Subjects: doubling of First Home Owners Scheme; Shell/Woodside takeover.
E&OE................................
Good morning ladies and gentlemen. I'm sorry for the early start. I announce today that the Government will from today double the First Home Owners Scheme grant from $7,000 to $14,000 for new dwellings. This increase will relate to contracts entered into from today until the 31st of December 2001. After the 31st of December 2001 the amount of the grant will revert back to the current level of $7,000. There will be no increase in the grant in relation to existing dwellings, and the same rules in relation to the availability of the grant under the present scheme concerning the principle place of residence, in other words it's not available for investment properties, will obtain.
This action has been taken by the government in a targeted immediate way to help an area of the economy identified by the recent National Accounts as having experienced a good deal of contraction. I met representatives of the Housing Industry Association some ten days ago and they explained to me some of the difficulties of the industry. And after the National Accounts figures came out on Wednesday discussions took place and senior colleagues and I formed a view yesterday that a measure of this kind would be desirable, it would be responsible, it would communicate a determination to boost confidence in a very important industry, and it is how a government should respond when economic figures indicate that although in many areas of the economy the signs are very positive there are some areas where that is not the case. And therefore the Government has taken this measure.
It will cost approximately $60 million this year, and $90 million next year. The Housing Industry Association, and I acknowledge the presence at this gathering of Mr Ron Silberberg, the Housing Industry Association has welcomed the Government's announcement and has indicated that the revamped First Home Owner's grant combined with the recent interest rate reduction will boost confidence and generate an additional 16,000 new home starts and demand for 24,000 jobs over the next nine months.
Importantly because of the very wide geographical spread of the housing industry many of the new jobs for which there will be demand are located in regional Australia. Indeed given the relative price of land in different parts of the country a $14,000 package of this kind will be of very special help to people buying their first home in the outer metropolitan fringes of the major cities and also in many country areas where land is obviously cheaper than what is the price of land in the more densely populated metropolitan areas.
The housing industry is a very important industry to this country. It is made up literally of tens of thousands of small businesses. This is very good news for small business in Australia. It is a signal from the Government that it believes in the housing industry, it recognises that it has contracted more sharply than was originally expected and that the right thing to do is to act to boost confidence in the industry, to do it in a way that targets an identified area of weakness and to do it in a way that is eminently affordable and also do it in a way and do it for an industry that will be able to respond as quickly and as immediately as any industry can respond to this kind of government initiative.
I have written to the Premiers today. They of course administer the scheme although it is fully funded by the Commonwealth. This increase will be fully funded by the Commonwealth. We don't ask the states to contribute any of the funding. But we do ask the states to do their bit by giving stamp duty relief to new home buyers. If they do that than the value to the industry of an increased package will be that much greater. I'm not making it a condition of the Commonwealth's new money. We're giving that new money, we're doubling the grant, we're picking up the bill come what may. But I very strenuously press upon the state governments of Australia that they have capacity to help with stamp duty. It may vary from state to state but some of them are awash with extra stamp duty because of changes in house prices and the valuations of land and so forth.
They can afford to come to the party with a stamp duty cut and I hope the community and the industry puts pressure on the states to come to the party. I don't prescribe what it ought to be. I don't make what we're doing conditional upon what the states are doing. But I seriously ask them if they're interested in the state of the building industry, the home building industry in their respective states, and if they care about the employment levels and the investment levels and the activity levels, let them come to the party with further stamp duty relief. And if that happens then we really have an even better package.
But whether they do or they don't is a matter for them, but irrespective of what they do this decision announced by me this morning will have an immediate and dramatic beneficial effect on a key industry. It will be good news for young home buyers, it will be good news for the industry, it will be good news for employment, and it will directly target an area which the national accounts revealed was the area that suffered the greatest contraction.
JOURNALIST:
[inaudible]
PRIME MINISTER:
Well Laurie, a lot of people put a lot of things to the Government, and we knew that there would be some downturn, that was to be expected because you had two things operating before the first of July. You had a lot of normal activity at a high level, and on top of that you had the pull forward. And we accepted, and I think the industry accepted that you're going to have a huge build up before July, you couldn't get a tradesman, it was very very difficult, the industry was booming and we expected a contraction. I think what happened was that the contraction was greater. Well industries tell us lots of things, and I'm not saying that they were misrepresenting the situation, I don't say that at all. What I'm saying is that you make your best assessments at the time and we now have clear and unmistakable evidence of a contraction and we're doing something about it.
