Interview with Patricia Karvelas on RN Radio

Patricia Karvelas

The Federal Opposition is considering a plan to let first home buyers take on bigger debts to help them break into the property market. With housing firming as a key election issue, Liberal MPs have floated the idea of loosening lending laws put in place a decade ago to stop risky borrowing. Banks love the idea, but the regulator says now isn't the right time to loosen restrictions. Andrew Bragg is a Liberal Senator and the Chair of the Senate Standing Committee on Economics, and the Shadow Spokesman on Home Ownership for the Coalition. He joins us this morning. Senator, welcome.

Senator Bragg

Good morning.

Patricia Karvelas

Your committee has started looking at these rules at this Inquiry, but has the Coalition already decided it's time for an overhaul?

Senator Bragg

Well, we are concerned that first home buyers can't get a mortgage. If you can't get a mortgage, you can't get a first home. Now, the government has spent no time looking at these banking and lending issues in the last two and a half years when they presided over an absolute disaster in housing. We think that it's important that we look at the 3% buffer that APRA has and also look, generally speaking, at the lending and banking laws because we don't want these particular rules to be rubbing out the Australian dream.

Patricia Karvelas

The regulator APRA decides how much of a stress test banks need to put on someone's finances before they approve a loan. Now, it's increased the buffer in recent years from 2% to 3%. Has APRA been too conservative in setting the rules?

Senator Bragg

Look, that's one of the main questions the committee needs to answer. If we are at the top of a tightening cycle, people are being assessed, first home buyers, that is being assessed at 9%, not 6%, for example, it's really going to remove their ability to get a loan. So, I understand that maybe there's a case for a 3% buffer at the bottom of a cycle, but at the top of a tightening cycle, I think it is very arbitrary. We need to better understand how many people that is actually impacting from a first home ownership point of view.

Patricia Karvelas

APRA is, of course, independent. Do you want Parliament or Ministers to really set that rate? Wouldn't that politicise the issue?

Senator Bragg

Well, APRA has a degree of independence, operational independence, over matters that come before it. But the Parliament sets the rules. For example, the Parliament sets the board composition arrangements for super funds, the Parliament has established the bank executive accountability regime. There are a whole range of examples where the Parliament has chosen to do particular things in relation to banking and financial services. I think, frankly, it's a massive thing for the Parliament just to give to APRA just for them to do in the dark and have no oversight, transparency, or even disallowance. 

Patricia Karvelas

If you're just tuning in, this is Radio National Breakfast. My guest is Liberal Senator Andrew Bragg, and we're talking about an idea being pushed by some Liberals to loosen credit laws to help first home buyers. If I can just be blunt, a bit of plain speaking, isn't this dangerous? The reason they were tightened up these laws is to try and ensure people don't get themselves into a financial pickle. Aren't you placing people in financial danger, potentially, if you go too far here?

Senator Bragg

It's a question of degree. Now, at the moment, you have basically very low level of delinquencies in Australia. So, the banks aren't able to take on any risk. Frankly, we want banks to take on some risk, particularly in relation to first home buyers. A lot of people who are listening today who may be older Australians would probably have never received a loan under the current arrangements if they were in place 20 or 30 years ago. We need to balance risk management against our objective of growing first home ownership in Australia. In other countries like Singapore, their equivalent regulator has to consider the impact on the economy and on people, whereas APRA only has one very narrow objective.

Patricia Karvelas

Would this do anything to actually ease house prices, though, or could it just push them up further?

 Senator Bragg

Well, this is a conversation about getting more first home buyers into the market. Now, obviously, in order to do that, you need to make sure that people can get loans. My point to you put simply, is that if the buffer is making it impossible for first home buyers to get in, and we're at the top of a tightening cycle, we need to look at whether that is the right rate, and we need to look at whether APRA has the right mandate, because maybe APRA needs to also consider the impact of its actions on first home buyers.

Patricia Karvelas

I just want to clarify something. Your housing plan possibly entails lending more easily, especially as you just articulated about first home buyers and also accessing superannuation more easily. What are you going to do about supply? Supply is the biggest problem identified by all the experts. All of the measures are about getting housing, but there's just limited stock. It doesn't actually deal with the fundamental problem.

