Government grands for first home buyers drive up prices as home ownership rates among young and middle aged Australians decline.
That is the view of economist Saul Eslake, who took a pot shot at the grants schemes after Tasmania's Treasury said in recent analysis of Australian Bureau of Statistics Hobart inflation figures that: "The increase in the housing component in the June quarter 2021 was mainly due to the continuing impact on new dwelling purchases as a result of the state and federal HomeBuilder grants."
"Exactly," Mr Eslake said.
"These grants should be called Second Home Vendors' Grants - or, if the grants are restricted to 'new builds' only, Builders' and Land Developers' Profit Margin Expansion Grants - because that's where the money ends up."
Mr Eslake graphed Australian home ownership data from the 1947 to 2016 censuses.
The graph showed home ownership had declined in the 25-34, 35-44, 45-54 and 55-64 age groups in recent decades and had only held up for 65 and overs.
"I don't think it's a coincidence that Australia's home ownership rate peaked at the first census after the first program of cash grants to first home buyers was introduced by the Menzies Government in 1964, after John Howard, as the president of the New South Wales Young Liberals, had persuaded him to offer it as a promise at the 1963 elections," Mr Eslake said.
" And has been going down ever since, especially among people under the age of 40.
"I can't think of any other area of public policy where governments of all political persuasions have persisted with the same set of policies for so long in the face of such overwhelming evidence that they don't work as the policy of giving cash to would-be first home buyers in the belief that it will increase the home ownership rate."
Tasmanian dwelling approvals soared in the past year, according to the ABS, although they dropped away in the most recent numbers.
Finance Minister Michael Ferguson said the HomeBuilder grants were deliberately targeted and short term, to save jobs in the construction sector when it was seeing projects cancelled and delayed.
"The grants were available for eligible building contracts entered from June 4, 2020, till March 31, 2021, and are complemented with discounts on state stamp duty for those who didn't build a home such as first home buyers and pensioners downsizing to a smaller property to free up family homes," Mr Ferguson said.
"The schemes were designed to assist the building and construction industries as they recovered from the impacts of the COVID-19 pandemic emergency, creating jobs and supporting the economy.
"The HomeBuilder scheme criteria were largely set by the federal government and are aligned across the country with the objective of getting construction under way and people in jobs as quickly as possible."
He said the Tasmanian government's First Home Owner Grant was still running.
" ... we specifically designed it to assist Tasmanians to build their first home and has been extended till June 30, 2022," Me Ferguson said.
"This was increased from $20,000 to $30,000 from April 1, 2021, to coincide with the end of the HomeBuilder Grants.
"The Tasmanian government also provides support to Tasmanians buying their first home and to pensioners downsizing to a smaller home by way of a 50 per cent rebate on the stamp duty on homes valued at up to $500,000.
"Historically low interest rates are creating cheap money which is fuelling a property boom across Australia and, indeed, many parts of the world.
"Home ownership would certainly have been lower had we not offered these opportunities.
"While increasing house prices are a national problem, Tasmania's strong local economy, and the fact that our state is one of the safest and most desirable places in the world to live, work and raise a family is also contributing.
"The strong plan the Tasmanian Liberal government took to the election includes a comprehensive approach to increase housing supply, which is the only way to combat rising house prices and put downward pressure on home prices and rentals."
"We will continue to secure Tasmania's future by stimulating activity in the building and construction sector, keeping Tasmanians in jobs, and helping more Tasmanians to build or buy a home."
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