Oct 282019

Andrew Laming, the member for the federal seat of Bowman, is today ‘bumping’ this article from the Redlands Bulletin in a bid to raise his profile. Akin to the little boy who stuck a digit into a pie pulling out a piece of fruit and claiming “what a good boy am I!”

There can be no other reason. It’s understood that Mr Laming, like a huge majority of politicians, is a dyed-in-the-wool narcissist, always seeking publicity, in his case, even negative publicity. He claims to be the architect of the First Home Loan Deposit Scheme which does not yet exist in legislation. It’s an idea, a thought bubble espoused by the PM during the 2019 election campaign. No bill has yet been introduced to the Parliament.

There are various articles available in the media following the May 12 announcement, but the ONLY reference to the ‘idea’ is the linked costing study initiated by Morrison, noted above. It makes interesting reading given the current state of Australia’s stagnant economy. It should be recognised that government is not making a budgetary allocation of funds, but only providing an equity investment on an ‘as needs’ basis. The costing study shows a proposed impost on the public purse, defined as Public Debt Interest, of $14.8m out to 2030 with a total ten year cost (PDI) of $140.9m. The total cost of the scheme over a 10 year period being $575.4m. Read the study document for clarity because it makes assumptions, including an apparent ‘return on investment’, which I’ll admit I don’t fathom, given there is no money actually being ‘invested’. Suffice to say, as the study confirms, the Scheme increases government debt.

What needs to be understood are the following points:

  • This is NOT a cash handout;
  • The scheme is a deposit guarantee provided by government to raise the intending First Home Buyer’s deposit to the required 20% of purchase price in order to avoid Lender’s Mortgage Insurance;
  • If the intending buyer does not have a minimum of 15% of the purchase price of a property as a deposit, they will not be eligible for the scheme’s assistance;
  • Intending purchasers need to be buying into a property which falls within maximum price parametres determined by a median housing market price on a State-to-State basis, Those medians have not been determined;
  • No detail exists regarding the basis under which the First Home Loan Deposit Scheme guarantee can be activated;
  • No methodology appears to have been applied, or indeed is evidence available for projected calls on that guarantee.

We should also note that Australia’s economy is stagnant, that much is reinforced by the Reserve Bank Governor’s calls on government for stimulus outside of monetary policy. Wages growth is stagnant, as revealed by Australian Bureau of Statistics data stands at 0.6%. Mean weighted average Cost Price Index – the cost of living – at the June Qtr is stated as being 1.3%. A 0.7% differential. The ABS Key Economic Indicators summary also makes very interesting reading, confirming what the RBA is continually stating. Stimulus is needed and with the wholesale cash rate at an all time low of 0.75%, for government to be pretending to provide stimulus through equity investment, encouraging First Home Buyers to borrow more, to go into debt at such low levels of retail interest rates approximating 5%/annum while wages growth is stagnant is quite simply irresponsible. Australia, currently, is sailing very close to recession, with only the price of our resource exports assisting with GDP growth, which in and of itself, is low in forward estimate terms. Global economies are bumping along the bottom of the fiscal pond right now, meaning that should our largest export customers – China, Japan, India – retract their demands for our iron, coal or gas, Australia would very quickly slide into recession.

In all, this deposit guarantee scheme is nothing more than someone’s ‘good idea’. Let’s use the public purse as a backstop, let’s artificially boost housing purchase and building rates (which are currently negative), all while still being able to claim a mythical budgetary surplus in the immediate short term. It’s nothing more than a political convenience, a very dangerous and potentailly destructive political convenience, constructed by politicians, for politicians. It won’t help Australia, or Australians in the longer term.

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