JOURNALIST:
So you were wrong back then.
PRIME MINISTER:
Well we made an assessment, we now have clear and unmistakable evidence that action is needed.
JOURNALIST:
Prime Minister, [inaudible] days ago, the Treasurer made the observation after national accounts came out, that the forward indicators, dwelling approvals, housing plans commitments, showed that the industry was in an upturn. On the same day the Reserve Bank cut interest rates, the capacity of home buyers had improved to [inaudible] industry. What's changed in the last two days?
PRIME MINISTER:
Well nothing has changed, I mean there's nothing inconsistent in saying that there's an upturn, noting that interest rates have been cut but then deciding that you're going to accelerate the upturn. And that's what we've decided to do. What this will do will be to dramatically accelerate the upturn, that's what it will do. There's nothing inconsistent in doing that. We decided that this additional measure was needed.
JOURNALIST:
Prime Minister isn't it an admission that it wasn't just the transition to the GST that was the problem [inaudible], that the GST itself was a problem for the industry?
PRIME MINISTER:
No it's not that at all, it's not such an admission. We always knew the transition was going to be there. The downturn has been greater than we would have liked and greater than what we were told by our advisers would be the case. And we've decided to do something about it. But it doesn't alter the fact that in the long run the new taxation system is highly beneficial.
JOURNALIST:
A week ago the Treasurer, in particular, was giving a strong lecture to his colleagues, including it seemed to you even, about the need for a tight budget. Now this is a lot of money even though you say it's affordable...
PRIME MINISTER:
Well in the totality of the Government's budget it is a relatively modest sum given the impact that it will have, the importance of the sector and I don't see any inconsistency between both my and the Treasurer's commitment to a sensible budget and this particular decision. I mean we have to preserve a sense of proportion, you cannot have a situation that just because the Treasurer and the Prime Minister say you've got to have a tight budget you can't do anything anywhere, I mean that is just, that is just sort of.
JOURNALIST:
But [inaudible] quite a lot everywhere.
PRIME MINISTER:
I don't think we're..a lot of people would be calling on us to do, I mean somebody asked me this morning would I cut excise by 10%, you've really..
JOURNALIST:
[inaudible]
PRIME MINISTER:
.once again.what did I say, I said no, Laurie. I mean a sense of proportion please.
JOURNALIST:
Prime Minister why did you decide to make December the 31st a cut off point for the enhanced package?
PRIME MINISTER:
Because we wanted it to be a short period, I mean the aim of this measure is to accelerate the upturn, quite deliberately. It is an activity measure, it's not so much a social measure. Although it will have beneficial social consequences for people who want to buy a new home. But its principal purpose is not social, its principal purpose is activity and you've got to have a cut off point, and we think a cut off point of 31st of December is the right one. If you have it any shorter you're not allowing long enough time, and if you have it much longer it's probably being over generous.
JOURNALIST:
Prime Minister The Australian uses the word panic in its headline, is this a panic measure?
PRIME MINISTER:
No. Easy for somebody to say, I mean you're, in a sense, damned if you do and you're damned if you don't. I mean my take out of the national accounts was that there's clearly a problem in the dwelling construction industry, and it clearly contributed far more than anything else to the downturn. And we're confident that the downturn is temporary, we're confident that the economy will resume growth, exactly by how much and when I don't know. Now for us to sit on our hands when we have the capacity to do this kind of measure is just being silly and stubborn.
JOURNALIST:
What prompted this movement Mr Howard? You're saying that you met with the HIA a week ago, which is before the National Accounts. Was this something you were originally contemplating for the budget?
