2012-2013 Federal Budget Analysis And The Property Market
After much anticipation the federal budget has finally been released, with the past week allowing for analysis of how this will come to affect the general market as well as more specifically, how it will affect the property market which is the main focus of our newsletter readership. The move by the Federal Government to begin building a surplus, forecast to total $1.5 billion in the 2012-13 financial period1, indicates that there is a general consensus that the Australian economy is moving at a pace which does not require further economic stimuli to the extent of creating a budget deficit to increase GDP growth.
How the budget may impact RBA rate decisions
However, this may pave the way for more interest rate cuts by the Reserve Bank as we shift towards a more “one-arm policy” in the coming year – as the government has indicated its desire to begin to cut back spending measures, thus we may see further reduction of interest rates to increase aggregate demand within the economy.
Potential direct effects on the property market
In terms of budget decisions which may affect property directly there are a collection which are worthy of note. These include:
- $3.6 billion allocated to duplicate the Pacific Highway, conditional on a 50:50 funding share arrangement with the NSW Government. This may result in potential increased demand in the Central Coast region of NSW
- A commitment being made to develop the Moorebank Intermodal Terminal in South Western Sydney in conjunction with the private sector which will lead to increase in the productivity of the freight industry in Sydney and create a possible boost in the market for rental property in the area2
Also good news came for domestic investors as the government announced an increase in tax on foreign investment in property trusts, from a marginal rate of 7.5% to 15%3,which may open the market further to local investors. In overall market terms however, the gains in confidence internationally from an increase in the budget surplus may work to offset the reduction in demand created by this change in tax legislation – making the impact of this budget on international investor confidence relatively neutral.
Budget analysis conclusion
Therefore, in overall terms, we see that although there may be minor affects on particular regions, in an overall sense, the property market will be relatively unaffected by the changes made within the 2012-2013 budget and more impacted by rate changes to come in the following months by the RBA as well as the release of demand and supply figures prior to the end of the financial year.
1 Sourced from: www.budget.gov.au/2012-13/content/overview/html/overview_01.htm; Date Accessed: 14/5/2012
2 Sourced from: Facts and Figures according to NAB 2012 Bidget Report at www.moneybasics.nab.com.au/wp-content/uploads/2012/05/federal-budget-2012-business2.pdf; Date Accessed: 14/5/2012
3 Sourced from: www.abc.net.au/worldtoday/content/2012/s3498984.htm?site=melbourne; Date Accessed: 14/5/2012
