Julie Owens (Parramatta, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister for Housing and Minister for the Status of Women. How will the government’s election policy to deliver new first home saver accounts help young Australians buy a house?

Tanya Plibersek (Sydney, Australian Labor Party, Minister for Housing) Share this | Link to this | Hansard source

I thank the member for Parramatta for her question. I know that she is one of the keenest and hardest-working doorknockers in this House. The fact that she has doorknocked more than 45,000 homes in her electorate in the last few years would have shown her that her electorate actually has a lower than average rate of homeownership. I am very pleased to tell her and to tell other members in the House about the first home saver accounts that Australians aged between 18 and 65 will be able to open from 1 October.

It is worth reminding the House that this government inherited historically low levels of housing affordability. When the Howard government came into office, the average home cost about four times the average annual wage. By the time they left office, it was about 7½ times the average annual wage. That of course made homeownership a distant dream for many young people. Many of them stopped saving because homeownership seemed so far out of reach. Saving a deposit is particularly hard when rents are high because of course it is very difficult to be putting money aside as well as paying higher rents.

This government has been working very closely with the financial services industry to help set up these first home saver accounts, which Australians aged between 18 and 65 will be able to open from 1 October. I am very happy to report that the ANZ Bank, the Commonwealth Bank, AMP and 17 other deposit-taking institutions will have accounts registered with APRA to open from 1 October. In a week’s time, hundreds of thousands of young people will be able to set up one of these accounts and start saving a deposit.

These accounts provide a very strong incentive for young people to save rather than to spend their money because for every dollar they put into this account, up to $5,000 a year, the government will give them 17c on every dollar invested. For example, if a couple save $5,000 a year, they will receive an $850 contribution from the federal government. If a couple are both saving, they will receive $1,700 from the government on their savings. On top of that, earnings on the accounts will be taxed at the special low superannuation tax rate of 15 per cent. That means that a couple on average earnings putting aside 10 per cent of their income into individual first home saver accounts would be able to save more than $88,000 after five years. The very important thing about this is that that is about $13,000 more than if they had been putting the money into an ordinary savings account—a very important difference. These accounts will help people who would otherwise find it difficult to save a deposit for their first home.

One of the great innovations of these accounts is that other family members—parents, perhaps grandparents—can also contribute to these accounts and see that government contribution as well. Particularly parents and grandparents, who are worried about whether their children and grandchildren will ever be well settled in a home of their own, can make these contributions, perhaps helping a young person set up an account on their 18th or 21st birthday. If grandparents, for example, put $100 into one of these accounts for someone’s 21st birthday, the government would contribute $17 into that account.

I would urge every young Australian who has a job, even a part-time job, to think about putting $20 a week into one of these accounts. By starting small and saving regularly not only do these young Australians develop a habit of saving that will serve them well later in life but also the wonder of compound interest will work on that money so that, by the time they are looking to use that money for a deposit, they will have a nice little nest egg. I will conclude by using the words of best-selling financial commentator and columnist, Scott Pape, who wrote:

… the First Home Saver Account rewards first home savers for developing a long-term savings plan.

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Anything that instils the importance of savings at the start of a young adult’s life can only be a good thing.