Treasury’s Fraser: Can’t afford a house? Aim low

By Leith van Onselen

Treasury Secretary, John Fraser, has given some useless advice to first home buyers (FHB), effectively telling them to ‘suck eggs’. From The ABC:

If you’ve been struggling through auction after auction because of an inflated housing market that’s made homeownership a distant dream – well, the head of the Treasury Department has a message for you: maybe it’s your mindset that’s getting in the way.

John Fraser has been in the role since the start of 2015; he’s also a member of the Board of the Reserve Bank of Australia; and today he was asked in a Senate hearing whether his department had figures on young people and homeownership.

It doesn’t.

“The data is not great,” Mr Fraser admitted. “You try to draw conclusions. You’ve also got to make a number of assumptions. The behavioural aspects are different.”

At my age, when I was buying a home in the ’70s, I probably had a different mindset to what a lot of younger people have at the moment.”

Mr Fraser acknowledged that those were “simpler times”, but continued by questioning whether young people’s hopes were set a bit too high.

“You have to make assumptions about what is ‘reasonable aspirations’ for a house…”

It’s always hilarious being lectured on housing expectations by a baby boomer who purchased a home in the 1970s – the most advantageous time in Australia’s history to do so.

Let’s recall that Australian housing was incredibly cheap back then, unlike now:

ScreenHunter_17772 Mar. 03 09.23

And let’s recall that Australian workers enjoyed huge nominal pay increases back then, versus minimal pay rises now:

ScreenHunter_17773 Mar. 03 09.27

As well as negative real mortgage rates – that is, where mortgage interest rates are below the rate of inflation:

ScreenHunter_17774 Mar. 03 09.33

In short, Fraser enjoyed the good fortune of:

  1. Purchasing a home at a cheap price; and
  2. Having his mortgage debt eroded away quickly by the combination of both rapid nominal income growth and high inflation.

Today’s FHB faces the opposite dilemma of:

  1. Record home prices; and
  2. Near record low nominal income growth and inflation, which makes paying-off today’s mega mortgage much more difficult.

Hence, Fraser has no right to lecture FHBs on expectations.

If Fraser actually cared about housing affordability and inter-generational equity he would instead be advising the Government to:

  1. cut Australia mass immigration program, which he himself has admitted is problematic;
  2. unwind property tax distortions (e.g. negative gearing and CGT);
  3. tighten enforcement of property foreign ownership rules and implement and implement anti-money laundering rules as they pertain to real estate gatekeepers; and
  4. provide incentive payments to the states to free-up land supply and planning.

But, hey, empty words are easier than action.

[email protected]

Leith van Onselen

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.


      • Why should he care – he will retire with millions in the bank and have cheap young labour to do his bidding.

        He has absolutely no incentive to look after anyone but himself.

    • ceteris paribus

      The absolute nonsense and hypocrisy we have to listen to from elected officials and senior public servants drives me crazy. Put them in the stocks and give us rotten fruit to throw at them.

    • @ jimbo

      “Society grows great when old men plant trees whose shade they know they shall never sit in.”

      …. just to drive home your point …

    • Even StevenMEMBER

      Mr Fraser is on the board of the RBA. And MB wonders why macroprudential isn’t being tightened? Ummm… maybe that’s because the RBA doesn’t see any major problems with the current level of house prices and household indebtedness!?!? The RBA remains in cuckoo-land. I’d add Treasury to that as well, but they are generally accepted to be an extension of the current Govt so can’t expect them to be frank and fearless.

  1. Leith
    Why don’t you now add on your list a VACANCY TAX
    What about the 200,000 empty homes in NSW alone

    • +100 great initiative in Vancouver – overdue here in Australia’s capital cities!

    • LabrynthMEMBER

      It is a band aid to a much more deeper problem. A simple land tax would capture and motivate non-cash flow producing properties to do something unless they like subsidising further a speculative investment.

        • Pretty easy to get around. For example, you could just set your sprinklers on a timer. The cost of water is cheap.

          A house near me has been vacant for years and the owner does exactly that to keep the garden alive.

      • It’s easy to enforce a vacancy tax. You charge say a 1% land tax, but part of it deductible against income earned from the property. If you don’t earn income from the property, you can’t claim back the tax.

      • RaymondMEMBER

        So a component of Land Tax then Gral? Refundable component but a part of an universal land tax as UE advocates.

        Cue Natural Trust in 3,2,1…..

      • Yes, unfortunately it is very easy to get a vacant dwelling to consume water and electricity via timer devices, these are cheap and I can’t see why a timer couldn’t be fitted to say, the bathtub in an apartment without gardens to give the meter readings the impression of active consumption.

        The plundering of the next generation rolls on.

