Labor will axe the Morrison government’s program that allows first home buyers to access their superannuation, vowing to follow through with a key recommendation from the Financial Services Inquiry to use super solely to look after Australians in retirement.

With new figures showing the First Home Super Saver Scheme is attracting a small fraction of new entrants into the property market, shadow treasurer Chris Bowen has confirmed Labor will phase out the scheme while also legislating an objective for super.

The scheme, which enables first time buyers to access extra savings put into their superannuation account, was introduced in the 2017 budget by then treasurer Scott Morrison. He argued it would help young people accelerate their savngs to buy into markets in which prices were growing at double-digit rates.

Between the start of the program on July 1 last year and the end of January this year, 2374 people have made requests to access their super under the program. That equates to fewer than 4 per cent of all first home buyers to have been granted a home loan over the past 7 months.

They have sought the release of $28.4 million from the Tax Office, or $11,962 per person.

Since people have been able to access their super, the actual number of first home buyers has fallen by 10 per cent.

In Queensland, loans to first time buyers have dropped a quarter while in Victoria they have edged down by 11 per cent

A quarter of those to have used the scheme withdrew money in its first month of operation.

Labor voted against the scheme when it was created by the Coalition government, and Mr Bowen says that if elected the ALP would phase it out.

He said current users of the scheme, originally predicted to cost the government $250 million over four years, would not be affected.

“It was always a fig leaf to cover up their failure to properly deal with housing affordability,” he said.

Mr Bowen said Labor would also return to a recommendation from the Financial Services Inquiry, that reported to the government in 2014, to legislate an objective for superannuation.

The report recommended that superannuation’s primary objective be set as to “provide income in retirement to substitute or supplement the age pension”. Mr Morrison and then financial services minister Kelly O’Dwyer agreed to the recommendation and promised to have it in place by the end of 2016.

“The objective will be a valuable yardstick against which to measure competing superannuation proposals, providing certainty that measures that do not accord with the objective will be held up to scrutiny,” they said.

The bill was introduced into the upper house in November 2016 and the Senate’s economics committee endorsed the proposal, albeit with a dissenting report from the ALP, in February the following year.

Three months later, the government unveiled its first home buyers scheme, which is at odds with the Murray recommendation.

Since then there has been no debate on the objective. While technically on the Senate notice paper for future debate, it is one of just four bills from 2016 that the government has failed to bring on for debate.

This week, Treasurer Josh Frydenberg said the government continued to back the Murray inquiry recommendations, including setting out an objective for superannuation.

“The bill is in the Senate,” he said.

“The government continues to work with all parties to secure its passage through the Senate.”

Mr Bowen said Labor would work with stakeholders in the super sector to agree upon an objective against which any future policies on superannuation could be judged.

“We’ve been open to setting this objective since it was recommended and we intend to legislate an objective,” he said.

The current inquiry by the House economics committee into Labor’s franking credits policy has revealed many individuals believe superannuation is more than just for retirement.

Several individuals have told the committee that Labor’s policy will force them to use their superannuation savings, reducing the amount of “left-over” super they will have to pass on as an inheritance to their children.

Liberal MP Craig Kelly backed their concerns about inheritances.

“One of the great reasons that people save in Australia and go without things throughout their lives is that they want to be able to pass some of their wealth on to their children, and that is an incentive for saving,” he said earlier this month.

Is Communist China taking over Australia?

Australia is selling off natural resources, farmland and property to China at a “crazy” rate – putting us at risk of becoming the “24th province” of the East Asian behemoth.

That’s according to real estate expert Doug Driscoll, who warned of the urgent need to start a national conversation about foreign ownership of residential property in particular.

While interest from overseas buyers has decreased in recent years, the Starr Partners chief executive said our overall rate of foreign ownership was still alarmingly high.

And he said a report released last month by Chinese international property portal Juwai.com showed there was now an “insatiable appetite” for Australian property among Chinese buyers, with our softening housing market boosting interest.

In 2017, ANZ found foreign buyers owned up to 400,000 Australian homes. Today, Mr Driscoll estimated that figure would be “close to 500,000”.

ANZ also estimated foreign investors bought between 30,000 and 50,000 new dwellings in 2015-16.

At that rate, Mr Driscoll said it “won’t be too long” before a million homes were in foreign hands, with buyers from China and India the most common demographic.

“It doesn’t take a rocket scientist to wonder what impact that could have on our economy,” he said.

“We’re only a population of 25 million with 10 million dwellings, and if we’re not careful we could be overrun quite easily.”

Mr Driscoll said it was a difficult topic to broach, with those who voiced concerns about foreign ownership often accused of racism

But he said it was essential to “leave emotions at the door” and look at the facts.

“I’m not being jingoistic or xenophobic. It’s absolutely crazy how much of Australia we’re selling off to China, and it surely won’t be long until they have far more influence in our day-to-day lives,” he said.

“It’s irrelevant whether (buyers are from) China, India, Great Britain or the moon – it lacks foresight.

“I look at the facts, and there’s a really high number of current properties owned and acquired by overseas buyers.”

Mr Driscoll also took pains to point out the difference between local buyers of Asian descent – who are clearly Australian – and overseas residents based outside the country who often leave their properties vacant for large chunks of the year, leading to the “ghost house” phenomenon.

“I’m not saying we should stop foreign buyers, but it should be more difficult because a lot leave their properties empty, which clearly has an impact on the rental market, and those ghost homes also have a wider impact on the microeconomy ? what happens to the local coffee shop or newsagent when there are fewer people living in the area than there should be?” he said

Mr Driscoll acknowledged fines had been introduced for foreign owners who left their properties vacant but said they were too small to affect offshore-based “multi-millionaires”.

