11 March 1996 - 3 December 2007
RELEASE OF THE PRODUCTIVITY COMMISSION REPORT ON FIRST HOME OWNERSHIP
The Prime Minister and Treasurer today announced the release of the Productivity Commission’s final report from its Inquiry into First Home Ownership and the Government’s response to the report.
The Productivity Commission report finds that fluctuations in prices and affordability are inherent features of housing markets and that there is limited scope for governments to improve affordability for first (and other) home buyers in the short term. The Commission observes that increased house prices have significantly reduced housing affordability for first home buyers, however the Commission’s assessment is that affordability will improve over time, with evidence of a market cooling already beginning to emerge.
Demand for housing rose strongly through the 1990s, underpinned by low interest rates, strong employment growth and financial liberalisation. The Commission recognises that demand drivers have been overwhelmingly beneficial to the Australian community and by themselves should not be the targets for ‘remedial’ policy intervention. Instead, the Commission concludes that government policy should be directed towards addressing structural factors that impede the efficient operation of the housing market.
The majority of the Commission’s recommendations relate to the supply side of the housing market and are therefore directed at State and local governments. In particular, the report finds that improving land release and planning approval processes, and ensuring developer charges for infrastructure relate appropriately to the benefits provided to home buyers in new housing developments, will assist with moderating price and affordability pressures over time. The Government encourages the States and Territories to look closely at this report and its recommendations.
The Commission also finds that reducing stamp duties would help first home buyers and improve the efficiency of the housing market over time. The Government welcomes recent initiatives by State and Territory governments to provide stamp duty relief for first home buyers and urges continued reform of stamp duty across all States and Territories.
The Australian Government provides significant resources to address the housing needs of low income households and does not support a national public inquiry into this matter. Work is already being undertaken under the auspices of the Housing Ministers’ Conference, looking at ways to enhance the affordability of housing for low income households. In addition, the Australian Government provides targeted assistance to low income households through the $4.75 billion Commonwealth State Housing Agreement (CSHA) and $1.9 billion annually for Rent Assistance to help nearly one million private renters.
The Government understands the importance of providing Australians with continued surety for their investment decisions. As previously announced, the Government considers that it would be inappropriate to change existing arrangements relating to capital gains or negative gearing. The Government has improved incentives to save and invest by introducing an internationally competitive capital gains tax regime. The Government will therefore not be conducting a review of the tax system with respect to housing or changing the capital gains tax provisions.
The Government remains committed to the First Home Owners Scheme in its current form. The First Home Owners Scheme was introduced to offset the impact of the GST and tax reform on housing. The Government will continue to support the First Home Owners Scheme and will not restrict or means test the current $7000 grant, thereby continuing access to all first home buyers.
A full copy of the final report is available on the Productivity Commission’s website at http://www.pc.gov.au, while the Government’s response to the report is also available at http://www.treasurer.gov.au.
The Government thanks the Productivity Commission and all those who provided submissions and assistance to the Inquiry.
23 June 2004
Contact: David Alexander
02 6277 7340