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Reserve Bank Governor Shifts Focus to People Rather than Spreadsheets

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Reserve Bank Governor Michelle Bullock was appointed to the position after a 20-year career in the Reserve Bank, including being the recipient of subsidised housing loans despite her substantial salary. Her early comments were reflective of her being “a long time in the public service bubble” and were out of touch with the hardships faced by everyday Australians due to past Reserve Bank policies causing high inflation and interest rates.

Her recent comments, however, appear to be much more in tune with understanding everyday Australians’ concerns.

At Senate Estimates, my questions were aimed firstly at getting updates on less reported projects and secondly, I wanted to know whether the Governor realised her role is about people not spreadsheets.

I found her responses encouraging and look forward to more people-oriented management from the Governor going forward.

Transcript

CHAIR: Thanks. Senator Roberts.  

Senator ROBERTS: Thank you for appearing. I missed you last time because I couldn’t get on the schedule. I want to get a quick update on as many things as possible. Part of the Reserve Bank’s process is to review inflation data and unemployment data. Do you use data from the ABS and, if so, do you use that data exclusively, or do you have other sources for unemployment and inflation data?  

Ms Bullock: We use ABS data obviously for inflation and unemployment. We use a variety of other sources of information, though, because we don’t just focus on the unemployment rate itself; we focus on a variety of measures that the ABS put out. We also focus on things like vacancies and advertisements. There’s information we get from our business liaison program, where we talk to businesses about what they’re doing with their labour forces: are they demanding more labour or not? So we use the ABS data, but we have a wealth of other information that we look at as well.  

Senator ROBERTS: Thank you. Business-to-business payment defaults and business bankruptcies, to the third quarter of 2024, are at a record. I’m sure you know that. Are you watching these metrics? And would these record figures act to reduce the appetite in the Reserve Bank for another interest rate rise?  

Ms Bullock: We do watch the business insolvencies data. My understanding is that they haven’t actually returned to the trend that they were prior to the pandemic. In the pandemic, with low interest rates and government assistance, insolvencies were actually at a record low. They have popped up, but they haven’t popped up to where the trend was going prior to the pandemic. So I think that’s important perspective to put it in. We do look at it and we look at it from a couple of perspectives. We look at it from the perspective of how monetary policy is impacting businesses, but we also look at it from the perspective of financial stability and the potential impact on banks, banks’ arrears and banks’ balance sheets.  

Senator ROBERTS: Thank you. Suicide Prevention Australia’s community tracker, also to the third quarter of 2024, shows a huge rise in the number of calls to help services, in suicidal behaviour and in clinical presentations. This is an independent and accurate barometer of how everyday Australians are doing. Are you aware of that tracker?  

Ms Bullock: Yes, I am. In fact I have regular meetings with various organisations—for example, Beyond Blue. They talk to us a lot about this sort of data. We also talk to ACOSS regularly, we talk to other charities in our business liaison program and we hear a lot about the fact that charities are seeing people come in who they haven’t seen before. So this is obviously an indication that they’re stressed. So, yes, we do keep in touch with that stuff. 

Senator ROBERTS: Can you update me on the state of the central bank digital currency, please? The last word we had was I think when Mr Debelle was deputy governor. I understand you’re developing a standard, not an actual currency itself? Is that correct?  

Ms Bullock: We’ve done a couple of things. We ran a pilot program with a real claim on the central bank last year. 

Senator ROBERTS: Is that what’s known as a ‘sandbox’?  

Ms Bullock: It was sort of like a sandbox, if you like. We had a number of different use cases. Various businesses came in with their use cases to use the central bank digital currency. From that information, what we took away was that probably the most fruitful piece of research we could continue with was the use of a central bank digital currency in a wholesale sense. By that I mean there’s a lot of discussion about putting assets on the ledger—for example, having a distributed ledger of financial assets—and then you could have a central bank digital currency which is used to make settlements of those financial instruments, or they might be physical instruments, physical assets. That’s the most fruitful work and that’s where we’re going at the moment. We’re in the process of standing up a project that looks at how a central bank currency could be used in the atomic settlement of assets. That’s where we’re going at the moment.  

