Is Labor putting out the housing fire or fanning the flames?

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If you've spent any time on social media, you've all but certain to have seen this meme.

The basic structure is simple.

There's a person holding a tiny bucket of water and they're trying to extinguish a burning inferno.

In this case, the fire is Australia's housing crisis.

The government insists it's doing more than merely throwing a little water over the blaze.

It argues it's getting it under control and will point to policies like today's expansion of a program that allows people to buy a house with just a 5% deposit as an example of that.

So is the government holding a hose that can put it out or throwing fuel on an already out-of-control fire?

Welcome to Politics Now.

Hi, I'm Brett Worthington filling in for PK.

And I'm Tom Crowley.

Now Tom, there are three certainties in life, death, taxes, and a Prime Minister returning from an overseas trip and rushing to a camera to make sure they are seen, to be doing an announcement about local news.

And after a week on the world stage, we saw the Prime Minister head to his home electorate in a West Sydney, where he's talking about this first home buyers grant being extended, essentially allowing a 5% deposit to get you into the property market.

What did you think of him?

Using this as the first announcement.

Homes, homes, homes.

Back to the most, well, close to home issue of all in politics.

It's the one that I think maybe displaces cost of living as that real, you know, the number one issue on the minds of voters.

So it's no surprise.

I mean, I think in the last term, you know, we would see him at a supermarket or we would see him maybe at a petrol pump talking about the cost of living this time.

It's all about housing.

Yeah, so this program, with a 5% deposit, the federal government then guarantees 15%.

So it gets you up to the 20%.

So you don't have to take out mortgage lenders' insurance.

It's expanded in a way that there's no, the cap that was on property prices is increased.

Now there's no cap on the amount at which a person can earn to be able to get into the program, which has meant you've had coalition figures out today saying billionaire children are going to be tapping in to this program.

The government is adamant that this is one way in which people can get into the property market sooner because the amount you need to save to get that deposit up and going is lower than what it otherwise would have been.

Do you think that argument stacks up?

Well, look.

I won't mince words, Brett.

This is the dessert part of Labor's housing offering.

The government had this conversion over the last three years, really, to this idea that the ultimate solution to the housing crisis is bill, bill, bill, we need more homes.

That is reflected in a lot of their policy platform.

They are trying in a number of fronts to get building going and to work with the states.

It doesn't really sell very well, though.

People don't kind of like necessarily the idea of hearing that a bunch of homes are going to be built in a few years' time.

It's not as tangible.

It's not as retail.

And so, just like always in federal housing policy, the government and the opposition came to the last election realizing that they needed some sweeteners as well.

And so, look, the government, in a sense, and particularly Housing Minister Claire O'Neill,

kind of on the defensive about this because they know they've got this balanced thing.

And so they say, look.

This is about we're working on the long-term solution.

We'll come back to you on housing supply.

But I think Claire O'Neill said, I couldn't look first home buyers in the face today and say they've got to wait for that long-term solution.

So here's a little treat, you know, in case you're hungry in the meantime.

And that is this demand side support, making it easier for a first-home buyer to get into a home essentially by putting more cash in their pocket.

And this 5% deposit guarantee or the help to buy scheme or some of the various tax deductions we saw from the coalition, you know, one way or another, we can talk about the financial maths.

They're just ways of putting more money into people's pockets.

And that's where ultimately I don't think there's any serious disagreement that this will push up house prices.

The conversation is really about how much the government leans on treasury modelling.

It's fair to say we don't know very much about, that just sort of says, oh, look, it'll only be minor.

It's a very big housing market.

We're talking maybe 20,000 extra people a year.

It's not enough to shift the dial.

There are some people out there who think it will be a much bigger run on housing and a much bigger impact on housing prices, I suppose we'll see over the coming months.

Because is the issue here, what are you modelling in putting forward that figure?

Like the government says, yes, it will increase 0.5% over the course of six years.

Other people are saying it's going to be way more than that because you are throwing a whole lot of people that are into the market at a time where that supply issue is still going to be an issue.

Look at Michelle Bullock at the RBA even yesterday saying she's seeing two years of not a huge lot of changes happening on the supply side.

So if you've got more people able to get into the market, how do you model that?

That's what it will be.

Exactly.

And this is one of those things, I mean, there are some things that Treasury and economists are quite good at modeling, essentially, because they have a lot of practice and we've seen it play out before.

There's a lot of guesswork in this because we just don't really know exactly how many people are going to be motivated to go out and buy a home that they wouldn't have otherwise under this.

There certainly seems to be a lot of enthusiasm about it.

And what we also don't know is, I guess, along the lines that you're talking about there, what Treasury might have assumed about how many homes will be built.

Because the truth is, if Treasury has taken as given what Labor is now saying about the number of homes it might want to build, and they're saying, well, we've got this guarantee, but we've also got these new homes and it'll all balance out.

