Yesterday the prime minister indicated the boosted first home owners grant (FOHG) would not be extended beyond the 30 June. Today, reports in the Daily Telegraph and Herald Sun suggested it would be extended when the Budget is announced on 12 May.

The Daily Telegraph quoted “insiders” as saying the boosted grant would be extended following lobbying by the housing industry. A report in The Australian last week also said extending the boosted FHOG was a “certainty” in the budget.

But yesterday, Kevin Rudd said in a speech in Perth that “all good things must come to an end” and that the boosted FHOG was only intended for a finite length of time.

Lobbyists, including AFG, the MFAA and The Loan Market Group have all called for the incentive program to be extended. These broking groups said that if it is not renewed, then the housing market will suffer a ‘massive hangover’.

I’ve heard many commentators argue that the FOHG is creating a false market bubble and may be putting people in homes they could otherwise not afford. But isn’t that more about the ‘credit generation’ than anything else. I would say that people would still get into houses they couldn’t afford anyway.

The CBA’a Ralph Norris said recently the scheme should not be extended.

The boosted first homebuyer scheme was introduced last December as part of the government’s first economic stimulus package. First homebuyers of existing houses receive $14,000, while those buying a new house receive $21,000 - as opposed to just $7,000.

Shouldn’t the government be thinking of ways to ’stimulate’ the economy in a proactive way instead of just handing out cash that can go anywhere? At least this initiative puts money in the pockets of many small businesses who then employ others in our economy. If they put a lid on this scheme, they need to take a good har look at themselves, because I don’t believe they know what they are doing.

PD

(Story by brokernews.com.au)