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A speech from the Prime Minister on fixing housing

“Fellow Australians, I want to address our most pressing national issue: housing. For too long, governments have tiptoed around the problems from escalating prices, but for the sake of our younger generations, that stops today.

First, let me run through what our housing issues are and how we got here.

The biggest problem we face today is that property prices are out of reach for many younger Australians. That’s only a recent thing.

Back in my youth – in the 1980s and 1990s - housing was more affordable. Yes, interest rates were a lot higher then, but those rates consistently fell through those decades, and right up to the Covid-19 period. 

In 1987, house prices were the equivalent of 2.8x the annual income of households. Today, that multiple is 9.7x and rising.
 

According to consultants, Demographia, we now have five of the 15 most expensive cities in the world when measured on a house price to income basis. Adelaide, Brisbane, and Melbourne are pricier than cities like New York and Greater London.

What house prices have done is to increase inequality between generations, and that has increased tensions between those generations.

Some might argue that the young will always have the Bank of Mum and Dad, though let’s not forget that many of them don’t have access to this. 

And the broader issue is whether we want to be a society where wealth is passed down from one generation to the next, making it harder for people to move up the income and wealth ladders.

I’d like to think not and that we are still a country that can offer a ‘fair go’ for all.

Unaffordable house prices aren’t just a problem for our younger generations. They’re also an issue for our economy too.

Property is so large compared to our economy that it is almost our economy these days. The latest figures show that residential housing is around 4.5x the size of annual GDP. 

 
Source: Cotality, World Bank, Firstlinks.

We’ve become so reliant on housing that any fall in prices would have a major impact on our economy. That makes our economic prospects increasingly fragile.

Not only that but housing’s dominance means there’s too much money flowing into property and not enough into other areas that have the potential to drive our economy.

More money going into innovative technology, health and other fast growing industries could do wonders for our productivity and living standards going forwards.

So, they are the main problems. You may ask: what’s caused them?

It’s a combination of a lot of things. On the supply side of the equation, it’s obvious not enough housing has been built to keep up with demand. People have blamed NIMBYs, planning regulations, construction costs, and a host of other factors.

However, I think there’s a bigger, neglected issue at play. For decades, Australia and many developed countries have had an overreaching strategy of making cities denser – that is, building more in inner city areas. Yet, that has made only land scarcer and driven up land prices.

When it comes to demand for property, I admit that governments including ours haven’t helped on this front. Tax breaks, first homeowner grants, and increased immigration numbers have juiced demand and prices. 

Governments are well intentioned though sometimes what helps people in the short run isn’t always what’s best for the country in the long term.

The mismatch in supply and demand has led to ever-rising prices and it’s got to the stage where housing is treated as much as an investment as it is a place of shelter.

Recent figures show that investors account for around 40% of new housing loans. That doesn’t seem like a sign of a healthy property market. 

No doubt you’ll be eager to hear about how my government intends to fix the housing issues.

Well, I don’t think any individual policies are helpful without an overreaching goal. So today, I’m announcing our target to keep house prices flat across the nation for the next decade. You can judge my leadership on how close we get to this goal.

Why aim for flat prices? Because if wages grow by 3% a year over the next 10 years, it means houses will become more affordable for more people over time. 

And this target will allow for a gradual adjustment in the housing market. We don’t want a big dip in prices because that would impact current owners and it would put a big hole in consumer spending and our economy. A gradual adjustment seems more sensible.

How are we going to achieve this? First, we’re going to address demand by cutting migration.

Last financial year, we had 667,000 migrants come to our shores, up from 464,000 a decade ago. Those high figures have put all sorts of pressure on house prices and rentals.


Source: AMP

We are going to cut that migrant number in half from January for 12 months. This measure should ease demand for both housing and rentals.

Our focus will be on primarily bringing in skilled migrants and temporary ones who have building skills and can help ease construction work shortfalls. Other areas of migration will be cut. 

