Introduction
The Australian housing policy landscape is again under scrutiny as the federal government expands the 5 per cent deposit scheme for first‑home buyers. The move, which took effect today, aims to make it easier for Australians to enter the property market, but it has ignited a heated political debate about potential impacts on house prices and housing affordability.
What the policy change means
Labor’s expansion of the 5 per cent deposit scheme is designed to assist more first‑home buyers access mortgages with smaller deposits. While proponents say the policy lowers the barrier to ownership, critics warn it could fuel further price growth if demand is pushed higher at a time when supply remains tight. The policy shift comes as the nation debates how to balance relief for buyers with broader housing market stability, particularly for young people trying to save enough for a home.
Reaction from the Nationals and the government
Former deputy prime minister and Nationals MP Michael McCormack has been among the most vocal critics. He called housing under the Labor government a “disaster situation,” arguing that the policy changes will likely make it harder, not easier, for young Australians to get into the market. On Sky this afternoon, he questioned how far the price impact could go and warned that the whole policy suite at federal and state levels risks pushing up costs for households already feeling the pinch of rising living expenses.
Economy and policy discussions aside, Prime Minister Anthony Albanese has referenced Treasury modelling to support his position. He noted that Treasury modelling predicts only a modest rise in house prices as a result of the policy changes, describing a projected 0.5 per cent increase over six years. Still, other industry voices have offered more cautious forecasts.
Forecasts and expert analysis
Beyond Treasury’s tempered outlook, the Insurance Council of Australia has presented a more pronounced forecast, predicting roughly a 10 per cent increase in house prices within a single year. This stark contrast in projections highlights the ongoing uncertainty about the policy’s short‑term impact on the housing market and the broader economy.
With such divergent forecasts, economists and voters alike are watching closely to see how the policy affects supply dynamics, lending standards, and the affordability ladder for first‑time buyers. Proponents point to the deposit scheme as a practical tool to help people break into home ownership and build equity, while opponents stress the risk of overheating demand and subsequent price rebounds, especially in markets already facing affordability pressures.
Implications for first‑home buyers
For a first‑home buyer navigating a tight rental market and rising costs, any policy intended to lower upfront barriers could be welcome. However, if price growth accelerates even modestly, the long‑term affordability equation may worsen for some buyers who still face deposit hurdles and serviceability tests. The debate thus centers on whether the policy will meaningfully expand access to ownership without fueling a price cycle that could outpace wage growth and household budgets.
Bottom line
Australia’s housing policy remains a balancing act: provide relief and pathways to ownership while safeguarding market stability. The expanded deposit scheme is a bold, controversial instrument in this ongoing national conversation. As Treasury and industry forecasts diverge, policymakers face a crucial test: can reforms help more Australians buy their first home without inflating prices beyond sustainable levels?
