Sussan Ley (Farrer, Liberal Party, Shadow Minister for Housing) Share this | Hansard source

I am happy to speak today on the First Home Saver Accounts (Further Provisions) Amendment Bill 2008 and the First Home Saver Account Providers Supervisory Levy Imposition Bill 2008. May I say at the outset that my remarks will be brief because these are essentially minor and relatively inconsequential amendments to measures that the opposition supported on 26 June this year when the government passed the First Home Saver Accounts legislation. I will make a couple of points, however, in order to illustrate what we are becoming increasingly convinced about on our side of the argument—that the first home saver accounts are not really going to achieve what they have set out to do and are going to make limited if any inroads into addressing the housing affordability crisis, as it is commonly being called, in Australia today. I do want to acknowledge that the government is not just relying on this measure but is about to introduce National Rental Affordability Scheme legislation into the House. Yesterday the Prime Minister and the Minister for Housing made, I think, the third launch of the Housing Affordability Fund. So there are two other measures. I will deal with them on another occasion because I think they will be similarly ineffective.

The first home saver account is essentially designed to encourage young people to save for their first home. It is quite inflexible in its design and operation. I think that its inflexibility is what is going to cause trouble and make the account unattractive to those who would provide it—namely, banks and other financial institutions; and to those who might use it—young people who, particularly in today’s modern, integrated global economy do not pretend to lay out their life path in the clear, deliberate fashion that previous generations might have done. They demand flexibility, and if they are putting money away in an account, they need to know how they may get it out. The problem with the first home saver account is that once you have put your money into it, it is very difficult to get it out—in fact, it is not possible. As I said when the bill was introduced, yes, there is a taxation advantage. The sensible thing would have been to say, ‘You give up that taxation advantage retrospectively if you withdraw your money from the account.’ But that is not possible. You cannot withdraw it; it needs to be rolled over into superannuation. This is a superannuation style account. Rolling it over into superannuation is fair enough—we all need to encourage people to save more for their retirement—but that may not be the option that a young person typically will choose at that time in their life. I just think it is going to add up to a fairly serious disincentive.

There are other disincentives too, which I will briefly go through. There is a $75,000 cap on funds over four years. That is not adequate to keep pace with rising house prices. Having caps on the accounts is not practical because house prices, incomes and lending criteria all change over time. The First Home Saver Accounts measure is unlikely to do much to help. If we can just focus on the substantial reason why we are facing the crisis we are now, it is that limited land supply, induced by restrictive land release policies of state and local governments, is the main reason for rising housing costs. Government taxes, fees, levies, charges and compliance costs are adding enormously to the cost of new housing, and now represent one-quarter to one-third of the cost of a new house and land package. So if one-quarter to one-third of the cost of a new house and land package is taxes going to governments, then all of our efforts must be directed towards that proportion of the cost of your new home. By adding more heat, if you like, on the demand side of the equation, in giving young people a bit more money, maybe, to go and put a deposit on their first home, you are not addressing that problem in any way. It is a supply side problem. I mentioned the other two measures the government has in place; they are addressed to the supply side, so it has recognised that—but they will not work either.

This measure will not necessarily make entry level housing more affordable for first home buyers. In fact, it could potentially have the effect of increasing house prices by giving people more money to spend without real increases in the supply of new homes—essentially leaving young people worse off. The problem is that, over the long term, residential property appreciates at an average rate of 10 per cent a year. Therefore, the savings accumulated in the first home saver account are unlikely to keep up with the increase in the property market itself. Further, if the property market does dip, the first home savers cannot access the money for four years, so they may miss a prime opportunity to buy.

What government co-contribution are we talking about? I remind the House that we are not talking about a great deal. The maximum government co-contribution you could get into this account for $5,000, which is the maximum you can deposit in a year, is $850. It is very hard for young people to find $5,000 to put away in their accounts. We really want to help those who are struggling and probably cannot find $5,000 a year to save and put in their accounts. My concern has always been that the increase in the value of your home and the inflation rate is going to outstrip the meagre co-contribution and the costs that you may face in having the account with the account provider. Without any increase in housing supply, there is a risk that, over the life of the first home saver account, any savings made by account holders will be outstripped by the increase in the price of a first home.

