The Treasury documents released to the Seven Network in response to a Freedom of Information request also indicate that the Treasury expects the mortgage burden to worsen.
But the Treasury says there are some benefits from our increased indebtedness – higher home ownership, and “bigger and better houses”.
It is also skeptical about the measures suggested to improve housing affordability.
The Seven Network had asked for information relating to housing affordability, mortgage defaults and trends in repayments...
A previous Freedom of Information request by The Australian newspaper for treasury information about bracket creep and wealthy recipients of the First Home Owners’ Scheme was refused by the Treasury and the Treasurer who issued what is known as a conclusive certificate, declaring that their release would not be in the public interest.
The Australian fought that case all the way to the High Court and lost.
The 180 pages of documents released to the Seven Network and put up on its website last night appear to have been released by the Treasury itself without reference to its Minister.
The Treasury identified 81 documents as relevant to the Seven Network request and released all but 17 of them, in some cases with deletions.
The documents indicate that:
. interest payments as a proportion of household disposable income are “some 2 percentage points higher than the previous peak” under the Labor government in 1989
. one reason is that more households now have mortgages, 35 per cent in 2003-04 versus 27 per cent in 1993-94
. many of these are investment mortgages
. and many are mortgages “to buy bigger and better houses”
. repayments per new mortgage still take up a lower share of disposable income than in the previous peak
. also the net worth of the household sector is much higher – around 6.5 times annual household disposable income, up from 4.5 times annual income in the mid 1990’s
. the aggregate debt servicing burden for households will increase in the short to medium term because new mortgagees typically take on more debt than existing ones
.many of measures suggested to improve housing affordability will have little effect
. in particular claims that releasing more land would boost affordability “probably overstate” the effect because the stock of the sought- after land is fixed
. the effect of abolishing stamp duty would be partly offset by a resulting increase in house prices
. and abolishing stamp duty would hurt some first home buyers, given that in some states they receive stamp duty concessions
. increasing rent assistance would “only further increase rents”
. removing negative gearing and depreciation allowances would supress rental investment, pushing up rents
. and there is no need to review the concessional tax treatment of capital gains made by landlords because there is “no conclusive evidence that the tax system has a significant effect on house prices”
The Treasurer Peter Costello last night made no comment on the release of the documents by the Treasury.
The Shadow Treasurer Wayne Swan released a statement highlighting the Treasury’s observation that the mortgage repayment burden is at an all time high but not its conclusion that repayments per new mortgage remain below their previous peak.