If that's where Treasury has come to this view, well then we'd be right to say, well, hold on a minute, because Labor's efforts to build homes are really, really slow.

As Michelle Bullock said, we're not getting anywhere near the pace.

So what happens if we turbocharge the demand side and then this supply stuff doesn't come through?

Then, you know, the rosier predictions wouldn't pan out.

We'll dig into the broader commitment on the supply side in just a second, but I am curious to get your take on Claire O'Neill, the housing minister, has talked about this being a matter of fairness, which is what you alluded to there, wanting to be able to look people in the eyes and say, I want you to be able to get into the property market.

And the government will say, Look, the median house price in Australia is in the mid-$800,000.

It means for a 5% deposit, you're looking in about $40,000 that you need to save.

And it's been not since 2002 since a person was being able to get the equivalent of a 20% deposit for $40,000.

But if you run those maths out even further, the person still only is putting 5% into it.

The median house price in, say, a city is in the $900,000.

If you're taking out, essentially you've got to pay back 95% of that mortgage, you're looking at $890,000 in debt before you start paying interest.

To what extent are the biggest winners here, the banks, in the amount of money they're going to make out of this scheme?

But also, is it fair for a future generation to be saddled with so much debt just to get into the property market?

Yeah, I think that that's where it's important with these things to, I suppose, understand your own financial situation because what might be a cheaper deposit hurdle might be if you're buying a more expensive house, more mortgage payments in the short term and then a longer time, as you say, paying off that mortgage.

So for some people, that might really work.

I think that there are a lot of first home buyers who are finding just that deposit hurdle is the really tough thing and for whom this might make a genuine difference.

Certainly we've seen a number of people in the earlier income-capped version of the scheme who were pretty excited.

It's been fully subscribed.

So, you know, obviously some people are making the determination that it's right for them.

But yes, I think that it's a funny way to use the word fairness is what I would say, because of course it's unfair over the long time horizon what this generation relative to their incomes, relative to what they get from a normal middle-class job, what they can expect to buy in terms of housing compared to what it was generations ago.

We all know this point.

It's so well worn, really.

And I think that what the government is starting to recognise and state governments are starting to recognise is you've got to do something really structural that might take a lot of time to restore that.

that sort of fairness.

And we're just at the cusp of that, but there's a long way to go before the kind of income to housing ratio is anything like what it was.

And Labor itself would recognise, as many economists say, that ultimately this kind of thing of just putting some money into one group of home buyers' pockets without addressing the structural supply stuff, you know, it doesn't necessarily restore fairness.

It it's just kind of baking in the unfair, I guess that's that's one way I'd put it.

Yeah so the policy comes into force today being October 1st.

It also comes at a time when we have clearer figures on where the property market is at.

So figures that we've seen coming out today showing that September saw the biggest monthly increase in property prices, I think, since about 2023.

Over the September quarter, they're up 2.2 percent.

So it just fuels that argument.

The government has to answer like, is this going to add them up even further?

The difficulty of the government is trying to sell a message about getting people into the property market, but the first question they're getting is, is this just going to make things more expensive?

Absolutely.

And we're at a point of the interest rate cycle now where the rates are starting to come down again.

I mean, you know, even when the rates were going up, there was not really any significant correction in house prices.

But now that the rates are getting lower again, you know, again, making it easier for everyone to borrow, that's part of why we're seeing that upward pressure on prices.

I think maybe the one thing the government's got to kind of hope is that the cost cycle to build things turns soon, because that's been the other key barrier that's going on in the background here.

The inflation pinch we've had over a few years has made it really expensive to build homes.

There's a workforce issue.

There is a lot of reasons in the sector why it's pretty hard to get stuff built at the moment, but there is a cyclical element to that.

Over time, it shifts.

We've been in an expensive point of the construction cycle now.

Maybe that's the kind of thing, if that shifts in the next couple of years, that might get more homes built and then we might see something different happen in the price area.

But in the meantime, yes, you know, we are going back uphill.

And so, we've seen over the last term of the parliament no shortage of debates over housing between Labor and the Greens, Labor and the Coalition.

We've seen legislation for this isn't new legislation, it's not new.

That's all done and carried.

So, the Parliament's done its task here, but we have seen the Coalition come out today focusing on will billionaires, children will be able to tap into this.

The Greens, though, arguing that this is more about this is going to inflate prices at a property front.

Have you been surprised at what the political reaction to this has been?

No, and I, you know, I think it's a bit easy in the end.

The genuinely hard stuff is actually proposing something that's really going to fix this.

And, you know, on the billionaires' children thing, I mean, you know, I don't know how many billionaires' children are wanting to buy a $900,000 townhouse in Melbourne to live in.

you know, it depends on access to the trust or not to be in the middle of the year.

