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Treasurer Josh Frydenberg handed down the 2022-23 federal budget on Tuesday (29 March), revealing a $78 billion deficit (3.4 per cent of GDP). This compared to a $79.8 billion deficit the year before.
The cost of living as fuel prices surge, omicron and the effects from the recent floods in NSW and Queensland had taken priority for the government, among other factors.
“The global pandemic is not over. Devastating floods have battered our communities,” Mr Frydenberg said.
“We live in uncertain times. The last two years have been tough for our country, there have been setbacks along the way.”
The government has indicated that it expects to spend $6 billion on disaster relief and recovery around the floods, across support measures for residents, farmers, small businesses and local councils.
Among other measures to combat the rising cost of living, the government has also introduced a one-off $250 cash payment for pensioners, veterans, jobseekers, carers, eligible self-funded retirees and concession cardholders.
There is also a temporary cut to fuel tax – with the government to reduce fuel excise by 50 per cent for six months, down from its current 44.2¢ per litre to 22.1¢.
But home ownership has also been a focus in this year’s budget.
Home Guarantee Scheme expanded
As indicated on Monday (28 March), the government has extended its Home Guarantee Scheme, expanding the number of places under its first Home Guarantee and its Family Home Guarantee programs, and launching a new scheme solely for regional Australia.
The government has dedicated $8.6 million over the four years from 2022-23 to more than doubling the total number of places under the Home Guarantee Scheme to 50,000 places a year.
The program is expected to cost $1.3 million in 2022-23, $1.4 million in the following year and $1.7 million in 2024-25, before surging to $4.2 million in 2025-26 – when there are more people who have secured guarantees and there is more risk of defaults.
There will be 35,000 guarantees available per year for the First Home Guarantee (previously the First Home Loan Deposit Scheme), up from the current 10,000 from 1 July.
The scheme, started in 2020, allows first home buyers to purchase a home with a deposit as small as 5 per cent, while the government guarantees up to 15 per cent of the property purchase price – helping the borrower skip lenders’ mortgage insurance (LMI).
The Family Home Guarantee, which similarly allows single parents with dependent children to purchase homes with a minimum deposit of 5 per cent, will be expanded from 1 July to 30 June 2025.
There will be 5,000 places a year for families.
The government has also launched a new guarantee scheme within the budget, which is specifically geared towards regional buyers.
Under the Regional Home Guarantee, borrowers in regional areas (including those who aren’t first home buyers) will be able to buy or build a new home with a deposit as small as 5 per cent, while the government guarantees 15 per cent of the property purchase price.
The scheme will be reserved for residents who have not owned a home in five years.
Subject to legislation being passed, the regional scheme is expected to kick off in the 2022-23 year.
There are other funding initiatives in the budget targeting regional communities, including a new $2 billion Regional Accelerator Program, with investments in infrastructure, advanced manufacturing, apprenticeships and higher education.
As Mr Frydenberg explained, “there is a lot in this budget for the regions”, because the government sees it as a key area for growth.
“One of the permanent structural shifts for our economy post-COVID has been more people are moving to the regions,” he told journalists.
“You’re seeing that in property prices for example in the regions. People want a land and house package, they want that peace of mind and don’t want to be locked down in the cities.”
Meanwhile, the National Housing Finance and Investment Corporation (NHFIC), which administers the Home Guarantee Scheme, has had its liability cap for low-cost loans supplied to community housing providers, increased by an additional $2.2 billion, to a total of $5 billion.
The rise in lending capacity is expected to support around 10,000 more dwellings.
The government reported that NHFIC has backed around 15,000 new and existing affordable dwellings since it was established in 2018.
Rising rates watch
Looking ahead for 2022-23 and 2023-24, strong labour market conditions and wages growth are expected to lift consumer spending from 3.5 per cent in 2021-22 to 5.75 per cent and 3.75 per cent in the following years.
But rising interest rates and weaker house price growth could temper consumption growth, the budget papers stated.
The outlook also warned of an impact from a rising cash rate, noting a “risk that the normalisation of monetary policy has a more negative impact on consumption”.
Dwelling investment is forecast to grow by 5 per cent in 2021-22 and 3.5 per cent in 2022-23, powered by low interest rates, rising house prices and government programs such as HomeBuilder, which contributed to a significant pipeline of construction work.
However, that growth is tipped to reverse in the year after. Rising interest rates are forecast to drag dwelling investment down by 1.5 per cent in 2023-24.
Recent building material and labour shortages, along with COVID-19 outbreaks, have raised construction costs and completion times for new dwellings.
The budget papers have warned that the floods and the Ukraine invasion, which has rocked supply chains, could present further risks, but constraints are expected to “slowly alleviate”.
However, the pick-up in net overseas migration post-borders reopening is expected to bolster housing investment.
Social housing
Around $1.64 billion has been dedicated to the National Housing and Homeless Agreement (NHHA) in 2022-23, which provides affordable housing and aims to prevent homelessness.
The government’s commitment is about on par with the previous year, when it gave the NHHA around $1.61 billion.
The NHHA contribution is part of $2 billion in funding for state affordable housing services, which also include $313.7 million in National Partnership payments.
A further $223.8 million has been allocated to housing for Indigenous people in remote communities in 2022-23, up on the $185 million from the year prior.
In addition, $3.8 million in 2022-23, has been designated to the Northern Territory Remote Aboriginal Investment, designed to invest in improving public housing and removing asbestos from community building in remote communities.
Looking at the government’s housing and community amenities function, which includes spending for the NHHA, other housing programs, and Defence Housing Australia, less spending is forecast for the years ahead.
The drop has reflected the end of the HomeBuilder program, the conclusion of the NHHA in June 2023 and decreasing payments under the National Rental Affordability Scheme, which is now closed to new applicants.
Around 5.7 per cent less will be spent in 2022-23 than the previous year, down to $8.2 billion, before a 29.8 per cent drop over the following three years.
However, the guarantee, grant and loan programs administered through NHFIC, are not captured in the housing and community amenities function.
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