Interview with Kieran Gilbert on Sky News on the Hour

Kieran Gilbert

Assistant Minister for Home Ownership, Andrew Bragg. Andrew, these numbers we're looking at, tens of thousands of first home buyers could be assisted by relaxing some of the APRA rules. Can you talk us through the pros and cons here? 

Andrew Bragg

Well, thanks, Kieran. One of the best ideas now in the policy marketplace on housing is the idea that you could introduce a segmented approach for first home buyers through the APRA capital weighting system, and that would allow first home buyers to have a lower interest rate and a lower buffer, and that would help them get into the first home ownership market.

Kieran Gilbert

APRA is defending the buffer that it's got in place, basically a 3% buffer, that people who take on new loans have to be able to service a 3% increase on the rates that they might have at the time of acquisition. APRA says they describe it as prudent. They're supported in that by the Commonwealth Bank of Australia as well. The largest bank believes that the current buffer should remain in place. What do you say to them?

Andrew Bragg

Well, when the buffer was set at 3% and there were 1% interest rates, official cash rates, it may have made sense. But now we're looking at a cash rate which is much higher. You're looking at applying a 3% buffer on top of a rate which is at the top of the tightening cycle. And so what you're now seeing is a lot of potential first home buyers losing an opportunity to get a first home. So that's why we think it is worth looking at these ideas, because it's very hard to get a first home if you can't get a mortgage.

Kieran Gilbert

Yeah, and that's why you're holding this inquiry. What do you want to find out about the proposal? What are you exploring here and what questions need to be answered? Because I guess viewers watching this might think, okay, that sounds great, but you don't want to make the market more vulnerable to shocks.

Andrew Bragg

That's right. So, there's a few points. The first point is that you need to have more supply, and eight years ago we were building 225,000 houses in Australia. This year under Labor, we'll only build about 160,000. So, you've got to start building more houses and then you can look to ways to tilt the scales in favour of first home buyers. This idea of giving first home buyers an advantage by giving them a lower capital weighting and a lower buffer, is an idea which I think should have been on the agenda for the last couple of years since Labor came into office. What we're now going to do in the hearings is pull apart this idea and see how it stacks up, see whether there are any risks and how it can be best designed.

Kieran Gilbert

I spoke about the Commonwealth Bank position earlier. CBA supports the APRA model, the 3% current buffer. Not all the banks do. I saw the National Australia Bank submission, it's quite interesting. They're suggesting not only should it be made easier for first-time buyers, but they're suggesting that student debt should be put to one side when considering the ability to repay. What's the argument there?

Andrew Bragg

That's an interesting idea that we will look at as well. But we're never going to have a position where you would threaten prudential safety, because one of the hallmarks of the Australian Banking system is it has been very safe and secure, and that is always going to be a high priority. But you don't want to have a situation where there is no risk at all. Right now, there are basically lower than 1% in terms of arrears. And I think that we need to be in a position where you can actually take a punt on some people because there'd be a lot of baby boomers, for example, that wouldn't get a mortgage under today's rules because the rules are so tight and inflexible.

Kieran Gilbert

Let me ask you about Max Chandler-Mather. He's put out a tweet; he’s going to hold a news conference. He's had a go at the Prime Minister for buying a $4.3 million home with his fiancé on the Central Coast of New South Wales. But he's using this as an argument to say property investor, doesn't mention Albanese, but says property investors can buy a $4.3 million home on the beach, whereas people are struggling to get in the market and pay their rent because capital gains tax exemptions need to go and negative gearing needs to go. What do you say to Chandler-Mather in his position?

Andrew Bragg

Well, firstly, we wish Mr Albanese all the best. Secondly, we don't think that increasing the tax burden on housing is the way to go. We want to have more supply, not less supply. And if you increase taxes and you shock the supply side of the market, I think you'll have an even worse position. But thirdly, what I would say is you need to be creative in finding ways to tilt the scales in favour of first-time buyers. Now, Mr. Chandler-Mather wants to do that through changing the tax system, it sounds like. We don't think it's a good idea. So, this approach of changing the mortgage rules, I think, is one of the best ideas, because it is actually a very clean way to put first-time buyers above other investors.

Kieran Gilbert

Andrew Bragg, thanks. We'll talk to you once you wrap up that inquiry. I appreciate it.

Andrew Bragg

Thanks, Kieran.

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