New roundtable to boost housing investment

Heads of the big banks and major super funds have all scored one of twenty spots on the Federal Government’s new investor roundtable designed to funnel money into housing.

Treasurer Jim Chalmers has previously flagged his interest in removing barriers stopping superannuation funds and major banks investing in housing, clean energy and other areas that offer “strong returns for our community”.

At the jobs and skills summit last month, the Government committed to using incentives to encourage super funds and private investors to invest more in housing projects.

The first roundtable, which will be held in November, will focus on the housing sector and will explore opportunities for Government co-investment.

Roundtables will be held every three months and focus on a different area of investment.

The chief executive officers of the big four banks will be on the roundtable as well as the head of Australia’s sovereign wealth fund, Raphael Arndt.

The ACT treasurer Andrew Barr will represent state and territory interests.

The leaders of the major super funds, such as AustralianSuper, Aware Super and HESTA, have also been included, as well as representatives from several other major institutional investment firms.

The represented super funds and institutional investors have a collective $2 trillion under management.

The treasurer announced the new roundtable format an investment event hosted by the Queensland Government.

He also commented on the Reserve Bank of Australia’s biannual financial stability review, which found some households were starting to suffer from higher interest rates and soaring inflation.

“[The RBA] have made what I think is an obvious point, and that is that the higher interest rates go, the more they will sting ordinary Australians,” Dr Chalmers said.

“Some Australians have a buffer in their personal finances but many don’t.”

In the report, the central bank identified recent home buyers as particularly vulnerable to rising interest rates.

Unlike more established borrowers, the RBA said first home buyers tend to borrow with small deposits and haven’t had a chance to build up their financial buffers and pay off a decent chunk of their loans.

The most vulnerable borrowers likely bought when house prices were booming and risk falling into negative equity as house prices fall.

“A large decline in housing prices that results in negative equity for households, alongside further shocks to disposable income, would increase the risk that some borrowers default on their loan commitments,” the report said.

A recent Equifax report showed first home buyers were more likely to default on their loans than established mortgage holders and the gap between the two groups was widening.

However, the RBA said Australian households are overall in a better position than other nations.

The RBA said most households and businesses have strong balance sheets and banks are well capitalised and therefore able to absorb a spike in loan defaults.

“Many Australian households and businesses built up substantial savings buffers during the pandemic and strong growth in incomes has supported the recovery in household consumption and contributed to low levels of loan arrears,” the report said.

Casting a shadow over this upbeat outlook is the possibility of a sharper-than-anticipated uptick in job losses, which would make it much harder for borrowers to meet loan repayments.

 

– BY POPPY JOHNSTON/ AAP