      • How about random physical inspections with a mandatory fine of 10× the avoided tax, with a deemed 10 year period for vacancy. With the owner having the onus of proving any lesser period. A $5k per year vacancy that gets caught is up for $500k. The government to have the senior debt.

        I bet lending institutions would be careful about lending to those likely to leave apartments unoccupied too.

      • Charge the land tax on all land by default but regularly go door-to-door and write out exemption vouchers if the door is answered by a person living there.

  2. “and today he was asked in a Senate hearing whether his department had figures on young people and homeownership.

    It doesn’t”

    Well we had a census just reclast year ently which ought to be able to give some kind of answer since I recall questions were asked about home ownership. I assumed that it was in electronic form should have led to quicker turnaround and access to data, but perhaps not.

      • Of course, but I also thought they eventually recovered from that and ended up with quite a high response rate.

    • I can’t box so would satisfy myself swinging my Wilson putter at his head
      Or an elbow

      Look at that smug look

    • It’s getting a bit like that – their commentary is such that I would have to really exercise restraint if we ever crossed and I already own my own home!

      Even most boomers have come around and understand why it is indeed harder and more different for current generation. Aiming lower is fine back then when there were actually jobs in the suburbs, but with centralised cities a commute time of 1.5hrs one way is simply poor. Calculated hosueprices or incomes anyway you want, this is the ultimate difference between then and now – life quality.

  3. “If Fraser actually cared about housing affordability and inter-generational equity he would instead be lobbying the Government to …”

    Maybe he is. You don’t know what he is telling them.

    • I’m pretty sure we know what ‘they’ are telling him in order for him to keep his mega$$ job.

  4. Nobody ever seems to want to talk about where, and what kind of house, they bought back in the day. Or how long it took them to get to work. Somehow, the current generation wanting the same as the previous one is not a reasonable aspiration.

    • My grandfather 1 bought an 1/2 acre in Brighton. Were St. Back in the day. Ex RAAF Spitfire pilot so gold card/DVA and State Banker/unionist so not exactly struggle street. Went from there. $$$$$. COmmute train/trams to State Bank HQ in city.

      Grandfather 2 ex AIF/mechanics also DVA/gold card (both never drew a pension although entitled to) went into real estate with brother in Brighton (Church St). Built massive rental roll. Bought in Edward St Sandy then Hampton St. Commute Sandy/Hampton to CHurch St Bright, i.e. small commute and his brother travelled from a few streets away.

      When they told me how much they paid, even adjusting for inflation, they got those places cheap. And biiiiiig blocks.

      Their cohorts all variously bought 1/2-1 acre in Mentone and northwards all VERY VERY cheap and watched things go from there.

      It’s not like buying in Tarneit (or Bumf$ck Wombat Forest) and going from there.

      Can’t even compare.

      Credit + immigration ponzi + overseas buyers != post WW2 Melbourne.

      Still, I wish I’d listened to grandfather 2 when he told me to buy in Highett in 2002 when it was still a sh%tty suburb adjacent Hampton and Black Rock and before it became East Hampton and prices went to the moon and I had a decent job out of uni instead of blowing it snowboarding around the world (“you can see that on telly!”)

      • “Still, I wish I’d listened to grandfather 2 when he told me to buy in Highett in 2002 when it was still a sh%tty suburb adjacent Hampton and Black Rock and before it became East Hampton and prices went to the moon and I had a decent job out of uni instead of blowing it snowboarding around the world”

        Ugh! In other words you just confirmed the criticism levelled by the elite at young people.

        Better to just remain silent…

      • @Matthew

        No I didn’t.

        I was merely reflecting on his prescience, with the benefit of elapsed time.

        Don’t be such a dill.

    • My parents bought in Cheltenham on my dad’s income (he was a truck driver). Even back then Cheltenham, which is around 20km from the CBD, was a good area. I highly doubt a similar working class family, even with two incomes, could afford anything comparable today. Admittedly my parents struggled during the 90’s recession when my dad lost his job, but I think a recession today would wipe out a lot of young families, especially if they’re forced to survive on the dole for a year like my dad did.

  5. Jumping jack flash

    Enough talk. It is time for action!

    Surely that guy who was treated to an all-expenses paid holiday to the UK to study their affordable housing projects (and learn from their mistakes) has arrived back on our shores with a head full of ideas, and eager to put spade to earth.

    The plan is quite simple and it ensures win/win/win for FHB/Banks/Pollies.
    Build “affordable housing estates” at least 3 hours commute from the fringes of any major city.
    3 hours should be far enough away as to not interfere with the billion dollar debt bubble that is secured against the current value of houses actually in the city. If these houses were to fall in price, well, that’d be pretty bad for the banks and their bubble.
    Make the new houses undesirable enough so nobody wants to live there except for an absolute last resort. The houses should be priced around 100 – 250K and never go up in price. Only down.
    That will keep the investors away.
    No infrastructure.
    Pretty much user pays for everything.
    Expensive utilities.
    Toll roads in and out of town.
    Exclusively zoned residential so no shopping centres, etc. Drive to the city, or use delivery services for shopping. This also bolsters the service economy!

