Falling house prices may not help first home buyers enter the market

All you students should be doing cartwheels in the school corridors, due to the fact that Prime Minister Albanese and Federal Treasurer Jim Chalmers are making it easier for young, first home buyers to purchase their own home.

The Labor federal government is driving down the value of house prices in a bid to make them more affordable. It is doing this by removing tax breaks on property investing that favoured investors over owner-occupiers.

The PM and his treasurer promised they wouldn’t be touching these tax breaks at the last election. Albo said he was tired of repeating himself. “No, for the 50th time, I WILL NOT be changing negative gearing or the capital gains tax discount!”

And then he did.

The government said these tax advantages tended to drive the prices of houses upwards, so Labor wound back negative gearing and the capital gains tax discount and now these breaks only apply to newly constructed dwellings, in a bid to create more housing stock. Existing home purchases will not qualify for the tax cut anymore. So this makes it more of a level playing field, when it comes to people wanting to buy a home and those who are looking for an investment property.

We are seeing a dip in the market, with Sydney, Melbourne and Canberra prices falling, but is that all due to the Treasurer’s policy or is it that we are in an economic downturn, that interest rates are on the up, inflation is high and rising again due to President Trump’s war with Iran and AI is coming to take all our jobs?

That might have an effect on housing prices too!

Why? Because tough economic times mean there is less money for people to actually buy a home. And even though prices have dipped by about 5 per cent, they are still not giving them away.

Now, economics is a dry old topic, but I thought I would try to explore the housing policy situation in a cartoon. The idea would be something like this. Okay, house prices are being driven down by the government in a bid to make them cheaper for first home buyers.

At the same time, the government’s policies have seen interest rates rise due to high inflation, partially driven by the Treasurer’s inability to rein in government spending.

This contradiction makes it harder to buy a house.

Hmm … How can I draw that in a cartoon without sending my readers to sleep? There is one way. A former treasurer of Australia back when John Howard was Prime Minister (1996-2007) was Peter Costello, who coined the term “the inflation dragon”.

Costello thought inflation was like the mythical* beast, burning up the value of money and reducing spending power.

I thought I would bring the inflation dragon to life again and use it in my cartoon as a strong metaphor. If I was going to draw housing becoming more affordable, on one hand, but on the other have inflation and rising interest rates making it harder, I knew I had to try and combine the two. So I sketched a house with the for sale sign out the front.

Initially I had the idea of having the huge inflation dragon sitting on the roof, menacingly staring at any first home buyers who came near.

Not a bad idea.

But I decided to do something different. I decided to wrap a sleeping inflation dragon around the house. The creature seems to be in a beautiful slumber, despite its gargantuan* size. It says to first home buyers that there are some fairly large impediments* still in their way.

Standing outside the home for sale, the treasurer Jim Chalmers promotes his policy to a young couple interested in buying. His claim is that he is making houses more affordable. If his policies do succeed in making houses cheaper, unfortunately some of his other policies have made it harder to get into the housing market by making interest rates higher. It could be a case of you can afford the house, but not the home loan!

POLL

GLOSSARY

• negative gearing: borrowing money to invest where the return (rental income) from your investment is less than the borrowing cost, for example, housing loan repayments
• capital gains tax: the tax investors pay on any profits they make when selling assets like investment properties
• inflation: the rising cost of goods and services
• mythical: existing only in fictional stories, not real, imaginary
• gargantuan: huge, extremely large, immense
• impediments: anything that makes progress, movement or development difficult

EXTRA READING

Budget ends 27-year-old tax rule

Testing politicians for ‘porkies’

Govt weighs property tax ‘break in’

QUICK QUIZ

1. Which election promise has the Albanese government broken?
2. What justification has the federal government given for this decision?
3. Who is Treasurer?
4. Which former federal treasurer coined the expression “the inflation dragon”?
5. Labor has removed two significant tax breaks for property investors – what are they called?

LISTEN TO THIS STORY

CLASSROOM ACTIVITIES
1. What’s inflation?
Create an infographic. The purpose of your infographic is to help other kids understand what inflation is and why everyone should know about it. Use information from the story to help you.

Time: Allow at least 45 minutes for this activity
Curriculum Links: English, Economics and Business Studies

2. Extension
What cartoon do you think that someone who did not agree with Mark on this issue would create?

Describe or make the cartoon.

Time: Allow at least 30 minutes on this activity.
Curriculum Links: English, Economics and Business Studies, Critical and Creative Thinking

VCOP ACTIVITY
1. Values, identities and actions
Study today’s Mark Knight cartoon and answer the following questions about the work:

What values does this cartoon invite us to think about?

Who is this cartoon speaking about? And who is this work trying to speak to?

What actions might the viewpoint in the cartoon encourage?

Time: allow 20 minutes to complete this activity
Curriculum Links: English, Personal and Social, Critical and Creative Thinking

2. Extension
How can cartoonists like Mark Knight encourage or change people’s opinions on a controversial subject or topic?

Do you think his work needs approval before going to print? Explain your answer.

Time: allow 10 minutes to complete this activity
Curriculum Links: English, Personal and Social, Critical and Creative Thinking