills are very important for those young Australians out there who still want to achieve the Australian dream of homeownership. From doorknocking in my community before and since the election, and from running mobile offices, I can tell you, Mr Deputy Speaker, that people welcome this commitment, whether they are parents who have kids and are looking to buy a home or they are young people who have not been able to save up to buy a home. They welcome the fact that the Rudd government is delivering on this commitment, as we do on all our commitments. This a real opportunity for people all across the nation, but particularly in my electorate, to actually save up a deposit and buy a home in the future. From 1 July 2008, a couple, each earning average incomes, will be able to save a deposit of more than $88,000 after five years of disciplined saving. That is up to $12,600 more than they would have saved using an ordinary deposit account, depending on returns. Young families out there now have a way forward to save that very important deposit.

This is part of an overall plan that we have to tackle housing affordability in this country. Unlike the opposition, unlike the Howard-Costello government, we have a Minister for Housing, a minister who is fully focused on tackling the housing crisis in this country and tackling issues like housing affordability. We have a $1.2 billion investment in first home saver accounts, which these bills are a very important part of delivering. But we also have a Housing Affordability Fund and a commitment of $512 million over five years to target the planning and infrastructure costs that are incurred when building new home developments. Tens of thousands of new home buyers are set to benefit from grants of up to $10,000 per home as a result of this initiative. So we have initiatives like the first home saver accounts on the demand side, allowing people to save a deposit, but we also have the Housing Affordability Fund looking at the supply side.

There are also, partly due to the fact that we have had high inflation and high interest rates, real pressures on rental housing because people are struggling to meet their mortgage repayments and they are pushing up rents in a lot of situations. In my electorate there are not only many people who are under mortgage stress, paying more than 30 per cent of their income in mortgage repayments, but many who are paying more than 30 per cent of their income in rental repayments, and they are also under stress. If we are serious about tackling the housing affordability crisis in this country we also need to recognise that that has an impact on rental affordability. So we have the $623 million National Rental Affordability Scheme to encourage the building of up to 50,000 new rental properties. I know that the housing minister is progressing all of these policy areas, and there have been recent policy announcements on all of these areas in the last few weeks as well as this legislation.

One of the things about a Labor government is that we also recognise that there are really disadvantaged people out there. There are people struggling to save up for a home and people struggling to pay their rent, but there are also homeless people out there—people who do not have a home to go to each night. Looking at the housing challenges in this country, we recognised that we needed to tackle homelessness. That is why we committed to the $150 million A Place to Call Home initiative—to build hundreds of new homes for the homeless across Australia. The First Home Saver Account scheme is a commitment to deliver an initiative for those looking to save up to buy a new home, but we also have commitments on the supply side and on the rental side. So we have an overall plan to tackle housing affordability in this country and to support people who are doing it tough.

As I said earlier, one of the most important things that we can do as a government is manage responsibly the Australian economy. If we are going to ensure that we have affordable housing in this country then we need to tackle the 16-year-high inflation rate left to us by the former government and continue to put downward pressure on interest rates. We know that high inflation leads to high interest rates and we want to see inflation in this country return from the current rate of 4.5 per cent to within the Reserve Bank governor’s forecasted range of two to three per cent. I welcome the fact that Glenn Stevens in a recent statement said that they are forecasting that, if we keep going the way we are, that will occur in 2010. But the reality is that we are currently facing high inflation in this country. In the governor’s statement of 2 September 2008 he says:

Inflation in Australia has been high over the past year in an environment of limited spare capacity and earlier strong growth in demand. In these circumstances, the Board has been seeking to restrain demand in order to reduce inflation over time.

So it is not just me, a member of the Labor Party, saying this; the RBA governor recognises that inflation has been high over the last 12 months.

We need to do our share of heavy lifting as a government and not just leave it to the RBA to tackle inflation. That is why one of the first things that we did as the Rudd Labor government was frame a budget firmly and squarely focused on tackling inflation, a budget with a $22 billion surplus, to take pressure off the demand side of the Australian economy and put downward pressure on interest rates. It was also a budget focused very much on the long term and on tackling the capacity constraints in the Australian economy—constraints that the RBA governor gave 20 warnings to the former government about—in the areas of education and infrastructure. We framed a budget focused fairly and squarely on a strong surplus, a $22 billion surplus, and also on the long term. It focused on investing in infrastructure through the $20 billion Building Australia Fund and focused on the long term through the $11 billion Education Investment Fund. If we are to tackle inflation and put downward pressure on interest rates we need to ensure that we are easing demand in the economy but we also need to do things on the supply side.

The budget that we brought down was strongly welcomed by independent commentators. Saul Eslake from the ANZ, a well-known commentator, said on 13 May:

The Budget embodies a very modest tightening of fiscal policy and as such is more appropriate for the circumstances than recent Budgets have been.

Heather Ridout from the Australian Industry Group said:

It is an on-task budget that is disciplined and ambitious … The government has taken a pretty hard-nosed approach to spending to address inflation …

We are a government that focus very much on tackling inflation and putting downward pressure on interest rates. The favourite that I have in terms of independent comments is one from Goldman Sachs on May 13, who said:

After two years of notable conflict, finally we have fiscal policy that is pushing in the same direction as monetary policy.

Finally we have a government that is focused on ensuring that fiscal policy is not forcing up inflation in this country. Finally we have a government that is not leaving all the heavy lifting on inflation and interest rates to the Reserve Bank. That is the critical issue in ensuring that we build and strengthen the economy going forward.

The former government, particularly in the last few years, following on from when John Howard in 2004 said he was going to keep interest rates at record lows, were fiscally irresponsible. They spent like drunken sailors and they failed to invest in infrastructure and skills to build capacity and productivity in the Australian economy. Sadly, as a result of that, we have seen eight interest rate rises in a row since 2004 and 12 since 2001. Mortgage holders, young families, those out there doing it tough trying to pay off their family home, have been the ones that have suffered as a result of that.

So when we came to office we had plans to tackle housing affordability—plans like the First Home Saver Accounts initiative, investment in housing funds to tackle the supply side, and investment in funds to build more rental properties and properties for the homeless—but we also had a fundamental plan to tackle inflation to put downward pressure on interest rates. I welcome the fact that just recently, in the last few weeks, we have seen, for the first time in seven years, families and homeowners get some interest rate relief. That interest rate relief has seen them get on average a $43 a month reduction in mortgage repayments. So those people in my electorate struggling to pay their mortgages have finally seen some interest rate relief. We welcome that and we will continue to act responsibly to deliver a responsible budget into the future.

Debate interrupted.