A similar policy has recently worked in Canada, which late last year implemented significant cuts to migrant numbers. Since then, both house and rental prices have marginally fallen across the country.

Don’t get me wrong, immigration has been wonderful for our country for a long time. But, the numbers, especially coming out of Covid, have been high, and it’s time to act on this.

If cutting migration doesn’t work to flatten house prices, then we reserve the right to take further action to reduce demand, and target tax breaks, first homeowner grants, and even bank lending, especially to investors. We’ll roll out more policies until we achieve our aim.

On the supply side, we’re going to continue to increase the building of new homes but we’re going to do it in a smarter way. 

The new strategy will emphasise development in outer urban fringes. This is going to be a major task because we’re first going to have to build the infrastructure on these fringes. Especially transport, principally fast trains. 

We don’t want people to live in these areas and be forced to commute 90 minutes to get to jobs in the city. We need faster transport to connect homes to employment opportunities. And that’s not to mention building the facilities, schools, shops and so on, to make these areas livable. 

We’ll still increase housing in inner city areas though the emphasis will switch to expanding our city boundaries and housing. 

There will be plenty of critics to this new planning strategy, though let me reiterate that densifying cities, like we’ve been doing, hasn’t worked to tame house prices.

It’s worth noting that our counterparts across the Tasman have had some recent success with greenfield development in outer urban areas, which has contributed to falling house prices in recent years.

To help with this strategy, we’re going to tie state government funding to quotas for land release, and we’re going to tie government funding for councils to quotas for housing approvals. 

Undoubtedly though, increasing supply is a slow burn. That’s why we need to take immediate action to reduce demand, first by reducing migration numbers and then with other policies if needed.

Outside of these housing specific policies, we’re going to ramp up incentives for businesses in fast growing industries. In AI, biotechnology, IT services and infrastructure, and renewable energy. We’ve become too reliant on housing to grow our wealth and we need businesses to pick up the slack. We want to help businesses succeed not only locally, but globally. Hopefully, this increases the flow of money into businesses, at the expense of the housing sector.

All told, I expect to get plenty of feedback about the new measures. From businesses aggrieved by the reduction in migration, which will impact demand for their goods and services. From current homeowners and investors who’ve been used to consistently rising home prices. From people employed in the real estate industry, who’ve benefited from decades of soaring house prices. From universities, about decreasing international student numbers.

What I would say to them is this: the country can’t be run to satisfy a segment of the population; it must be run for what’s best for the whole country.

The situation with property prices is out of control and major action is needed. Making housing affordable for younger generations is this government’s number one priority and we won’t stop it until we make it happen.

Thank you for your attention and good day.”

*To be clear, Anthony Albanese did not make this speech, though I wish he did. It's purely the work of my imagination.

 

James Gruber is Editor of Firstlinks, aka Prime Minister for a day.

 

 

  •   22 October 2025
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27 Comments
Edward
October 23, 2025

If renting becomes more attractive, you'll need more investors........reducing the incentives will not help to achieve that. Germany, BTW, has certain guarantees for investors.
The biggest tax rort is not the 50% CGT reduction for investment properties, but the 100% CGT free status of owner occupied homes: a huge incentive to over capitalise (for want of a better word) and thereby increase the average value of a home.

Edward
October 23, 2025

The average home traded in the 80's was nothing like the average home traded today. No wonder it is relatively more expensive. Factor that in and the difference is a lot smaller.
Having said that, I suspect James Gruber will not get an invitation to become Albo's speech writer anytime soon, a bit too much common sense.....??

4
Geoff D
October 23, 2025

That's for sure Edward! 3 bedroom, 1 bathroom, carport for me then but now much larger with more bathrooms and entertainment areas. However, I believe the land on which houses were built was larger in earlier days so that factor has to be considered as well. And that's the problem! What is average?

