Cory Bernardi (SA, Liberal Party, Shadow Parliamentary Secretary for Disabilities, Carers and the Voluntary Sector) Share this | Link to this | Hansard source

The first home saver accounts and the Housing Affordability Fund are designed to support Australians saving part of their income in order to buy their own home. The coalition supports measures that will improve savings. Any government initiative designed to tackle the current decline in housing affordability is certainly most welcome. We often hear of Australians facing mortgage pressures. However, it is becoming increasingly difficult for young families to afford their first home. First home saver accounts are intended to provide a tax-effective way for Australians to save for their first home. The coalition welcomes these well-intentioned initiatives. As such, we supported the scheme in June of this year.

The First Home Saver Accounts (Further Provisions) Amendment Bill 2008 will implement the remaining aspects of the scheme. The coalition will be supporting this bill, thereby making the system operable, but we have a few comments and a couple of reservations. There can be no doubt that many Australian families are dismayed over rising housing costs. One of the goals for every parent is to see their children being able to afford their own home. I notice there are many students in the gallery today. We would like to see all of them able to afford their own home and able to save in a tax-effective way throughout their lives.

Families and young people really do need every help that government can give them, so that they can continue to save and afford their own home. This was recognised by the former coalition government when last year it committed to a similar scheme, but the scheme we advocated was more flexible in its administration. As well as this, under the coalition proposal last year, children could be account holders allowing for a more substantial deposit to be built up over a longer period, all in a tax advantaged environment, thereby encouraging a culture of saving from a very young age. This is an area particularly close to my heart as I devoted a considerable amount of my preparliamentary life to encouraging savings for children.

The coalition’s proposed scheme last year was to introduce tax-free home saver accounts to provide a simple, tax effective way to help Australians save for their first home. In contrast to Labor’s policy, the coalition’s proposal was to have two types of accounts, one being a tax-free home saver account for children and the other a tax-free home saver account for adults. Under the coalition’s policy, tax-free home saver accounts for children were to be available to all Australians under the age of 18. Parents, grandparents and others wishing to contribute up to a total of $1,000 between them each year could place money into an account. What better way to demonstrate to children the benefits of saving and planning for the long term? The appeal of this initiative was not only that it would have changed the future financial potential of our children but also that contributions would have been tax deductible and savings in the account would have been available to purchase a first home any time after the account holder turned 18.

The coalition recognised the difficulties faced by first home buyers then, and we acknowledge and we recognise the difficulties that continue to confront first home buyers now, which is why we will be supporting the amendments to the First Home Saver Accounts scheme. However, there are factors within the Rudd government’s First Home Saver Accounts scheme that present some concern. The scheme does not really address the decline in housing affordability. The first home saver accounts will not reduce the prices of houses or land. They will allow people to accumulate a deposit in a tax effective manner but they do not go to addressing the real substance of the problem, which is housing affordability. Mr Rudd and Mr Swan can spin this scheme any way they choose, but their government is not tackling the cause of the growing problem—that is, the actual factors contributing to high house and land prices.

This scheme does not address the limited land supply that is a result of restrictive land release policies of state and local governments. In some states—and South Australia, of which I am a proud senator, is one—the Land Management Corporation now has a for-profit objective, and so they have an incentive to reduce the release of the supply of land, which is the significant, substantial cost for first-time buyers. It is an appalling situation and it is something that, quite frankly, this legislation does not address. It makes a mockery of the cooperative federalism model that the Rudd government has championed so loudly.

The principal reason for rising house costs is that the land supply has been restricted and this has caused prices to rise accordingly. We also have enormous government taxes, fees, levies, charges and compliance costs—all adding enormously to the cost of new housing. We are advised that these now represent a quarter to a third of the cost of a new house and land package. A quarter to a third of the cost of a new house and land package is taken up in taxes, fees, levies, charges and compliance costs—unnecessary burdens in many instances. The Rudd government’s first home saver accounts will not solve the housing affordability problem because they will not increase the supply of affordable homes. They will only increase the amount of money that potential home buyers will have to spend. If all potential home buyers participated as fully in this scheme as they possibly could, they would all be on a level playing field, which would only drive the cost of first homes up in an inflationary market because they would all be there at the same starting point and would be able to bid accordingly.

The first home saver accounts are currently restricted at $75,000. As a result, with the Rudd government failing to address the actual cause of increasing housing prices, we can expect house prices over the longer term to continue to rise, and this figure of $75,000 as a percentage of a house price will steadily decrease in relation to the overall cost of purchasing a home. There are also restrictions in this bill on accessing the saved money for a period of four years. That in some instances may restrict people from purchasing a home at the best possible time in the property cycle. We may see a market turn. We may see that many first home savers miss out on a key opportunity to buy. We also recognise that the government will pay a contribution of 17 per cent of the up to $5,000 saved each year. This is a flat rate for everyone involved in the scheme, so it stands to reason that those on high incomes who can save the most amount of money will get the most benefit and will be able to compete more effectively in what is currently a very tight property market.

Problems associated with this include the clause in the bill that the individual must deposit $1,000 over four separate financial years in order to be able to withdraw their money. This can present difficulties for some individuals. I understand that there is an incentive to encourage people to save in a continuing and ongoing manner. But if people put money into these accounts and for some unforeseen or unexpected reason they cannot continue to put $1,000 aside for four separate financial years, they would have no access to their money. If their plans change or their circumstances change, they cannot access their money unless they roll their money into their superannuation and take their chances with early release provisions.

As well as these factors, the first home saver accounts cannot be used to purchase property until after 2012, because you have to have them for four years and the scheme does not take into account those who have already commenced saving for their first home. We should be offering every support to those people who have been doing the right thing in a non-tax-advantaged environment. Of course, those who are on low incomes or in debt are obviously in no position to save and they will not benefit from the scheme. They have once again been overlooked by the Rudd government.

The first home saver accounts will have to be easily accessible and understandable for young people in order for the scheme to carry out what it is designed to do. The fact that we are revisiting this scheme and making amendments to it indicates that it was not well considered in the initial instance. Every additional layer of complexity in the regulatory framework will not only reduce the return to savers but reduce the participation of savers, diminish competition and decelerate the arrival of these important and valuable products onto the market.

Whilst the coalition supports the amendment bill, there are some concerning factors. We call on the Rudd government to further investigate these issues in the near future for the benefit of young Australian families. The coalition will work cooperatively to see benefits for young Australian families and to help those who want to do the right thing and save for their first home. We want homebuyers in this country because there is no greater investment in one’s family than giving them a place called home. We will be supporting these bills, as I have indicated, but we believe that the Rudd government should be doing more.

Scott Ludlam (WA, Australian Greens) Share this | Link to this | Hansard source

The Greens will be supporting the First Home Saver Accounts (Further Provisions) Amendment Bill 2008 and the First Home Saver Account Providers Supervisory Levy Imposition Bill 2008. The bills make some minor legislative amendments to support the smooth functioning of the government’s first home saver accounts. The primary legislation implementing this policy was passed with the support of the Greens, so we will not be opposing these bills. The first home saver accounts are a central component of the government’s efforts to address housing affordability and homelessness. I note that the scheme will absorb around half of the $2.2 billion of new funding that the government has allocated to address housing affordability and homelessness. For this reason it is important to recognise the limitations of the scheme and to make sure that our resources are properly targeted.

The median house price has increased from four times the average annual income to six to seven times that income. It has created housing stress right through the market and it has made it harder for people to get into their first home. The rental market is also becoming untenable for many, with one in 10 low-income households in private rental spending more than half of their income on housing. In May 2008 the Minister for Housing announced that 100,000 Australians were homeless. Given the gravity of these problems and the enormous impact that they are having on the lives and welfare of so many Australians, it is critical that the government channels public resources toward solutions that will have the greatest impact and will target the greatest need.