Senator ROBERTS: So you’re not developing a standard?  

Ms Bullock: No. Basically, we’re looking at what the business case might look for. We’re not so interested in the technology and we’re not so interested in standards. What we’re interested in is: is there a business for this?  

Senator ROBERTS: Would that allow other parties, including each of the banks, to develop their own cryptocurrency?  

Ms Bullock: The banks themselves can develop what some people call ‘stable coins’, and some banks have developed stable coins. Central bank digital currency, if it were to be developed, would be something that everyone could potentially use—not literally every Australian, because, if we’re focusing on business, then it might be that some businesses can use it. Individual banks can, in theory, at the moment—and some of them have experimented with it—develop stable coins, which are effectively cryptocurrency. CHAIR: It’s your last question, Senator Roberts.  

Senator ROBERTS: This would not exclude existing cryptocurrencies, such as bitcoin?  

Ms Bullock: No. The central bank digital currencies would not have a relationship with bitcoin, no.  

Senator ROBERTS: But it wouldn’t exclude bitcoin?  

Ms Bullock: What do you mean by ‘exclude bitcoin’?  

Senator ROBERTS: To sideline them or remove them.  

Ms Bullock: No, bitcoin would continue to exist, but central bank digital currencies offer a different business proposition than bitcoin. Bitcoin has particular uses; central bank digital currencies would not be encroaching on that space, I suspect. 

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How One Nation Will Make Home Ownership a Reality for You!

The housing supply and affordability crisis is upon us and debating how we arrived here won’t help.

One Nation’s housing policy ‘looks to the future,’ offering common-sense solutions to help more Australians purchase their own home, while at the same time, reducing rent.  

Overview

  • Lower immigration to sustainable levels to reduce housing demand. 
  • Ban foreign ownership of residential property to increase housing supply. 
  • Allow a portion of your superannuation to be invested in a home purchase. 
  • Ditch Labor’s Housing Future Fund and invest those funds into creating a new People’s Mortgage Scheme, offering 5% deposit and 5% interest rate. 
  • Allow people with a HECS debt to roll their debt into a People’s Mortgage account, improving their ability to obtain and service a housing loan. 
  • Implement a 5-year moratorium on charging GST for new home construction, which will make new homes more affordable. 

The Role of Interest Rates in the Housing Crisis

The Reserve Bank understands that slowing down construction is an effective tool in reducing inflation and is doing so knowing it will make the housing crisis.  

This is what I mean when I say the Government is “stepping on the accelerator with handouts and government-sponsored construction,” at the same time the Reserve Bank is tightening the reins with higher interest rates. 

The result is a shambolic government from Anthony Albanese and Jim Chalmers. 

A shortage of home construction firms is also contributing to the problem. As of May 2024, there have been 2,500 building company bankruptcies | May of 2024 financial year. 

These failures are a result of rising material costs, approval delays, high interest rates affecting both the builder and the customer and a shortage of skilled labour.  Our immigration policy has brought millions of people into the country, however only a fraction of those migrants are qualified in construction trades.  

The Government’s answer involves a set of measures that “promise” many new homes, yet so far, only a few thousand have been delivered and they are mostly homes that were already in the pipeline. 

In other words, the Albanese’ Government’s efforts have made no meaningful impact on the crisis. 

One Nation’s approach will tackle inflation without relying on interest rate rises.  Refer to our inflation policy. 

The Role of Immigration in the Housing Crisis 

One Nation’s policy to address the housing shortage involves reducing immigration until the housing market stabilises.  

This strategy is grounded in logic that if we already have a limited supply of houses and we increase demand faster than new homes can be constructed, it will only lead to a worse housing shortage.  Even those who support high immigration should recognise that this approach makes sense. 