He said we should strike a balance between New Zealand’s ban on most foreign homeowners and the 15 per cent tax imposed on foreign buyers in large parts of Canada.

“Last year, Chinese developers acquired a third of all residential development sites in Australia ? that’s astonishing,” he said.

“We need to be open for business to China and India ? they’re the countries with the most foreign investors with a burgeoning middle class of hundreds of millions.

“But we need to introduce stringent rules and regulations regarding foreign investment because the government’s interest should be protecting its citizens.”

He said, at the moment, the only factor that could limit Chinese buyers was restrictions placed by the Chinese government in an attempt to stop local money leaving the country.

Mr Driscoll also said Labor’s proposed changes to negative gearing and capital gains tax – in a bid to make it easier for first homebuyers to get their foot in the door – were unnecessary given first homebuyer activity had already increased in recent years.

But he believes changes to those policies would make property less attractive to local investors, which could impact house prices ? and lead to an “influx” of foreign buyers who he claimed were using “ingenious” ways to get money illegally out of their own country, particularly in China where they are only allowed a maximum of $50,000 a year.

“If they are getting this money out of China, then they are finding ways to get it into the Australian system,” he said.

However, a spokeswoman for the office of Opposition Leader Bill Shorten told news.com.au independent experts such as Treasury and the Grattan Institute did not believe changes to negative gearing would affect property prices.

She stressed foreign investors could only buy new properties in the country and that new property was also exempt from Labor’s restrictions on negative gearing – and that both policies were designed to encourage investors to build new housing and not speculate on existing housing.

Meanwhile, realestate.com.au chief economist Nerida Conisbee said changes to negative gearing wouldn’t be enough to entice back foreign investors in droves.

“I don’t think (changes to negative gearing) will lead to a recovery of offshore investment unless we see price growth returning, cut taxes for offshore investors, ease up on finance and have more development,” she said.

“There’s nothing at this stage to suggest foreign investors will be coming back to Australia any time soon.”

 

 news.com.au/FEBRUARY 16, 2019

The Reserve Bank of Australia has revealed it may cut official interest rates, with governor Philip Lowe saying the economy

could be weaker than it had expected.

 

In his first major speech of the year, Dr Lowe told the National Press Club in Sydney that the RBA’s central forecast is for

dwelling investment to fall by 10 per cent over the next two-and-a-half years.

 

The bank left official rates steady at 1.5 per cent on Tuesday following its first meeting of the year, but that followed 

a string of poor key data releases in recent days, including an acceleration in the fall in house prices across Sydney and Melbourne.

 

Financial markets already put the chance of a rate cut this year at better than 50-50 even though the RBA has maintained – 

until today -that it’s most likely next move would be to increase the cash rate.

 

But Dr Lowe on Wednesday said that the bank may have to change its position.

 

“Looking forward, there are scenarios where the next move in the cash rate is up and other scenarios where it is down,” he said.

 

“Over the past year, the next-move-is-up scenarios were more likely than the next-move-is-down scenarios. Today, the probabilities

appear to be more evenly balanced.”

 

Dr Lowe said much would hinge on the strength of the jobs market, with unemployment now at 5 per cent.

 

Despite the low jobless rate it has not translated into a sharp lift in wages.

 

On Monday, the ANZ’s closely watched measure of job advertisements turned negative for the first time in three years.

 

The governor said if the job market tightened then rates would rise but any softening would force the RBA to reassess the situation.

 

“If Australians are finding jobs and their wages are rising more quickly, it is reasonable to expect that inflation will rise 

and that it will be appropriate to lift the cash rate at some point,” he said.

 

“On the other hand, given the uncertainties, it is possible that the economy is softer than we expect, and that income and 

consumption growth disappoint.

 

“In the event of a sustained increased in the unemployment rate and a lack of further progress towards the inflation objective, 

lower interest rates might be appropriate at some point. We have the flexibility to do this if needed.”

 

Dr Lowe said the bank had downgraded its forecasts for the economy which is now tipped to grew by 3 per cent this year and 

2.75 per cent in 2020. He said this should be sufficient to see a “gradual” reduction in the jobless rate.

 

Dr Lowe attempted to put the recent fall in house prices in some context, noting the sharp run up in values in Sydney and Melbourne 

over recent years.

 

While conceding those who have bought into the market in the past two years might be suffering some pain, there was no obvious 

signs this was playing into the broader economy.

 

“Continued low income growth, together with falling housing prices, would be an unwelcome combination and would make for a softer 

outlook for the economy,” he said.

 

“Some Australian households have high levels of debt, so there is a degree of uncertainty about how they would respond to this

combination. So we are monitoring things closely.”

 

Dr Lowe said this “adjustment” in the housing market was affecting the economy more broadly through a slowdown in residential

construction. The bank believes dwelling investment is likely to fall by 10 per cent between now and mid-2021.

 

There had been concerns that this week’s banking royal commission final report could lead to a tightening of credit conditions 

which would then feed into the broader economy.

 

Dr Lowe said credit standards had undergone a necessary tightening over recent years, conceding there had been concerns that 

lending to small businesses may had swung “too far” away from the sector.

 

“In that context, I welcome the report of the royal commission and the government’s response,” he said.

 

“The commission’s recommendations that bear on credit provision are balanced and sensible, and should remove some uncertainty.

 

“I also welcome the commission’s focus on: the importance of service – as opposed to sales – in the financial sector; the necessity 

of dealing properly with conflict of interest issues; and the importance of accountability when things go wrong.

 

“Addressing them is central to rebuilding the all-important trust in our financial system.”

 

SMH /6 February 2019