First home saver accounts have the potential to assist first home buyers to save for a deposit on a home loan and thereby avoid getting into trouble with undercapitalised mortgages that they cannot afford. This is undeniably helpful for people who can afford to contemplate purchasing a house. Because the savings in first home saver accounts can only be withdrawn to purchase a first home, rolled into superannuation or withdrawn when the account holder turns 60, they are really only of use to people with enough money to seriously contemplate purchasing a house or who can afford to divert a portion of their income to long-term savings in order to benefit from this government contribution. As the government contribution is a percentage of the amount saved, those people who can afford to contribute more will receive greater government assistance. As there is no means testing, there is nothing to prevent people who have sufficient financial means to secure a home loan unassisted from still benefiting from this scheme.

The eligibility criteria exclude people who have previously built or purchased a house to live in, but they do not exclude people who own a house that they built for investment purposes. The 15 per cent tax rate on earnings from a first home saver account is good for higher income earners who ordinarily have their income taxed at a higher rate, but is not beneficial for lower income earners who may have all of their income taxed at this rate anyway.

As Senator Bernardi pointed out, first home saver accounts do not address the shortage of supply of affordable housing, yet they have the potential to increase demand in the medium term when account holders are able to access their funds and seek to make a purchase. In isolation, increased demand obviously has the potential to further inflate house prices. Essentially, the first home saver accounts assist largely the same people who are already eligible for a first home owners grant, which is estimated to cost the Commonwealth an additional $1 billion in 2008-09. It is worth while assisting people to purchase their first home and assisting them to get on a financially sustainable footing, but I would argue that spending half of the $2.2 billion of new money allocated to housing affordability and homelessness in the 2008-09 budget on this scheme is quite disproportionate and does not give due regard to the grave need of those people who are simply too poor to benefit from a measure such as this—notably, people struggling to meet the cost of private rental accommodation and people without a home at all.

The people experiencing the most serious housing stress are low-income families in private rental accommodation. According to a study commissioned by the Australian Housing and Urban Research Institute, 65 per cent of low-income private renters are experiencing housing stress at the moment. Approximately half of private renter households in housing stress experience severe housing affordability problems. That means they are forced into making decisions they would not otherwise make, such as missing meals or letting kids miss out on school activities. The Salvation Army reported to the recent Senate inquiry into housing affordability that the vast majority of clients seeking assistance from their emergency relief centres were in private rental accommodation and were paying on average slightly more than half of their entire income on housing. As the Australian Housing and Urban Research Institute study observed, many in private rental no longer aspire, or are no longer able to aspire, to homeownership.

I welcome the fact that the government is pursuing measures to address these needs through the National Rental Affordability Scheme and the Housing Affordability Fund and by building homes for the homeless. These are important initiatives and they are a welcome indication of the government’s concern for people in housing stress, but they are not receiving anywhere near the same degree of public funding as the first home saver accounts. In order to provide some more resources for these measures, I will be moving two simple amendments in the committee stage which are aimed at targeting first home saver accounts at those most in need. The Greens would like to see this measure means tested and targeted so that it cannot be accessed by people who already own an investment property. The money saved should be directed to those in greatest need who cannot afford to yet purchase a home—low-income earners in rental accommodation and homeless Australians.

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

I rise to speak on the First Home Saver Accounts (Further Provisions) Amendment Bill 2008 and the First Home Saver Account Providers Supervisory Levy Imposition Bill 2008. The financial pressures faced by first home buyers have increased, with the price of an average home rising more quickly than the average annual wage and first home buyers spending a greater proportion of their total income on mortgage repayments than at the beginning of the decade. Housing affordability, as measured by the Housing Industry Association, is at record lows, with mortgage repayments for the typical first home buyer now consuming 31.7 per cent of their gross income compared to 17.9 per cent in 1996.

On 4 February 2008, the Rudd Labor government confirmed its 2007 federal election commitment to establish first home saver accounts to assist Australians aged 18 and over to save for their first home. This measure will be welcomed by those who are struggling with high rent—people who are desperately trying to save what they can out of their weekly budgets for a house deposit. The First Home Saver Account Providers Supervisory Levy Imposition Bill 2008 will enable the minister to impose a separate levy on first home saver account providers. This proposed legislation is consistent with the existing financial sector levy framework that funds the Australian Prudential Regulation Authority supervisory activities on a user pays basis. First home saver accounts provide an additional mechanism for individuals in which a family can save for their first home in which to live. They are an important part of our plan to tackle the housing affordability crisis.

These two bills implement additional parts of the government’s election commitment to assist people to save for a deposit for their first home. Accounts can be provided by banks, superannuation funds, building societies, life offices and credit unions. Specifically, the two bills establish a levy to recover the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission and the Australian Taxation Office costs of regulations that mirror the current retirement savings account model and an unclaimed moneys provision that will be consistent with those applicable to other financial products.

On 8 February this year, a consultation paper was released outlining the proposed features of the accounts and how they would operate. The government undertook an extensive consultation process, which concluded on 7 March this year, and sought comments from the community and industry on the detail of the accounts. The government received 150 submissions from individuals, businesses and organisations. In response to the issues and suggestions raised during the consultation period, the Rudd Labor government has made a number of changes to improve the design features of the accounts. Some of the key changes include: the government will contribute 17 per cent on the first $5,000, indexed, of individual contributions made each year; an overall account balance cap of $75,000 has been introduced; and the upfront contribution of $1,000 has been removed. The government has maintained the taxation incentives—investment earnings or interest that accrue in the accounts will be taxed at 15 per cent and withdrawals will be tax free where they are used to purchase a first home to live in.

According to official statistics, it has never been harder for first home buyers to purchase their first home in Australia. The average home now costs seven times the average annual wage, up from four times the average annual wage just 10 years ago. Nationally, first home buyers, as I mentioned earlier, are now spending 31.7 per cent of their total income on mortgage repayments, up from 17.9 per cent in 1996. The proportion of homes being bought by first home owners declined from 21.8 per cent in June 1996 to 17.1 per cent today. That is why this measure is so important.

The Rudd Labor government has a national housing affordability strategy. Federal Labor’s First Home Saver Account scheme is a key component of that strategy. First home saver accounts will work in conjunction with federal Labor’s existing $1.1 billion worth of commitments to increase the supply of affordable first homes and rental properties. They include the Housing Affordability Fund, which will increase housing supply by providing money for local infrastructure, and incentives for state and local governments to lower development charges. The National Rental Affordability Scheme will provide investors tax incentives to increase the supply of new affordable rental properties across Australia, saving 50,000 low- to middle-income families 20 per cent on their rental bills. And we will introduce a better approach to land release, with all surplus Commonwealth land being freed for housing development or community infrastructure. This measure is to be commended and welcomed by those opposite, as it will help young people to save for a deposit for their first home. It will help young families.

Rising housing prices and higher interest rates over the last three years, have increased financial pressures on households and made it harder to save for a first home. Homeownership is important to the wellbeing of Australians. We need to do all we can to make the dream of homeownership a reality. 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 in which to live through a combination of government contributions and lower taxes.

Saving for a house deposit and maintaining a loan is difficult for young families. That is why the Reserve Bank of Australia’s interest rate cut earlier this month was so welcomed by mortgagees. For some homebuyers it was their first experience of a rate cut, after the 10 consecutive interest rate rises experienced under the Howard coalition government. Families across my home state of Tasmania certainly welcomed the recent 0.25 per cent interest rate cut by the Reserve Bank. This cut took pressure off family budgets. It was the first interest rate cut for seven long years—seven long years of worry and stress for families; seven long years of wondering how to make ends meet. For the average mortgage, the interest rate cut will put more than $500 a year back into the family budget—and, for many Australians, much more than that. For 740,000 first home buyers, this is the first time they have experienced an actual reduction in their mortgage payments.

There is no doubt that the economic challenges that we are facing in Australia today are significant. Labor inherited an economy which has suffered nearly 12 years of neglect from those opposite and was hit with 10 interest rate rises in a row—including eight rises in three short years. Families are still hurting from these increases in interest rates. Those 10 interest rate rises also had a huge impact on the level of economic activity in Australia. Furthermore, when the Rudd Labor government was elected in November last year, inflation was running at a 16-year high.