    If FHBs whinge, they are being “precious”. Clearly these are affordable, and within reasonable commute distance. 6 hours a day driving, well, you already work for 8, so what’s the big deal?
    Pollies declare resounding success at conquering the affordability problem.
    Banks have their billion dollar debt bubble protected from the slum.. er.. affordable housing estate, and from houses actually getting cheaper, which is impossible while there’s billions of dollars secured against their current prices.

    • That’s a wonderful idea Jumping jack flash. The shortage-deniers would love you. They would finally have proof that there is no shortage of housing in Sydney (errr. 3 hours out of Sydney that is).

    • Not sure if you meant it as a joke but that’s EXACTLY what they are doing in Melbourne with lollipop hill, Williams landing and even more rubbish suburbs like melton etc.

  6. A few weeks back this same asshole was making the point that we will soon get to the point where parents are helping kids with rent payments not just deposits for mortgages. The same man admitted he stumps up for his son in London to pay the rent because as a teacher the kid would have no chance of keeping a roof over his head in London.

    I have come to a new conclusion about the ruling class and the political instability we have had and it is this.

    The State is losing its legitimacy.

    They control every aspect of our lives and if you complain you are being treated unfairly the destroy you or publicise your social security records to shame you. The are straight up C#&ts.

    My Son asked me this am about the Government and it’s need for control. I told him straight they are illegitimate, They are murderers and thieves. They murder people all over the middle east for no fcking reason. They torture people on tropical islands for their own amusement. The tax us and dont give back what was promised. I think in law that is called obtaining financial advantage by deception and it is a crime.

    The average Australian is far more compassionate, honest and decent then these fckers.

    We do not need them

    • So what we have is a 3rd world government working very hard to convert a 1st world country into their desired 3rd world country whereby the 1% own everything including the people… I seriously believe this to be true and cannot see any other outcome if a) they keep power or b) Labor take over and dont undo the vast crony-capitalist mechanisms that have been built up over the last 20 years or so.

      • Problem with democracy is legitimacy isn’t performance based. It’s based on vote. It’s basically a dictator that changes every 4 years so unless we have leaders with a long term horizon, an impossible feat given current incentives, this ship is going down to the 3rd world.

    • “The State is losing its legitimacy.”

      Losing? Lost ages ago. Luckily everyone spends their time commenting on blogs instead of participating in politics so it doesn’t matter.

      • There was a time when I was at Uni that I did participate. I worked for a former Federal Cabinet minister in his electorate office.. they offered me a future there. But I said no when I realised that (1) They would bullshit me when I asked legitimate questions about policy and (2) They actually believed the shit they say.
        I could almost guarantee you the Libs are showing up to Branch meeting BBQs and cake sales talking about 18c as if it was the most important thing since the Cuban missile crisis, the local members included. The ALP hacks would be talking about the Building Commission, or some minor tweak to the child care benefit to take $50 off one group and give to another to improve affordability.. All the while not realising the economy is turning to quick sand. .

  7. Fraser would have to be one of the biggest disappointments as the top Treasury bureaucrat. Out of a stellar career he has sunk to appallingly low levels in the last couple of years, hiding in his ivory tower. At least Henry had the balls to speak his mind! It just confirms to me how contagious the infection of groupthink has become in higher levels of public service. We have a Tax Commissioner who thinks he collects tax to spend on services, an RBA Governor who thinks following Basel is progressive, the APRA CEO who thinks his job is to observe the bubble and not act, a Centrelink CEO who threatens defenceless recipients and then supports the release of private information to win an argument and the list goes on. It’s just so appalling that these are people that are unelected and yet are having a deleterious effect on the lives of ordinary Australians. The frank and fearless advice seems to have dwindled as their career rewards have increased, so I can only conclude the public service in this country has sold itself and utterly lost the notion of “public” service.

