Plan to extend First Home Owners Grant

14 September 2001

The Federal Government is planning more help for home buyers and the housing industry in an effort to maintain the domestic economic recovery in the face of growing global uncertainty.

Senior government advisers have indicated that the $14,000 grant for first-time buyers of new homes will be extended, and ministers in recent days have highlighted the importance of the labour-intensive housing sector in maintaining economic momentum.

The Minister for Employment, Mr Tony Abbott, emphasised the role of the housing recovery after figures showed a sharp rise in full-time jobs in August. Construction, he said, was "a sector where full-time employment predominates".

Australian Bureau of Statistics employment figures for August showed a rise of 77,200 jobs, reversing the previous month's record slump in full-time employment and cutting the unemployment rate to 6.8 per cent.

Housing is a driver of economic growth in Australia, and it is in the middle of an upswing. Figures on housing, also released yesterday, showed a 10 per cent rise in dwelling commencements in the June quarter, after four successive quarterly declines in response to the introduction of the GST last July.

The Treasurer, Mr Peter Costello, said on Wednesday that the 0.9 per cent economic growth rate for the June quarter was partly underpinned by the emerging housing recovery, which was supported by the Government's first-home owners grant.

"We want to keep domestic conditions expansionary in the way they are in the housing sector," he said.

The scheme offers a $14,000 grant for buyers of new homes, at a cost of $150 million over 10 months. Industry has been pushing for an extension of the grant for first-time buyers of new homes at $10,000 and a lower amount for buyers of existing homes. It is understood the Government has accepted the need to continue the new-home incentive at a higher level beyond December 31.

The August jobs turnaround is also supported by continued strong retail spending and the recent turnaround in housing.

The underlying trend in the job market, after excluding volatile swings, shows the market is picking up. Over the past six months employment growth has averaged 16,000 a month, compared with average job losses of 7,000 in the previous six-month period.

The turnaround could prevent the unemployment rate from breaching the 7 per cent mark, analysts say.

But the August result reinforced doubts about the reliability of the Bureau of Statistics' labour force survey, which has become increasingly volatile over the past year.

The recent strength in the economy puts Australia in a better position to withstand the possible fallout from an Ansett Airlines collapse, in which 16,000 jobs are at risk, and the impact of a prolonged downturn in the export market.

The Department of Employment's leading indicator of employment also reinforced the recovery scenario, posting a second rise in July that pointed to stronger jobs growth next year.

"While it is too early to declare that the indicator has turned, the employment outlook for 2002 is improving," the department said.

The August jobs survey showed a rise of 77,300 jobs in seasonally adjusted terms, driven mainly by an increase of 72,600 full-time jobs. This reversed June's record decline of 79,000 full-time jobs.

In August the unemployment rate fell 0.1 to 6.8 per cent, but in mainland Australia it ranged from a low of 6 per cent in NSW to 8.2 per cent in Queensland. The participation rate - the proportion of the working-age population in a job or looking for one - rose 0.4 percentage points to 64 per cent.

The August result, however, could have been boosted by the ABS, which employed 40,000 people on a casual basis to conduct the 2001 Census.

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