In 2006, the now opposition leader, the member for Wentworth, Malcolm Turnbull, told families that high inflation was a ‘fairy story’. Unlike those opposite, those of us in the Rudd government have no intention of sticking our heads in the sand and hoping these challenges will go away. We have not hidden from economic challenges in the past and we will not hide from them today.

Our Prime Minister, Kevin Rudd, has made it clear to the Australian people that we acknowledge the various economic challenges we are up against and that we are determined to address them. We have been and will continue to be upfront with the Australian people, giving them the honest answers they deserve. The Rudd Labor government believes in governing for the future; it believes in laying the foundations for the nation’s long-term prosperity. We do not believe in short-term bandaid measures. We, unlike those opposite, have a plan for the future. I am confident and I have every confidence in the Prime Minister and Treasurer Swan to guide us and the Australian people through these tough times.

We have hit the ground running in many areas—in particular, housing affordability. The previous government did not even have a housing minister. Why? Because they did not care about families struggling to make ends meet. In March 2006, housing affordability stood at four times the value of the average annual wage. When those on the other side left office at the end of 2007, it was 7½ times the value of the average annual wage. That is a huge decline in real housing affordability for working families.

We have a practical plan of action to do something about a real need for working families. Our Housing Affordability Fund has been met with much appreciation from the community. I note that the Australian Local Government Association has welcomed the government’s announcement already. Its president, Councillor Paul Bell, said:

We are pleased that funding can be made available to help councils facilitate affordable housing projects. We are particularly grateful that the Australian government are prepared to fund community infrastructure related Housing Affordability Fund projects.

I support this package of bills because I want people in my home state of Tasmania to have the opportunity to buy a home. As Prime Minister Kevin Rudd said in question time on 15 September this year:

The government, in building an Australia for the future, is determined to ensure that whatever can be done to preserve the dream of Australians to one day own their own home does not just remain a dream but can still be a reality.

A home provides security. Home ownership carries with it a raft of social and economic benefits that directly affect individual and family stability, security and capacity. I support these bills because these measures will work towards ending the housing crisis.

Gary Humphries (ACT, Liberal Party) Share this | Link to this | Hansard source

I too support the legislation which has been tabled to assist first homeowners by establishing first homeowners savings accounts. But I am a little less enthusiastic about the outlook for homeowners than Senator Polley is. I recognise that the legislation which the government has tabled in this area changes one small part of the equation that homeowners, particularly first home owners, face. But I also acknowledge that there are huge pressures in other areas and this measure, of itself, will only go a very small way towards reducing the present struggle that many Australians encounter in being able to afford their own homes.

The fact is, as Senator Polley has noted, that housing affordability has become more difficult in recent years because of a complex range of factors. No one decision of government, or no one omission or neglect by government, has led inexorably to homes becoming less affordable than they once were. But we can point to a number of key factors. One of those is that the supply of new land into the Australian marketplace has become more and more restricted.

It is clear, and this was identified by a recent Senate inquiry, that state governments had pursued a deliberate policy of limiting the amount of land that they released into the marketplace for new homes. Not every homeowner looks for a greenfields block of land to build their home but a very significant proportion of them do just that. If state governments make the deliberate decision to reduce the amount of land that they put into the marketplace for the purposes of allowing new building to occur, it increases the cost of the land that they do actually release and that pushes up the cost of homeownership.

We can see in areas all over metropolitan Australia, particularly Sydney, Melbourne, Brisbane, the Gold Coast and elsewhere, that the decisions of state governments to restrict that pipeline of land onto the marketplace has had a very significant inflationary effect on the cost of land. The cost of a block of land anywhere near urban areas in this country these days is very much higher than it was just 10 or 15 years ago. That has a flow-on effect.

You might ask why governments would choose to restrict the amount of land that they release. Well, of course, governments receive returns from the release of that land. When those returns are maximised because the price is pushed up, the return to the governments concerned is that much greater. This is very evident in the case of the Australian Capital Territory, where the government in this territory has made a quite deliberate decision to restructure the land release program to greatly restrict the amount of land being released in this territory with the effect that, first of all, the price of new blocks of land has risen dramatically in the last 10 years and, secondly, many people have been pushed to crossing the border into New South Wales to find affordable land. It is quite ironic that a Labor government in this territory would force people to go across the border to find housing that they can afford, but that is exactly what has happened in this territory. It is not alone in doing so.

Also, the costs to government associated with the purchase of land have increased quite dramatically in recent years. We have seen very little attempt by state governments to adjust, for example, thresholds at which stamp duty is paid for the purchase of housing. So, as the price of housing has gone up, people are finding themselves having to pay more and more in stamp duty to be able to make that purchase. Other fees, levies, charges and compliance costs have been rising and, in almost every case, that goes to state governments; sometimes it goes to local government but, in all cases, it is government that is benefiting from those higher costs. Indeed, governments across this country have been reaping increasingly larger amounts from taxes and charges relating to housing.

That might all be excusable and understandable if that enormous dividend to governments was being ploughed back into affordable or public housing in some form or another, but we know that that is not the case. We are also aware that the amount of public housing available to Australians across the country has been, at best, stagnant or, in real terms, diminishing in recent years. Despite the investment of over $1 billion by the Commonwealth government in the Commonwealth-State Housing Agreement over a number of years, we have seen no net increase in the amount of housing available to Australians in the category of public housing. It might be a good thing, in some sense, that people are leaving public housing and making the decision to buy their own homes outside the public housing system. But it also obviously puts pressure on that system when more people are being effectively forced out of public housing because of the unavailability of suitable accommodation.

I note Senator Polley’s views about how iniquitous it is that housing has become less affordable to Australians in recent years. But I have to say that I do not share Senator Polley’s view that somehow this can be sheeted home to the former coalition government, because our contribution to that situation was to increase the real living standards of Australians by increasing real wages in Australia by some 20 per cent. That was our contribution to making Australian housing more affordable. But we were working against state and territory governments, which were at the same time pushing up the cost of housing. There was a very real transfer going on there from the Commonwealth to the state and territory fiscs by virtue of that sleight of hand.

The First Home Saver Accounts measures before the Senate at the moment do go some small way towards helping Australians to cope with those higher costs but, as I have indicated, they are far from being the complete answer. We appreciate that mortgage pressures are very difficult to cope with and that getting your first toehold in the marketplace is a real challenge. Being able to put together the money for a deposit is extremely important and it is a welcome development to see the measures in this bill put that more within the reach of average Australians.

I do note, however, that this measure is an echo of the measure that was announced by the coalition during last year’s election campaign. One of the features of the coalition’s proposal was that there should be two types of accounts available to potential first home owners: the first a tax-free home saver account for adults and the second a tax-free home saver account for children. People might well wonder why children need home saver accounts, but the fact is that those children will grow up and they will aspire, like every other Australian, to own their own homes. Their capacity to do so will be enhanced if they have some money behind them. These days children will need to face the costs of higher education and so having the money put aside in a quarantined form by way of a first home saver account is actually a very good idea. It also offers the possibility for parents, grandparents and others to contribute to that account. Being tax free, they would help those children to reach adulthood with some backing behind them for the purposes of making housing accessible and affordable to them within a reasonable period of becoming adults. In my opinion, that is a superior model for providing affordable housing in the long term to Australians. That has not been taken up by this government, but I commend the idea to them. It is not too late to come back and to look at the question of how we might make housing more affordable in a long-term sense. That is certainly one way of doing it.

We acknowledge that a measure such as this needs to be carefully thought through. It needs to be buttressed by a number of other measures to ensure that Australians are in a position to be able to put together the wherewithal to make these important decisions. But, as I said, we do not believe that this is the complete answer. The supply of land is a crucial additional ingredient for ensuring Australians have the ability to afford to buy their own land or to buy existing housing.

