Budget Hopeless

Hotspotting

The Federal Government’s latest Budget will go down in history as the “band-aid budget”.

Rather than fix fundamental problems and deal with core issues, the Federal Treasurer has thrown cash in various directions, in what looks very much like an election Budget.

They haven’t provided solutions to any of the core problems in the housing industry, particularly the rental shortage.

There are broken limbs everywhere in the industry - and in other parts of the national body - and the Federal Government has applied band-aids to a few of them.

It’s the same in other areas. Rather than pull the necessary levers to bring down power prices, as they promised repeatedly to do at the last election, they are throwing cash at everyone to help with their next power bills.

It’s another band-aid. It doesn’t reduce power prices which are a key component of inflation and a serious problem for many businesses. It’s simply a short-term, short-sighted, vote-buying measure that doesn’t address the core problem.

But, at Hotspotting, our key focus is on the very important issues in the housing market, particularly the rental shortage and the high costs of buying homes.

The Federal Budget repeated the previously announced ambition of building 1.2 million new homes over five years, but did not nothing to address the current rental shortage, nor to deal with housing affordability – something politicians often talk about, but continually make worse with their policies and decisions.

The Real Estate Buyers Agents Association of Australia (REBAA for short) summed it up when it commented:

“The Federal Budget featured plenty of promises to somehow improve housing supply over the long-term, but failed to recognise one of the most simple ways to remedy the rental crisis.”

They were referring to the reality that mum-and-dad investors provide over 90% of the homes that people rent in Australia and they need to be encouraged and incentivised to solve the dire shortage of rental properties – at a time when all the costs of owning real estate have risen.

REBAA President Melinda Jennison said the Federal Government had again refused to accept the fundamental role that property investors have long played in the provision of rental housing in this country. “Again, we have been presented with a variety of measures to supposedly boost housing supply at a time when building approvals and completions are at decade-lows,” Jennison said. “For decades, property investors have shouldered the burden of providing rental supply for successive governments. However, it's evident that this is no longer the situation. The rental crisis is the end result of this changing dynamic.

“The volume of investors currently active in the market is well below where it needs to be to significantly improve rental supply, but the Federal Government still won’t do anything to encourage more investors into the market.”

I agree with Jennison when she says that it's surprising that the budget has provided incentives to foreign investors to purchase established Build to Rent developments, but no incentives have been offered to the resident investors who provide homes for millions of renters throughout our country.

Aidan Collyer of Collyer Property Investments said the move for foreign investment tax breaks “will price young people who want to invest out of the market”.

“This is already an incredibly competitive market, Labor is allowing international investors to make a quick buck at the expense of the great Australian dream,” he said.

Elsewhere there have been plenty of critics of the Budget’s response to the nation’s housing crisis – or the lack of it.

The Daily Telegraph reported widespread criticism of the Budget’s failure to “shift the dial” on the housing shortage.

It said the Albanese government’s much-championed $6 billion pledge to address the housing crisis has fallen flat with the bulk of the money going towards infrastructure and not actual homes.

Almost $2 billion has been channelled into a rental assistance scheme, the same amount has been given to charities to build 40,000 social and affordable homes, while more than $1 billion to help states and territories with the construction of roads, sewers, energy and community infrastructure.

Despite the cost of building a new house rising more than 50% in the past three years, the Budget did not include assistance to help homebuyers with the cost of buying a property.

Everybody’s Home, a national campaign seeking to fix the crisis, said the budget failed to tackle rising housing costs.

It said: “The government’s ‘new’ funding for social housing is a repackaging of existing initiatives, offering loans instead of providing real funding, and the continuation of a funding agreement with the states and territories - something the Commonwealth routinely renews for other essential services like education and health.”

Everybody’s Home said the increase to Commonwealth Rent Assistance would provide some short-term relief, but was not a lasting fix.

And that is the failing of this Budget – it provides short-term relief on a number of issues, but does not provide any lasting solutions.

The West Australian newspaper commented that the increases to the Commonwealth Rental Assistance scheme contributes only a pittance to housing costs, with the weekly boost enough to buy only two cups of coffee.

The Budget offers a maximum of $12.50 per week to recipients of the assistance scheme, according to analysis by CoreLogic.

CoreLogic economist Eliza Owen echoed the comments of many others when she said the Budget missed an opportunity.

Yes, indeed, this band-aid Budget is a massive, missed opportunity. It could have provided real and lasting solutions to the rental shortage, to housing affordability and to many other core problems for Australian households – but it failed to do so.