Scott Murdoch From: The Australian June 03, 2011 12:00AM
ANZ Bank's Australian chief executive Phil Chronican has said the government's first-home buyer stimulus did nothing but drive up property prices, and warned that mortgage arrears would remain high as consumers struggled with cost of living pressures.
As bank shares fell further on the market yesterday, Mr Chronican said local housing prices were likely to remain flat but governments and regulators needed to address the chronic demand and supply imbalance in domestic property.
ANZ has estimated there is a 230,000 shortfall in the supply of residential houses in Australia, which it blames on governments not releasing enough land for development.
Mr Chronican, who heads the Australian operations of the bank under group chief executive Mike Smith, said state and federal governments needed to invest more in social infrastructure to support housing development.
The government's increased first-home buyers stimulus, delivered during the global financial crisis, did little to ease affordability problems, he said.
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"We need to refrain from pursuing short-term policies that add to demand-side pressures," Mr Chronican told an American Chamber of Commerce lunch in Sydney.
"If we really want to help people into homes, we need to address the supply-side issues, not add to the demand that drives prices up.
"We have seen what can happen when (governments) get it wrong in the case of the first-home owner's grant. These grants were capitalised against house prices so quickly they didn't so much benefit first-home buyers . . . it was the first-home seller's grant really."
Mr Chronican repeated the warning of major bank bosses that mortgage arrears were beginning to rise as customers struggled with higher interest rates and cost-of-living pressures.
Analysts have forecast that arrears could soar to nearly $13 billion in the next year as mortgages written in 2009 begin to sour.
ANZ was one of the least active banks during the global financial crisis, as it scaled back its residential mortgage-lending in the downturn.
The two Sydney-based banks, Westpac and Commonwealth, were most active and were expected to experience higher rates of arrears.
Arrears were "a problem that's going to stay with us for a while", Mr Chronican said. "I don't know if it will get worse or not."
He said tax policy had created an obsession about investment property ownership. "Governments might want to look at whether . . . negative gearing tax breaks are fostering an unhealthy focus on housing as an investment and compounding the affordability issues."