Van Derek
October 23, 2025

What a lot of nonsense PM. Young couples today are spending $5,000 PA on morning coffees, another $5,000 on mobile phones and apps luxuries older generations never had. Further, labour government kowtows for votes creating an expectation of entitlement rather than motivation. The fact that there is a supply issue supports the argument that housing is not overpriced. Aussies have always winged about immigrants getting the better of them, forgetting its immigrants that helped build Australia. It's always been a lucky country for those prepared to set goals and work towards them.

2
CC
October 23, 2025

The fact that housing now costs 14x average salary in NSW versus 8x in 2002 , and much less than that 40 yrs ago, would disprove your argument.
Housing is outrageously expensive now.

Dudley
October 23, 2025


"Back in my youth – in the 1980s and 1990s - housing was more affordable. Yes, interest rates were a lot higher then, but those rates consistently fell through those decades, and right up to the Covid-19 period."

"In 1987, house prices were the equivalent of 2.8x the annual income of households. Today, that multiple is 9.7x and rising."

Google:
'Term of average mortgage in Australia in 1987?'
'In 1987, the average term for a mortgage in Australia was between 20 and 25 years.'

'Term of average mortgage in australia in 2025?'
'The standard or average term for a home loan in Australia in 2025 is 25 to 30 years, with 30 years being the most common term.'

WHAT ARE THE MORT-GAGE PAYMENTS IN % OF AFTER TAX INCOME ???

1987:
= PMT(18%, 25, (1 - 20%) * 3.3, 0)
= -48% (- = paid in)

2025:
= PMT(6%, 30, (1 - 20%) * 9, 0)
= -52%

Same outcome.

Swapped:
. large interest rate and small principal, for,
. small interest rate and large principal.

See 'Bunk of Dad&Mum": save 80%-90% of after tax income, in 4 years buy 2 bedroom flat cash on knocker without mort-gage and without bankrupting 'Bank of Mum and Dad', go on to save 50% of after tax income.

1
Peter
October 23, 2025

But inflation was higher in the 80s/90s so the borrower benefited from rising house prices and rising wages, which boosted wealth and made repayments easier over time.

Dudley
October 23, 2025


"But inflation was higher in the 80s/90s so the borrower benefited from rising house prices and rising wages, which boosted wealth and made repayments easier over time.":

'plus ça change, plus c'est la même chose'

Home prices and wages increasing today. What is quantifably, quantitatively different?

Peter
October 23, 2025

In the 80s average wage growth was ~8% p.a., last ten years (to '24) it was < 3% p.a..

So that 52% of 2025's post tax income doesn't come down very quickly with 3% wage growth, but the 48% comes down much faster.

Dudley
October 23, 2025


"So that 52% of 2025's post tax income doesn't come down very quickly with 3% wage growth, but the 48% comes down much faster.":

So, how much does each variable interest mort-gage payer pay of their after tax income over the term of their mort-gage?

Peter
October 23, 2025

Part of the answer on the supply side is to make down-sizing easier (mostly about reducing the cost of doing so because of stamp duty, but also the tax/benefits efficiency of doing so because of the massive distortions in the tax/welfare system that benefit the family home.

1
CFP
October 23, 2025

This doesn't increase supply as downsizers will still need to live somewhere so will buy/rent another property. Supply is increased by building new properties or putting properties that are sitting vacant on the market. They'd be better off decreasing incentives for investors who are leaving properties vacant for the likes of AirBnB, and incentivising them to utilise those properties for long term rentals.

