Treasury warned Labor’s five per cent deposit plan would lift house prices days before it was announced

The Albanese Government decided to expand and accelerate first-homebuyer subsidies four days after receiving confidential advice that they would drive up prices in an already heated market, a Treasury official has revealed.

Treasury told the Government the plan to allow new buyers to purchase homes with five per cent deposits would expand a limited existing plan by 59 per cent.

One in ten homebuyers are forecast to use the new scheme each year, up from one in 16 under the former Home Guarantee Scheme.

The deposit guarantee is provided to the lender not the borrower, which means the government guarantees first-homebuyers can repay their loans, and is already credited with increasing prices of houses and apartments across the country.

Nicholas Dowie, Treasury’s assistant first secretary of the Cities, Planning, Infrastructure and Analysis branch, told a Senate committee on Thursday night that final modelling was presented to Housing Minister Clare O’Neil’s office on August 20.

This was four days before Housing Australia announced that from October 1, all first-homebuyers would be eligible to get a mortgage with a five per cent deposit, with no income limits or caps on the number of places.

The expanded scheme was brought forward from January 1, even though three Reserve Bank of Australia interest rate cuts in February, May and August were already stimulating demand amid a shortage of homes.

The Government introduced price limits based on median house prices in each capital city at the time.

Labor’s initial plan to expand the old Home Guarantee Scheme was announced in April ahead of the May election.

Mr Dowie said a request to model the effect on home prices wasn’t made until July 25 and the final advice was given from August 15 to 20.

“The dates I provided were around the modelling, purely, around the impact of that,” he told a Senate committee on Thursday night under questioning from Liberal shadow housing minister Andrew Bragg.

“The advice was provided in writing. We were asked for modelling in late July 2025. Twenty-fifth of July, we sent preliminary estimates to the housing ministers’ office.

“Final estimates were provided on the 12th of August, 2025 and there were some supplementary questions that were asked a few days later about that, which Treasury provided further clarifying information between the 15th to the 20th of August.”

That was four days before the Housing Australia announcement of August 24. Prime Minister Anthony Albanese’s office didn’t request any modelling on the effect on property prices.

“The only request we received, that I’m aware of, is from the housing minister’s office,” Mr Dowie said.

Treasury’s modelled that allowing all first-homebuyers to get into the market with a 5 per cent deposit would see national property prices rise by 0.6 per cent over six years, than would otherwise have been the case.

“What we modelled was the effect of that increased demand on dwelling prices,” Mr Dowie said.

“It spits out what we best think the impact is on prices which is what that 0.6 per cent figure is. It shows the impact of dwelling prices to a shock in supply or demand.”

This was slightly different to the 0.5 per cent figure over six years cited by Mr Albanese on October 1, when the Home Guarantee Scheme was renamed the 5% Deposit Scheme.

The scheme is already having a great effect on the property market with Cotality data showing national home prices in October rose by 1.1 per cent, marking the fastest monthly gain since June 2023 when net overseas migration levels were approaching record-high levels of 550,000.

Ben Rimmer, Director-General of Treasury’s Housing Group, told the Senate committee 70,000 first-homebuyers were likely to be recipients of Labor’s scheme every year, up from 44,000 previously, in a housing market with 700,000 annual sales.

But he was unable to tell Nationals Senator Matt Canavan if that number related to the number of mortgages.

“That’s a reasonable question, Senator, but I’m not sure we have that exact number,” he said.

Emma Jarman, the executive leader of Housing Australia’s 5% Deposit Scheme, admitted the program lacked a product disclosure statement required of other financial products, despite it effectively replacing lenders mortgage insurance for borrowers with a deposit under 20 per cent.

“There is not a product disclosure statement for the schemem however there is an information guide that lenders must provide customers at the time of the application process,” she said.