Election campaign housing policy offers from Labor and Coalition carry risks

It's rare to see a calm, smart and measured former mandarin angry, but I saw that for the first time yesterday when I spoke with Martin Parkinson about the blockbuster Coalition housing announcement.

I say blockbuster because that's the political purpose here — it's a flashy big bang policy that makes you stand up and notice.

Former secretary of the Prime Minister's Department, Martin Parkinson, has been frustrated for some time that we are not having the big conversations we need to be having to reform our country's tax system, the policies we need to embrace to unlock intergenerational fairness and productivity. 

But those ideas aren't very sexy and they raise risk because there are "losers". 

We are in an election campaign that has turned into a spend-a-thon and race for the newest shiniest attention grabber in a culture that is suffering from a short attention span. Sometimes, policies that sound shiny and radical in an effort to get disengaged voters' attention carry risks.

Parkinson told me he is worried the Coalition's new policy to allow first home buyers to deduct interest payments on the first $650,000 of a mortgage against their taxable income is reckless.

The policy will allow these deductions for five years, provided you continue to live in that home for that period. This policy will be available to individuals with a taxable income of $175,000 or less — and joint applicants earning a combined income of $250,000 or less.

"If the LNP delivers this demand stimulus to address what everyone knows is a supply-side problem in housing, it is utterly, utterly irresponsible and will be unable to be unwound," he told me.

"This is another example of wilfully misdiagnosing a problem in the pursuit of short-term political gain. It is not leadership to continue to pretend to voters that you have solutions when you don't, that just feeds into voter distrust and anger!"

Parkinson isn't the only one worried, either.

Independent economist Saul Eslake told me yesterday it was a "candidate for dumbest policy decision of the 21st century (rivalling the WA GST deal)"

"It will allow those eligible for it, to take out bigger mortgages than they otherwise would, by reducing the after-tax cost of servicing a mortgage. In that respect, it is similar to a big cut in interest rates — but restricted to first home buyers who buy new homes. And we know that results in higher home prices, not higher rates of home ownership," he told me.

Eslake believes the new Labor housing policy will also drive up house prices, despite housing minister Clare O'Neil declaring it would not have a significant impact on house prices.

A re-elected Albanese government would allow all Australian first home buyers to purchase with a 5 per cent deposit, avoiding lenders mortgage insurance, in an expansion of an existing scheme. The government will also commit $10 billion to build 100,000 new homes exclusively for first homebuyers.

"Labor's policy of guaranteeing 15 per cent of deposits will have a similar effect," Eslake said.

Are these the game changers we need?

Both major parties are right to focus on the housing problem, the question is whether these policies are the game changers we need. Young Australians have made it crystal clear that they are tired of platitudes and are seeking proper systemic change. 

Gen Z and millennials are the biggest voting bloc in this election and their votes are being cultivated at the 11th hour on the issue most existential to their sense of safety, security and sense of fairness in what was once the lucky country.

Grattan Institute chief executive officer Aruna Sathanapally said she thinks the impact on pushing up house prices may be limited but she worries it just builds in more tax breaks at a time when we need to be rethinking tax.

"It is limited in scope so might not have a big impact, but would take us in the wrong direction, adding to demand in the housing market, adding more income tax concessions that hollow out our tax base, and sending more tax breaks to high-income earners when we should be trying to rein these tax breaks in," she said. 

Sathanapally said it was a "surprising policy".

"No credible expert, to my knowledge, is calling for tax-deductible mortgage payments as housing policy or tax policy in Australia," she warned.

She estimated the commitment on mortgage deposits under the Labor package would likewise have a small effect in lifting demand but that would be "offset" by the plan in relation to working with states to build houses through public developers. 

"The latter is a positive move — and sensibly progressed through mainly concessional loans to the states but the proof will be in the execution. We think some states have a better foundation to deliver this than others," she said.

The politics are simple

Redbridge Group pollster Kos Samaras told me the two competing housing policies will shape the campaign in very different ways and were policies he believed voters would notice at a time when Generation Z and Millennials were feeling neglected by the major parties.

"Labor housing policy may resonate with renters, predominantly in middle urban electorates like Parramatta and Chisholm. The Coalition's housing policy may resonate stronger in outer suburban communities, especially within the Indian Australian diaspora, who prefer purchasing new homes in growth areas, close to family," Samaras said. 

If the policies are well marketed they will resonate in electorates such as McEwen in Victoria and Werriwa, south-west of Sydney, he said.

The politics are crystal clear. And in a world of quick social media videos and fast impressions, they may cut through. But will they really deliver the great Australian dream once again?

Patricia Karvelas is presenter of ABC TV's Q+A, host of ABC News Afternoon Briefing at 4pm weekdays on ABC News Channel, co-host of the weekly Party Room podcast with Fran Kelly and host of politics and news podcast Politics Now.

Having trouble seeing this form? Try this link.