The CEO of one of Australia’s largest mortgage groups has described the 2017 federal budget as “ineffective” and slammed the government’s efforts to improve housing affordability.
Mortgage Choice chief executive John Flavell said there were “no silver bullets, no truly substantive changes, just an ineffective spray of pops and fizzles” in Tuesday night’s budget.
The measures are “merely a grab bag of solutions” that cumulatively will have “no net positive impact on the issue of housing affordability”, he said.
The Mortgage Choice chief shot down the government’s first home buyer super saver scheme, which will enable FHBs to salary sacrifice up to $30,000 towards a home deposit.
“At best, a couple who salary sacrifice a portion of their income into their super might be able to scrape together enough money to pay for the stamp duty charged in markets like Sydney and Melbourne,” he said.
“There is nothing to suggest that this new scheme will deliver a different result to the spectacularly unsuccessful First Home Saver Account initiative that was launched by the Rudd government in 2008 and withdrawn from the market in 2014.”
Mr Flavell also took issue with the government’s actions to help combat the growing problem of homelessness in Australia, arguing that $375 million to fund social housing was not enough.
“While this is a nice touch by the government, when you consider that there are more than 100,000 Australians sleeping rough each and every night, I believe the funding proposal does not go far enough,” he said.
“We are a wealthy country and we should be doing more to help this sector of the community.”
One measure labelled “naïve” by the Mortgage Choice boss was the federal government’s decision to increase the capital gains tax discount (from 50 per cent to 60 per cent) for investors who purchase ‘qualified affordable housing’.
“Increasing the tax incentives for investors will only serve to drive up investment demand for affordable housing, which in turn, could drive up the living expenses for those who are most in need of affordable accommodation,” he said.
All of the property investor adjustments were largely fringe-based changes, Mr Flavell said.
“In Australia, almost 40 per cent of all loans are written for investment purposes. Indeed, over the last few years, Australia has fast become a nation of landlords — and these landlords are all voters. As such, we were never going to see the government do anything other than fiddle at the fringes of property investment policy,” he said.
“And while the government is too shy to make significant structural policy changes that will impact property investors, they are not too shy to make changes that will affect the big banks. Of course, one must ask whether the big five banks will really be the ones to feel the effects of the levy?”
Mr Flavell said the Treasurer is either “conveniently ignorant or at best naïve” to believe that the new levy imposed upon the big five will not feed through to consumers.
“In one way or another, consumers, depositors and borrowers alike will all have to bear the brunt of the levy,” he said.
“Everybody wants a stronger banking system that succeeds in delivering better consumer outcomes. But, to take an approach that is more about plugging the revenue gaps in the budget rather than making structural changes, is short-sighted and not the right tactic for the federal government to employ.”
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James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.