In addition, I note that the first home saver accounts are restricted to $75,000. The Rudd government is not addressing with this measure the actual cause of increased house prices and so we can expect there to be further pressure on that figure as time goes by. This figure as a percentage of the cost that people will have to incur in getting into their own homes will steadily decrease in relation to the overall house price. At the end of the day, it will need to be adjusted. There does not appear to be a mechanism within the legislation to do that. I expect that the government will have to revisit that question as housing continues to rise in cost.

There is a restriction on accessing the saved money for four years—meaning that, should the market turn, many first home savers may miss a key opportunity to enter the marketplace, and that is always unfortunate. The government will pay a contribution of 17 per cent of up to $5,000 saved each year. That is a flat rate across the board for everybody. It does not vary on the basis of one’s existing needs. Those on high incomes will be able to compete more effectively in an already tight property market. It was a little bit surprising to see a Labor government introduce a measure of that kind without any sort of progressive nature. As I say, we foresee some issues that will need to be re-addressed when the government sees the operation of this scheme in practice. It could be that, in due course, amendments will be required. Problems potentially include the clause that the individual must deposit $1,000 over four separate financial years in order to be able to withdraw their money.

We are aware that Australia is entering a period of financial uncertainty. People these days are more likely to face the prospect of unemployment than they were just 12 months ago. We see the prediction in the budget this year that over 100,000 Australians are expected to join the dole queues. If you happen to be one of those Australians and you have perhaps put one or two years deposit aside pursuant to the terms of this scheme and you find yourself unemployed and unable to contribute in the third year or the fourth year, your capacity to withdraw from the scheme is thereby limited. I think that represents a serious limitation on the way in which this operates. If people’s plans change, they cannot access their money until they roll the money into their superannuation and take their chances with early release provisions, and we know that there are many problems associated with the way in which that works.

The scheme being set up at the moment, effectively requiring a four-year qualification period, means that these measures will not benefit any first home purchasers until 2012. For people who are already in the process of saving for their first home these measures will not be of particular benefit. A great deal of work needs to be done by this government to ensure that it puts in place a really changed outlook for Australian first home owners. I think cheap lines like, ‘We’ve got a minister called the housing minister in this government,’ and, ‘We’ve turned the corner on housing affordability because we’ve got a person called the housing minister in this government,’ really do not give credit to Australians’ understanding of this issue or create any real expectation that we can make a difference with policy such as this.

The fact is that we as a government did care very deeply about homeownership and the capacity of people to be able to afford to buy their own home; hence our decision to ensure that Australians were able to take advantage of a rising economic tide, to benefit from increasing levels of employment and to take advantage of rising levels of real wages, and those measures were rolled in together to ensure that the outlook for Australians was much brighter. In one sense, the growing wealth of Australians would have had some flow-on effect to the price of housing. It is somewhat inevitable, I suppose, that the wealthier people are overall, the more expensive housing becomes in reaction to that marketplace.

But it was not helped one iota by seeing state governments respond to that problem by starting to deliberately push up the cost of housing in order to be able to effectively transfer that benefit from the pockets of taxpayers into their own coffers. I hope that in the present environment, where housing affordability has become more tight, where Australians are facing the prospect of falling living standards and higher unemployment, state governments will review those policies and push more land out into the marketplace to address the problem of the high costs associated with buying that first block of land to build that first house. That, I think, is an appropriate response to Australians’ desire to see that dream of first home ownership continue and to preserve the very high levels of homeownership that we experience in this country relative to other parts of the world.

To sum up, very clearly the opposition will not stand in the way of a valuable measure such as this, which presents a possibility for Australians to take forward a dream of being able to own their own homes. Putting money aside in an account like this, which is tax free and protected and for which incentives are offered, is a really important measure to be able to make a real difference, but it is not the entire answer.

Before we hear other Labor senators rise in this place and tell us how much we have turned the corner by virtue of putting this measure in place, let me remind them that this is a very long-term and very complex whole-of-government task that must be shared with governments at other levels in Australia. I think the Rudd Labor government would do well to put the issue of greater housing affordability on its agenda for future COAG meetings and meetings of the relevant state and territory ministers councils to make sure this issue is not neglected. I suspect a great deal could be done through the persuasion of state ministers to release some of the land which they have tied up in land banks at the present time to improve affordability through measures such as that.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I rise to support the First Home Saver Accounts (Further Provisions) Amendment Bill 2008 and related legislation. I note that this bill is essentially an administrative bill to impose a levy in order to finalise the government’s First Home Saver Accounts scheme and that it imposes this levy to provide funding for APRA to carry out supervision of financial institutions which offer this scheme. So in that sense I welcome it.

I want to make some brief remarks in relation to the importance of housing affordability. Clearly there has been a decline in housing affordability. We have seen in recent years a spike in house prices in a number of markets, including, in South Australia, the Adelaide market, where housing affordibility is becoming increasingly difficult for young people who are not in the housing market and who do not have the benefit of being able to sell their existing home with significant capital gains in order to buy another home. It is become increasingly difficult.

I think one of the bedrocks of a good society is to ensure that we have high levels of homeownership, but for too many young Australians in particular and those who, through changed life circumstances, find themselves in the real estate market again this dream has become a nightmare. I think we need to pause to reflect briefly on the implications of a drop in the homeownership rate, on what that means for us as a society in terms of people giving up on buying homes, not getting into the market and deciding to spend their income on other items rather than what I consider to be a bedrock in society: having that home and having that foundation in a community.

I agree with Senator Humphries that there are many other things that can be done. I see this move by the government as a good first step. But I think it is important that we consider not just land release but also planning laws. I am not a great subscriber to the view that you simply have increased urban sprawl in terms of the carbon footprint and in terms of the impact that has on the environment.

In Adelaide, Madam Acting Deputy President, as you may well be aware, before World War II about 46,000 people lived in the City of Adelaide in what was known as the ‘square mile’. Now there are something like 22,000 people living there, fewer than half as many as 70 years ago and significantly fewer than, for instance, at the turn of the century. There is no reason why Adelaide has not got the capacity to have many more people living in the CBD. The Adelaide City Council suggests going back to pre-World War II levels. I think we should be bolder and go for a much more ambitious figure of up to, say, 100,000 people living in the CBD. That would involve the Commonwealth playing an active role—to put it bluntly, putting a rocket up state governments, who are dragging their feet on planning laws and, I think, standing in the way of allowing for environmentally sustainable, sensible developments that will allow for affordable housing, particularly in the CBDs of our cities and in transit corridors. There have been suggestions that that is the way governments are going across the country, and I welcome that, but I think much more needs to be done much more quickly in order to deal with that problem.

So, whilst this legislation is welcome in order to anchor the package announced by the government with respect to this saving scheme, unless you tackle those fundamental issues of housing affordability, of planning laws, of the release of land and of affordable housing generally—for which state governments bear a great deal of responsibility in terms of rates, taxes and impositions on new developments—I think that we will simply be moving too slowly in increasing the levels of homeownership in this country and ensuring that young people actually have a fighting chance of getting into the housing market. With those brief remarks, I indicate that I support this legislation, and I hope it is a package of many measures that in the future will make a dramatic difference in our level of homeownership in this country.

Anne McEwen (SA, Australian Labor Party) Share this | Link to this | Hansard source

I seek leave to incorporate speeches on these bills by Senators Bishop, Carol Brown and McEwen.

Leave granted.

Mark Bishop (WA, Australian Labor Party) Share this | Link to this | Hansard source

The incorporated speech read as follows—

I rise in support of the First Home Saver Accounts (Further Provisions) Amendment Bill 2008 and the First Home Saver Account Providers Supervisory Levy Imposition Bill 2008.

Both bills implement additional parts of the Government’s election commitment to help young people save for their first home.

As we are all aware, saving for your first home is very difficult. Individuals and young couples are just starting their careers. And income levels are yet to reach their peak. Under the previous government there was also 10 interest rate rises in a row.

As a result, around $400 per month was added to the mortgage of the average home. Interest rate rises exacerbate the affordability of home loans for people entering the market. Today average home loan repayments throughout Australia are over $2,000 per month. First home buyer mortgages have more than doubled in the last 12 years. Mortgages of a quarter of a million dollars for first home buyers are the norm.