As I said, the government will pay a contribution of 17 per cent of the first of $5,000 saved each year—a flat rate for everyone. In effect, an apprentice who earns $10,000 a year will get an $850 co-contribution. A person earning $180,000 will also get an $850 contribution from the government. That is better than the initial proposal we had, which saw the person on $180,000 getting a whole lot more. I am pleased that we have evened that out, but it is still relatively inequitable if somebody on a higher income gets the same contribution of taxpayer dollars as somebody on a much lower income.

Another problem: I see that you must also deposit $1,000 over four separate financial years in order to be able to withdraw your money. If plans change, you cannot access your money unless you roll it into superannuation. Optimising the first home saver account initiative will require products that are attractive to—and, more importantly, understood by—young people. Each additional layer of complexity in the regulatory framework will reduce returns to savers, dampen competition and choice and slow the arrival of these products to market. They are already late. They were announced, initially, as being open for business at least a month ago. They are now due in two weeks. I had a look on the website to see if there were bells and whistles associated with their launch in any of our banking or financial institutions. I did find the ABC bank offers first home saver accounts, but then I found that the ABC bank does not exist; it must be some learning or assessment tool that resides online. However, I understand that some credit unions will be offering the accounts and I have been told that some banks will also be offering the accounts.

I have been told that banks are desperate for deposits. Anything that the banking sector can do and that we can do to encourage young people to save has got to be good, so that is the reason, essentially, that we agreed to the passage of this legislation in the first place. We do want young people to save for their own homes. We do want to change the savings culture. It was very disingenuous of the Treasurer when he introduced legislation in June to come up with some figures that had savings of $88,000 from a typical couple. It was very disingenuous, because that money would largely be their own savings effort, irrespective of this legislation. When people are examining it closely, when they are really getting down into the fine print, they are thinking, ‘This is all too hard’—and they are right.

Back to the subject of these bills, which, as I said, are minor and relatively inconsequential amendments to the legislation that was passed in June. Essentially, this legislation includes: various provisions to make the scheme more operational; a system for dealing with unclaimed money—of course you need that; amendments to secrecy and information-sharing provisions between the ATO, APRA and ASIC, and, given that there are taxation implications, there are probably implications associated with the Child Support Agency too, and you need to have the appropriate flows of information—quite sensible. A framework, which I understand is not prescriptive at this stage, is also introduced to deal comprehensively with family law situations, so that if a separating couple has a first home saver account as an asset shared between them then there are provisions for how it is to be dealt with under family law.

The changes also introduce a framework for imposing a levy on first home providers to provide funding for APRA, the Australian Prudential Regulation Authority, to carry out its supervision of financial institutions which offer these accounts. This is consistent with the user-pays approach that APRA has. It is actually modelled on the retirement savings account supervisory levy, so that those who offer an account have to pay for APRA to supervise the management and running of that account.

I am not sure whether financial institutions will pass that cost on to those who take the first home saver account deposits; I suspect the accounts would become even more unattractive if they did. But it is worth noting that something that in everyone’s individual case is small—we are talking about kids with a bank account to save for a first home—has just turned into a legislative, bureaucratic and red-tape nightmare. I know that, even with the best will in the world, we all hate red tape but we seem to end up absolutely tied up in knots with it. But this is just crazy because the amount of red tape associated with this measure is going to have people running a mile from it.

So the final measure that is contained in these bills and that involves the supervision of APRA should certainly ring alarm bells in all of us. Although we want financial integrity and we want people to offer the correct financial advice to those who take out deposits and accounts, and we do not want any bad people in the system ripping people off when it comes to bank deposits, we really do have to be careful that we do not swing too far in the other direction. As I said, this is consistent with the existing financial sector levy framework, but it is a nightmare to administer and it is highly costly. I conclude my remarks by saying that the coalition supports these bills and looks forward to their entry onto the lending and financial scene in two weeks time—and I particularly look forward to seeing the take-up rate.

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