Anthony Albanese has overseen the arrival of 2.4 million new residents in just the last 2 years, creating a demand for 700,000 homes.  With home approvals at just 160,000 per annum, our housing shortage continues to get worse.  In turn, the worsening shortage will cause higher rents and higher home prices, putting home ownership or rentals out of reach for many everyday Australians.  

Rent controls discourages construction, making the problem worse. 

The graph below illustrates new housing approvals against population growth. Under Anthony Albanese’s Labor/Greens government, the number of home approvals has decreased while new arrivals have increased. This trend suggests that without the implementation of One Nation’s housing policy, the problem is going to get significantly worse for everyone currently living here. 

The Role of Foreign Buyers in the Housing Crisis 

During COVID, with immigration at such low levels, there was an opportunity for a “’catchup” – a period of construction without the pressure of increased demand.   

Despite this opportunity, no significant catch-up occurred, yet new homes were built.  So where did these homes end up?  

Part of the answer can be found in the August 2021 Census, which revealed that one million of Australia’s 10.8 million homes were empty on Census night. 

One Nation believes that part of the issues stems from foreign buyers purchasing new housing stock and locking it up, so that it can be sold as “brand new” when values rise. Much of the construction during this COVID period was removed from the market in this manner. The Greens also highlighted this issue: read here.  

One Nation’s housing policy includes measures to end foreign ownership of residential and agricultural property, aiming to help Australians secure homes. 

Another contributing factor are owners that decide tenants are too troublesome and choose to forgo rental income. This problem would likely be more common among foreign or corporate investors who view real estate as a speculative investment – focusing on fast capital appreciation rather than rental returns. 

Why wouldn’t foreign investors pour capital into Australian real estate, given how fast property prices are increasing?

 

Rising Australian real estate prices were an irresistible target for international and local capital. Additionally, superannuation firms are increasingly investing in residential property, potentially adding to the demand and contributing to rising prices.  

Is Short-stay Accommodation Contributing to the Housing Crisis? 

The short-stay rental market, such as Airbnb, is often highlighted in discussions about housing. There are approximately 100,000 short-stay properties in Australia, which adds to the 280,000 rooms available in the conventional accommodation sector. 

In comparison, Australia’s total housing stock comprises 10.8 million homes, meaning short-stay properties represent less than 1% of the overall market. 

The short-stay rental market caters to people seeking holiday or business rentals and is an industry with a finite growth curve.  Many short-stay rentals are not stand-alone units.  Often, they are converted spaces like garages or spare rooms. These types of properties would not typically qualify as permanent rental accommodation under existing planning regulations.  

Many of these properties have always been used for short-stay purposes. In the past, these properties would have been managed by local real estate agents and legacy websites like Stayz. Therefore, the actual number of rental properties removed from the market for short-stay use in the past 5 years, is much less than the 100,000 figure suggests. 

While some on the left are fixated on short-stay rentals, it appears to be more an ideological abhorrence of Australians that use entrepreneurship to get ahead. 

We Need a People’s Mortgage Scheme! 

The Housing Future Fund (HFF) is an Albanese Government initiative to create a fund that invests in mortgages. Currently valued at $10 billion, it is expected to be increased to $20 billion. However, this scheme has not delivered a single new home and is limited to just a few thousand properties per year.  

One Nation proposes to turn this scheme into a low-deposit, low-interest Government-backed mortgage scheme for Australians, especially those with a HECS debt.  This proposal would help people secure homes years sooner. 

One Nation will convert the HFF into a mortgage fund, offering government-backed loans to Australians who fail to meet traditional banking criteria. This is aimed primarily at the three million HECS debt holders in Australia.  These individuals, HECS repayments can restrict their ability to buy a home, manage a mortgage or save for a deposit, as their HECS debt impacts their income. 