No surprises there—given median house prices across Australian capital cities are now in excess of four hundred and twenty thousand dollars. It’s not hard to understand why there are declining numbers of first home buyers in the market. In 1991, first home buyers represented 20% of the market. Earlier this year that figure had fallen to just 16.4%. The great Australian dream of owning your own home is becoming more difficult. Australia has a long tradition of home ownership.

In the post war years returned soldiers and immigrants alike staked out their piece of land and built their homes. Home ownership offered security and stability. It still does. We want to keep the dream alive. We acknowledge the Commonwealth has a role to play and this Government has a strategy. Unlike the previous government we have made housing affordability a priority. We do not believe that housing policy should be left entirely to private developers and banks.

In order to have an effective policy which will address the housing needs of all Australian’s, its necessary to have a federal government that is interested and engaged in the policy debate. Making home ownership a reality for young people will require a shift away from rampant consumption and debt, with rental properties on the decline and in many cases rents very high, young adults have found that living at home is a far better option than moving out.

Why pay rent when by staying at home you can spend on yourself. When the time comes to buy a house, parents are increasingly refinancing to give the kids a start, particularly at a time when they thought they would be free of both the kids and their mortgage.

The family home has all the creature comforts. Of course there is the plasma TV in the bedroom, a wireless laptop, latest touch screen phone or PDA and an iPod. In the wardrobe is designer gear and in the driveway a nice set of wheels. Now why would they want to move out?

With credit and charge card debt in Australia reaching almost $45 billion. A ten percent increase over the previous year. And five times the level of debt in 1998. We need to bring back the principal of saving.

In 1996, the cost of a new home represented some four times the average annual wage. Today the cost is closer to 7.5 times the average annual wage. Saving the deposit is half the battle. First home saver accounts are designed to give young people a step up into the property market.

But, home ownership is not just the great Australian dream. It forms the basis of social stability. And the value to our society extends far beyond the benefit to the individual.

In 1996 Hilary Clinton quoted an African Proverb—

“It takes a village to raise a child.”

The proverb means the responsibility lies not only with parents, but also with the extended family, and in some cases the community. It is something to consider as in this century we move towards a more mobile workforce,

With more people renting because of the high cost of housing. Members of the Australia Defence Forces for example, may choose to rent because of the excellent housing provided by the Defence Housing Authority, or because of the relatively short term nature of their postings. We also want people not in work to move to places where employment opportunities exist.

Not everyone will choose to purchase a home. However as a government we need to give strong support to home ownership. Because home ownership builds the communities that we live in. It forms the nucleus that promotes the development of schools and health services, libraries and family centres. Communities and the people who live in them provide us with support, security and friendship. Communities and the people who live in them educate our children in social responsibilities, and care for us as we age. But perhaps as importantly, home ownership builds wealth. As an investment it’s second only to superannuation in securing your future.

If you own your own home there is a fair chance you will do well in a country like Australia. But over the last decade we are seeing divisions in the housing market. There are some who own their own home and have made substantial in roads into their mortgage. Over the years there has been a dramatic increase in the value of their properties. So this group while increasing the equity in their homes, are also reaping the benefits of the capital appreciation of what in many cases is their primary asset.

On the other hand, we are seeing a generation who feel they are condemned to rent for the rest of their lives. Savings and a savings plan are the first steps in reaching the goal of home ownership. And the first home savers accounts will become a foundation for many who believe a home of their own is out of reach. It is hoped that for young people the accounts will help to develop and encourage a culture of saving.

The government will contribute a maximum of $850 per year to accounts. Or a total of $3,400 over four years. The maximum account value is $75,000 plus any accrued interest and government contributions. Investment earnings from the accounts will be taxed at 15 percent. Withdrawals from accounts will be tax free, so long as they are used to purchase a home to live in. The accounts will work in conjunction with the Housing Affordability Fund, which will assist local governments to reduce the cost of water, sewerage, transport and other services for new housing developments. Making more land available at a lower cost. These initiatives go some way to addressing the demand and supply issues that currently stop young people from entering the property market.

After a lengthy consultation process which began in February with the release of a discussion paper, and the announcement of the scheme by the Treasurer in the May Budget. First home buyers can sign up for saver accounts on the 1st October 2008. The intent of the two bills is to address further parts of the Government’s First Home Saver Account legislation.

The bills seek to:

• Establish a levy to recover the APRA, ASIC and ATO costs of regulation, in line with the current Retirement Savings Account model. The levy, which is also attached to life insurers and superannuation funds will be set by the Treasurer each year.
• Implement a scheme for dealing with unclaimed money. The scheme will work in a similar fashion to non-superannuation investments. Where the account holder cannot be located the money will be paid to the Commonwealth after a period of seven years. However, account holders will be able to make a claim for their money at any time. This measure will reduce the compliance burden for providers, where accounts have been inactive for a considerable time.
• Amendments also go to secrecy and information sharing between the ATO, ASIC, APRA and the States and Territories. That is, it will provide access to information required by agencies, while ensuring privacy is protected. It also provides for information sharing between the Commonwealth and the states on first homebuyers.
• There are amendments to deal comprehensively with Family Law matters. The measures will ensure that in the event of a family breakdown, individuals will be able to access their partner’s Family Home Saving account, without the need to resort to costly legal proceedings.

These are all technical amendments. But they will give providers greater certainty of the final of the design scheme. In the Budget the Treasurer outlined more than $2 billion worth of initiatives to help families to get into their own home. They include -

• the $1.1 billion First Home Saver Accounts to encourage savings for home ownership,
• the $359 million Housing Affordability Fund that will deliver more homes, more quickly and at less cost.
• the $622 million National Rental Affordability Scheme that will build fifty thousand new rental properties; and
• a further $100 million has been allocated to build new homes for the homeless.

The initiatives address both the demand and supply problems that exist within our communities. The Housing Affordability Fund will address supply issues in getting housing development sites up. The First Home Saver Accounts tackle the demand problems by helping young people to save enough for a deposit. And the National Rental Affordability Scheme will provide affordable rental accommodation in our cities. This package of initiatives is a comprehensive start in addressing housing affordability. The previous government simply said, not our problem. I commend these bills to the Senate.

Carol Brown (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

The incorporated speech read as follows—

I rise today to make my contribution to the First Home Saver Accounts (Further Provisions) Amendment Bill 2008 and the First Home Saver Account Providers Supervisory Levy Imposition Bill 2008.

These two bills deliver the final parts of the first home saver scheme, following the passage of the substantive legislation earlier this year.

When the First Home Saver Accounts Legislation was passed in June 2008 the Treasurer Mr Swan highlighted its importance to first home buyers when he said and I quote:

“The introduction of the First Home Saver Accounts marks an important new beginning in housing policy in Australia. The accounts will help young Australians to once again realise the dream of homeownership.”

Indeed in the lead up to last years election the now Government made addressing the Housing crisis in this country a priority, convening a housing affordability summit and committing to introducing a comprehensive package of initiatives, such as the first home saver initiative, aimed directly at making home ownership in this country more accessible and affordable.

This initiative reflects our commitment, to assisting Australians realise that the great Australian dream of home ownership—something that in recent times has become increasingly out of the reach particularly for younger Australians.

As most of us are well aware, the biggest challenge when it comes to home ownership in this country has traditionally been saving an initial deposit. This remains true, perhaps more than ever.

As the Treasurer explained, the initiatives contained in this bill will provide a tax-effective way for Australians to save for their first home.

Any Australian, aged over 18 and under 65 will be eligible to open an account, so long as they have they not:

• previously purchased a home or built their first home in which they live,
• do not have or have not had previously a first home saver account and
• can provide their tax file number.

Personal contributions can be made by the account holder or any other party.

The account will be supported by government contributions, with the Government contribution being 17 per cent of the first $5,000 of contributions made into the account each year.

This will mean that the Government will give $850 to any first home saver account holder who contributes $5,000 a year.

The first home saver accounts are part of the Governments broader commitments to responsible economic management and assisting Australians with cost of living pressures.

