With property and housing front and centre of political, social and economic debate so far in 2024, Treasurer Jim Chalmers has delivered his hotly anticipated federal budget for 2024–25 to Parliament.
Walking a fine line between delivering cost-of-living relief without adding to inflation, the Treasurer sought to assure Australians in his 2024-25 budget address that help was on the way for those hardest hit by the current economic climate.
To that end, housing was a major focus, with Chalmers stressing that the government was unlocking funds to enable more homes to be built, while also delivering measures to help with housing pressures right now.
Off the back of a 15 per cent increase to Commonwealth Rent Assistance included in the 2023-24 budget, Chalmers announced the maximum rate would grow by a further 10 per cent for those receiving the benefit. With a price tag of $1.9 billion, he noted that it was the “first back-to-back increase to Commonwealth Rent Assistance in more than 30 years”.
Rental assistance, alongside energy bill relief, are estimated to “directly reduce headline inflation by ½ of a percentage point in 2024-25” – while not adding to broader inflationary pressures.
According to the Treasury, “this could see headline inflation return to the RBA’s target band by the end of 2024, slightly earlier than expected at MYEFO (the mid-year economic and fiscal outlook).”
Many of the housing initiatives – from infrastructure spending to skills training for the construction sector – were framed in light of the government’s goal of building 1.2 million homes over the next five years. It’s a promise that housing bodies are committed to working towards, while acknowledging that current projections see the nation falling short.
But Chalmers stressed that the government was committed to the plan.
“Our goal is ambitious – but achievable, if we all work together and if we all do our bit”.
Here are the housing-related measures intended to support that goal and other housing pressures contained in the 2024 financial statement:
Homes for Australia
As unveiled by Prime Minister Anthony Albanese last Friday, this year’s budget includes $11.3 billion to address the acute housing shortages facing Australians.
This package, called the ‘Homes for Australia’ plan, includes $9.3 billion that has already been pledged over five years under the National Agreement on Social Housing and Homelessness, which will be dedicated towards repairing social housing and providing crisis support.
A further $6.2 billion in new investments was added to the plan in the latest budget, bringing the total amount of funding invested in housing since 2022 to $32 billion.
The Homes for Australia plan includes $1 billion for crisis and transitional accommodation for women and children escaping domestic violence, and for youth, pledged as part of the previously-announced National Housing Infrastructure Facility.
A further $1 billion has been committed to states and territories to build roads, sewers, water and community infrastructure to support new residential development.
The budget also delivered $1.9 billion in concessional loans to help community housing providers construct 40,000 social and affordable homes.
Meanwhile, the $2 billion Social Housing Accelerant Payment will fund 4,000 new or refurbished social houses.
Rent assistance
Commonwealth Rent Assistance has been increased by 10 per cent, representing a total investment of $1.9 billion for the federal government.
“Rising rents are another big part of the inflation challenge, and we’re supporting renters who need our help,” said Chalmers.
Since 2022, Commonwealth Rent Assistance has risen by 40 per cent to mirror the steep upward trajectory of prices in the private rental market.
Chalmers noted that the rental assistance boost will provide “much-needed help for young people and renters of all ages doing it tough” amid a swathe of supply and affordability challenges
Increasing the pipeline of construction workers
The government has earmarked $90.6 million within this year’s budget to boost the construction workforce.
This contribution aims to remove the cost barriers to education and training for construction careers with $88.8 million put towards 20,000 additional Fee-free TAFE training places to increase the pipelines of workers in construction and housing.
It also includes $62.4 million to flow to the states and territories that will provide an additional 15,000 Fee-free TAFE and VET places over two years from 1 January 2025.
Another $26.4 million was pledged to create approximately 5,000 places in pre-apprenticeship programs over the same period.
Within the latest financial statement, the government additionally committed to maintaining $5,000 support payments to priority occupations for another 12 months to 1 July 2025, marking an increase from $3,000.
According to the government, “this will provide certainty to apprentices while the Strategic Review of the Apprenticeship Incentive System is underway.”
Simplifying process for migrant workers
A further $1.8 million is devoted to simplifying skill assessments for around 1,900 potential migrants from countries with comparable qualifications who want to work in Australia’s construction and housing sector, and to prioritise the processing of around 2,600 skills assessments through Trades Recognition Australia in high-need occupations.
