Dutton, Albanese duck questions about policies that could ‘fuel the housing price fire’

A Coalition plan to allow first-home buyers to claim as a tax deduction the interest on their mortgage would deliver high-income earners double the financial benefit received by low-income earners, new analysis shows, as experts express fears both major parties’ housing policies will hurt the budget bottom line.

As Opposition Leader Peter Dutton knocked back repeated questions on whether he would financially help his son Harry to buy a home, after Harry joined his father on the campaign trail, Prime Minister Anthony Albanese pushed back at suggestions his own policy to effectively guarantee the loans of first-time buyers would let people enter the property market when they were unable to maintain repayments.

Both Labor and the Coalition put major housing policies at the centre of their campaign launches at the weekend. If re-elected, Labor would guarantee 5 per cent deposits of all first-home buyers so they do not require lenders’ mortgage insurance. It says it would also pump $10 billion into equity programs with state government and private developers to build 100,000 homes for first-time buyers.

The Coalition says it would allow first-time buyers to claim the interest on their mortgage, up to a mortgage limit of $650,000, for five years when they buy a newly built home. About 30,000 people are assumed to use the scheme each year, which has been estimated to cost $1.25 billion.

This is in addition to the party’s plan to let first-time buyers take up to $50,000 out of their superannuation to put towards a home.

But economists have warned the policies, particularly the interest deduction plan, will drive up house prices.

Opposition Leader Peter Dutton has dodged questions on whether he would help his son Harry pay for a house deposit.Credit: James Brickwood

Brendan Coates, housing and economic security program director with the independent Grattan Institute think tank, said the Coalition’s policy was deeply regressive because high-income households would be able to claim far more in tax deductions.

He said someone on $240,000 would gain a tax benefit of $87,000 over five years on a $650,000 mortgage. For someone on $60,000, the benefit on a $250,000 mortgage would be just $23,000. If they could get a $650,000 mortgage, the benefit would be just $44,000.

“It’s highly regressive, subsidising 47 per cent of high-earners’ mortgage interest costs,” Coates said. “Those on low incomes – the group most likely to be priced out of home ownership – would receive much less.”

In a bid to appeal to Gen Z and Millennial voters frustrated by the housing crisis, Dutton spruiked his policy in the marginal Brisbane seat of Ryan that the Coalition lost to the Greens in 2022.

He was joined by his son, a 20-year-old apprentice carpenter, who told reporters it was tough to buy a home and he was “saving like mad”.

“I’m saving up for a house and so is my sister and a lot of my mates, but it’s almost impossible to get in in the current state,” he told reporters in Brisbane on Monday.

Asked if he would help Harry, the opposition leader said he did not want Australian parents to have to dip into their savings to help their kids. Asked a second time directly why he would not help his son buy a home, Dutton refused to engage with the question.

“I haven’t finished the excellent points I was making,” he said.

In a Dutton family video released by the Liberal Party at Sunday’s campaign launch, Dutton said his daughter Rebecca was “madly saving as a childcare worker on a pretty low income” for a house.

Anthony Albanese and Housing Minister Clare O’Neil at a new housing estate in Adelaide on Monday.Credit: Alex Ellinghausen

“When she does the sum, she realises that after five, probably even 10 years of really hard saving, she’s not going to be close to a deposit,” he said.

Albanese, who campaigned in Adelaide and Hobart, was pressed on the dangers of allowing people to put down just a 5 per cent deposit on a property. Some analysts have warned this could pose a risk to the financial system if house prices crashed.

Credit: Matt Golding

But Albanese pointed to the current 5 per cent deposit scheme, saying fewer than three people out of 150,000 had defaulted on their mortgage.

“So all of the same [current] conditions to get your borrowing still apply. The only difference is that the government effectively is guarantor for 15 per cent of the loan, so we’re very confident,” he said.

Albanese also rejected suggestions a lift in housing construction would add to inflation. Following the previous government’s HomeBuilder program, house construction inflation surged to 20 per cent.

“If you increase supply at the same time as you do something about demand, that’s the key,” he said.

Charlie Egan says a successful housing policy would need to fix the industry’s underlying problems.Credit: Alex Coppel

But Charlie Egan, a director at Melbourne-based building company Small Projects, said Labor’s housing policy would struggle to tackle the underlying problems within the industry.

“The construction is not the core issue; the development is the problem. The developer has to take the financial risk to deliver the government policy,” he said.

“If you’re limiting the buyer pool to first-time [buyers] … you’re eliminating a huge amount of the market, which limits your revenue line. So the biggest problem … is who’s going to take the development risk to deliver it?”

EY chief economist Cherelle Murphy said while Labor’s plan would add to housing supply, both sets of policies would ultimately “add fuel to the house price fire”.

She said the damage to the budget of poor policies would hurt future generations of taxpayers.

“The total cost is not just billions that will be spent in the near term but the additional debt that accrues to the government’s balance sheet,” she said.

“The unborn children who will be raised in these homes will be the ones meeting the ongoing cost of them. The policies and all the discretionary promises being made at the moment should be funded from savings elsewhere.”

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