Treasurer hands down budget 2024/25

On Tuesday evening (14 May), the Albanese government handed down its third budget since coming into power in 2022.

Initiatives concerning housing (some of which had been announced ahead of the budget speech), include:

• $423.1 million over five years from 2024–25 in additional funding to support the provision of social housing and homelessness services by states and territories under a new National Agreement on Social Housing and Homelessness.
• $1.0 billion in 2023–24 for states and territories to support enabling infrastructure for new housing through a new Housing Support Program – Priority Works Stream.
• $1 billion “directed towards” crisis and transitional accommodation for women and children fleeing domestic violence and youth under the National Housing Infrastructure Facility (including redistributing the mix of concessional loans and grants to increase the proportion of grants to $700.0 million).
• A $1.9 billion investment to increase the maximum rates of Commonwealth Rent Assistance by a further 10 per cent to further alleviate rental stress.
• Supporting more community housing providers to access finance through the Affordable Housing Bond Aggregator by increasing the cap on the government’s guarantee of Housing Australia’s liabilities by $2.5 billion to $10.0 billion (with an associated increase in the line of credit that supports the Affordable Housing Bond Aggregator of $3.0 billion to $4.0 billion).
• $19.7 million over six years from 2024–25 to support housing research; fast-track feasibility studies on the release of Commonwealth land to support social and affordable housing; and maintain Treasury’s capability to develop, advise on, and implement housing policy and programs.
• $9.3 billion via a five‑year National Agreement on Social Housing and Homelessness for states and territories to combat homelessness, provide crisis support, and build and repair social housing.

These build on the announcement that the Albanese government would earmark $90.6 million to boost the number of construction workers, with $88.8 million for 20,000 additional Fee-Free TAFE training places to increase the pipeline of workers for construction and housing.

Outside of housing, other major announcements include:

• The extension of the $20,000 instant asset write-off for another year.
• An energy rebate for more than 10 million households. The rebate will see households receive a total rebate of $300 (automatically applied to their electricity bills) and eligible small businesses (expected to be around 1 million) will receive $325 on their electricity bills throughout the year from 1 July.

The credits will be applied in quarterly instalments.

Inflation expected to fall below 3% by year’s end: Chalmers

Federal Treasurer Jim Chalmers said that the 2024/25 budget aims to be a balancing act between supporting lower and middle-income earners in managing increasing costs while tempering the impact to inflation (which rose 1.0 per cent in the March 2024 quarter to be 3.6 per cent annually, or 4.0 per cent on an annual trimmed mean basis.)

The Treasury’s forecasts said inflation is expected to “return to the target band by the end of 2024”. This is below the Reserve Bank of Australia’s forecasts, which is for inflation to end the year at 3.8 per cent before returning to the target range of 2–3 per cent in the second half of 2025.

Instead, the budget papers said CPI will drop to 3.5 per cent by the end of this financial year and to 2.75 per cent by the end of the 2024/25 financial year. It will then remain there in 2025/26 before falling to 2.5 per cent by 2026/27.

The Treasurer said the energy rebate and rental assistance would help reduce inflation. “Responsible relief that eases pressure on people and directly reduces inflation,” Treasurer Chalmers said.

“Our responsible approach to the Budget is supporting monetary policy by keeping pressure off inflation. We are banking over 96 per cent of tax upgrades this year while inflation is still above the band.

“Our extension to energy bill relief and increase to rental assistance are expected to directly reduce inflation by half of a percentage point in 2024–25 and not expected to add to broader inflationary pressures.

“While there is heightened uncertainty to the outlook, Treasury is forecasting that because of our cost‑of‑living policies, inflation could return to the target band by the end of this year.

“We are striking the right balance between keeping pressure off inflation, easing cost of living pressures, supporting sustainable growth and building fiscal buffers in an uncertain global environment.”

Will cost savings result in inflation rising?

However, some economists have said that the budget measures may end up being inflationary, if Australians choose to spend rather than save any cost-saving measures (such as the stage 3 tax cuts or energy bill rebates.

Reacting to the budget, Peter White AM, managing director of the Finance Brokers Association of Australasia (FBAA), said: “I am concerned about commentary from economists who believe the budget may keep inflation and interest rates higher for longer. I hope this is not the case and that the Treasurer is correct with his prediction that the budget will help bring down inflation.

“Recent talk of yet another interest rate hike is creating greater stress for home owners with a mortgage who have ridden the interest rate wave and now need a break. Lower rates are particularly important for middle Australia where interest rate hikes have hit hard.”

PEXA Group chief economist Julie Toth welcomed the funding to improve housing supply and affordability but warned housing shortages are likely to get worse before they get better.

“The additional measures and funding announced in this week’s Federal Budget are very welcome – $1 billion in new funding will make a real difference to urgently required crisis and transitional housing across Australia,” she said.

“Future support for trade apprenticeships, essential urban infrastructure and purpose-built student housing, will help reach the Government’s Housing Accord ‘stretch-target’ of 1.2 million new homes.

“However, we remain concerned about Australia’s immediate housing shortage. The Government’s first annual National Housing Supply and Affordability Council (NHSAC) report predicts Australia’s housing shortage will worsen until around 2027, due to rising population, diminishing household sizes and construction supply constraints. This imbalance will eventually improve as demand growth slows and construction capacity increases. Unfortunately, in the meantime housing affordability for buyers and renters is likely to deteriorate further.

“We know that resolving Australia’s housing availability and affordability problems is complex.

“All levels of Government must pull in the same direction to actively support industry and community initiatives. No single measure or organisation can solve this housing shortage alone.”

PEXA has previously said that the government should establish a national register of all private-sector affordable housing projects across all jurisdictions. It believes such a register would “facilitate tailored responses to Australia’s urgent housing needs, allowing for real-time tracking, adjustment, and evaluation”.

[Related: Housing ‘a big focus’ for the budget 2024/25]