Supporting gender equality in priority sectors
The budget additionally revealed a $55.6 million investment to launch the Building Women’s Careers program, which seeks to support gender equality and women’s participation across traditionally male-dominated industries and provide women with access to flexible training within the construction industry and other priority sectors.
Funding to bring real estate into anti-money laundering effort
One of the line items that may impact property professionals the most comes under the guise of crime-fighting.
As announced earlier this month, the budget earmarks $166.4 million to implement reforms to Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) regime. This includes moving forward with so-called “tranche 2” reforms that will see real estate included among the professional sectors that are obligated to report suspicious financial transactions.
As it stands, Australia is just one of five jurisdictions out of more than 200 that do not regulate tranche-two entities, which include lawyers, accountants, trust and company service providers, real estate agents and dealers in precious metals and stones. A failure to reform these industries could result in the nation being ‘grey-listed’ by the Financial Action Task Force.
The budget funds will primarily support the Australian Transaction Reports and Analysis Centre (AUSTRAC) to implement the new regime, including providing education and guidance to newly-regulated entities like real estate businesses to understand their obligations.
Power bill relief
The budget also highlighted new power bill relief would be on its way.
Aiming to directly ease cost-of-living pressures for households and eligible small businesses, additional energy bill relief would be coming, at a cost to the government of $3.5 billion.
From 1 July 2024, it was outlined that the Government will deliver rebates of $300 to every household and $325 to around one million small businesses across the country.
The government said extending energy bill relief to all households would “directly reduce headline inflation by around ½ a percentage point in 2024–25 and is not expected to add to broader inflationary pressures.”
Federal budget 2024: What’s in it for property? – Smart Property Investment
INTEREST RATE IDEALISTS ‘SETTING THEMSELVES UP FOR DISAPPOINTMENT’
Bendigo Bank has thrown cold water on Australia’s hopes for a cash rate cut this year.
The non-major bank has stated that the latest inflation and job data has “all but confirm[ed] 4.35 per cent is here to stay until 2025.”
As the country grapples with last week’s cash rate hold and predictions for the upcoming federal budget, Bendigo Bank has warned Australians not to get their hopes up about an interest rate downturn before the year is out.
In contrast to the optimistic outlook that kicked off 2024, commentators have recently warned of a delayed cut or even another rate rise as economic indicators continue to stagnate.
“Markets have been rethinking their timeline for when the easing cycle might start and had even started to partially price in another hike,” said David Robertson, chief economist at Bendigo Bank.
“Our view for over a year has been that Reserve Bank of Australia (RBA) rate cuts will start in 2025 to help the slowing economy, but not in 2024 because of how difficult it is to eradicate inflation,” said Robertson.
“With the market now coming to the same conclusion, the first-rate cut is now predicted for early to mid-2025.”
Currently, Australia’s unemployment rate is remaining steadily in the high threes – markedly lower than usual – while core inflation remains “stubborn”.
While these statistics suggest a potential future rate hike, Robertson noted that “much weaker retail sales numbers were reminder households were doing it tough, and are cutting back on discretionary spending”.
“We’re still expecting very slow economic growth and domestic demand ahead, with the main bright spots coming from international tourists and students, and strong public investment,” said the chief economist.
He noted that while inflation indicators seem to be declining, the core read tells a different story.
“Headline CPI fell to 3.6 per cent in the latest numbers for the first quarter, but the core read was 0.2 per cent higher than hoped at 4 per cent, with rents and services inflation remaining the problem,” Robertson said.
“The latest RBA statement on monetary policy now forecasts core inflation to be still well above target at year-end.”
Despite this, he still asserted that rate cuts are likely to take place in 2025 to bolster the country’s slowing economy.
Overseas, cuts have already started to take place, with Sweden’s central bank cutting rates last week, and the European Central Bank expected to follow in June.
“While the possibility of another hike is always there, and similarly the US are going to start their easing cycle, we still favour no move up or down from the RBA this year,” the chief economist concluded.
Interest rate idealists ‘setting themselves up for disappointment’ – Smart Property Investment
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Regards David, Benjamin & the Team at DB Philpott Real Estate
