If Liberal Party senator Andrew Bragg had his way, he would pump the biggest housing bubble in history.
Bragg has already lobbied for Australians to use their super to buy a home while still working rather than waiting until they reach the super preservation age to pay off a mortgage.
Bragg also suggested that people should be allowed to pay their super into a mortgage offset account.
“Because in the absence of the bank of mum and dad, a lot these people will never be able to get into the housing market”, Bragg argued in March.
Now, Bragg is calling for an easing of capital adequacy rules to make it easier for banks to lend to home buyers.
Bragg has endorsed a call by bankers to relax home loan regulations to make it easier for first-home buyers to enter the housing market.
They argue that the low home loan arrear rates of less than 1%, despite the Reserve Bank lifting the cash rate 13 times to 4.35%, are evidence that banks are not taking enough risk on marginal borrowers.
Bragg said the Australian Prudential Regulation Authority’s bank capital rules have reduced risk but may also have contributed to less growth and fewer first-time homeowners.
“There is a cost of regulation which impacts lending”, Bragg said in a speech to The Sydney Institute on Tuesday night.
“We can have banks which are both unquestionably strong but easily able to lend to first home buyers”.
How does this help anyone, apart from the banks?
Andrew Bragg suffers from an acute case of what economists term the “fallacy of composition”.
That is, offering an individual easier credit or allowing them to use their superannuation to buy a home increases their purchasing power and allows them to enter the market sooner.
However, offering everyone easier credit or allowing them to use their superannuation to buy or pay off their mortgages will raise home prices, making housing more expensive for all.
This is true for all demand-side housing measures, including first-time homebuyer assistance. They drive up property prices and are essentially self-defeating in terms of affordability.
Meanwhile, Australians will wind up giving up their retirement savings for little real advantage, leaving them even more dependent on the aged pension in their senior years.
If Andrew Bragg truly cared about housing affordability and home ownership, he could advocate for lower immigration and the elimination of tax subsidies for property investors.
Because Australia’s property market is now a Ponzi scheme supported by immigrants and taxpayers, and the situation will only deteriorate if superannuation is included and lending standards are relaxed.
