History repeating itself two decades on from Howard-era failures
AMP Bank’s chief economist Shane Oliver offered a full-bodied criticism of the Labor government’s cornerstone First Home Guarantee scheme to Yellow Brick Road’s Mark Bouris on the Property Insights podcast this week.
Oliver slammed Labor’s interventionist housing policies as “totally ridiculous” when discussing the matter with Bouris. “I don’t like any of them,” he added.
His comments come barely a week after Labor introduced a major expansion of the FHG on 1 October.
Like many economists and market commentators, Oliver worries that the FHG – which allows first-home buyers to purchase a property with just a 5% deposit – will inflate already sky-high house prices even further.
Following the expansion, income limits and annual quotas have been entirely removed from the FHG, while house price thresholds have been significantly lifted.
While these adjustments may benefit those with existing property portfolios and early FHG participants, Oliver warned that “for everybody else down the queue, the price just goes up by the same amount.”
Read more: Opinions mixed as expanded First Home Guarantee comes into force
Oliver’s Ponzi-like description of the scheme underscores the Catch-22 situation Labor is facing.
Voters are seeking more equitable access to home ownership, yet demand-side incentives risk distorting the market over time unless accompanied by measures to address supply constraints.
A bit of history repeating
Oliver’s criticisms are not without precedent.
Former Prime Minister John Howard’s decision to double the First Home Owners Grant (FHOG) in the early 2000s offers a historical parallel.
The FHOG, introduced in 2000 as a one-off $7,000 grant to offset the impact of the GST for first-home buyers, was doubled to $14,000 in 2001 for those purchasing or building new homes, as a way of stimulating construction activity.
Research from The Australia Institute and others shows this policy drove up house prices by a similar margin, ultimately eroding any benefit, therefore failing to resolve underlying supply issues.
Oliver worries that history is simply repeating itself.
“The only people that get a benefit from it are you and me, because our house prices go up,” said Oliver of such policies.
Meanwhile, housing supply remains incredibly tight.
Supply-side failures
Labor has a plan to build 1.2 million new homes by 2029. But the annual run rate has consistently fallen short, with Oliver warning of a mounting backlog.
“The bottom line problem is we just don’t build enough houses relative to the number of people in Australia,” said Oliver. “Demand is greater than supply. And guess what happens when that happens? House prices go up.”
Data from the National Housing Accord shows that 180,500 new dwellings commenced in 2024-25, falling nearly 60,000 short of the Accord’s annual target of 240,000.
Over five years, the cumulative shortfall is now projected to reach 180,200 homes, up from an earlier estimate of 160,000.
Oliver advocates for regional development and reduced red tape as long-term supply-side solutions.
“You’ve just got to make it easier for developers to get the property… You’ve got to find ways to put up properties quicker. It’s now taking… 50% longer today than it did 10 years ago to build a home… which is just a joke in the great scheme of things.”