1
Fergus
October 23, 2025

A complete policy would include:

Reducing Demand (reduce immigration / removal of tax incentives such as neg gearing and 50% CGT discount / increased stamp duty on property purchased by foreigners ie 70% plus like Singapore have done and including in APRA and RBA charters property price stability / lowering in line with wage inflation...how: RBA can use interest rates and more importantly APRA can force banks to tighten credit...the price of a property is dependent on how much cash one can borrow...reduce the level of borrowings will reduce what a vendor can expect from buyers...and reduce GOVT incentives eg. 5% mortgage guarantee etc which just brings forward demand)

Increase Supply (but don't rely solely on private developers who have no interest in increasing supply to a level for prices to decline....the GOVT needs to via a GOVT DEPARTMENT - maybe called DEPARTMENT of HOMES for AUSTRALIANS....also build sustainable / well designed and located homes to increase supply...sell at cost +5% to those with incomes up to $200K (family total assessable income) and lease out at below market rents others and also provide some which are 100% subsidised housing for the home-less etc.)

But this is a pipe dream as the GOVT / POLLIES / BANKS / MORTGAGE BROKERS / RE AGENTS and INVESTORS / DEVELOPERS / HOME OWNERS etc do not want their property prices to fall...greed before fairness.

1
Bill Brown
October 23, 2025

I purchased my home in the 1970s - 2 small mortgages, outrageous interest. It scared the crap out of me. I felt like I had been imprisoned

Up until the end of the 1980s, state governments built modest but practical Housing commission homes with federal funding, which moderated demand for privately built homes. Neo-liberal economics killed that idea off, urged on by politicians slavishly copying Thatcher and Reagan.

The concept of government homes was simple: you put your name on a list, waited a year or so, and were provided with a home you could rent for less than private rentals while you saved. If you wanted to, you could buy the home later. Government on- cost was marginal at around 5%. You could get a start in the property market if you went that direction.

Governments of all persuasions now have to be belted around the ears to force them to add stock into the market. Modest homes, no McMansions, with homes built to a practical standard supervised by a Department of Works, are whats needed. No entertainment rooms or porch columns, but with a backyard, a carport and suitable for grass and kids and dogs. It doesn't matter if those homes are on greenfield sites as long as there are transport connections to employment sites, and not built on a floodplain, but sadly road/rail is infrastructure, and governments are not good at that anymore. Good transport meant a one-car family, lowering fuel demand, road costs, and emissions.

Take me back, oh Great time-Lord

Capping housing valuations is a good idea, but Govt investment in building homes to increase supply ia a better idea.

Brian Cabot
October 23, 2025

It would take a great statesman to make this speech and carry through with the resulting policies. I hope the real Albo takes note. I have held the opinions you expressed for many years and, as an engineer, I recognised that the property market is a classic example of a system running on positive feedback, where some of the output is fed back to reinforce the input. All systems with positive feedback eventually go into either uncontrollable instability (e.g. when a microphone gets too close to a PA system loudspeaker) or complete system lockup. To maintain stability, systems need negative feedback - where some of the output is subtracted from the input. Of course, when I express my opinions to people who are mom and pop property investors, I get a lively response. Getting home ownership back to affordable levels will require decades of discipline and patience to counteract the decades of greed and stupidity that have created the current situation. This will not happen without a cultural change in Australian society.

I recently read an article written by Banjo Patterson in the 1890s where he commented on the way that people were buying city property in the expectation that they could then sell it at a later time for a profit without using it for any productive purpose. To counter this, he suggested that all property owners should pay an annual tax based on the price at which they would be prepared to sell, thereby providing an incentive to moderate their price expectation and to use the land productively. It seems that we have not made much progress in the greed and stupidity culture over 130 years.

1
Steve
October 23, 2025

Australia, though not unique at least appears somewhat different to many of the countries we are compared with, for example Germany by MC above, as well as the UK, US and many others. We are asked to basically fund our own retirement via super. We have no universal pension (i.e. not means tested). And governments of both persuasions have made the aged pension just a safety net, not a comfortable option for most of us. Now I'm not getting into any of the plusses or minuses of this set-up except to say the result of this is that all Australians are expected to INVEST some of their earnings to pay for a comfortable retirement. The investment universe is admittedly wide, but there is a natural home country bias, and people generally choose property or stocks as the two big classes (along with cash/fixed interest). When it comes to risk, property may be seen by many as a less risky option than shares. So you can lay a half decent argument that government policy (paying for your own retirement) has basically driven many people into property investment as the lowest risk way to provide for their retirement; the outcome is additional demand. So when Treasury always talk about the missing revenue from subsidising property investment, perhaps they could include an offset for how much a state funded alternative universal pension might cost? And the aged pension is not an alternative. For most people. Of course the bigger driver of actual high prices is the inability of supply to keep up with demand, but this is a broken record so I'll not bang on.

