BS’s new bear, Callam Pickering, is at it again:
With first home buyers priced out of the market, housing affordability will become an increasingly hot topic for governments at the federal and state levels. Historically this has always meant an increase to the first home owner grant.
Earlier this week Tasmanian Premier Lara Giddings announced a doubling of Tasmania’s first home owner grant to $30,000 or around 10 per cent of the median dwelling price in Hobart. In Western Australia, the state government has increased the first home owner grant for purchasing or constructing new homes, although they also reduced the first home owner grant for purchasing established homes. The current trend for first home owner grant is to direct first home buyers towards new homes rather than established ones but that may change if first home buyers continue to be cautious.
Unfortunately the first home owner grant does not work. It is one of Australia’s greatest rorts. Rather than improve housing affordability, the benefits of the first home owner grant accrue directly towards home owners and investors. Effectively it is a government mandated wealth redistribution vehicle that benefits the middle and upper-class.
A welcome pre-emptive strike from Mr Pickering and exactly right. I do not think it likely that we’ll see FHB grants return to existing property any time soon. The one exception might be if we hit a recession in the next few years. Lindsay Tanner defended the 2009 grant on the basis that it is appropriate in circumstances when the nation faces a catastrophic fall in aggregate demand.
Having said that, Treasury never put the grant into the original stimulus package. It was added later by the pollies so I guess an economist’s notion of catastrophic is different to that of the politician.
