‘Smart politics, dumb policy’: Chalmers, Taylor to debate economic future
Greens leader Adam Bandt has joined economists in criticising the housing policy pitches of both Labor and the Coalition, labelling them a “bandaid” solution.
Economists said the policies, launched on Sunday and aimed at helping first home buyers purchase a property, will only drive up prices and worsen future budget deficits.
Labor pledged to allow first home buyers to purchase a property with just a 5 per cent deposit and remove the requirement for lenders’ mortgage insurance.
In addition, Labor announced it would spend $10 billion on building 100,000 new homes that would only be available to first home buyers to purchase.
The Coalition meanwhile has announced a scheme that would allow first home buyers of newly built properties to receive a tax deduction on the interest paid on their mortgages.
The proposal, known as the “first home buyers mortgage deduction scheme”, is expected to cost $1.25 billion, and the Coalition claims it will boost construction activity and housing supply.
Mr Bandt on Monday described both policies as “the battle of the bandaids”.
“At best, it’s bandaid answers, at worst, it will push house prices up even further,” Mr Bandt said.
“We need to get serious about the causes of the housing and rental crisis in this country. We need to reform those billions of dollars in negative gearing and capital gains tax handouts, going to investors with more than two investment properties.”
Adam Bandt says the housing policies put forward by Labor and the Coalition will push up property prices. (ABC News: Matt Roberts)
‘Smart politics, dumb policy’
Many economists say the policies will only make house prices more expensive, and do not adequately address the chronic shortage of housing across the country.
“Neither of these policies are really going to shift the needle on home ownership in Australia, that’s largely because they’re pretty much benefiting those that are already very likely to buy a home,” Brendan Coates from the Grattan Institute said.
“The policies will also boost house prices, although the effects of that will likely be fairly modest.”
Economist Saul Eslake said the Coalition’s tax deduction scheme would be a “significant reduction in the after-tax interest rate” that people would pay on their mortgages, and would “supercharge” house prices in conjunction with their policy that would allow people to use up to $50,000 from their superannuation to put towards a deposit.
“We know from what has happened when interest rates have fallen significantly during the GFC [and] more recently during COVID that people respond to that, not by paying less in interest, but by taking out much bigger mortgages which push up the price of housing,” he told ABC News Channel.
“So this policy, especially when combined with the Coalition’s … so-called “Super for Housing” policy … that is really a souped-up first home owners grant scheme but using individuals money rather than taxpayers’ money to pay for it.
“This will supercharge housing prices so in that sense it will actually make the problem of housing affordability worse.
“The government’s proposals will have a smaller impact in continuing house price inflation than the Coalition ‘s policies will, but they will both have the effect of enriching those who already own homes at the expense of those who don’t or who can’t.”
Independent economist Chris Richardson described the housing pitches as “smart politics, dumb policy”.
“Making it easier for first homebuyers to buy is the go-to policy of governments who are avoiding doing the hard yards,” he said.
“More money chasing the same amount of housing is the most well-worn path to failure in Australian policymaking, and both the government and the opposition seem intent on proving that they can double down on that dumbness yet again.“
AMP chief economist Shane Oliver told AAP that the policies announced by both parties were at odds with their previous pledges to spend appropriately, given the scale of forecast future budget deficits.
“It’s all inconsistent with spending restraint or getting the budget back under control and it seems over-the-top this time around,” he said.
“Major parties should be resisting the temptation to spend more.
“If they are going to provide tax relief, it should be on a permanent, logical basis rather than arbitrary sugar hits.”
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Policy proposals to be debated
It comes as Treasurer Jim Chalmers and Shadow Treasurer Angus Taylor prepare to face off in a second debate about the economy on Monday night on 7.30, moderated by Sarah Ferguson.
The pair will face questions on their respective housing policy announcements, the global economic impact of US tariffs, and tax reform.
Along with housing policy, both Mr Chalmers and Mr Taylor will outline how their respective parties will tackle the global economic risks arising from US President Donald Trump’s tariffs, and how Australia will navigate the uncertainty.
The politicians will join Sarah Ferguson live in the studio at 7:30pm AEST — and will be broadcast live on ABC TV, ABC iview and streamed live.
Jim Chalmers and Angus Taylor will debate housing policy, tariffs, tax reform and more live on 7.30 tonight.
Watch 7.30, Mondays to Thursdays 7:30pm on ABC iview and ABC TV
