In a bid to address Australia’s growing housing affordability crisis, Opposition Leader Peter Dutton has announced a sweeping reform plan to reshape the Australian Prudential Regulation Authority (APRA).
The proposed changes, if implemented under a Coalition government, would reduce the serviceability buffer on home loans and adjust capital treatments for loans backed by Lenders Mortgage Insurance (LMI). While the Coalition claims these measures will boost homeownership, critics are questioning the plan’s potential impact on financial stability and its broader economic consequences.
Dutton argues that Labor’s current financial policies are blocking Australians from achieving the dream of home ownership. A key aspect of the proposed reform is to mandate APRA to consider the impact of its regulations on housing access, particularly for first-home buyers. The Opposition leader highlighted that the existing 3 per cent serviceability buffer, which was introduced to guard against interest rate hikes, has become a barrier to borrowers despite the current cash rate exceeding four per cent.
“The system should support aspiration, not entrench inequality,” Dutton said, criticising the rigidity of financial regulations. He argued that the Coalition’s approach would unlock opportunities for homebuyers without compromising financial stability.
However, financial experts have raised concerns that lowering serviceability buffers may expose both borrowers and lenders to greater risk in a volatile economic environment. Historically, buffers have played a crucial role in ensuring borrowers can withstand future interest rate increases and economic shocks.
The Coalition also proposes changes to LMI-backed loans, stating that Australians without financial support from family face unjustly higher borrowing costs. By adjusting the capital treatment of these loans, the Coalition believes it will level the playing field for those without access to generational wealth.
“This is not about compromising APRA’s independence,” Dutton insisted.
“It’s about ensuring that regulators also support broader economic objectives, like fair access to finance.”
Yet, industry leaders have warned that reducing risk-based capital requirements could undermine the financial resilience of lenders, potentially destabilising the housing market in the long run.
Beyond financial regulation, the Coalition’s housing plan encompasses a range of measures, including increasing housing supply, reducing migration to align with housing availability, and funding essential infrastructure. Notably, Dutton also proposed a two-year ban on foreign investors and temporary residents purchasing existing homes, arguing it would free up supply for local buyers.
“We will boost housing supply by removing barriers to construction and cutting unnecessary red tape,” Dutton stated, pledging to restore the Australian Building and Construction Commission to counter alleged union corruption that he claims has inflated building costs.
While the plan includes commitments to support older women and first-home buyers by allowing superannuation savings to be used for housing deposits, concerns remain about the long-term impact on retirement savings.
Labor has dismissed the plan as a short-term political stunt, arguing that it lacks genuine structural reform to address housing affordability. Minister Julie Collins criticised the Coalition’s approach, stating that focusing on deregulation without comprehensive supply-side reforms would fail to deliver sustainable housing solutions.
“Labor is investing in building new homes and supporting renters, while the Coalition is proposing risky financial deregulation that could destabilise our economy,”
Collins said.
As the federal election approaches, Dutton’s housing reform proposal will likely remain a key battleground issue. While it appeals to aspiring homeowners frustrated by the current market, the broader economic risks and opposition from financial regulators could prove significant hurdles to its implementation.
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