Under this initiative the Government will invest around 1.2 billion over four years to help young Australians realise their dream.

These bills include the measures necessary to make the scheme operational.

These include:

• Amendments to ensure the secrecy provisions to enable Commonwealth agencies to share information they require in order fulfilling their statutory obligations, while ensuring the privacy of the account holder is protected.
• A scheme for dealing with unclaimed money in First Home Saver Accounts will be established. Under this scheme First Home Saver Accounts which 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 later identify themselves to the FHSA provider will be able to reclaim their money.
• Introducing a framework for imposing a levy on FHSA providers to provide funding for Australian Prudential Regulation Authority to carry out its supervision of financial institutions which offer FHSAs.

The Government is also introducing a number of other amendments to ensure the First Home Saver Accounts operate as they were intended. These minor amendments will allow existing laws to interact appropriately with the FHSAs.

The $1.2 Billion First Home Saver Accounts initiative is designed to assist Australians save money for the purchase of their first home, and, as I stated previously, these accounts will form only part of a range of measures this Government is implementing to deal with the current housing affordability crisis.

The Government has shown just how serious it is about tackling the affordable housing problem, by appointing the first ever Minister solely responsible for housing, the Hon Tanya Plibersek.

Since elected, the Government and Minister Plibersek have wasted no time on introducing measures aimed directly at improving housing outcomes for families, whether it be in terms of home ownership, accessing affordable rental properties, or in an increasing number of cases, quite simply ensuring that they actually have a roof over their head.

For many Australians, the family home or access to decent quality housing is a central tenet for many other aspects of life—providing stability, surety, a place in which to develop a sense of community and, of course, a place in which to establish a sense of pride.

For many Australians, many a happy memory has been forged in a place they have called home—whether it was teaching your child to ride a bike or making a home to raise your family, annual Christmas BBQs, or the establishment of successful veggie patch.

Indeed, access to affordable housing plays a crucial role in defining family, community and even national relationships.

In recent years however we have sadly seen a crisis in terms of access to affordable housing develop—with many aspiring home owners being squeezed out of the market and many more renters being unable to access affordable housing solutions.

The result? An increasing number of Australians suffering from what has been termed mortgage or rental stress - with a disproportionate amount of their income being consumed by housing costs.

Even worse is the situation for the estimated 100,000 people in Australia who are currently homeless, with no place to live.

The Rudd Labor Government has a comprehensive long term plan to address the shortfall of affordable housing; because we recognise that finding an affordable home is becoming more difficult in Australia.

As such we have invested $2.2 billion in a number of significant housing initiatives.

National Housing Affordability Fund

The first of these initiatives consists of a $512 million Housing Affordability fund to assist in the construction of new homes, making more affordable dwellings for those who need them.

This $512 million investment over 5 years is designed to provide a partnership with Governments and others across Australia to bring down infrastructure and holding costs for a new house in a new housing development across the nation.

The fund has placed an emphasis on proposals that improve the supply of affordable dwellings, we believe this will save home owners significantly as we will be providing the local investor with grants of up to $10,000 per home to reduce infrastructure barriers and holding costs associated with construction of a new home.

In my home state of Tasmania where affordable housing is such a critical issue the launch of the Housing Affordability Fund has been met with strong praise from, the then State Minister for Housing, the Hon Lara Giddings.

The Tasmanian State Government has already established a new Housing Innovations Unit to work with local councils and other stakeholders to investigate areas of Crown Land which may be available to utilise the Housing Affordability Fund, I am confident the State Governments Housing Innovation Unit and the Federal Governments Housing Affordability Fund will together be able to provide Tasmanians with more affordable housing.

Application guidelines for the Affordability Fund were recently announced by Minister Plibersek and the Prime Minster.

At the launch of the guidelines, the Prime Minster emphasised that aim of the fund was to encourage the building of much needed housing developments for Australians.

National Rental Affordability Scheme

As part of its plan to tackle housing affordability the Government has also announced, the National Rental Affordability Scheme, which will see the Government invest $623 million over the next four years to help stimulate construction of affordable rental properties.

The rising cost of rent has placed increased financial pressure on working families, so this Government will increase the number of affordable rental dwellings available whilst also reducing rental costs for low-to-moderate income households.

The National Rental Affordability Scheme delivers on an election commitment we made to the Australian people last year, by encouraging large scale investment and innovative delivery of affordable housing to try to ensure up to 50,000 affordable rental properties are built over the first four years.

The scheme will be delivered in two phases, with a two year establishment phase from July 2008 which will involve the construction of 11,000 homes and an expansion phase from 2010 to 2012 involving 39,000 homes.

The Government has also made a commitment that if the demand from renters and investors remains strong we will make available a further 50,000 homes from 2012.

To drive this scheme we are offering institutional investors and other eligible bodies annual tax incentives or a grant every year for a period of up to 10 years to ensure the production of these affordable rental homes.

To be eligible for a property built under the National Rental Affordability Scheme, tenants need to be low or moderate income earners, earning below a defined income limit.

We believe this scheme will provide many Australians struggling with the rising costs of rent the chance to live in an affordable rental home.

Homes for the Homeless

Also in our battle to provide housing for all Australians the Government will invest $100 million over the next four years, and another $50 million in 2012/13 to build 600 new homes for the homeless.

This investment forms part of the Government’s A Place to Call Home strategy, the homeless will be able to move directly into housing instead of going into refuges and will receive tenancy and support services.

The A Place to Call Home strategy will help the homeless break the cycle of moving in and out of homeless support services and help them re establish themselves in society.

Minster Plibersek has also released a Green paper, on homelessness, and conducted extensive consultation, with the White Paper due out this month which will set out the Governments plan of action to tackle homelessness until 2020.

Increasing the supply of land

Finally, the Government is also currently in the process of implementing its election commitment to release surplus commonwealth land for the purpose of building new houses and communities. With a report due in the New Year, this promises to provide another means of tackling the housing affordability crisis.

In support of this, Minister Plibersek earlier this year announced the appointment of Dr O’Donald as the inaugural chair of the National Housing Supply Council.

The Council is due to publish its State of Supply report to analyse the adequacy of rates of construction and land supply in Australia over the next twenty years.

The council will also contribute to the Governments approach to the sale of surplus Commonwealth land.

Therefore the work of the council will enable the Government to better assess current and future demand for housing across Australia.

The Rudd Labor Government is aware of the large scale investment required to rectify the availability of affordable housing in Australia.

All of these initiatives form part of the Governments comprehensive and coordinated approach tackling to the issue of housing affordability in Australia.

Such initiatives, including, of course, the one that is the key subject of this bill should be applauded.

Need I remind those opposite that this is in stark contrast to the situation the Rudd Government inherited a little over 10 months ago?

When this Government came to office housing costs had increased significantly and were spiralling out of control, it had become extremely difficult for Australians to purchase their own home.

Indeed when taking over office at the end of last year the average cost of an Australian home had increased to a staggering 7½ times the average annual wage.

This is in stark contrast to 1996, when the average cost of a home then was four times the annual average wage.

This represents a dramatic increase in the cost of housing, the Government recognised how out of reach owning your own home had become to average Australians, so we set about introducing measures to ensure owning your own home once again become accessible to working Australians.

In the last decade under the watch of those opposite, we have also seen the average mortgage for a first home buyer double from $107,000 in 1996 to reach $248,000 by the end of last year. Back in 1996 mortgage holders were spending 15.2 per cent of their total income on repayments, by the end of last year this had risen to upwards of 30 per cent.

These figures highlight how in the last decade there has been a huge increase in what first time home buyers were having to outlay for the purchase of their first home. With this in mind the Government decided to introduce First Home Saver Accounts to help encourage personal savings whilst also providing some extra financial help to first time home buyers.

Before introducing the First Home Saver Accounts the Government wanted to receive public feedback to ensure the best system possible, so earlier this year we released a consultation paper outlining the proposed features of the accounts and how they would operate.

In seeking comments on the paper the Government received over 150 submissions from individuals, businesses and organisations.

