The 2022/23 Federal Budget delivered last night by Treasurer Chalmers contained some positive news for the national housing industry and for South Australia.
The economic forecast does not assume a recession. Budgeted growth for the current 22/23 Financial Year is 3.25% and is forecast at 1.5% for FY 23/24 with a lift to 2.25% forecast for FY 24/25.
Inflation in FY 21/22 came in at 6.1% and is expected to peak to 7.75% during FY 22/23 but to land at 5.75% on a full year basis for FY 22/23. This indicates that we can expect quite a slowdown in the rate of inflation in the second half of this current financial year. Inflation is then forecast to drop back to 3.5% in FY 23/24.
The Budget deficit forecast for the current Financial Year is better than previously expected off the back of improved commodity prices which reduced the expected deficit by $41.1 billion. However, the remaining deficit of $36.9 billion is still a big number.
The infrastructure spending contained in the Federal Budget 22/23for SA includes $660 million allocated to:
- Off ramps for the Southern Expressway. $60 million.
- Reduction of congestion in Southern Adelaide and improve road safety. This project will involve removing the Marion Road train crossing and upgrading the short section of Marion Road between Cross Road and Anzac Highway. $200 million.
- The South Australian component of the Freight Highway Upgrade Program. $400 million.
In an environment of increasing challenges to housing affordability, through increased interest rates and high inflation as well as growing rents, the only real shining light seems to be the low rate of unemployment. The increasing rents are likely to continue trending upward due to a tight rental market and no immediate view of increasing housing stock coming onto the market. In the twelve months to September 2022, rents have increased 10% nationally placing a significant burden on households.
Last night, the Treasurer announced the National Housing Accord which is a new commitment targeting the building of 1 million affordable homes in the 5 years from 2024.
The Accord is a joint effort between industry, governments and investors and will see an initial $350 million funding for an incremental 10,000 homes with a 7 star+ energy rating with States and Territories supporting up to another 10,000 homes, bringing the total to 20,000.
For many, 2024 probably seems a long way away but given the challenges around building industry capacity including supply chain challenges and available land, it’s probably realistic. We would also expect that the forecast increase in Net Overseas Migration from 150,000 in 2022-23 to 235,000 by 2023-24 will ease some of the challenges for the building industry in attracting sufficient labour.
Additionally, the National Housing Infrastructure Facility will be provided with additional flexibility to disperse $575 million toward a projected 5,500 new social and affordable dwellings and to attract more institutional capital to the sector. That $575 million was previously unallocated.
The Budget forecast includes $457 million of additional revenue over the next four years from increased FIRB fees and penalties. These changes took effect from 29 July 2022 and will impact the attractiveness of Australian property to foreign investors.
From an environmental perspective there is also good news for home-owners and renters with the announcement of a $20 billion Government fund for improved energy transmission. The Powering Australia Plan will involve a reduction in taxes on electric cars, the establishment of a national electric vehicle network and for 100,000 Australian homes, the provision of solar battery storage. Also in the planning is a $224.3 million Community Batteries for Household program and $102.2 million for Community Solar Banks for 25,000 apartments, rentals and low-income households.
Like all Federal Budgets, the real story comes in the execution of the plans and the reality of the forecasts. The ride for households looks a little bumpy for the next year or so with relief in sight if the 23/24 inflation forecast is accurate. Let’s wait and see.