Good news, or "double trouble" for homebuyers?

In the face of unprecedented global financial turmoil, the federal government has busted open the piggy bank, announcing the 10 billion dollar “Economic Security Strategy” – a spending package designed to stimulate the economy and protect jobs.

Pensioners and carers will receive lump sum payments between $1400 and $2100 in early December; low and middle income families will also receive a $1000 bonus per child (the government no doubt hoping to boost the manufacturing and retail sectors just in time for Christmas). More than 50,000 new training places will be created, and infrastructure funds and investments will be accelerated to 2009.

"This $10.4 billion strategy will strengthen the national economy and support Australian households, given the risk of a deep and prolonged global economic slowdown,” said Prime Minister Kevin Rudd as he outlined the plan in Canberra.

The other big winners under the scheme are ostensibly first-home buyers. $1.5 billion will be set aside for a “time-limited” scheme, to double the $7000 grant for established homes to $14,000, and triple it to $21,000 for new homes.

The Master Builders Association and Housing Industry Association have both welcomed the news, saying pumping money into the housing sector has traditionally been an effective way of boosting activity in other sectors of the economy.

But the Real Estate Institute and some economists have expressed concerns it could result in a jump in prices for established houses. ANZ Chief Economist Saul Eslake told the ABC: “I think as a general proposition that measures that put money in the hands of home buyers end up putting the same amount of money into the pockets of home sellers.” However he admits it’s a strategy that will get money moving more quickly, whereas planning and building infrastructure takes more time.

There’s no doubt we need more homes in Australia to cope with our rapidly growing population, and with the Reserve Bank expected to continue cutting official interest rates (possibly as low as 4.5%) it could see more people able to enter the market. But is the raising of the first home buyers’ grant to $14,000 for established homes, is it potentially “double trouble” for some, with sellers looking to get more while they can?