Scott Morrison’s 2017-18 Federal Budget would have to be one of the most anticipated in recent memory. Speculation about its content has generated enormous media coverage, as well as a lot of angst in response to the leaks and red herrings on the subject of housing affordability.
It’s all the more remarkable given that the Commonwealth Government has limited means to do anything meaningful to fix the problem. Increasing supply to meet demand is largely a State and Local Government issue while on the demand side, we have to hope that Morrison is as good as his word, and resists the many noisy demands for an end to negative gearing.
His argument against any such move aligns with our own views; that Australia is not a single market and tampering with negative gearing to address a Sydney-Melbourne problem would cause pain to investors and owner-occupiers in other cities and towns, particularly in regional Australia. However there have been enough hints dropped so far to suggest that there might be an adjustment to the level of Capital Gains Tax discount.
It would be safe to assume that the floated superannuation honeypot is off the table for first home buyers though there are strong indications that a salary sacrifice option will be presented on May 9. It’s a Labor steal that was a good idea poorly executed so let’s hope sharper minds are put to work on the delivery side.
The Treasurer has dropped plenty of clues about his focus on social and affordable housing and security of tenure so it’s more than likely this will feature in his Budget. While it’s not a fix for housing affordability it does address one of the unfortunate consequences of the problem – the increasing number of priced out first home buyers who are competing with low income earners for rental accommodation.
The imposition of a tax on foreign investors making it harder to buy Australian real estate is more about politics than property. It’s an easy one for the Government to gain political points while having negligible impact.
While it doesn’t sit under the banner of housing affordability, the announcements relating to infrastructure spending are the ones with the greatest potential to tackle these issues in the long term. Sydney and Melbourne’s sky high housing prices are largely the result of a long-term failure to match supply to demand.
Funding for Badgerys Creek airport will drive an infrastructure boom which in turn will open up new areas for housing and employment. It’s a win win for Sydney and a project of sufficient scale to keep the economic wheels turning over for many years to come.
Equally transformative is the mooted Brisbane to Melbourne inland rail project. Transport is the driver of economic growth and the essential element that will unlock the potential for growth in regional areas outside the capital cities.
Our two largest cities are literally bursting at the seams. A former Treasurer once quipped that if you’re not living in Sydney you’re camping out, but with the right infrastructure in place, it might be time to revive the pioneering spirit and pitch the tent somewhere else.