The Turnbull government must urgently reform housing policy to avoid creating a class of lifelong renters, economists warn.
Prospective first-home buyers hoping for some relief once interest rates eventually drift higher will be left wanting, according to Rachel Ong Viforj, professor of economics at Curtin Business School.
The market has failed and strong government intervention is needed to fix the problems that are locking young Australians out of the housing market, she says.
“I do not think that we can afford to keep waiting around for the market to do its job any longer,” Prof Ong Viforj told the National Press Club on Tuesday.
“It’s very clear the market is not doing its job.
“The problem is so big at the moment and so entrenched and so persistent that it is going to require significant reform to make progress.”
Last week’s federal budget proposed a range of measures to help improve housing affordability, including allowing first-home buyers to make voluntary contributions up to $30,000 to superannuation to save for a deposit.
But that will not do anything to ease housing demand and will offer greater benefits to those on higher incomes, Prof Ong Viforj says.
She says the government needs to go further with genuine reform on negative gearing and capital gains tax concessions.
Economist Danielle Wood says government rather than the market has failed.
Governments have not kept with releasing new land, planning laws have stood in the way of boosting supply and investor tax concessions have worked to increase speculative activity.
“Government failure has led to some pretty perverse outcomes in the market,” she said.
Ms Wood said it was “absolutely baffling” the federal government failed to tackle capital gains tax concessions in the federal budget.
The new superannuation saver scheme was mildly helpful.
“If you’re trying to buy a median home in Melbourne or Sydney you’re talking about a deposit of $160,000 to $200,000 – $30,000 isn’t getting you very far,” she said.
Prof Ong Viforj believes the government must build on its mild housing affordability measures with more meaningful reform in the 2018/19 budget.
“The great Australian dream of owning a home is rapidly fading for younger generations,” she said.
“It’s very urgent that we now move very quickly beyond piecemeal approaches to housing affordability.”