  8. Fuck me. What a joke.
    “The data is not great,” Mr Fraser admitted. “You try to draw conclusions. You’ve also got to make a number of assumptions. The behavioural aspects are different.”
    ‘We really don’t know what we’re talking about. Honestly, we’ve got no clue. I better not say anything that might make me look stupid.’
    “At my age, when I was buying a home in the ’70s, I probably had a different mindset to what a lot of younger people have at the moment.”
    ‘Hmmm, it was quite easy for me. It’s probably bloody hard now. Let’s pretend that’s their fault.’
    Mr Fraser acknowledged that those were “simpler times”, but continued by questioning whether young people’s hopes were set a bit too high.
    ‘By “simpler times” I really mean it was a shedload cheaper. Tough luck! It’s you who wants something better than a shitbox in nowheresville that has “massive negative equity” written all over it. OK my generation was able to buy a nice four-bedder in Malvern on a normal wage, but it was a different world then’
    “You have to make assumptions about what is ‘reasonable aspirations’ for a house…”
    ‘Hey Gen Y/Millenial, do you really think you can afford a house in these great Alpha Cities of ours? You must be kidding! I know they’re your homes and you were born here and stuff, but you just have to accept that we’ve pocketed all the cash now and you will have to work the debt off for us. Look at all the foreigners that want to come here, what a great place Australia is!’

    • In those days it was not easy, in fact it was hard, 3 years in your current job, 3 years saving with the one bank, sandwiches for lunch, almost no going out and for the vast majority the choice of housing and suburbs were pretty drap to say the least.
      However where he misses the point entirely is that today it is practically impossible without incredible luck, ie inheritance, rich parents or insanely well paid job and your other half also well paid.
      The other point he does not see, as from this article is the fact that a couple on median income each (and from my observations this is less than half the population) can only afford the worst houses in the worst suburbs which in the old days would have gone to the lowest paid workers.
      I think his ongoing wage depends upon this type of verbal nonsense.

  9. I wonder how much time Fraser took off his yachting to come up with this junk.

    Firstly, he has data. It’s publically available on the ABS website (Cat: 6523.0). The Grattan Institute has reported on it multiple times. He just doesnt care for it, and never asked to be briefed on it. Plausible deniability.

    The majority of his APS underlings are GenY, and will be brooding at their desks today. I hear the culture in that place, at the moment, is sky high

  10. Mining BoganMEMBER

    I’m liking the anger shown here people. Keep it up. Hopefully it will spread through the entire community.

    • No I think everyone is going through the very definition of suffering which is wishing the reality to be something else.

      Realistically there is so much self intrest in this, apart from shortening your own life span, no change will come out of it.

    • reusachtigeMEMBER

      It’s good to see a government finally doing something to help young people get onto the property ladder to experience the joys of home investment.

    • Yes, I know a few regional towns where titled and developed land has been sitting for sale at semi reasonable prices for years so I suspect there are some influential people who want to get their money back. Local wages and unemployment in these areas dont add up to building a new house.

  11. Just another example of self-serving bias with a side-dish of attribution bias. Call it out every time you see it guys.

    The belief:
    My success is due to my own skill. Your failure is due to your own faults.
    My failure is due to the the faults of others. Your success is due to luck.

    The reality:
    Our successes and failures are a combination of a small amount of conscious actions and a huge amount of blind luck.

    When you’re running or bicycling into the wind, you’re very aware of it. You just can’t wait till the course turns around and you’ve got the wind at your back. When that happens, you feel great. But then you forget about it very quickly—you’re just not aware of the wind at your back. And that’s just a fundamental feature of how our minds, and how the world, works. We’re just going to be more aware of those barriers than of the things that boost us along.

    See also:

    Dear Mr Fraser,

    Go fuck yourself in the orifice of your choice.



    • It’s ridiculous that we have reached the stage where that little shack is cheap by Sydney standards because it’s 30 kms out of the city in a “working class” suburb. In the 70s it would have cost an average year’s wage; at the most, 2 years. Now it is 10 times.

  12. Leith,
    I think all the work you’ve done on housing prices, infrastructure and immigration basically makes the case that high immigration leads to bad government.

    Governments always take the path of least resistance. They bank the extra tax revenue higher immigration brings and spend it on pork barrelling rather than making long term investment decisions.

    Successive governments have proven they cannot manage a high immigration program properly.

    I think a simple meme to get out there is
    high immigration = bad government

    • No you missed the point entirely. Basically socialist government in the west promised too much to the boomers with their ponzi welfare. Only short term fix is up immigration with nice side effect of bailing boomers out by selling assets to foreigners and throwing the young under the bus (that was always the plan).

      Basicallly if you are promised something for nothing, watch out. The current government is exactly what the people deserve unfortunately.

      • So you are saying the boomers deserve to make a fortune and the young deserve to be under a bus. Because we are getting what we deserve right?

      • Well in a democracy who chooses the government.

        Btw I’m not saying it’s a good thing but that’s how things work. People of voting age today choosing which future generation non voters gets butchered.

  13. Oh so it’s the ‘mindset’ is it?
    If only we had known that all along.
    Thanks John for clearing that up.
    Next time FHBs are bidding at 10x income for their first house they’ll know to adopt the right ‘mindset’.