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Indeed, recent talks surrounding the likelihood of major economies going into recession, Australia’s rising inflation (expected to reach 7.75 per cent by December) and the cash rate at (2.6 per cent), alongside recent flood impacts will be some of the factors weighing down on the federal Budget to be announced tonight at 7:30pm AEDT (25 October).
Inflation now being the primary influence of the government’s budget, with the latest floods fuelling price rises.
The federal Treasurer Jim Chalmers said it is estimated these floods will detract around a quarter of a percentage point from GDP growth in the December quarter, adding 0.1 percentage points to inflation in the quarter.
“We are most focused on the human costs of these natural disasters but it will have implications for the cost‑of‑living, for the economy and for the Budget as well,” Mr Chalmers said.
“[Treasury] expect that the floods will cause fruit and vegetable prices, for example, to be 8 per cent higher than otherwise over the next two quarters."
It marks the first budget since the new Albanese government stepped into office in May 2022 and it comes at a time when the government tackles a deficit between $30 billion and $40 billion.
Given the current economy, Mr Chalmers has made clear this won’t be a budget that splashes cash around and instead will tighten spending and ensure long-term investments to draw down Australia’s debt.
Despite fuelling fear around tightening government spending and putting some programs on the chopping block, Mr Chalmers has committed this budget would focus on health, aged care, the National Disability Insurance Scheme (NDIS), defence and infrastructure.
In addition, affordable housing schemes announced during the election are expected to provide some detail and disaster payments and policy reforms have been flagged.
Mr Chalmers has committed $3 billion in the “Contingency Reserve” for additional Commonwealth spending for disaster response.
“Already, about $1.5 billion has been spent on payments to those who were impacted by previous floods and disasters,” Mr Chalmers said.
“The additional money in the Contingency Reserve will go towards government payments and other kinds of support.”
Mr Chalmers has said this budget will be about “building resilience in our economy”.
Affordable housing and incentives
With homelessness on the rise in Australia, with some 116,000 people across the country without a home, the government is committed to “developing and implementing an ambitious housing reform agenda”, according to Small Business and Housing Minister Julie Collins MP.
A key part of the government’s housing reform agenda was the creation of the National Housing Supply and Affordability Council, which will provide a forum to progress critical housing reforms to drive change.
A key part of this council, to date, has been the creation of the National Housing and Homelessness Plan.
Ms Collins explained: “This plan will set out the reforms needed to help more people to buy a home, make it easier to rent and help to support more Australians who are at risk of, or experiencing homelessness.”
Ms Collins added the government was moving quickly to invest in social and affordable housing by unlocking up to $575 million through the National Housing Infrastructure Facility.
This will “bolster” the government’s commitment towards its $10 billion Housing Australia Future Fund, which will build 30,000 new social and affordable dwellings within its first five years.
Government guarantees
In addition, as interest rates have hit 2.6 per cent amid record housing prices, the cost of owning a home is a challenge for many Australians, despite the slight downturn in property prices.
The government reforms such as the Help to Buy scheme, Regional First Home Guarantee and the First Home Guarantee will be discussed, but with the latter two already on the market, no changes have been flagged to date.
The $329 million Help to Buy scheme, will assist home buyers to purchase a new or existing home with an equity contribution from the government.
Eligible home buyers will need a minimum deposit of 2 per cent, with an equity contribution from the federal government of up to a maximum of 40 per cent of the purchase price of a new home and up to a maximum of 30 per cent of the purchase price for an existing home.
Home buyers will not be required to pay rent on the stake of the home held by the federal government as well as be exempt from lenders mortgage insurance.
While the federal government is yet to launch the scheme, the NSW government has flagged it will begin in early 2023.
The new Regional First Home Buyer Guarantee opened in October, set to help up to 10,000 regional Australians get into their first home with a deposit of as little as 5 per cent, with the government guaranteeing up to 15 per cent of the purchase price for eligible first home buyers.
In addition, the First Home Guarantee (FHBG) launched in July offering up to 35,000 guarantees each financial year, offering first home buyers the opportunity to purchase a home with a deposit as little as 5 per cent. Plus 5,000 Family Home Guarantees will be made available each year over three financial years.
[Related: Budget wont be a cash splash, treasurer warns]
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