Helen Polley (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

As I was saying yesterday, the Rudd Labor government is fixing the problems created with housing affordability under the previous coalition government. We now have a Minister for Housing, Tanya Plibersek, backed up by departmental capacity in the Department of Families, Housing, Community Services and Indigenous Affairs. The previous government did not even have a housing department, nor a minister for housing. That is how concerned they were over the affordability issue facing working Australians. They just did not care; they were so out of touch. I think it has been demonstrated since the last election that the coalition still have not learned—they are still arrogant, they are still out of touch, and they have not listened to the Australian people.

On this side of the house, the Rudd Labor government have got clear goals in pushing policy forward. We want more Australians to own their own homes. We want enough housing supply to meet the demand. We want first home buyers to have a bigger deposit when they are able to buy their first home. We want a more affordable rental market that attracts private sector investment. We want to reform the system of public and community housing, and we want to halve the rate of homelessness. Homeownership is not just about ensuring people have a place to live; homes are also financial assets. For many Australians, their home is their largest asset, accounting for, on average, 55 per cent of their wealth. Owning a home gives us the certainty of a roof over our heads when we retire, making it a little easier when we do retire. But, even more importantly, it certainly helps those that are reliant on a pension.

I am confident that these measures will help young Australians realise the dream of homeownership, and I am proud to be part of a government that is willing and ready to address the real issues that are facing our country like petrol and grocery prices, the housing crisis and the health system. We had 12 years of neglect from the former government, and they left us with a legacy of inflationary pressures on all Australians, particularly working Australians. It has been left to the Rudd Labor government to come in and clean up the mess that was left by the former Howard coalition government. The Australian government under Kevin Rudd has a vision for Australia’s long-term future. This legislation is an important part of that vision, and I commend the First Home Saver Accounts Bill 2008 and related bills to the Senate.

Andrew Bartlett (Queensland, Australian Democrats) Share this | Link to this | Hansard source

The Democrats support the First Home Saver Accounts Bill 2008 and related bills, and that is a matter of record. As recently as a couple of days ago in speaking to a Senate committee report, I spoke on this issue of providing more support to people in the area of housing. The proposal for the first home saver accounts is a welcome one.

It has been a long-standing concern of mine and the Democrats that there has not been adequate attention paid at the national level to provide more assistance to people to help them deal with the housing affordability crisis, nor has enough attention been paid at the national level to try and reduce the problem of housing affordability as a whole. I am sure the government is not suggesting that First Home Saver Accounts on their own will be the solution to the difficulties that first home buyers face, but I do think they will provide some assistance for some people. Anything that helps move things forward should be supported, but it should not be done so uncritically. I think that is the key part of this area, and it is still one of the unanswered questions with regard to the federal government. It is indisputably a positive thing, that they now have a minister specifically responsible for, and focused on, housing issues. It is also indisputably a positive thing to have greater resources attached to the bureaucracy at the national level to support the minister—people who are specifically focused on and have responsibility for housing issues.

One of the problems that we have had in the past—in part because that has not existed—has been a lack of data and a lack of examination of the consequences of measures. That must apply to this new measure. We need to closely monitor how it operates, not just in terms of how many individual people access it and then uncritically wave a flag and say, ‘All of those people have now been helped by this account,’ without any examination of the wider issues. We also need to try and assess the consequential impacts of this account. Some of these things are hard to nail down precisely, but I think we need to make an effort.

One of the valid criticisms of the First Home Owner Grant has been that it was potentially inflationary—I think undoubtedly inflationary. In some areas all it has done is provide some extra capacity for demand to push up the price in terms of available housing. That issue was addressed in the recent report by the Senate Select Committee on Housing Affordability. I remind the Senate and those interested in this issue that it is a very worthwhile and unanimous report. I would encourage people to study and examine it. The same possible consequence can potentially be one amongst other consequences that occurs as a result of this measure.

Personally I would like to see, as I stated in this place the other day, the First Home Owner Grant scheme being wound back, targeted much more precisely, means tested and applied to lower cost housing only—rather than being open to all comers whatever their income, their resources and the cost of the house they are buying. We should be targeting these measures at people that need assistance rather than providing grants or tax breaks for people that are already doing well. That is something that I think also needs to be monitored with regard to the first home saver accounts.

Certainly there is some criticism—perhaps ‘concern’ is a better word—that this measure might end up providing more taxpayer subsidies to people who are well-off than those who are less well-off. That is not necessarily in itself a reason not to do it, but I think it depends on the extent of that disparity. Let us not forget that what we are doing through this process is dedicating some tax expenditure to assisting people to afford homes. In the past we have suffered from massive amounts of money going in and purportedly being spent on housing measures without any real assessment of whether or not they are effective in terms of value for money for the taxpayer, in terms of affordability, in terms of not making the problem worse and in terms of being targeted at those most in need.

