One of the country’s leading economists has savaged a government plan to make housing more accessible, labelling it “ridiculous”, while also sharing a glimpse of the likely interest rate landscape in 2026.
And it’s likely more bad news for homeowners or homebuyers.
AMP chief economist Shane Oliver has been vocal about his opposition to the federal government’s First Home Guarantee Scheme while appearing on Mark Bouris’ ‘Property Insights’podcast.
Mr Oliver repeatedly called the scheme, which allows first-time buyers to use small deposits without incurring pricey lender’s mortgage insurance, “ridiculous”.
He argued that the initiative, a cornerstone of the Labor Party’s 2025 federal election campaign, was not in the best interest of most first home buyers.
“If you get in first and you’re at the top of the queue and you get that thing, then fantastic, you get an advantage,” he said.
“But everybody else down the queue, the price just goes up by the same amount (as the price cap increase). It’s ridiculous.”
MORE: ‘Punch me’: angry bidder’s wild auction act
AMP chief economist Shane Oliver appearing on Property Insights with Mark Bouris. Picture: Yellow Brick Road on YouTube.
Mr Oliver said a major flaw of the scheme was that young people using it would have to incur substantially more debt – even if they saved on lender’s mortgage insurance.
He noted that those using the scheme would be lumped with pricier loans and they would borrow 95 per cent of the value of their property purchases.
Mr Oliver’s comments have echoed those of many other housing market commentators, including Simon Ma, the head of advisory group Our Top 10, who said the scheme would encourage buyers to borrow more, extending the life of their debt.
“Some first home buyers believe the government is contributing the additional 15 per cent deposit, leaving them with an 80 per cent LVR loan. That’s not how it works,” Ma said.
“Buyers are taking on a 95 per cent LVR loan, borrowing 95 per cent of the property value. The government guarantee simply removes the need for lenders mortgage insurance, it doesn’t reduce the loan size.”
MORE RATE CUTS TO COME
On the subject of the RBA’s cash rate, Mr Oliver predicted “several more” rate cuts to come.
“One in November, another in February and probably another one in May,” he said.
“So that will take the cash rate down to 2.85 per cent.”
While this would equate to more borrowing power for buyers, Mr Oliver said it would also work to drive up property prices.
“When rates went down people got a lot of money and spent and drove up property prices,” he said.
Mr Oliver said he expects the RBA to deliver “several more” cuts to the cash rate. Picture: NewsWire/Jeremy Piper.
“To get prices back down you’ve got to keep rates really high and you’ve probably got to drop the economy into recession to drop prices back down to where they were five years ago, and such that wages buy as much as they did back then.
“But I don’t think that’s going to happen.”
MORE: Bargaining blunders that cost a fortune
Mr Oliver said the “bottom line problem” was a lack of productivity and supply.
“We just don’t build enough houses relative to the number of people in Australia,” he said.
“You’ve got to get population growth down to a sustainable level … and you just gotta build more homes.”
Mr Oliver has warned of continuing to jam more people into Sydney. Picture: David Gray/AFP.
“It’s taking 50 per cent longer today than it did 10 years ago to build a home or a unit which is just a joke in the great scheme of things.”
PRIORITISING REGIONAL AREAS
Regarding property development, Mr Oliver said more emphasis should be placed on drawing the population into regional centres and away from the major cities.
“Ultimately if you just keep jamming more people in Sydney or Melbourne you’re just going to end up with overcrowding, no matter how beautiful you make the apartments,” he said.
“My position for a long time has been that we have got to decentralise and make our regional centres … bigger centres than they are.”
MORE: ‘Losers’: Sydney suburbs where home values are falling
The 2021 census recorded the population of Port Macquarie at 86,762 for the local government area. Picture: iStock.
Mr Oliver said a “sustainable solution” would see more people living in areas like Orange and
The median price of a house is $880,000 in Port Macquarie and $635,000 in Orange, as of September.
The median house price in Orange has risen 1.2 per cent over the last year, while Port Macquarie’s has climbed 3.5 per cent.
The way to encourage more buyers to these areas, Mr Oliver says, is through a tax cut.
“When you live in a regional centre, you should get a lower tax rate,” he said.
“Regional centres have been complaining for years that they’ve lost their numbers, that regional Australia is in decline. “This would reinvigorate it.”
English (US) · 