Page 5406 - Week 13 - Tuesday, 16 November 2010
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in other states. However, whilst we are pleased that a cap is being imposed, our view is that it should be lower than what is being proposed. In the detail stage I will be moving an amendment to the proposed cap.
The Greens also support means testing the scheme. It defies common sense that the intergovernmental agreement specifically provides against means testing, and I ask the minister to justify why it is that first homebuyers fall into a particular category that warrants a government handout irrespective of their income or other assets. What is the reason for this and how does it help the ACT community? I can see no justification for an open-ended scheme that hands out money to people irrespective of whether they actually need it or not.
The first homeowner grant scheme was introduced on 1 July 2000. The original justification was to offset the effect of the GST on homeownership. In 2008-09, 80 per cent of the grants paid in the ACT were for existing homes. I think nationally the number is closer to 90 per cent. As no GST is payable on the purchase of existing houses and there is no evidence that GST payments indirectly affect existing house prices, it is hard to see how it could possibly be said that the function of the scheme is to compensate for the GST.
The accepted policy objective now is to encourage and assist homeownership and help first homebuyers get into the market. In the last financial year the ACT spent around $23 million on a scheme that the Productivity Commission, along with every other economic commentator I could find, found has increased house prices. The Productivity Commission also said “the case for providing direct financial assistance to foster homeownership is not strong”. As I said, the OECD has since gone one step further and said the grants should be phased out altogether.
The Senate committee recommended that there should be a comprehensive review of all government initiatives aimed at improving housing affordability. In addition, the Productivity Commission also found that, while conceived as compensation to first homebuyers for the introduction of the GST, the funding might provide a greater return to the community were it redirected to support the housing needs of low income households in rental, public or community housing.
If governments wish to continue to assist first homebuyers directly, a scheme along the lines of the existing first homeowner grant has attractions in terms of administrative simplicity and flexibility. But a greater impact on homeownership levels could be achieved if that assistance were better targeted at lower income households, with assistance rates commensurately increased. Targeting would be best implemented by limiting support to those purchasing homes valued below regionally differentiated price ceilings.
It is somewhat concerning that the limit being proposed in this bill directly contradicts this finding by aligning us with other state caps for no real reason and not focusing on the actual price of homes in Canberra. Again, this is from the Productivity Commission:
Measures that increase purchasing power will tend to increase house prices, particularly if there is limited capacity to augment supply in response to the
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