We propose offering People’s Mortgages with fixed terms of up to 25 years at a 5% interest rate, with the option for early repayment, and requiring only a 5% deposit. This is in line with the Government’s own low-income deposit scheme. 

Applicants will also have the option to use up to one-third of their superannuation for the deposit, with the condition that the funds must be repaid when the home is sold. 

For Australians who have been employed for several years, have a reasonable income and superannuation balance, and qualifies for the first home buyers grant, it’s likely that no cash deposit will be required for an entry level property.  Additionally, the mortgage repayments will be comparable to current rent payments. 

People’s Mortgages for HECS Debt Holders 

One Nation will offer HECS debt holders a simple and straightforward choice: 

  1. Continue paying off your HECS debt while managing a mortgage as you do now; or 
  1. Roll your HECS debt into your mortgage, extending the repayment period over a longer period.  This option allows you to secure a mortgage sooner if your income and eligibility for a First Home-Owner’s grant, along with a superannuation top-up, support it.  While this option increases the total cost of your HECS debt over time, it enables you to purchase a home much earlier. 

Mortgages will only be issued if the applicant meets the lending criteria, including the ability to make the repayments through gainful employment or a self-owned business.  

These mortgages will be administered through an Authorised Deposit-taking Institution (ADI) or approved intermediary, such as mortgage brokers. 

Case study: Blake has the average HECS debt of $25,000 and is paying that off over the average duration of 9.5 years. The debt increases every year with indexation, Blake will most likely repay a total of $29885 at $300p/m before being eligible for a home loan. Under One Nation’s low deposit mortgage, Blake can roll the $25,000 debt into their mortgage and pay the debt off over 25 years at 5% interest for a total repayment of $43,800. This will add $146 per month to the mortgage, a much more manageable figure.

For more details on how One Nation plans to make HECS fairer, refer to our HECS Policy. 

Suspend Charging of GST to Buyers 

According to the Australian, government fees, charges and taxes account for 50% of the cost of a home in Sydney and 32% in Queensland.  Housing has become a cash cow to maintain bureaucratic empires and social agendas, making it increasingly difficult for everyday Australians to afford to build their own home. 

One Nation policy will strip away red, green and blue tape, allowing tradies to get on with the job. 

I have requested the Parliamentary Budget Office cost our proposal to suspend collection of Goods and Services Tax (GST) on new home construction. The policy is straighforward – builders will be able to claim back the GST on all building materials they used in the construction of the homes, rather than passing the GST cost onto home buyers. 

This measure will cost $1.4 billion over 5 years and will lead to a corresponding reduction in the purchase price of new homes. 

Since GST revenue is collected on behalf of the states, the Federal Government will compensate the States for the reduced GST revenue.  This practical measure provides direct assistance and rewards the completion of new, ready-to-sell homes.

Addressing Building Materials Shortages 

Amid discussions about building houses, the Prime Minister is ignoring a critical issue: the availability of building materials. 

At the same time the Prime Minister is trying to build homes, the Greens and the Prime Minister’s own Net-Zero cabal are obstructing essential industries.  These groups are targeting forestry for timber, steel production for frames and supports, and cement manufacturing.  Of note, a major ingredient in cement is fly ash, a byproduct from burning of coal for power.  Therefore, eliminating coal power will also decimate Australia’s cement industry. 

One Nation’s Strategy to Tackle the Building Materials Shortage 

  • Approve the harvesting of plantation timber for the domestic construction industry, with conditions for adequate replanting and regeneration. 
  • Building new, clean steel plants at Abbot Point and Port Hedland to capitalise on Australia’s competitive advantage in steel production. This will lower costs, improve the quality and increase the availability of steel for the construction industry. 
  • Utilise steel mills to provide fly ash for cement production and provide heat for production of ceramic tiles and other building materials. 
  • Promote the development of an Australian hemp industry to produce hemp-based particle board, building bricks and insulation. 

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