PRIME MINISTER:
Well I never get into what we may or may not be contemplating for the budget. But look, I had an hour long discussion with the HIA about 10 days ago and they had all their movers and shakers from around the country, and you know they gave it to me both barrels and in their typical style and I listened to what they had to say and I thought they made a bit of sense. And I said, well look, we'll have a, I'll have a look at it, I'll come back to you. And I knew the accounts were coming up and I wanted to see them because I didn't know until the morning precisely what the contraction was. I feared there would be a contraction, I felt it in my bones, but I thought it might be slighter than it was. But I decided that after having seeing that and when it was so clearly the problem area, that the sensible, measured, targeted, responsible, effective thing to do, was to do something for the housing industry. And that's what we've done.
JOURNALIST:
Prime Minister, you and the Treasurer have made great play of the Government's standing as an economic manager in the last couple of days, in particular. And also saying, including today, that the economy looks like it's going to improve rather than anything else. In that environment, can you understand why the dollar is so weak, and are you concerned about it?
PRIME MINISTER:
Well I'm not going to talk, or give in the nature of a commentary on the dollar, I'm not. It is just too dangerous for a Prime Minister to start sort of giving a running commentary on the level of the dollar. And I'm just not really going to get into that. Beyond the observations I've made in the past that you have to take a long view of the value of the dollar and not just take a snapshot.
JOURNALIST:
Well, on that basis, wasn't it dangerous to be attacking the Reserve Bank on its interest rates decision since that's been taken as a very bad sign in international financial markets?
PRIME MINISTER:
There's nothing in the monetary policy understanding between the Government and the Reserve Bank that precludes in any way observations on monetary policy by the Government.
JOURNALIST:
Prime Minister, you're off to Ryan today, was this decision timed so that you could campaign on this issue in Ryan?
PRIME MINISTER:
No.
JOURNALIST:
Do you think it will win Ryan for you?
PRIME MINISTER:
I don't think it will have any particular effect on Ryan. No I don't. I don't. I mean, this measure's been taken in response to what we identified arising out of the economy. I can't see that it will have an enormous effect either way. I hope it is seen for what it is meant to be and that is a deliberate and careful and responsible attempt by the Government to inject more activity and confidence into a very important industry that manifestly has contracted more than any other section of the economy and, therefore, has contributed more than any other section of the economy by that contraction to the negative figure. Now, the figures came out on Wednesday. I took the view that if we were going to do anything we should do it immediately. And this is about as immediate as you can get to do it on the Friday morning.
JOURNALIST:
How concerned are you that it could be counteracted by the price of new houses going up considerably in the wake of this decision?
PRIME MINISTER:
I think the level of competition that there'll be.there's a lot of excess capacity in the home building industry at the moment and I think that will act as a very severe constraint on that.
JOURNALIST:
Are you expecting that people will change their decision from buying an existing house to buying a new house rather than bring more people into the market?
PRIME MINISTER:
I don't know. I can't tell that. I am sure that it will induce a great deal more activity. Just whether that's bringing new players on to the field who wouldn't otherwise have offered to play or it brings about a change.I think it's more likely the former than the latter, that would be my guess but I don't know.
JOURNALIST:
Mr Howard, on another issue, when can we expect the decision from the Treasurer on the Woodside/Shell matter?
PRIME MINISTER:
When he's in a position to make it. I'm not going to speculate about that.
JOURNALIST:
Prime Minister, would the stamp duty.what sort of financial difference could that make for average people.?
PRIME MINISTER:
It depends on how much the relief would be. But I mean, I'm just putting it on the States and they really do have an obligation to come to the party on this. They're awash with extra stamp duty, particularly States like New South Wales. And they owe it to the home building industry and employment in their States to come to the party. Now, I want to make sure I'm not making this conditional on them doing anything. We're doing this whether they're wiling to chip in or not but they ought to chip in and they should, sort of, put the politics aside on this and chip in and help the industry.
JOURNALIST:
But are the States, as the newspaper suggested this morning, awash with more GST revenue than expected?
PRIME MINISTER:
The ABS's measure, Laurie, is different from ours and there's nothing in what came out yesterday to alter what we've previously said and that is that the GST collections, according to our measurements, are running according to plan, not significantly ahead but certainly up. It may be that when we have the final numbers in there'll be a little variation on that. I don't expect so.
Thank you.
[Ends]