Marise Payne (NSW, Liberal Party, Shadow Parliamentary Secretary for Foreign Affairs) Share this | Hansard source

I welcome the opportunity to participate in the debate on the First Home Saver Accounts Bill 2008 and the First Home Saver Accounts (Consequential Amendments) Bill 2008. It is timely given that yesterday the Senate Select Committee on Housing Affordability in Australia, which I had the honour and privilege of chairing, tabled its report. It is timely that I have the opportunity to speak in this debate. The housing affordability problems that Australia faces are well documented and are reaffirmed in the documentation tabled by the select committee yesterday. As a committee, we had the opportunity to hold hearings across metropolitan and regional Australia and to hear evidence and receive submissions from across the breadth of the community. The committee heard not just from academics, to whom I know Senator Moore referred yesterday afternoon, particularly from AHURI, but from members of the public, local government, planning experts, the Real Estate Institute and from Commonwealth and state departments—that is, in some cases, those state governments which were inclined to support the committees inquiry constructively, which was a distinct minority of state and territory Labor governments, disappointingly.

The evidence that we received in that process, the evidence which the government would say brings about this legislation today, is quite clear. The cost of housing has increased from roughly four times the average wage to seven times the average wage—if I may paraphrase—over the past decade. It is also the case that in evidence provided to the committee both by industry experts and supported by the federal Department of Families, Housing, Community Services and Indigenous Affairs and the RBA, we are conservatively estimated to be underbuilding dwellings in Australia by 30,000 a year. When you bear in mind the demand that already exists, the challenges currently on the supply side and perhaps even add to that mix the government’s most recent announcements in relation to increases in immigration numbers, this is a very significant challenge which we face.

Most would say, and many of those who gave evidence to the select committee would say, that many young Australians now face the prospect of not being in a position to own their own home—certainly not in the short to medium term. As my colleague in the other place the member for Farrer has indicated, the coalition will be supporting the First Home Saver Accounts Bill 2008 primarily because we believe that any measure that encourages a culture of saving, as is intended with this particular product, should be encouraged. We want, however, to place on the record a number of concerns that we have in relation to the legislation and that includes a number of potential disincentives inherent in the legislation and its structure for potential first home buyers who might be considering committing to these accounts. Some of these disincentives, we are concerned, have not been addressed by government.

We also have ongoing concerns that the first home saver accounts do not address a number of the fundamental causes of the decline in housing affordability and we do wish to place on the record our concern that, unless more is done to address the constriction of the supply of housing, this bill may in fact result in increasing prices, which would be an undesirable outcome from all perspectives. As has been stated before and elsewhere, there are a number of conditions that the initiative presented in this bill is required to satisfy if it is to boost the purchasing power of home buyers relative to the market. Firstly, it needs to be taken up by home buyers. It must be offered by sufficient financial institutions to facilitate competition in the market and to give consumers opportunity and choice. It should not make housing more expensive than it would otherwise be and it should also be cost-effective in both its implementation and its administration.

We examined the question of whether first home buyers will actually be prepared to commit to this particular savings scheme initiative. To satisfy the basic criteria for a government co-contribution, a potential home buyer is required to make a contribution of $1,000 in four financial years. The government is then indicating that they will provide a contribution of 17 per cent of what the first home buyer pays in, up to a maximum of $5,000. That equates to a maximum government contribution in any year of $850. It is important to note that the government contribution is not, in fact, automatic. If you only saved $1,000, you would get $150 from the government and you must wait a minimum of four years before you can access those funds for any deposit on a first home. Realistically, four years is a long time for a first home buyer. Their plans, their circumstances and market conditions can all change very quickly, and in fact we see that every day in Australia at the moment. A minimum four-year commitment does not necessarily allow potential home buyers to respond to changing circumstances.

Potentially, another deterrent for first home buyers to commit to a first home savers account is the lack of flexibility that exists with regard to contributions. As I have said, payments can only be made to purchase that 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. So the accounts, as they are designed, do not make any allowance for fluctuating incomes. In what is a particularly dynamic labour market in 2008, and particularly in the economic circumstances that pertain to Australia, that may be an issue. For example, in today’s very flexible job market, a potential first home buyer might be in a position to contribute more in one year and less in another. So there is that inflexibility that surrounds these accounts, particularly from the perspective of some young people who we know might not be inclined to commit to anything that locks them in for a considerable period of time.

I also want to make a couple of observations about the level of complexity associated with the accounts, which could present some concerns or act as a deterrent to potential first home buyers. These issues were aired both in submissions to Treasury in the development of the policy, as I understand it, and in submissions to the Senate Select Committee on Housing Affordability in Australia. Complexity is a challenge in the market, as we all know. When you are contemplating the level of financial literacy that exists amongst young Australians, it can often be regarded as relatively low itself. Abacus, the peak organisation representing building societies and credit unions, raised that particular concern in their submission to Treasury. We should not be expecting young first home buyers to commit to a scheme that they might not understand. That was also evidenced in the committee’s report, which I will make some reference to. Abacus, in their submission to the Senate Select Committee on Housing Affordability in Australia, indicated:

Optimising the FHSA initiative will require FHSA products that are attractive to, and understood by, young people. Each additional layer of complexity and the regulatory framework will reduce returns to savers, dampen competition and choice, and slow the arrival of FHSA products to market.

