KEY POINTS:
CANBERRA - The campaign for the November 24 election has moved into a savage battle for the nation's struggling mortgage belt and the votes of young Australians for whom home ownership has become the impossible dream.
Both major parties have now rolled out massively expensive plans to help first-home buyers save the deposits needed to enter the nation's booming housing market.
But economists have warned that the scale of their election promises, now totalling more than A$100 billion ($118 billion), will increase inflationary pressures and the need for higher interest rates, further lifting mortgage repayments.
Prime Minister John Howard, who announced almost A$10 billion in new pledges at his official campaign launch on Monday, has been attacked for the inflationary impact of his promises in the wake of last week's increase in Australia's official interest rate.
Labor leader Kevin Rudd will today reveal new spending proposals at his launch in Brisbane, although he has promised to keep his total campaign promises below those of the Government, and to resist a dollar-for-dollar vote-buying spree.
At the heart of the latest round of big-spending promises has been Howard's belated acceptance of Australia's housing affordability crisis.
But Rudd's long-standing emphasis on the problems facing young Australians trying to buy their own home, and the welcome his policies received, were reinforced by a series of grim statistics and projections.
The latest national outlook by the Housing Industry Association warned that record low housing affordability was not only excluding young Australians from the housing market, but was also deterring builders from new developments, and pushing up rents.
The association said demand for new homes exceeded supply by about 20,000 dwellings, creating barriers that have made Australia one of the most difficult countries in the world for first-home buyers.
It warned that if adequate measures were not taken to encourage investment, the housing shortage and affordability crisis would continue until the end of the decade.
Association managing director Ron Silberberg also said that last week's interest rate rise was hammering people renting homes: "The private rental market is a disaster zone."
The Bureau of Statistics reported that in the year to the end of September house prices across Australia rose by more than 10 per cent, soaring by more than 16 per cent in Melbourne, Brisbane and Adelaide.
Median house prices have reached A$525,000 in Sydney, more than A$400,000 in Melbourne, Perth and Canberra, and A$366,000 in Adelaide.
A report by housing consultants Demographia quoted in The Age newspaper found that Australians paid 6.6 times the median household income for a median-priced home.
In New Zealand, Ireland and Britain a median-priced home cost between 5.5 and six times the median annual income, and in the United States and Canada, between three and four times.
The report said an affordable market was regarded as about three times a buyer's income.
Real Estate Institute president Graham Joyce further warned that the door would be closed on many more aspiring home buyers by last week's interest rate rise, adding an extra A$60 a month to mortgage bills.
Howard and Rudd have promised generous tax breaks for first-home buyers to encourage savings, with Rudd also proposing massive spending on low-income rental housing.
But government spending has been identified by the Reserve Bank as a key driver of inflation, and it warns of further interest rate rises in a message that leading economists believe could lead to another increase before Christmas.
"I'm concerned about the inflationary effect of what Mr Howard had to say [in his campaign launch], particularly on the same day that the Reserve Bank issued its statement warning of inflationary pressures and in fact adjusted upwards its inflation projections for the period ahead," Rudd said.
Treasurer Peter Costello replied: "The Coalition Government has presided over 10 surplus budgets and as long as we keep that budget in surplus, with decent savings, then I think that's consistent with good monetary policy."
Median house prices
$525,000 in Sydney $400,000+ in Melbourne, Perth and Canberra $366,000 in Adelaide
*In Australian dollars
