CEO Update: A weekend of bad policy announcements

Leading an organisation keen to drive ambitious, long term policy change, I never thought I would find myself yearning for a ‘small target’ election, yet that is precisely where I find myself today on the back of the weekend’s policy announcements. To start with, housing. In the face of an ongoing crisis in housing affordability and availability requiring serious long-term action and attention, what was offered over the weekend were two big policy announcements that miss the mark. 

Both Labor and the Coalition announced policies designed to help more young people become first time homeowners. Neither addresses underlying supply issues and both are likely to stimulate demand, adding more pressure to markets and prices. 

The Coalition policy of allowing tax deductibility of interest payments on mortgages for first home buyers and the Labor announcement of allowing all first home buyers to purchase with a 5 per cent deposit and no mortgage insurance both add to demand without adequately addressing supply side issues. These may be popular with voters but they are short-term fixes for long-term, complex problems that require real reform and political will to fix. Ultimately, it is the very people they are supposed to help that may face the unintended consequences and continue to struggle to get the homeownership foothold so desired.   

We recently published a short piece of research by CEDA intern Wenting Hu, which looks at Australians’ experience of financial wellbeing during and since COVID, looking particularly at the impact of housing on financial wellbeing. It is clear that outright homeowners have higher levels of financial wellbeing than those with a mortgage, and both have substantially higher wellbeing levels than renters. None of the recent policy announcements will take the pressure off those who are renting for the long-term or assist them into the housing market. 

The tax relief announced by both sides are more of the same policies – providing a short-term benefit, while ignoring underlying structural challenges. These are also precisely the types of hard to reverse policies that often end up eroding fiscal positions more than expected. Everyone acknowledges the need to rebuild fiscal resilience, now more than ever, yet all we are seeing by way of election policy is moving in precisely the opposite direction.  

Post-election, the incoming Government will no doubt move quickly to implement promised election commitments. Having done this, the usual pattern seems to be too little time to create the mandate for bigger picture reforms before attention turns again to the next election. It’s little wonder that sorely needed big reform continues to end up on the backburner. This begs the question, how do we break the cycle of every election becoming about increased spending and sugar hits? Moving to fixed three-year terms with a known election date might help - at least we might get an extra 12 months of policy opportunity. We would also like to see whole of government intergenerational reporting. 

In the same vein, improving government efficiency requires a sustainable, long-term structured focus, the opposite to what we’re currently seeing in the US. There is little doubt that DOGE has raised questions around the size of public sectors around the world. A recent article in the Economist shows Australia as a clear outlier in terms of Government size. We think the data overstates the size of our public sector, but what is more important is the efficiency and outcomes of government. Previous CEDA research has found that 95 per cent of our government programs are not properly evaluated. Without lifting that performance, we will never know whether and which programs and services are operating effectively and as intended. 

Despite our obvious policy frustrations and the doom and gloom pervading many conversations at present, we remain positive about our long-term potential. CEDA’s Progress 2050 goals are centred around a strong economy and strong social compact working together to enable future prosperity. But achieving these goals requires ambition, long-term focus and commitment from all sides and levels of government, together with business and the wider community. We will do our part to drive the conversations and ideas that can help us get there. 

Melinda Cilento
Chief Executive, CEDA