Because Abacus is the organisation that represents credit unions—and I have a previous professional history with their predecessor—they have, over the years, as credit unions made a great deal of effort in relation to financial literacy to engage their customers and potential customers on these issues. I understand very well the point that they are making: their indication that it would be very unfortunate if the standing of the First Home Saver Accounts policy were tarnished by any evidence that young Australians had in fact made investments in the products without really knowing what they were doing and perhaps, and there is the potential for this, having gone backwards in capital value terms and, therefore, exacerbating for them the very disadvantage that the First Home Saver Accounts policy was designed to address. That might happen if, for example, the potential buyer cannot keep up with the repayment of $1,000 for four years and the account stalls. These are things which we think need to be taken into account.

If the first home saver account is offered by a registrable superannuation entity and the product is investment linked, it is not capital guaranteed. We all know that superannuation can go backwards as an investment; it is a long-term investment. But this is actually a short-term exercise, so these issues need to be taken into consideration. In such events, the first home saver account holder may be left worse off than if they had just used an ordinary savings account or had scraped together the money for a home deposit from day one.

I also note another potential deterrent: the concern expressed by some organisations that the FHSAs could be outstripped by housing price rises. A potential first home buyer, who is locked in for four years, might find at the end of the four years that housing prices have risen faster than their savings. As I understand it, and as was reported to the committee and discussed elsewhere, these concerns were raised during the public consultation process for the accounts and have not actually been addressed.

In terms of account providers, I referred in my earlier remarks to the importance of competition in the marketplace for the provision of the accounts. For the accounts to offer a robust product that is competing well in the marketplace and, importantly, giving the best value to first home buyers, there needs to be competition amongst many providers to ensure quality and to allow for portability of the accounts. We need to be very cognisant of the level of support that there is for potential providers to back the government’s scheme.

There are some bureaucratic arrangements attached to the scheme which some potential providers have expressed concerns about. Again, they were reiterated in the select committee’s hearings, particularly in our first hearing in Sydney. That bureaucratic burden, if you like, can be a very heavy disincentive for providers. The whole process of aligning their systems to work with these new requirements is not an easy one. It is not an inexpensive one for them either, and they would need to be assured that the product is going to be one which has significant take-up before they actually work their systems down that line.

Approved deposit-taking institutions and life insurance companies, of course, have to notify APRA, as the regulatory authority, before they can offer first home saver accounts. They have to obtain the licences that are relevant in this area and, in many cases, they have to establish whole separate trusts. Financial institutions themselves, as they should—but nevertheless it needs to be noted—need to keep detailed records because earnings are taxed to the account provider at 15 per cent rather than to the individual account holder. That means more detailed reporting requirements, particularly to the Commissioner of Taxation, who will be administering the government co-contribution. The Commissioner of Taxation is required to undertake the compliance work, which may be considerable given that the requirement in the outline for the account is only to live in the house for six months after it is purchased or constructed.

I want to make a couple of comments about restrictions on supply in the market in Australia. Whether it is state and territory land taxes and levies, whether it is land release policies, or whether it is a lack of investment in a number of key areas in transport and infrastructure, they all combine to artificially restrict the supply of housing. The Senate committee evidence showed us this. They are issues which need to be addressed as a matter of urgency. Clearly, if the government is going to add to demand with initiatives of this nature then it must also add to supply to avoid those prices escalating. The Housing Industry Association contends that the housing industry should be building at least 175,000 new residential dwellings each year to satisfy the demand which currently exists.

I reiterate the remarks I made at the beginning of my comments today: we are currently under-building in Australia by an estimated 30,000 dwellings a year. The Reserve Bank of Australia says that any efforts to improve housing affordability should focus on policies regarding land use and improving efficiency in the supply of land and housing. Clearly, with this measure, which is a relevant measure in the debate, the government is not yet at the main game in terms of addressing the problem of housing affordability by taking up the issues of supply shortages to make its consequent policies most effective. The supply of land to build entry-level first homes is not keeping up with the demand. By adding more dollars to the demand side of the equation, you end up giving people more money to spend in what is already a very tight housing market. And there is the concern—which has been expressed by a number of commentators and is recorded, as I said, in the committee’s report—that this increased spending and increase in demand has the capacity to inflate housing prices further than they already are. That means that the public benefit of any co-contribution would end up being bid away in higher prices.

As I said, the coalition are not opposing the first home saver account bills and this initiative, because we do appreciate and have long said that any incentive that encourages young people particularly—and, in the first home buyers market, that is essentially what we are speaking about—to save is an important and positive outcome. But the government’s maximum co-contribution can only be achieved by saving $5,000, a difficult target for a young person who is probably currently renting. There are complexities surrounding the rules that govern these accounts such that a young potential homebuyer may look at them and decide that it is easier to pursue other saving options. They may well recognise that the small advantage they might accrue over the four years for which they held the FHSA could be very quickly outstripped by the rising costs of housing in Australia.

I said at the beginning of my remarks that the debate on these pieces of legislation is very timely with respect to the tabling of the select committee’s report on housing affordability in Australia, which was entitled A good house is hard to find. I do not often commend reports to the Senate—we all have enough to do with our time—but I would commend the detail of this report to the Senate in terms of the breadth of its examination of the issues right across Australia in both regional areas and capital cities and in terms of the opportunities which were presented for witnesses to come forward to the Senate select committee and provide evidence on the challenges not just in relation to homeownership but more broadly than that, as I referred to yesterday. It is a very important resource for us as senators, for us as a parliament and I would hope, in fact, for the government. I hope that the government looks very carefully at the recommendations that the committee has made and responds constructively to those.