Well, exactly.

Yeah, yeah.

So, you know, that's, that would be a pretty extreme case.

I don't know whether there's anyone who's really in that position.

I think what Andrew Bragg and the coalition recognise is that, you know, they went to the last election with pretty much the same sort of thing.

They made some noises on supply.

They had a lot of stuff that economists said was just going to push up prices, put money in people's pockets.

They know they've got to go away and come away with a more credible housing policy about how are you going to get stuff built?

How are you really going to make a difference here?

The Greens, I think, probably know that as well.

The key part of their housing suite, if you like, is negative gearing, tax concessions for property investors.

They say, you know, if you make it less attractive for investors and you push them out of the market, that that's another category that Labor hasn't wanted to consider that could make a difference on the price front.

But then on the supply side of things, it's fair to say that their own policy offering lags a little behind, and they probably recognised in the last term that what was seen to be a bit of obstructiveness on this kind of supply question hurt them politically as well.

So I think both of these parties, you know, this is a crisis that's not going anywhere.

People are very angry about it.

It's always much easier to be playing the kind of attacking the government on this, I think, than it is to come up with an alternative policy plan.

But both of those parties recognize they didn't win the argument the last time around, so they've got some work to do.

Yeah, so if we look at the supply side, the government's pledge is this 1.2 million homes over the five years.

To get there, it would require record levels of housing construction this year, next year, the year after that.

So, if the target's roughly around 240-odd odd thousand, they're sitting at what, about 190,000, well short of it.

We heard from Claire O'Neill this morning on our end breakfast conceding that ambition is where it's sitting.

They're certainly not pulling back from that target.

But as your reporting has shown throughout the year, there is...

clearly concerns within all parts of the government about whether or not this is realistic and whether or not that is going to force the government to have to say we're going to fall short and this is what we're doing to to try and get as close as we can to it.

Yeah, look, 1.2 million homes.

I think we could just about say

it's not going to happen.

I don't think you can find anyone left who really thinks it can.

And as you say, Treasury itself basically told the government in no uncertain terms, this target's not going to be met.

Now,

that's obviously politically quite uncomfortable for Claire O'Neill and the government.

In a sense, it's maybe not necessarily their fault.

It reminds me a bit of the $275 power price promise where, you know, that thing in the rear vision mirror, we're not talking about it anymore, the government will say.

The error was probably making it in the first place, because at the end of the day, when it came to energy bills, then the war in Ukraine happens, all these things happen.

It takes it out of the government's control, and at the end, they can't really do much to deliver on a promise for something they don't ultimately control.

So much is true there in the housing space as well.

I mean, the federal government, it just can't build homes, doesn't have the constitutional power to build homes.

It's paying others, states, developers, community housing sector, to build homes for them.

But it doesn't control all the levers.

And as I mentioned earlier, it kind of made that promise at the very worst time in the construction cycle with inflation making everything so much more expensive, so much harder to build.

This just wasn't the right point in the cycle where 1.2, although a worthy aspiration, was ever going to be able to be met.

Now, that doesn't mean that you should necessarily just drop all ambition to try and lift the construction numbers.

And I think there probably is some importance in clinging on to the 1.2, a bit like clinging on to sort of, you know, temperature climate targets, even as they cease to become likely that you just sort of keep pushing as close to it as you possibly can.

And that, I think, is what we're hearing from Claire O'Neill.

But yes, I think they are going to have to probably live with the fact that that promise was unwise and it certainly would take a...

quite remarkable turnaround.

It really goes to the heart of the joys of the Federation because like you say, this will be federal government will have a role, states and then local councils as well.

And it's everything from infrastructure in areas, it's roads, it's making sure people are able to find housing near where they work.

And so whether or not Claire O'Neill is able to bring together the states, whether or not it's a prime minister in the national cabinet type element to drive this change, when you hear reports like the August approvals were down on July, it does make that target of getting there that bit harder.

But

it's certainly not going anywhere anytime soon.

And I suspect

you'll be a busy man filing stories on this.

Let's have a look at the opposition.

And Susan Lee likes a letter, doesn't she?

The opposition leader, this time not writing to the Republicans that we saw last week when she was criticising the government over its recognition of Palestine.

This time adopting for a charter letter of her own.

So charter letter is something that a prime minister gives to ministers outlining what he expects from them, what their portfolio areas will really look into, any overlap between other ministers.

It's not necessarily an approach we've seen taken by an opposition leader in the past, though.

No, it's pretty unusual, isn't it?

Yeah, these marching orders for ministers obviously make sense sense from a prime minister who wants to set the strategic direction for a government.

Maybe this reflects how much work Susan Lee recognises that they have to do on the policy front.

I mean, we talked about it with housing a moment ago.

