The economy
Ask any real estate agent and they will tell you that the overall economy has a big influence on the health of the property market.While some feared a savage tightening, Hockey has restricted cuts to government spending to just 1.7% in 2014-15, with most of the pain shuffled to the ‘out years’ starting in 2016-17.
Economic growth is forecast at 2.5% next year, with unemployment rising from 5.8% now to 6.25% in 2015.
16,500 public servants will go mostly through natural attrition – a result unlikely to please anyone with an interest in ACT property.
Most of the pain will be in the health and education sectors but the heavy lifting has been shifted to the states, starting in 2017. So expect to see some tougher decisions closer to home later on – and perhaps a rise in the GST.
Families
Families are the largest buyers of real estate in Australia, particularly in the middle and outer-ring suburbs of large cities and regional areas like south east Queensland.Their spending power will be crimped a little with family tax benefit increases frozen from this year and FTB-B gradually restricted to households earning $100,000 per year.
The property industry
The new government foreshadowed that assistance to industry would be wound back and that’s exactly what they did – and the property sector was no exception.The slow starting National Rental Affordability Scheme, designed to help build new homes for low and moderate income earners, has been frozen pending a review, and First Home Saver Accounts have been abolished along with a pilot scheme for seniors wanting to downsize their home.
The budget forecasts growth in private investment in housing at 7.5% next year, which seems a pretty optimistic number given it is more than double this year’s growth.
For Australia’s 1.9 million property investors, the budget brings a big sigh of relief – negative gearing survives intact.
Infrastructure
Just as we predicted last September, road spending has been a big winner with multi-billion projects scheduled to proceed right around the country.The most important of these include:
- a North-South arterial road in Adelaide
- WestConnex in Sydney
- the East-West Link in Melbourne
- a long overdue upgrade of the Bruce Highway in Queensland
- a new bypass in Toowoomba.
But wait, there’s more. Thanks to the ‘infrastructure asset recycling program’, state governments will receive a subsidy equivalent to 15% of an asset sale if they plough the money back into new infrastructure.
Politics
There’s a final rub to the forecasting and future gazing, thanks to the Australian constitution.Some of the measures announced last night cannot be attached to the appropriation bills, which means that to take effect they must be approved by both houses of parliament in their own right.
Three of the most contentious – the paid parental leave scheme, the increase in petrol excise and the so-called deficit levy on high income earners – have already attracted public opposition from some of the Senators needed to pass them.
In other words, while we have a budget printed on paper, its final form hasn’t been settled yet – and there is plenty of politics still to come.
