Two Steps Forward and One Back for Industry as Election Looms
As we think about heading to the polls on 18 May, Scott Clements has taken a look at the promises made by the major parties as part of the recent budget and run his eye over them in regard to the development industry.
As you’d expect there’s some good, some bad and some missing pieces to the puzzle, “What both sides of politics are doing is lacking consistency, particularly in regard to the things that will stimulate development, create affordable housing and enable more home ownership, greater investment and balanced set of economic conditions to drive confidence.”
“From changing negative gearing to funding infrastructure projects there are policies from both sides that are a case of two steps forward and one step back.”
‘It’s is good to see both sides of politics investing in infrastructure, upgrading road, rail and utilities. Nation building projects provide excellent employment opportunities and creates mobility enabling people to move easily, facilitating the potential for new development opportunities.”
“But what is really missing from both sides is a commitment to make housing a priority. From improving access to finance to managing land supply, more can be done. Housing should be a priority and affordability needs to placed fairly and squarely at the heart of future housing policy.”
“For the property industry, the most interesting take away from the budget and ensuing election campaign will be how the effect of negative gearing changes are offset by the build to rent sector. It does feel like Labor would like the large funds and organisations to be our housing landlords of the future, whilst limiting the amount of investment properties held by individuals at least with respect to existing stock,” said Scott.
- Striking a balance between long term economic gains (through infrastructure spending) and short term stimulus (through tax cuts and energy bill rebates)
- Tax cuts for low to middle income workers will result in increased disposable income, which will then increase consumption and stimulate the economy short term
- Large infrastructure projects, in particular new rail and rail upgrades will act as a type of ‘nation building’ long term. Not only linking capital cities together through fast rail, but linking regional areas to capitals will stimulate long term growth in these regional areas, and act to strengthen our central business districts.
- Of course large infrastructure projects create many jobs during the construction phase, which will help smooth out any downturn in other parts of the construction industry.
- Immigration – At a time that the government has stated it is concerned by the effect of the housing downturn on the economy, and that downturn is partially driven by a weak demand versus supply equation they have decided to cut the yearly immigration quota. Whilst spending on national building infrastructure, and concerned about lack of demand, cutting immigration doesn’t seem to make a lot of sense.
- There have been no new measures with respect to affordable housing. Whilst acceptance of different housing products by local councils, and integration into their planning schemes is a big part of this puzzle, strong leadership from the federal government, and funding around how to solve the issues long term would have been welcome.
- Build to rent is also a rising asset class, that could help reduce cost of living pressures for many. The budget contained no measures or funding in this space.
- The headline figure of a $2.3B package to support cancer patients can only be a good thing, but as you’ll see below, I also believe there is something missing from this
- They have adopted similar (but greater than) the government’s tax cuts to low- and middle-income earners, resulting in increased disposable income, thus short-term stimulation of the economy
- Education was another pillar of their response, with $1B for TAFE resulting in 150,000 more apprenticeships. Education (along with infrastructure) is one of the most important keys in supporting Australia’s long-term growth and prosperity.
- Previously announced measures such as support for the build to rent developments (via halving of tax rates) will help spur this new sector on, and potentially assist with housing affordability.
- Labor are looking to oppose the tax cuts to higher income earners. A policy that will no doubt get the support of many, but in reality, means that bracket creep is becoming a major issue and that Australians, on average, will end up being taxed at record levels
- The negative gearing policy remains the same. It is hard to predict how these will affect the economy long term, but in the short term there is some real risk that their introduction will deflate the property market and drag Australia into recession. A much slower implementation (if at all) should be considered.
- Labor are looking to spend $2.3B on reducing costs for cancer treatment, but what if half of this was funnelled towards cancer prevention (or prevention of disease in general) – imagine what long term benefits this could have for all Australians (not to mention the reduction in stress on the health care system)