Federal Budget: no big bang, just pops and fizzle

May 10, 2017

“Anyone expecting a ‘big bang' from the 2017-18 Federal Budget in terms of addressing housing affordability, will have been left sorely disappointed,” Mortgage Choice chief executive officer John Flavell said.

“There were no silver bullets, no truly substantive changes, just an ineffective spray of pops and fizzles.

“The changes outlined in the Budget last night were merely a grab bag of solutions that cumulatively will have no net positive impact on the issue of housing affordability.

“In the first instance, the first home buyer super saver scheme is unlikely to have a huge impact. At best, a couple who salary sacrifice a portion of their income into their super might be able to scrape together enough money to pay for the stamp duty charged in markets like Sydney and Melbourne.

“Indeed, there is nothing to suggest that this new scheme will deliver a different result to the spectacularly unsuccessful First Home Saver Account initiative that was launched by the Rudd Government in 2008 and withdrawn from the market in 2014.

“Downsizers were also addressed in the Federal Budget. While the decision to allow those over the age of 65 to make a non-concessional contribution of up to $300,000 into their superannuation account was a good financial incentive, it could hardly be considered an enormous motivation. 

“Homeowners located in prestigious suburbs who take advantage of the downsizer initiative, are unlikely to be releasing the type of property that young buyers need and can afford.

“The Federal Government also addressed foreign investors within its Budget. Overseas property investors are always an easy target for the Government. Unfortunately though, I don't think the Treasurer's plan to limit the level of foreign investment approvals on new developments will drive the result the Government craves.

“Furthermore, the Government's Ghost tax was a good idea in theory, but I think it is spooky just how soft this tax actually is. All of the changes made in this area are unlikely to substantially reduce the level of demand coming from international property investors.

“Meanwhile, to help combat the ever growing problem of homelessness in Australia, the Government announced it would provide $375 million to fund social housing.

“While this is a nice touch by the Government, when you consider that there are more than 100,000 Australians sleeping rough each and every night, I believe the funding proposal does not go far enough.

“We are a wealthy country and we should be doing more to help this sector of the community.

“On the subject of affordable housing, the Federal Government's decision to increase the Capital Gains Tax discount (from 50% to 60%) for investors who purchase ‘qualified affordable housing' is, unfortunately, quite naive.

“Increasing the tax incentives for investors will only serve to drive up investment demand for affordable housing, which in turn, could drive up the living expenses for those who are most in need of affordable accommodation.

“Unsurprisingly, all of the property investor adjustments were largely fringe-based changes. In Australia, almost 40% of all loans are written for investment purposes. Indeed, over the last few years, Australia has fast become a nation of landlords - and these landlords are all voters. As such, we were never going to see the Government do anything other than fiddle at the fringes of property investment policy.

“And while the Government is too shy to make significant structural policy changes that will impact property investors, they are not too shy to make changes that will affect the big banks. Of course, one must ask whether the big five banks will really be the ones to feel the effects of the levy?

“Mr Scott Morrison is either conveniently ignorant or at best naïve, to believe that the new levy imposed upon the big five will not feed through to consumers. In one way or another, consumers, depositors and borrowers alike will all have to bear the brunt of the levy.

“Everybody wants a stronger banking system that succeeds in delivering better consumer outcomes. But, to take an approach that is more about plugging the revenue gaps in the Budget rather than making structural changes, is short-sighted and not the right tactic for the Federal Government to employ.  

“Last night, Mr Morrison said the Budget would be able to deliver a surplus by 2021. While we would all like this to be the case, this is yet another Budget to suggest we will be back in surplus within the forward estimate period, but we don't seem to be any closer to achieving that goal.”