Senator Bragg

That's right. The way I would look at it is it's a policy in two parts. Firstly, you have a policy on supply because you can't solve this crisis unless you build more houses. Only eight years ago, we were building 225,000 houses, and under this government, we'll only build 160,000 houses this year. We're massively going in the wrong direction. We need to build more houses. Then, secondly, you want to find ways to tilt the scales in favour of first home buyers. Allowing people to use their own money in super, looking at lending laws, for example, these are all things, frankly, that the government could have been doing in the last two and a half years while it's been sitting on his hands, presiding over a massive influx of migration while housing construction has collapsed.

Patricia Karvelas

What are you going to do to radically transform the rate of actual dwellings being built? How can you actually accelerate that at a time when you're actually cutting immigration?

Senator Bragg

It also goes to the composition. As you know, the CFMEU wouldn't let the government bring in builders. Although we all think that yoga teachers are virtuous and very good people, we've had more yoga teachers and we've had builders during a housing crisis, so that wasn't very smart. It also goes to the composition of people you bring in. But ultimately, you've got to find a way to supercharge the building construction sector. You've got to make sure that proposals get approved. That requires you to work with all parts of government in Australia, and we will have a very strong supply policy.

Patricia Karvelas

So, the message from you is to watch that space. There will be a supply strategy. We're just yet to hear it.

Senator Bragg

Definitely, of course. You have to build more houses. Otherwise, the problem only gets worse.  Unfortunately, even with the leading indicators we have at the moment of this government, there'll be even fewer houses built next year than this year.

Patricia Karvelas

How creative. Can you give me any insights into that side of the equation? I'm particularly obsessed with supply because, as you know, Andrew Bragg, I talk to everyone, and everyone keeps saying supply is overwhelmingly the problem in this economy in this country. I still am yet to hear from you and Labor about how to accelerate the supply part of the question.

Senator Bragg

Well, we're not announcing our full housing policy today, as much as I would like to, but that will come before the election. But the government's supply policies have been complete failures. I mean, the Housing Australia Future Fund and the Housing Targets have both failed. I think, although we have a new Minister in the Housing portfolio, I think the new Minister needs new policies rather than just more marketing because their supply policy has been a disaster on the numbers. You've gone from 225,000 houses seven years ago to 160,000 houses today. So, the numbers don't lie.

Patricia Karvelas

Now, we know that Labor is looking, at least its Treasury, is looking at options on negative gearing reform. I've spoken to MPs on your side of politics who think that this needs to be looked at. We know some of the Independents think this needs to be looked at. What's wrong with looking at it?

Senator Bragg

We don't think that increasing taxes on houses is going to result in more houses. That's pretty simply our view. As you know, about half the cost of a new house in New South Wales already goes in taxes and regulatory charges. So, increasing the tax burden on housing is not a very good approach. Unfortunately, it's been held out by some, like the Greens, as a silver bullet to the housing crisis, when unfortunately, there isn't a silver bullet other than building more houses and finding ways to tilt the scales in favour of first home buyers.

Patricia Karvelas

Okay, but you've come to a conclusion. This is about looking at options and looking at reform options. Why shouldn't it be on the table to explore? Isn't that what any good government should be doing?

Senator Bragg

Well, because even if you changed it, you would still have a massive housing problem.

Patricia Karvelas

Well, it would have to be obviously part of a larger suite of changes, right? But you need to look at all options when you've got such an inferno burning.

Senator Bragg

But as you just said, the key is getting more houses built. If you have higher taxes on houses, aren't you going to have fewer houses? It's pretty simple, I think.

Patricia Karvelas

Yeah. I don't know if it's about higher taxes on houses. You're framing it's about people being able to minimise their own tax, right? Should there be any limits, do you think, to how many negatively geared property people can have?

Senator Bragg

The deduction of rental losses is a pretty standard tax principle that applies across the economy. At the end of the day, I think this is a massive distraction from the core issue, which is that the government have not built enough houses, and they haven't been creative in ways to help first home buyers. That's why people are going crazy about housing, because people feel that they can't get in. Unfortunately, this government, they don’t seem to be interested in finding any creative solutions.

Patricia Karvelas

Thanks so much for joining us this morning.

Senator Bragg

Thanks a lot.

[Ends]

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