The Rudd Labor Government undertook a comprehensive consultation process, the feedback we received was extremely helpful to provide more effective public policy. In response to the issues and suggestions raised by the various stakeholders during the consultation process a number of improvements have been made to the FHSAs.

The scheme is in the final stages of preparation and will become operational on the 1 October 2008, we hope the scheme will encourage all Australians to save for a deposit for their first home, we believe that the accounts will assist people to make disciplined savings to invest in the great Australian dream, of owning your own home.

The First Home Saver Account provides an extremely effective and fiscally rewarding program for first home buyers, a couple earning average yearly incomes both putting aside 10 per cent of their income into individual FHSAs after five years would be able to save a deposit of more than $88,000.

As the program demonstrates disciplined saving can provide average Australians with a wonderful opportunity to save a substantial amount for use as a deposit for the purchase of their first home.

The Government’s First Home Saver Accounts are a critical measure to help provide Australians with more affordable housing options.

Therefore I commend this bill to the chamber and ask for its full support.

Anne McEwen (SA, Australian Labor Party) Share this | Link to this | Hansard source

The incorporated speech read as follows—

Over the last decade it has become increasingly difficult for people to purchase a home. The rising cost of living has hit many Australians hard and it is our responsibility to ease this pressure as much as possible. Australians suffered under the I 0 interest rate rises that occurred under the Liberal Party and while they suffered, the Liberal Party wasted taxpayer money on their spending sprees.

When Labor came into Government, Government spending was running at between four and five per cent growth on the part of the Coalition. We have reduced that to just on one per cent.

If we had continued this irresponsible spending, at the same growth level that the Howard Government had it running at for the last several years, it would have cost taxpayers an extra $23 billion worth of outlays. Another $23 billion of taxpayers’ money would have been blown away. Those opposite spent recklessly with the money of the Australian public and the damage that recklessness has caused to this economy is still evident today.

Thankfully, families were able to breathe a slight sigh of relief when the Reserve Bank of Australia’s recently made an interest rate cut. This is the first time families have had a rate cut in 7 years. For 740,000 first time buyers, this is the first time they have experienced any mortgage relief at all. Families and the Government expect banks to pass on this rate cut as quickly as they passed on the 10 consecutive rate rises under the Liberal Party. Australians need to feel the benefit of this cut.

Every economy in the world today is facing tough economic conditions. The global credit crunch and global oil price shock have buffeted confidence and share markets and are slowing global growth. Wall Street stocks have tumbled and consumer confidence across the OECD economies has fallen to its lowest point in almost 30 years.

Here at home, we have seen the cost of living soar and the reality of this is that people are not only struggling to put food on the table and fill their petrol tanks, they are struggling to put a roof over their head. No one does it tougher than the homeless.

According to the Australian Bureau of Statistics report Counting the Homeless Australia 2006, the number of Australians who sleep rough rose by 16 per cent in the five years between 2001 and 2006.

The report showed there were 105,000 Australians who were homeless on Census night in 2006, up from 99,900 in 2001 with 16,000 rough sleepers in 2006, up from 14,000 five years earlier.

The report shows a shift in the type of households who are becoming homeless—with more couples and families becoming homeless and slightly fewer singles. Addressing homelessness is a major priority for the Government, and we have already announced an additional $150 million to build new homes for homeless Australians under A Place to Call Home.

The Government released its Green Paper on homelessness in May and is currently developing a White Paper to set the agenda for tackling homelessness to 2020. The White Paper is likely to be publicly released in early October.

Labor is not only dedicated to assisting those already homeless, it is also determined to prevent more Australians ending up on the streets. With more families becoming homeless, we have recognised that something must be done about housing affordability.

During the election campaign, Labor put forward a strong housing policy to assist Australians in keeping a roof over their head; these bills are a part of that. The Rudd Labor Government will invest around $1.2 billion over four years into the First Home Saver Account plan. One of the biggest barriers to home ownership is of course saving for a deposit; First Home Saver Accounts will assist people to get that deposit, providing a tax effective way for Australians to save for a first home through a combination of government contributions and low taxes.

For example, a couple each earning average incomes and both putting aside I 0 per cent of their income into individual first home saver accounts would be able to save more than $88,000 after five years. Consumers who receive these accounts will benefit in a number of ways. For example, any contributions made to these accounts will not be subject to tax and investment earnings or interest will be taxed at a minimal rate of 15 per cent and withdrawals from a first home saver account will be tax free where they are used to purchase a first home to live in.

Contributions may be made to the account by the account holder or by another party, such as an employer, on behalf of the account holder. The government will make additional contributions which will be paid directly into the account after the individual has lodged their tax return and the provider has submitted the relevant information to the Australian Taxation Office. The government will contribute 17 per cent of the first $5,000 indexed for individual contributions made each year. This means an individual contributing $5,000 will receive a government contribution of $850.

A wide variety of providers will be able to offer these accounts, including public offer superannuation providers, life insurers, banks, and credit unions. Banks, building societies and credit unions will be able to offer deposit accounts and superannuation providers, life insurers and friendly societies will be able to offer investment linked accounts. Over the first three years, federal Labor’s First Home Saver Accounts will help around half a million people with their first home purchase.

The impact and benefits of Labor’s first home saver accounts extend further than just those individuals. Labor’s First Home Saver Accounts will also help boost national savings, with these accounts anticipated to hold around $6 billion after the first three years of operation.

Earlier this year, the First Home Saver Accounts Act 2008 and the First Home Saver Accounts (Consequential Amendments) Act 2008 and the Income Tax (First Home Saver Accounts Misuse Tax) Act 2008 implemented the Government’s election commitment to introduce these accounts.

The bills before us today implement further aspects of the Government’s policy. The two bills are the First Home Saver Accounts (Further Provisions) Amendment Bill 2008 and the First Home Saver Account Providers Supervisory Levy Imposition Bill 2008.

The First Home Saver Accounts (Further Provisions) Amendment Bill 2008 includes various provisions to make the scheme operational. These include:

• a system for dealing with unclaimed money;
• amendments to secrecy and information sharing provisions between the ATO, APRA and ASIC; and
• dealing comprehensively with family law situations.

The system for dealing with unclaimed money will be similar to the way other non-superannuation investments are currently administered. Accounts which 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 later identify themselves to the account provider will be able to reclaim their money. These provisions will ensure that First Home Saver Account providers are not required to service small, inactive accounts, reducing the burden on providers.

The Life Insurance Act 1995 (section 216) and the Banking Act 1959 (section 69) provide for the treatment of money, in a life insurance company and bank account respectively, which become unclaimed.

These Acts generally provide that a policy or account which is inactive for seven years becomes unclaimed money and is to be paid to the Commonwealth. Without amendments, these Acts would apply to FHSA provided by life insurance companies and banks. Because of the particular requirements in those Acts, this makes it doubtful whether the Commonwealth would be able to pay unclaimed moneys back to the bank or life insurance company unless the account holder had satisfied the FHA withdrawal rules, including the four-year rule in the main case of a home acquisition payment.

The amendments to the secrecy and information sharing provisions will ensure the secrecy provisions enable Commonwealth agencies to share information they require in order to fulfil their statutory obligations, while also ensuring the privacy of account holders is protected.

Part of these changes is to do with the exchange of information between the Commonwealth and the States and Territories. In each State and Territory, the Commissioner of State or Territory Taxation administers the State or Territory’s First Home Owner Grant Acts. State or Territory Commissioners do extensive compliance work in relation to the grants, including whether home buyers do actually live in the homes that they buy. Having access to this information would clearly provide great assistance to the Commissioner in the administration of First Home Saver Accounts, particularly in terms of compliance work.

These amendments are necessary to make that information sharing possible. They put in place provisions that will enable the Commissioner to provide First Home Saver Account information to State and Territory taxation officers in instances where First Home Owner Grant information can be provided in return.

