Morrison Vows to Cut Aussie First-Home Owner Deposit to 5%

(Bloomberg) -- Australian Prime Minister Scott Morrison committed as much as A$500 million ($350 million) to cut costs for first-home buyers, seeking to boost his chances of re-election with his government trailing in opinion polls before an election on Saturday.

The government would offer guarantees to cut the required deposit for first-home buyers to 5% of the purchase price, instead of 20%, Morrison said at the Liberal Party’s campaign launch in Melbourne on Sunday. The plan would apply to couples with combined annual income of no more than A$200,000 ($140,000), or no more than A$125,000 for singles, with the guarantees provided through the National Housing Finance and Investment Corporation.

Morrison Vows to Cut Aussie First-Home Owner Deposit to 5%

“It can take nine to 10 years for an average household to save a deposit,” Morrison said in an emailed statement. “We want to help Australians realize the goal of buying their first home by cutting years off the time it takes to save up.”

Morrison’s governing Liberal-National coalition is trailing the opposition Labor Party narrowly in opinion polls. The government on Sunday also pledged A$4 billion to build a road link in Melbourne. Labor Party Leader Bill Shorten said he would provide A$10 billion to build a suburban rail loop in Melbourne should his party win the election.

Ground Zero

Sydney and Melbourne have been ground zero for Australia’s worst property slump in a generation as prices tumble from their peak in 2017. Real-estate website Domain said new listings in the two cities -- Australia’s largest -- are down more than 20% from a year earlier.

The Reserve Bank of Australia on Friday slashed its growth forecasts as the crumbling housing market prompts householders to spend less. Economists and fixed-income traders expect the central bank will cut interest rates twice within a year, after it decided against easing policy on Tuesday as it waits to see whether the persistent hiring strength of the past two years is maintained.

Morrison’s First Home Loan Deposit Scheme would start on Jan. 1, and the value of homes eligible would be determined on a regional basis. The program would prioritize loans from smaller lenders in an effort to boost competition. Australia’s four biggest banks account for about 80% of residential mortgages loaned by banks, according to data from the industry oversight body.

The Australian reported that Labor will match the plan, citing Shadow Treasurer Chris Bowen.

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