We have not done a lot of those assessments in the past. We certainly have not done them for the First Home Owner Grant, and that has been a problem—that we have not even had the data there to make the assessment. People have had to speculate to some extent. I think the concerns as a consequence of those speculations are valid, but it has been quite unsatisfactory. We have had sizeable amounts of public money spent through that grant without a lot of effort put into gathering the data about how it is applied, what its impacts have been, whether it has gone to people most in need, whether it has had a positive or a negative net effect on housing affordability and all of those sorts of things. When we are giving tax breaks to people we need to closely assess the total cost, the net impact and the benefit for individuals and for the public.

It is on a totally different scale and in a different context, but nonetheless I think it is valid to draw the comparison with the capital gains tax exemption on the family home. That is something that, according to the report of the Senate committee inquiry into housing affordability that was tabled the other day, is estimated to cost as much as $20 billion a year. That is an estimate, and, frankly, I am still astonished that there is so little effort put in by Treasury and others to more accurately measure the extent of that tax break. Whatever it is—whether it is $20 billion or substantially less—it is a hell of a lot, and it is a lot more than the money provided for public housing, for the First Home Owner Grant and rent assistance. If you add all of those, the result is still nowhere near the cost of that single tax exemption. I know no-one from either of the major parties is going to suggest that that tax exemption be scrapped. I use it simply to point out that an exemption in itself is not necessarily a good thing and certainly not necessarily the most cost-effective thing. That exemption is clearly far more beneficial for people who are well-off. It is a regressive tax break. It may have other social good attached to it, but we should at least be clear about the pluses and minuses.

The same should apply to this legislation. On balance it is definitely a plus. One extra reason I think it is a plus is that it reinstitutes a savings culture, which has disappeared to a large extent in recent times, for a range of measures. It is now much more easy to access a housing loan without having saved a sizeable deposit. People can use the aforementioned home owners grant and just whack it straight onto a deposit or, in some cases, use it in lieu of a deposit. That is good in terms of helping people purchase a house, in terms of the immediate consequence, but if it means people taking on board more debt than they can really manage then you are probably not really doing them a favour in the long run. You also are potentially creating unhelpful consequences for the overall cost of buying a home. If you have more money available and able to be borrowed than people can really afford, that can have the effect of unhelpfully and excessively stimulating demand, and that just makes it more difficult for everybody. So I think the impact of encouraging a savings culture through this is significant on its own, regardless of all of the other impacts the legislation may have. I know it is not the only measure the federal government is putting forward with regard to housing and purchasing a home, or indeed housing more broadly.

I welcome this and the other measures that have been put forward. I still think a lot more needs to be done, I might say, and done quite urgently. Some of that involves taking decisions that are potentially politically difficult. But, when you compare that to the enormous hardship that a lot of Australians are suffering at the moment because of the high cost of housing, particularly the high cost of renting, you see that those difficult political decisions need to be confronted. It was the refusal to confront those over the years that led us to the mess we are in today. We support the legislation and we hope that its impact and effects are monitored closely.

Glenn Sterle (WA, Australian Labor Party) Share this | Link to this | Hansard source

I seek leave to incorporate remarks from Senator Wortley.

Leave granted.

Dana Wortley (SA, Australian Labor Party) Share this | Link to this | Hansard source

The incorporated speech read as follows—

Mr President, I rise to speak to the First Home Saver Accounts Bill 2008 and related bills.

The purpose of this bill and the related legislation is simple: it is designed to help many Australians realise the dream of owning their own home.

As we know the cost of housing has skyrocketed over the past decade ... that-the dream has become more and more remote for families, couples and singles around the nation ... more and more of a struggle for many people just wanting a modest place to call their own...a place to call home.

It doesn’t seem that long ago in my home state of South Australia that $250,000 would buy an extremely well-appointed house in Adelaide or an inner-city suburb.

The real estate pages make it clear that these days a similar property would fetch anywhere between $500,000 and $800,000.

A 3-bedroom unit that sold for $102,000 in 1995, was snapped up at $321,000 in 2007.

The picture is clear. It’s tough for people trying to break into the market in 2008.

Median Adelaide house prices for the March quarter this year, according to the Real Estate Institute of South Australia, were more than $350,000.

Eight years ago, in March 2000, the median price for a metropolitan house was around $130,000.

The reality is, that would-be first homebuyers still are battling to gain a foothold on the path to owning their own home.

In the bills before us today, ...

The Government is honouring a promise to the Australian people to work for better housing affordability ... to bring the dream back within reach.

The main bill before us establishes First Home Saver Accounts, which are low-tax accounts aimed at giving aspiring homebuyers a boost.

The accounts are an uncomplicated, tax-effective means by which Australians can save up for their first home, resulting from the partnership of low taxes and Government contributions.

They aim to give a hand to those working hard and saving hard for their first home.

The Government will add 17 per cent on the first $5000 put in by individuals, meaning that through the scheme, a couple on average incomes will be able to save a deposit of more than $88,000 after five years.

That’s up to $12,600 more towards the cost of a home than the same couple would save using an ordinary deposit account, naturally dependent on returns.

As an added benefit, the First Home Saver Accounts will provide young people with a real incentive to save.

This is not only a Government determined to reform, revamp, repair and re-energise a society ...

