Federal budget measures to reduce cost of living pressures for Australian households and more rent assistance funding have been welcomed by industry groups, but many believe more should be done to address the nation’s housing supply crisis.
The budget has delivered its largest increase to Commonwealth Rent Assistance in more than three decades, by increasing the maximum rates by 15% at a cost of $2.7 billion over five years.
Other big ticket budget items included measures to boost rental supply and increase construction of social and affordable rental housing, and $11.3 billion has been allocated over the next four years to fund a 15 per cent pay rise for 250,000 aged care workers.
Treasurer Jim Chalmers said Australians have shown resilience in the face of heightened global uncertainty, persistent inflation and higher interest rates, which were combining to slow the economy.
“The best response to these challenges is a responsible budget that strikes the right balance between easing cost of living pressures, securing the essential services people rely on and laying the foundations for future growth,” he said.
Striking the right balance between support and repair
The Committee for Economic Development of Australia (CEDA) chief economist Jarrod Ball said the budget has struck the right balance between delivering targeted support to vulnerable Australians amid the cost-of-living crunch, while taking modest steps on fiscal repair.
“The Government has delivered budget restraint in line with the current economic challenges of high inflation and an uncertain economic outlook,” he said.
“Targeted measures such as increasing eligibility for the single parenting payment, modest JobSeeker increases, housing support, enhanced healthcare support and energy price relief are sensible and proportionate in the current environment.
“Stronger increases in income support for vulnerable Australians will be critical as economic and fiscal circumstances permit.”
However, Mr Ball said there was more work to be done to ensure the budget was brought back into balance over the medium term – despite this year’s “blink-and-you-miss-it” surplus.
“This Budget’s projected shrinking fiscal gap over the medium-term is predicated on continuing strength in the labour market, delivering higher tax receipts and lower expenditure growth,” he said.
“Serious tax reform remains critical to shoring up the medium-term position by strengthening our capacity to afford growing demand for critical services and supports while driving greater investment and workforce participation.”
Housing supply and affordability to remain a major issue
Property industry groups have welcomed the government’s expansion of both the First Home and the Regional First Home Buyer guarantees, but warned the housing crisis remained a major problem.
PropTrack economist Eleanor Creagh said the scheme’s eligibility criteria has been expanded to friends, siblings and other family members, as well as to non-first-home buyers who have not owned a property in Australia in the past 10 years.
“These changes build on last year’s increase in the number of places available – 35,000 per year for the First Home Guarantees, 10,000 places per year under the Regional First Home Buyer Guarantee, and 5,000 places per year to 30 June 2025 under the Family Home Guarantee,” she said.
“Affordability has deteriorated markedly, to the worst levels since the 1990s on some measures, and repayments are now very high relative to history in real terms.
“These conditions are challenging for first-home buyers, for whom the most significant hurdle to home ownership is the deposit burden. The expanded Home Guarantee Scheme aims to tackle this issue.”
Master Builders chief executive Denita Wawn said the housing crisis continued to be a major issue across the nation, and the budget failed to implement enough initiatives to start increasing housing supply.
“At present, builders are facing a shortage of key tradespeople whilst substantial industry transformation is underway for a net zero economy,” she said.
“Around half a million new building and construction workers are required by the end of 2026. As the population is expected to grow, more support is required to attract, train and retain workers in the industry.”
Urban Development Institute of Australia national president Max Shifman said it was hugely positive to see further steps taken to bolster housing attainability, ownership, affordable and social housing, as well as removing some of the inhibitors to Build-to-Rent.
“But there is substantially more work to be done to boost housing supply and keep downward pressure on prices given high net migration projections and the low forecasts on new dwelling supply in the coming period,” he said.
Welcome relief for some renters
Some 1.1 million Australians will benefit from The Commonwealth Rent Assistance’s (CRA) rates increasing by 15 per cent at a cost of $2.7 billion over five years.
Real Estate Institute of Australia president Hayden Groves said while CRA was a much-needed measure, housing supply at scale still needed to be addressed.
“The widely previewed commitments of the Home Guarantee Scheme rule changes, recommitment to the Housing Accord, an extra $2 billion for the NHFIC mandate and taxation rule changes for the niche Build-to-Rent sector are welcome but will not in themselves address the elephant in the room, which is building more homes for Australians,” he said.
“We hope the long-awaited National Plan for Housing and Homelessness puts all options on the table to truly unlock housing supply and the hotly debated Housing Australia Future Fund finally gets off the ground.”
Emma Greenhalgh, National Shelter chief executive, said measures to increase the Commonwealth Rent Assistance showed that the Government has recognised renters were doing it tough but it only dealt with the symptoms of the housing crisis.
“We know that the rental crisis is not a short-term issue,” she said.
“Over 331,000 households are in rent stress across the country. This came about because of successive governments’ chronic underinvestment in housing supply for low-income households.
“We need bold and ambitious solutions to address this problem that will not go away by tinkering at the edges with a mixed bag of small measures.
“It’s positive that these measures will help those who need it the most, but in order to truly end the crisis, it’s time to see bold reforms.”
Ms Creagh said strong migration, low vacancy rates and limited new supply meant tough conditions for renters were likely to remain.
“To address the housing shortage and cater for our growing population, it is key that we continue to focus on building more homes,” she said.
“Unfortunately, incentivising investors to return to the market is a missing ingredient in the budget.”
Inflation and the Reserve Bank of Australia
CommBank chief economist Stephen Halmarick said the budget has sought to balance the risks to the economy from high inflation, the need for ‘cost of living’ relief and the requirement to move the medium-term budget outlook onto a more sustainable footing.
“On balance, we have not changed our inflation forecast and continue to see a return to inflation within the 2-3 % target by mid-2024,” he said.
AMP chief economist Shane Oliver said the budget’s implications for inflation, and hence the Reserve Bank, were minimal.
“With the budget overall taking more out of the economy than it’s putting back in compared to what was projected last October, it’s hard to see significant implications for the RBA but it will be wary of the boost to households from the cost-of-living measures, which could boost spending,” he said.
Sourced from realestate.com.au