There's a pretty clear recognition, I think, internally in the party that...

The Peter Dutton policy offering just didn't cut the mustard.

There wasn't a lot of detail on so many fronts and just about everything needs to be reviewed.

There was a public service, there was nuclear, there were just so many elements where they couldn't cut through with a credible policy offering.

What we've seen and what you often see really after a heavy defeat is a lot of squabbling, a lot of what I might describe as passive aggression, and just a lot of sort of people running their own races and going off and having kind of

big picture conversations about...

framing, freelancing.

It's all a bit chaotic.

We've seen all the Andrew Hastie stuff in the last week or two.

Yes, have you seen my car?

It's a big, shiny car.

Let's talk about it.

That's right.

Yeah, why don't we, you know, what if we blow the party up?

You know, so be it.

it was kind of the gist of what we were hearing last week.

I wonder if we can take this as a sign from Susan Lee of saying, hey, you know,

let's do some work here.

Let's, you know, I want you to be thinking about this area.

I want you to be thinking about this area.

Whether you like me as your leader or not, whether I'm there by the next election or not, we need to have some ideas.

So let's get down to work on that.

Yeah, I think there's a clear operation that's underway in the opposition leader's office to try and make it a much more professional operation.

Now, that's the ways in which they communicate with you and I, The Susan Lee opposition is much more present in places like the press gallery than Peter Dutton's opposition was.

They are much clearer with where the leader is going, looking to shape debates.

But you're also seeing that internally now.

Clearly, she wants to run a professional operation, much like you would see on a government.

And you hear a lot about getting oppositions ready for government.

And if a charter letter is a way in which she can put out some KPIs, as some are saying, this is what I want you to work towards.

But it potentially is a way in which you can say, let's have these policy debates.

And here's what I expect from you as a minister.

Keeping ministers closer to their briefs, as we didn't see necessarily in the last week with Andrew Hastie, potentially allows for that contest of ideas to be played out in a proper process way.

Whether or not sending a letter to a minister or a shadow minister is ever going to really rein them in, I think is very much yet to be seen.

What do you reckon the reaction would have been when some of those who maybe aren't the biggest fans of Susan Lee received an email saying, here's your job?

Oh, I'm sure Angus Taylor and Andrew Hastie were diligently reading the letter, underlining the key bits and taking it all to heart.

Brad, I don't know what you mean.

They're all one big happy family, Susan Lee told us yesterday, and they'll be getting back together when they come back to Parliament.

Yeah, absolutely.

And look, you know, even some of the ones who are on her side, people like Andrew Bragg and Tim Wilson, I think they probably fancy themselves as being able to run their own races and have their own policy thoughts without necessarily needing direction.

So

whether this is going to result in some really clean and uniform policy process, I don't know.

But I think there's an argument for Susan Lee that I don't know whether she would yet admit that she's probably unlikely to be the Prime Minister.

We never know, but she's probably unlikely really as it stands to even go to the next election.

But if that's the case, you know, the legacy of her period of leadership could be, at the very least, bringing these very disparate trains of thought within the party together to just sit down with one another and hash it out and say, okay, what should our party be about?

What should the rebuilding look like?

And I think trying to urge the colleagues, whether they listen to her particular dot points in the letter or not, to just focus their minds on that policy conversation is a constructive contribution.

Yeah, now one thing we also need to mention is as we're recording this, we've heard the Prime Minister raise his concerns about these reports that are coming about the suggestion that China could have banned iron ore imports from the mining giant BHP.

You don't need me to tell you just how important iron ore is to the Australian budget, Tom, but the Prime Minister suggesting that there could be an attempt to create a bit of leverage during the negotiations that are playing out has attracted some eyebrows that are being raised.

Yes.

I suppose you'll have to tune into tomorrow's podcast or check out the ABC website to figure out whether this is just a bit of business brinkmanship going on here with BHP or whether this is really very bad indeed.

Because as you say,

if the worst parts of it are true,

that would not be a particularly good outcome.

But it does seem like there are some indications that this kind of positioning

for commercial reasons, trying to negotiate the price with BHP, might be nothing to see here.

So, yes, stay tuned.

As we were saying yesterday, that iron ore price has done wonders for the budget outcome that we just saw handed down this week.

So, any serious threat to it would have ripples right throughout all parts of the government.

And like Tom says, we'll be covering that across all the ABC platforms.

And you can find it online, on the radio, and on your TV throughout the day.

Tom, that's it for for politics now.

Thanks for joining me.

Thanks for having me, Brett.

And tomorrow we'll wrap the week's news with Mel Clark when we bring you the party room.

We would love to hear from you if you've got a question for us.

So you can send us a voice note, just send them to thepartyroom at abc.net.au, and Mel and I will get you an answer for them tomorrow.

See ya, Tom.

See ya.