In a last-ditch effort to woo voters ahead of the May 3rd Federal election, both Anthony Albanese’s ruling Labor Party and Peter Dutton’s Opposition Coalition have unveiled big spending housing and cost-of-living promises, adding up to at least $10 billion on each side.
While young first-home buyers have been placed front and centre in the new initiatives, leading economists and commentators believe the impact of the new policies will be to simply drive up housing prices even further, putting home ownership further out of reach.
Labor’s first-home buyer boosts
Formally launching his election campaign in Perth, Prime Minister Anthony Albanese has pledged that a re-elected Labor government would give all first-home buyers access to 5% mortgage deposits.
In a major expansion of an existing scheme, Labor would guarantee a portion of a first home buyer’s mortgage, so they could be in a position to buy a home with as little as a 5% deposit without the requirement for expensive Lender’s Mortgage Insurance (LMI).
Banks and other lenders usually require LMI if approved buyers have less than a 20% deposit.
The current 5% deposit guarantee scheme is limited to 35,000 people a year and available only to singles earning under $125,000 a year or couples on a combined income of $200,000.
Those caps would be scrapped if Labor is re-elected.
“This means a Sydneysider and first-home buyer can purchase a $1 million apartment with a $50,000 deposit with their loan guaranteed by the Albanese Government,” the Prime Minister said.
“It means a Queenslander and first-home buyer can purchase an $850,000 home with a $42,500 deposit.”
Mr Albanese also pledged that if re-elected, Labor would build up to 100,000 homes for first-home buyers.
Labor says the $10 billion scheme would see the Federal government partnering with state housing developers and industry, to build up to 100,000 homes over 8 years.
Homes built under this scheme would be reserved for first-home buyers only, not investors or “up” or “down-sizers”.
“We want to ensure Australians owning their own home is within reach, and that's what Labor's policy will ensure for more Australians,” Mr Albanese said.
“This is a generational change that will empower a new generation of first home buyers.”
Unveiling another new promise that would let all Australian workers claim a new standard tax deduction of $1,000 a year for work-related expenses, the Prime Minister said all-up Labor’s policies would leave the average full-time income earner $3,110 a year better off.
“We have already delivered a tax cut for every taxpayer, and we want to continue to reform the tax system to slash red tape and make it easier for people to keep more of what they earn,” Mr Albanese said.
Peter Dutton’s pledges
At the Coalition’s formal election campaign launch in Sydney, Peter Dutton unveiled a dramatic housing initiative of his own.
In what the ABC described as “a controversial but historic structural change to the nation's tax system”, Mr Dutton pledged a Coalition government would allow first-home buyers who build a new dwelling to deduct mortgage interest payments from their income taxes.
The Coalition claims this policy would mean a family on average income would be around $11,000 a year better off—or $55,000 over five years.
"Today I bring a message of hope to all Australians seeking to own a home of their own," Mr Dutton told his audience.
"I will be a prime minister who restores the dream of home ownership."
Mr Dutton’s First Home Buyers Mortgage Deduction Scheme would be limited to five years and to the interest paid on the first $650,000 of a mortgage.
It would also be means-tested at $175,000 for singles and $250,000 for couples, and recipients must live in the property.
As the scheme only applies to new home builds, the Coalition argues it will boost construction activity and housing supply.
Mr Dutton also used his campaign launch to promise that under a Coalition government, about 10 million workers would receive a one-off income tax cut at the end of next financial year.
The cut would come in the form of a refund of up to $1,200 for everyone earning up to $144,000 a year after they lodge their 2025-26 tax return.
The reaction
There’s been guarded support from the property industry for the major new housing initiatives from the two major parties.
Master Builders Australia said it “applauded” both Labor’s targeted investment for first-home buyers and the Coalition's mortgage interest deduction scheme.
However, CEO Denita Wawn issued a note of caution.
“Supporting first-home buyers is only meaningful if we’re also making it easier to build the homes they want to live in,” she said, pointing to a shortage of construction workers, escalating building costs, low productivity in the building industry and red tape slowing housing approvals.
The Property Council said Labor’s scheme of reserving up to 100,000 newly built homes for first-home buyers was a “generational investment" that could be a “game changer”.
“We look forward to early industry involvement in the scheme design to make sure the benefits are maximised,” Chief Executive Mike Zorbas said.
The Council was also upbeat about the Coalition’s housing proposals.
“Coupled with supply improvement policies, deductibility of mortgage repayments on new builds will help first-home buyers who are watching their dream of home ownership slip away,” Mr Zorbas said.
However, the reaction from leading economists was scathing.
“Both sides have got a dumpster fire of dumb for us today,” independent economist Chris Richardson declared.
“Both sides are throwing more money around, which will keep inflation higher than it would otherwise have been.”
Another independent economist, Saul Eslake, declared that it was “a sad day for aspiring first-home buyers,” with “both major political parties…proposing policies which will add to upward pressure on housing prices… - ostensibly to assist those trying to buy their first home, but in practice further enriching those who already own at least one.”
Cameron Kusher, the former head of Economic Research at REA Group, was more measured in his criticism, but said both major parties had unveiled “policies which massively stimulate demand for housing but do very little for supply.”
“More demand-side stimulus, such as those being taken to the election, is most likely to result in higher prices and even larger demand-side stimulus in the future because prices are even higher next time.”
High-profile Melbourne apartment developer Maxwell Shifman questioned where the land for Labor’s promised 100,000 new homes for first-home buyers was.
He was equally critical of the Coalition's plans.
“The problem with today's promises is continued demand stimulus without tackling the barriers to more affordable housing supply - cost, time and planning.
“The Coalition's Mortgage Tax Deduction Scheme is really just another first-home buyer grant,” observed veteran ABC Finance commentator Alan Kohler.
“As such, it's more likely to drive house prices higher than make them more affordable.
“Same goes for Labor's 5% deposit scheme, also for first-home buyers.
“Combined with the five rate cuts, the market is now predicting house prices will probably take off this year,” he said.
“Housing affordability will be more of a crisis next year than it is now.”