Federal policies not to blame for house prices: treasury
At the housing affordability hearing, treasury officials have been asked several times by mostly Labor MPs whether federal government policies are adding to housing demand and price increases.
John Swieringa, the assistant secretary of treasury’s social policy division, conceded that while some policies could be described as “demand-side” policies and that first principles would suggest “supply-side” policies might be better, they do nevertheless assist affordability.
Swieringa said that with interest rates declining over 30-35 years it has become easier to service a loan, but property prices have gone up meaning the size of a deposit has increased, and this can often be the “pinch point for affordability”. So policies such as the first home loan guarantee and first home super saver “assist with getting over that threshold”.
Incentives may “pull forward demand but also entice more supply”, he said, citing policies such as HomeBuilder grants, which are mostly for new dwellings. He said these are the sorts of levers the federal government can pull, whereas states and councils tend to have more control over supply side factors like zoning.
Swieringa also distinguished between the affordability of home ownership and housing – noting that although houses might get more expensive due to investor activity, investors can help drive down rents.
Those two prices don’t always move in the same direction … so the affordability of buying doesn’t give the full picture.
Geoff Francis, the assistant secretary for the direct tax, said that policies like negative gearing and capital gains tax concessions remain “unchanged for decades” so they may have had a short-term impact on prices, they haven’t driven unaffordability over the long run.
He also noted that owner-occupied housing is “one of the most tax preferred” forms of investment, with no capital gains tax, while investors pay capital gains tax and tax on their rental income.
A majority of Australians would be comfortable with venues requiring patrons to be vaccinated as a condition of entry, and for jabs to be mandatory in a range of employment and leisure settings, according to the latest Guardian Essential poll.
The latest survey of 1,100 respondents also indicates that only 26% understand and approve of the four-phase plan to reopen Australia once vaccination rates rise to 70 and 80% of adults – with 54% either saying they don’t understand the plan to wind back restrictions, or they do understand it but lack confidence in it.
The new poll shows mandatory vaccinations are supported for Australia’s health and disability care workers (83% and 82% of respondents approve). A further 77% of respondents think vaccines should be compulsory for airline travellers, and 74% think teachers and teacher’s aides should be inoculated before working at schools.
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Housing demand tapering off after record growth: Treasury
The House of Representatives tax and revenue committee is hearing from Treasury officials about housing affordability, at a time of record high price growth.
The chair, Liberal MP Jason Falinski, gave a long opening statement setting out that people under 40 are “less likely to own a home than at any time in our history” since 1947.
Falinski has been criticised in the media for recent comments suggesting affordable housing paradoxically increases prices (by reducing investment and supply). In Tuesday’s hearing he hit out at “the usual vested interests” for “ill-formed” criticisms. Falinski promised the inquiry will remove the “guardians” keeping others out of the housing debate, suggesting that “no idea is off limit and no question too stupid” to get to the bottom of housing unaffordability.
John Swieringa, the assistant secretary of Treasury’s social policy division, said there are a number of factors driving demand including: rapid population growth (before the pandemic); structural decline in interest rates over decades; and the effect of financial deregulation in the 1980s.
Crystal Ossolinski, the director of domestic demand in the macroeconomic group, said that housing supply tends to be inelastic because it takes a “very long time to build”, one year for a house or two to three years for medium density housing.
Ossolinski said there had been “strong demand” during Covid-19 which was surprising and unexpected. This reflected “changes in preferences” and reduced consumer spending elsewhere in the economy – which meant people wanted bigger houses because they were spending more time at home.
Ossolinski suggests that “demand factors are tapering off” because there will be no more interest rate cuts and population growth has stalled while migration has been paused during the pandemic.