The Rudd Labor Government is a government that, unlike its predecessor, believes in listening to the people who elected it ... and working towards a better, fairer, more inclusive nation for the young people of today and tomorrow.

This Government believes in working with the Australian people ... that’s why, after broad consultation, this policy has further been improved.

The resultant legislation makes for a program that is more straightforward—and, crucially, fairer.

Among these changes for the better, we’ve removed the $1000 upfront contribution and the link to residency.

This will make it simpler for people who don’t currently have savings, to open an account and get a foot in the door of home ownership.

In another sensible, simplifying move, the Government has moved to an overall indexed account balance limit of $75,000, rather than the $10,000 annual contributions limit previously proposed.

Another important aspect of the scheme is that parents and grandparents will be able to put money into accounts for their children and grandchildren.

And parents who want to open an account for their child also will benefit from the removal of the required $1,000 upfront deposit.

These factors will see further benefits to those saving for their first home.

The second bill in the package, puts forward consequential amendments needed to establish the First Home Saver Accounts.

These amendments largely relate to tax and corporations law.

Individual contributions to the First Home Saver Accounts are not taxed as they come out of participants’ income after tax.

The government’s contributions to the accounts will not be subject to tax.

There are other tax savings, too, with these special new accounts.

Withdrawals to buy a first home will not be taxed, while earnings on the accounts will be taxed to the account provider at 15 per cent.

With a regular account, the individual account holders would be taxed on any earnings at their marginal income tax rates.

To ensure those taking part don’t misuse the accounts, the third bill in the package establishes the First Home Saver Account Misuse Tax, which will be applied to recoup any benefits improperly obtained.

Overall, these bills give people striving for their first home a chance to gain this important asset.

They will give Australians a chance to take part more fully in society and to build more economic and social stability for themselves and their families.

I commend these bills to the Senate.

Jan McLucas (Queensland, Australian Labor Party, Parliamentary Secretary to the Minister for Health and Ageing) Share this | Link to this | Hansard source

First of all, I thank the various senators for their contribution to this debate. The introduction of the First Home Saver Accounts Bill 2008 and related bills marks an important new beginning in housing policy in Australia. Homeownership is important to the wellbeing of Australians, and the accounts will help more Australians to once again realise the dream of homeownership. The biggest barrier to homeownership is saving for the deposit. First home saver accounts will provide a tax-effective way for Australians to save through a combination of a 17 per cent government contribution and a low 15 per cent tax rate on earnings. For example, a couple who were both earning average incomes and putting aside 10 per cent of their income into individual first home saver accounts would be able to save more than $88,000 after five years. That is almost $13,000 more than they otherwise would have.

The government’s First Home Saver Accounts initiative is part of our responsible approach to economic management, as it encourages young Australians to save. The government is investing around $1.2 billion over four years in the First Home Saver Accounts policy, including administrative costs. This is part of a package of measures, costing $2.2 billion over four years, to boost housing supply and assist those most in need, namely first home buyers and renters on low and moderate incomes. This includes the Housing Affordability Fund, which will assist local governments to reduce the cost of providing new housing related infrastructure and improve planning processes; the National Rental Affordability Scheme, which will provide investors with incentives to construct rental housing for low- and middle-income households with rents 20 per cent below the market level; and a better approach to land release with the identification of surplus Commonwealth land which could be developed into additional new housing. Through these measures, the government is taking the initiative to provide housing affordability for all Australians.

I would also like to clarify some points raised by opposition speakers in relation to the bill. It was suggested that the first home saver accounts do not allow for fluctuating incomes. That is not correct. In order to withdraw money from a first home saver account, contributions of at least $1,000 must be made in each of at least four financial years. The requirement is not that contributions must be made in the first four financial years or even four consecutive financial years. Individuals will not have their accounts closed if they are unable to contribute for a year or two. If an individual finds themselves in a position where they are unable to contribute for a year or so, their account will remain open. When they are again in a position to be able to contribute, they may do so. The government contribution will be paid on any amount of personal contributions up to a maximum of $5,000 per year. It is not necessary to contribute a minimum of $1,000 to receive a government contribution. There is no requirement for an individual to hold an account for four years before they receive a government contribution.

A speaker referred to comments made about the level of complexity of the first home saver accounts in response to the consultation paper issued by the government in February 2008. The government has listened to industry and the community. The final policy design announced by the government in the 2008-09 budget has simplified the overall operation of the first home saver accounts for individuals, account providers and the tax office. These changes will make it easier for account providers to offer the accounts and for account holders to understand how they operate. The most important of these changes is the flat 17 per cent government contribution on the first $5,000 of personal contributions, which has streamlined and simplified the contribution arrangements. First home saver accounts will receive significant tax concessions, along with government contributions designed to assist individuals to save for their first home. Given these benefits, it is important that there be laws and compliance measures in place to ensure first home saver accounts are being used solely to assist with the purchase of a first home. The government has worked with the potential providers to ensure compliance costs are minimised.

Once again, I thank those who contributed to this debate. I commend the bills to the Senate.

Question agreed to.

Bills read a second time.