1
Mart
October 23, 2025

Albo (allegedly) in Firstlinks this morning: "However, I think there’s a bigger, neglected issue at play. For decades, Australia and many developed countries have had an overreaching strategy of making cities denser – that is, building more in inner city areas. Yet, that has made only land scarcer and driven up land prices".

Clare O'Neil (Albo's Housing Minister) speech last night: “When councils around Melbourne knock back townhouse or apartment developments near train stations, another Victorian family can’t afford to live close to their jobs,” O’Neil said. “When one council says ‘not in my backyard’, another council must step up.” O’Neil contrasted the rapid release of land and construction approvals in growth corridors such as Wyndham, Melton and Brimbank – which she said had done the “heavy lifting” – adding it was now time for the whole city to tackle Victoria’s housing challenge. The federal minister’s comments echo similar calls from the Victorian government as it moves to accelerate density around transport hubs (https://www.theage.com.au/politics/victoria/segregated-city-the-west-alone-can-t-shoulder-housing-boom-minister-warns-20251021-p5n44c.html)

Cam
October 23, 2025

I'd be impressed if Albo did make this speech. I tend to vote the other way, but this was certainly swaying me.
An idea to add is satellite cities with fast trains.

Dane
October 23, 2025

Both sensible and courageous. Thats why by paragraph 2 it was obvious it did not come from Albanese or any politician.

Mart
October 23, 2025

"A bold, indeed courageous policy Prime Minister" - Sir Humphrey, Yes Prime Minister

Jack
October 23, 2025

This speech made no mention of taxes that encourage property speculation by granting half of the capital gains tax-free if the property is sold after 12 months. There is also no mention of a family’s increased capacity to borrow more (and bid up prices) due to lowered interest rates over the past 30 years, the inclusion of the second income from a working spouse, as well as the rise in real (after inflation) wages

Such a superficial analysis suggests that it was delivered by Prime Minister Albanese.

Michael
October 23, 2025

Firstly, lower levels of lending to property investors will result in less rentals, increasing demand and rents unless governments build more public housing properties.
Secondly, in 1987 a basic house was 5x my annual salary and I was in a reasonably paid government job.

Fergus
October 23, 2025

RE:
"Firstly, lower levels of lending to property investors will result in less rentals, increasing demand and rents unless governments build more public housing properties".

Fewer rental properties does not equal higher demand. Fewer rental properties can mean more people buying to occupy therefore reducing the need to rent and the demand for rental properties. If homes become cheaper...more people will be able to buy to occupy...hence less need / demand for rental homes.

Robert
October 23, 2025

Fewer rentals WILL increase demand for rentals and as renters compete for a smaller pool, rents will increase.
It might come as a surprise to some but not everyone wants to "own their own home" There's a percentage of the population that just want/need to rent.
As an investor just before Covid l decided to sell at least one of 7 properties in Brisbane. I offered first option to every one of the tenants and l was prepared to reduce the price according to whatever the agents commission would have been for a private sale. I was a little desperate.
At that time interest rates were low and with 20% deposit, loan repayments would have been less than paying rent.
NOT ONE of the tenants were interested in buying. ALL had good reasons to continue renting.
Reduce the rental pool and competition will increase rents.

David
October 23, 2025

lol. A great test of who reads all the way to the bottom.

James for PM!!!

Mart
October 23, 2025

Grubernomics !

 

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