Federal Treasurer Jim Chalmers has handed down Budget 2024, which some in the real estate industry have labelled “a strong budget if inflation forecasts hold.”

Treasury forecasts an annual inflation figure of 3.5% for the upcoming June quarter. For the 2024–25 year, it’s even better with Treasury forecasting 2.75% inflation. This is again lower than the RBA’s forecast of 3.1% and returns inflation to the central bank’s ideal 2-3% range. 

A headline number is the $3.5 billion in energy bill relief for all Australian households[i] and around one million small businesses. From 1 July 2024, more than 10 million households will receive a total rebate of $300, and eligible small businesses will receive $325 on their electricity bills throughout the year. The Government estimated this to directly reduce headline inflation by around 1/2 of a percentage point in 2024–25 and is not expected to add to broader inflationary pressures.

Yet many experts, including Shadow Treasurer Angus Taylor[ii], question these assumptions. The Shadow Treasurer warned, “Labor has added $315 billion of new spending at a time when we need restraint. That’s $30,000 of extra spending for every Australian household.”

According to leading economist Shane Oliver from AMP Capital, “This Budget, like all of those since 2020, has again benefitted from extra revenue flows coming from higher personal tax collections due to stronger jobs growth and higher commodity prices (and hence mining profits) than assumed. 

“This is not smart management, but good luck flowing from conservative forecasts.”

Tax cuts central to cost of living support

One of the Budget’s central tenants is the tax cuts for all 13.6 million Australian taxpayers from 1 July 2024, which aim to ease cost of living pressures for middle Australia, reduce return bracket creep, support women, and boost labour supply.

From 1 July this year, the Government will:

• reduce the 19% tax rate to 16%.
• reduce the 32.5% tax rate to 30%.
• increase the income threshold above the 37% tax rate from $120,000 to $135,000.
• increase the income threshold above the 45% tax rate from $180,000 to $190,000.

From 1 July 2024, all households will receive a $300 credit automatically applied to their electricity bills and around one million small businesses will receive $325 off their bills over 2024–25. The credits will be applied in quarterly instalments. The Government is providing $3.5 billion for this relief, which extends and expands the energy bill relief rolled out to households and small businesses in 2023–24[iii].

Addressing housing pressures

In response to the rising cost of living in the real estate sector, the Government has introduced measures to support renters by enhancing Commonwealth Rent Assistance. The Government is allocating $1.9 billion over five years to raise the maximum rates of Commonwealth Rent Assistance by an additional 10%[iv]. This initiative builds on the 15% increase implemented in September 2023 and will result in maximum rates over 40% higher than in May 2022 due to indexation and the Government’s actions.

The Government is allocating $1 billion to states and territories to develop new housing. This funding will also cover the connection of essential services such as water, power, sewerage, and roads[v]. This investment builds on the $500 million already committed through the Housing Support Program, which aims to support the necessary infrastructure to facilitate the construction of more homes.

More funding will be provided to address student accommodation and for a new five-year, $9.3 billion National Agreement on Social Housing and Homelessness with states and territories. 

The Government is targeting the $1 billion increase to the National Housing Infrastructure Facility to support better housing for women and children experiencing domestic violence and for youth. 

Other measures to support housing include: 

• $88.8 million for 20,000 new fee free TAFE places, including increased access to pre-apprenticeship programs in courses relevant to the construction sector.
• Under the Housing Australia Future Fund and National Housing Accord, an additional $1.9 billion in concessional loans to community housing providers and other charities will support the delivery of new social and affordable homes.
• Making a landmark $4 billion joint investment with the Northern Territory Government to improve conditions and address overcrowding in remote housing in the Northern Territory.
• Allowing foreign investors to purchase established Build to Rent developments with a lower foreign investment fee, conditional on the property continuing to be operated as a Build to Rent development.

AMP’s Shane Oliver commented, “The housing measures are unlikely to alter the home price outlook which is dominated by supply shortages and high rates.”

Angus Raine, Executive Chairman of Raine & Horne, agrees and is urging the Albanese Government to consider other possible supply measures, such as reassessing annual caps on non-concessional superannuation contributions and balance transfer caps. Angus believes this measure could mitigate the housing shortage by freeing up additional housing stock currently held by empty nesters.

Australia is experiencing a housing crisis. The Commonwealth and state/territory governments have agreed that 1.2 million new, well-located homes are required over five years from mid 2024. 

“However, there are few incentives for retirees to sell their existing investment properties and transfer the sale proceeds into the lightly taxed superannuation environment,” Angus said.

Infrastructure boost 

The Budget provides $16.5 billion for new and existing projects across Australia over ten years, a move that is sure to help underpin those residential and commercial markets that will benefit from the spending. 

Specifically, the Government has pledged $4.6 billion to 69 new projects[vii], including:

• $1.9 billion for Western Sydney road and rail infrastructure to support the new Western Sydney Airport.
• $300 million for METRONET to deliver a capacity signalling program in Western Australia.
• $177 million to provide bridge and intersection upgrades along the Warrego Highway in Queensland.
• $80 million to upgrade the Lyell Highway between Granton and New Norfolk in Tasmania.
• $120 million for the Princes Highway to deliver interchange upgrades at Mount Barker and Verdun in South Australia.
• $50 million to plan for Stage 2B of the Canberra Light Rail.
• $12 million for Victoria’s Bridgewater Road and Portland Ring Road intersection upgrade.

Treasurer Chalmers defended the budget spending, stating, “We are striking the right balance between keeping pressure off inflation, easing the cost-of-living pressures, supporting sustainable growth, and building fiscal buffers in an uncertain global environment.”

However, Shadow Treasurer Angus Taylor expressed dissatisfaction, saying, “After two years in office and three Labor Budgets, the Government is no closer to dealing with its homegrown inflation crisis – which means more pressure on cost of living and interest rates higher for longer.”

If you’re considering selling a property before winter, contact your local Raine & Horne agent today for an obligation-free appraisal. 

[i] https://budget.gov.au/content/01-col-pressures.htm

[ii] https://www.angustaylor.com.au/media/media-releases/budget-2024-25-another-cost-living-con-job

[iii] https://minister.dcceew.gov.au/bowen/media-releases/new-power-bill-relief#:~:text=From%201%20July%202024%2C%20all,be%20applied%20in%20quarterly%20instalments.

[iv] https://www.pm.gov.au/media/easing-cost-living-pressures#:~:text=%241.9%20billion%20to%20increase%20Commonwealth,to%20make%20student%20loans%20fairer.

[v] https://budget.gov.au/content/02-building-homes.htm

[vi] https://www.therealestateconversation.com.au/news/2024/05/10/angus-raine-calls-government-tackle-australias-housing-affordability-crisis-head

[vii] https://minister.infrastructure.gov.au/c-king/media-release/investment-deliver-future-made-Australia