7am Why Albanese won't solve the housing crisis
Oct 7, 2025
In this intriguing discussion, economist Saul Eslake delves into Labor's home-buyer scheme and its implications for Australia's housing crisis. He critiques the scheme's effectiveness, arguing that it may inadvertently raise prices rather than enhance affordability. Eslake also explores the historical failures of similar policies and the political motivations behind rising housing prices. He questions whether the government's ambitious supply targets can genuinely address the crisis and emphasizes that meaningful solutions may require challenging price structures.
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Scheme Widens Access But Mainly Speeds Entry
- The expanded 5% deposit scheme removes income tests, raises price caps and lifts participant limits to let many more buy with small deposits.
- Saul Eslake warns this will mainly fast-track buyers who could eventually afford homes rather than create new ownership overall.
Bank Rules Still Limit True Borrowing
- Banks still enforce income multiples, debt-service limits and APRA stress tests, which constrain how much people can borrow despite smaller deposits.
- Eslake argues the policy mainly lets those already likely to borrow buy sooner and thereby raises demand now rather than create new buyers.
Buying Power Pushes Prices Up
- Policies that let buyers spend more on housing tend to push prices up when supply is inelastic in the short term.
- Eslake cites modelling and past evidence suggesting first-home buyer schemes often raise prices in the segments those buyers target.