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Wednesday, 8 February 2017
Page: 391


Mr ALEXANDER (Bennelong) (11:15): Firstly, I would like to say that I agree with much of what my friend the member for Newcastle has said—not all, but much. As Chair of the Standing Committee on Economics when this inquiry began, I know that it was called out of concern for two issues: the volatility in the housing market, which is our biggest asset class; and opportunities for home owners to get into the market. There was much evidence put forward and certain conclusions have been drawn. I, like the member for Newcastle, regret that there was not a stronger set of recommendations, but maybe the recommendations will come in the form of policy.

Home ownership is now one of the most pressing issues facing communities today and, potentially, future generations. In the last 40 years, Australia has been moving from a country that celebrated the highest rate of home ownership to a country of lords: landlords. While both investors and home owners fill vital niches in this market, investors currently have an unfair advantage when buying a property, and that advantage is maintained throughout their period of ownership. If this trend is allowed to continue, fewer people will own more property, funded by those who with every year will become less able ever to have a stake in Australia. This group of aspirational home owners and their parents are rightly becoming more disenchanted at the inequity of the current tax system that so advantages the investor over those forced to rent. We need to develop a strategy of transition that transfers some of the advantages of the investor to the first home buyer.

As the chair of this committee when this inquiry was instated, I was very pleased that the Treasurer of the day agreed that these were pressing issues and set out an inquiry with such wide parameters, which allowed us to look at every nook and cranny of this complex policy area. There were many insights that this inquiry uncovered. Most telling of all is the intricate nature of Australian housing policy. We know there are no easy answers to the questions that this inquiry produced. Anybody who says it is simply a matter of cutting a tax break or building more homes does not fully grasp the details of the area. Of great concern is the level of volatility that has developed. Imprudent action could burst the bubble, with disastrous results. The transition to sounder policy must be managed so as to protect government revenues both during the period of transition and post-transition.

I took the following eight points from the inquiry: (1) that record low interest rates had a profound impact on the housing market; (2) that there is a dominance of investors over owner-occupiers; (3) opportunistic speculative investment is driving prices and volatility; (4) new, low-wage investors are entering the market with little capacity to fund interest rate rises or survive a weakening rental market; (5) there are investors with highly geared multiple properties also vulnerable to the same market factors; (6) supply is not the only factor in providing housing opportunities for first home buyers; (7) APRA's recommendation to restrict investor borrowing to 80 per cent had an immediate effect on the market; and (8) the RBA's justification for the previous interest rate was out of concern for an overcorrection and to assist homebuyers.

Much has been made about the final report presented by this committee. Many people are disappointed that no recommendations came from the large amounts of evidence that was provided to the inquiry. However, this evidence can now provide a perfect platform for all parties to go away and develop a suite of policies to even the playing field between home buyers and investors. Certainly listening in to the evidence presented has formulated a suite of policies in my mind and how we can fix this market. Firstly, we heard evidence from APRA during this inquiry that they shared concerns about the volatility of the market. The inquiry heard that when APRA pressured the banks in 2015 to reduce their loan to value ratio requirements and cap lending growth for investment loans—a measure to manage lender risk in an overheated market—investor appetite immediately cooled. This measure should be investigated for further development and refinement. As the RBA's charter obligates a responsibility to maintain the economic prosperity for the Australian people, it now appears a logical step would be for these two regulators to work cooperatively to stabilise the market. Through consultation with RBA and APRA, there could be a pre-emptive calibration to the levels of lending to investors that could add a powerful control mechanism to housing inflation. Regulators should be mandated to maintain housing inflation within a prescribed range. This would allow for predictable and timely moderation of the housing sector through macro prudential tools.

There is a lot of discussion about supply in this market. While I would contest that it is not the panacea to the problem, it will certainly have an impact on house prices. It is critical that owner-occupiers are given advantages before the new supply goes on to the market. As the system stands at the moment, new dwellings will simply be snapped up by the investor as they have in recent years. As I have said before, it is a little like, Madam Deputy Speaker, if you were to play Roger Federer you would lose and if you were to play him 1,000 times, you would lose 1,000 times. That is what it is like for the home buyer when he or she is forced to play against an investor with these rules.

Following this debate, this chamber will host the debate on the inquiry that I chaired after leaving the Economics Committee. I would recommend anyone interested in the supply question to observe it or read my speech from yesterday. On the surface, it discusses the value capture funding model and the great opportunities that this has for funding high-speed rail on the eastern seaboard. However, the key purpose of this is the opening up of regions and the potential for housing supply presented by a strategic decentralisation. New cities on a fast line, 30 minutes or so out of a Sydney or a Melbourne could provide homes for millions of people. Contrary to popular belief, high-speed rail's prime purpose is not an alternate mode of transport between capitals; rather it is a tool to effect dynamic regional growth, to rebalance our settlement as land near regional stations will then compete with the most expensive land in the world—Sydney, the second most expensive city and Melbourne, the sixth most expensive city in the world. High-speed rail has the capability to provide an abundant supply of affordable housing for many generations to come. It will open up our regions and provide the space for this housing stock with the interconnections with other towns and economic hubs that is currently lacking in our suburbs.

Finally, here is a novel proposal to help people into the property ladder and save our superannuation system. If we extended superannuation to be used for purchase of an owner-occupier home rather than the existing limitation to the purchase of investment properties through self-managed funds, we would enable first-home buyers greater access into the marketplace. The proportion of the house purchased through superannuation must remain the property of the superannuation fund. In this way, using superannuation to purchase a home changes the components of the superannuation fund without reducing its net balance. Individuals should have the ability to borrow as much from the superannuation fund as possible, conditional on the home being retained as part of the superannuation fund. Selling the superannuation funded home before the superannuation fund matures will require proceeds from that sale to pay off the original super borrower. This policy is in place to ensure the superannuation fund is preserved as much as possible for retirement and does not become another source of credit. This policy does not compromise the superannuation's sole objective of providing a reasonable standard of living in retirement, as the value of the property is retained as part of the fund. This will enable first home buyers significant assistance in accessing the property market without compromising retirement savings.

These are my thoughts on how to remedy the housing affordability crisis, but I would welcome a thoughtful, nuanced discussion in this country to form a broad policy to help people get into the market, a policy that gives— (Time expired)