A number of changes will be made so that Family Law situations are dealt with effectively. Currently, if a First Home Savers Account provider accepts a contribution which breaches the account balance cap, it can be returned to the account holder within 30 days, and the account provider will not commit an offence. This is not an appropriate outcome where the contribution is a result of a family law obligation. An amendment is being made to allow the account provider in such cases to return the contribution to the account provider from which the contribution came.

To ensure payments and contributions to superannuation made under a family law obligation are treated the same as other payments and contributions, a number of provisions are being modified to refer only to payments or contributions from a First Home Saver Account, rather than referring to the sections under which the payments or contributions are made

An amendment is made to ensure account providers who act in good faith in relation to a family law obligation will not be liable for loss or damage. The Government wants to ensure that these accounts create no disadvantage to any party.

The Government acknowledges that there are likely to be medium implementation costs for providers who choose to offer FHSAs. For this reason the design of the initiative as reflected in the law has sought to minimise compliance costs for account providers.

The second bill we are debating today, First Home Saver Account Providers Supervisory Levy Imposition Bill 2008, imposes a levy in relation to the provision of first home saver accounts. It also establishes the administrative framework for the collection of these levies to fund Australian Prudential Regulation Authority’s role in the supervision of the accounts.

The levy will be collected from the 2009-10 financial year and will have two components: the restricted component (related to the cost of supervision) and the unrestricted component (related to potential system impact and vertical equity considerations). Both components are determined as a proportion of assets, with minimum and maximum limits for the restricted component.

The bill does not set the actual amount of the levies but only provides a formula for their calculation. The Treasurer must later determine the actual amounts and percentages to be used in the formula, with such figures to be contained in a disallowable legislative instrument.

Further demonstration of our commitment to making housing more affordable is the Housing Affordability Fund, guidelines of which were released last Monday. Local, State, and Territory Governments and private companies can now apply for grants from the Rudd Government’s Housing Affordability Fund to help reduce the cost of building new homes.

The Housing Affordability Fund is a Rudd Government initiative that invests $512 million over five years to target the planning and infrastructure costs that are incurred when building new housing developments.

Tens of thousands of new home buyers are set to directly benefit from the Fund, with savings coming from grants of up to $10 000 per home, reduced holding costs, and contributions from other levels of government.

The Fund will also address some of the other upfront costs faced by developers that are ultimately passed on to home buyers—like infrastructure charges for the installation of sewerage, roads, cycle-ways and parks.

State, Territory and local governments and private companies are all eligible to apply for grants. The Housing Affordability Fund is a critical part of the Australian Government’s housing strategy. The 2008-09 Budget included $2.2 billion in new housing affordability investments:

• $623 million National Rental Affordability Scheme to encourage the building of up to 50,000 new rental properties;
• $150 million Place to Call Home initiative to build hundreds of new homes for the homeless across Australia; as well as a
• $1 .2 billion investment in the First Home Saver Accounts that we are discussing today.

These bills are a significant element of the Rudd Government’s plan to boost housing supply and assist those who need it most, particularly first home buyers and renters on low and moderate incomes. I commend the bills to the Senate.

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

I rise to close debate on the First Home Saver Accounts (Further Provisions) Amendment Bill 2008 and the First Home Saver Account Providers Supervisory Levy Imposition Bill 2008. I want to thank all those senators who have participated in the debate. As has been pointed out—and I appreciate Senator Xenophon’s contribution—most of the comments made were made in an earlier debate about the initial bill, which established the parameters of operation of the first home saver accounts. What we are dealing with here is two bills that relate to a range of prudential supervision and administrative operational issues of the first home saver accounts. So—whilst I thank senators for their contributions, which in the broad were very positive—many of the contributions we have heard consist largely of debate that occurred on the earlier piece of legislation, which has already passed the Senate chamber.

I have just a few remarks. Homeownership is important to the wellbeing of Australians, and the first home saver accounts will help Australians to once again realise the dream of homeownership. Briefly, an individual can open an account if they are aged 18 or over and under 65; have not previously purchased or built a first home in which to live; do not have and have not previously had a first home saver account; and provide their tax file number to the provider. Personal contributions can be made by the account holder or another party and can only be made from after-tax income. Individual contributions are not taxed, as they are made from after-tax income. Government contributions are not taxed, and withdrawals to purchase a first home are not taxed.

The account is supported by government contributions. The government will contribute an extra 17 per cent on the first $5,000 of personal contributions made into the account each year, and this will be indexed to average weekly ordinary time earnings. This effectively means that an individual contributing $5,000 will receive a government contribution of $850. There is an overall account balance cap of $75,000, which is indexed to average weekly ordinary earnings. As a general rule, in order to access money to purchase a first home, personal contributions of at least $1,000 must have been made in each of at least four financial years. In addition, earnings on account balances are taxed at the account provider level at the statutory rate of 15 per cent rather than in the hands of the individual account holder at their marginal tax rate. So there are two significant advantages: the tax advantage on the earnings of the account balance and the government contribution of $850 where an individual contributes $5,000, which I referred to earlier.

First home saver accounts recognise that the biggest barrier to homeownership is saving for a deposit, and they 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. This will allow a couple, each earning an average income and putting aside 10 per cent of their income into an individual first home saver account, to save more than $88,000 after five years. If they were to save in the traditional way—through a bank account, credit union account or building society account—they would not receive the same level of tax concession or government contribution. So effectively they are able to save up to more than $88,000 after five years. This would be $13,000 more than they otherwise would have.

These two bills implement the final parts of the account saving scheme. The bills include a scheme for dealing with unclaimed money, for amendments to secrecy and information sharing between the regulators—the ATO, APRA and ASIC—and for dealing more comprehensively with the interaction between first home saver accounts and family law. The bills also include a framework for imposing a supervisory level to fund the Australian Prudential Regulation Authority’s supervision of each account provider on a user-pays basis.

The finalisation of the schemes by these two bills marks an important new beginning in housing policy in Australia. To update the Senate—I do not think this was known at the time of the initial bill—indications are that at least two of the four banks will be offering the accounts on 1 October 2008 and 16 other ADIs, including a large number of credit unions, have registered with APRA to offer first home saver accounts. These include the New South Wales Teachers Credit Union, with over 150,000 members, and the Defence Force Credit Union, with over 80,000 members. More broadly, this 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 account, including administrative costs.

There is just one other issue I wanted to remark on in concluding the debate. I know it has come up today and during debate on the original bill. That issue is the opposition’s contention that this should be extended to children. What has been created here is a medium-term savings vehicle. Some members of the Liberal opposition may not be aware of this but when they were in government they actually introduced children’s superannuation accounts. Regrettably, this was an absolute flop because, unfortunately, the behavioural response by parents and grandparents with respect to superannuation children’s accounts was that there was very little take-up. I spent a number of question times—

Cory Bernardi (SA, Liberal Party, Shadow Parliamentary Secretary for Disabilities, Carers and the Voluntary Sector) Share this | Link to this | Hansard source

You’ve just given up, have you?

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

Fundamentally, the problem was that the behavioural response to a superannuation children’s savings account was never going to be effective.

Cory Bernardi (SA, Liberal Party, Shadow Parliamentary Secretary for Disabilities, Carers and the Voluntary Sector) Share this | Link to this | Hansard source

This is not a superannuation account.

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

I accept that it is not a superannuation account, but it is first home saver account and, Senator, you are arguing that it has similar features to the superannuation children’s account. I know that you were not here, Senator Bernardi, but I asked quite a number of questions of Senator Coonan over a number of question times and at estimates, in an attempt to find out how many superannuation children’s accounts were opened. I could never get an answer. I know why I never got an answer. It was because, industry informed me, there were only three accounts opened for superannuation children’s accounts—hence my comments about the behavioural response.

We believe that we have established the appropriate parameters. We do not believe it is appropriate to extend it to children. The issue of children’s saver accounts in the superannuation context unfortunately—I do say ‘unfortunately’—is evidence that the take-up of children’s accounts would be very low in that area if it were adopted. I thank all senators for their contributions. I reiterate that we are investing $1.2 billion in this medium-term savings vehicle, the First Home Saver Accounts policy.

Question agreed to.

Bills read a second time.