The Budget was delivered on May 11 by Treasurer Josh Frydenburg and, as expected, it is considerably shaped by the extraordinary times we live in: the ongoing impacts of the COVID-19 pandemic on our economy, our lifestyle and our economic recovery path.
Defying predictions, unemployment hasn’t risen to forecast all-time highs as a result of the pandemic and is now expected to drop below 5% late next year. This is great news for a government whose strategies of supporting people through a range of supportive programs appear to be working.
Inflation and the CPI (Consumer Price Index) is expected to increase over the next year following an understandable period of stagnancy during COVID where it rose just 1.1% for the year (an all-time low!). The Reserve Bank of Australia (RBA) is targeting a 2-3 per cent CPI for the year 2022-23 which is getting Australia back on track towards normal growth.1
One of the most obvious ways that life during the pandemic changed for many of us was ‘lockdown’ requirements to spend so much more time in our homes and immediate surrounds; working, exercising, schooling and relaxing. The actual economic impact of this is immeasurable, but anecdotal evidence suggests significant shifts in how we live and how we plan to live in future.
Apart from changes to home budgets from reduced incomes and changed ways we spent money during the pandemic, there is a preference now for properties with space for a home office set-up, there has been a major reduction in appetite for studio and single bedroom inner-city apartments and far more interest in outer-city properties. Investment in renovating and improving our homes is also evident, using funds that might otherwise have been spent on travel and hospitality.
Under the new Budget the Government will provide $782.1 million over four years to increase home ownership, support jobs in residential construction and enhance housing data. The HomeBuilder program is expected to support $30 billion in residential construction with more than 120,000 Australians applying for the grant.
According to the Federal Budget Briefing by the Customer Owned Banking Association (COBA), “Australia is experiencing a renewed upturn in residential construction, spurred on by a range of government policies designed to support the sector, alongside record low interest rates.”2
The percentage of first home buyers entering the market is approaching the highest level since 2009 – nearly 40% of new home loans, well above the 10-year average of around 30%.1 The New Home Guarantee will be expanded under the Budget, providing 10,000 additional places. under the program first home builders and those purchasing a newly-built home will be able to do so with a loan to value (LVR) ratio of up to 95%.
The Budget also announced a new program called the Family Home Guarantee which gives eligible single parents the opportunity to build a new home or buy an established home with a deposit of just 2% so long as they are able to service their home loan repayments.
At the other end of the home-owning demographic, the minimum age for older Australians to make a post-tax downsizer contribution to super when they sell a family home is being lowered to 60, which is designed to encourage downsizing and free up larger homes for growing families.
The new First Home Super Saver Scheme allows eligible first home buyers to use voluntary super contributions to grow a home-buying deposit and increases the maximum amount of voluntary contributions that can be released under the First Home Super Saver Scheme from $30,000 to $50,000.
The Budget also removes the threshold allowing superannuation contributions to be paid on amounts less than $450 per month.
The Budget is committing $3.4 billion to improve women’s safety, economic security, health and well being. This includes an additional $1.7b for child care which will mean costs for families with two or more children in care will decrease and the annual subsidy cap is being removed.
To support household income and create jobs, the Budget includes an additional $7.8b in tax cuts by extending the low and middle income tax offset (LMITO) for 2021-22. This offset gives workers earning less than $126,000 per year up to $1,080 of tax relief.
Inbound and outbound international travel is expected to remain low until mid-2022, after which a gradual recovery in international travel for tourism, business and study is predicted to take place.
Other major spending highlights from the Budget1
- An extra $13.2b committed to the National Disability Insurance Scheme (NDIS)
- $17.7b to support aged care through the next five years with training for 33,800 additional staff to provide support for the elderly living in their own homes
- More services added to the Medicare Benefits Schedule and more medications included on the Pharmaceutical Benefits Scheme
- $6.4b for skills training and apprenticeships
- $2b set aside for preschool funding from 2022-25
- Transport infrastructure is a major feature with $15.2b of extra spending planned in the next 10 years
- Infrastructure upgrade funds for the next decade are $110b
- $565.8m has been allocated to support international technology partnerships and new initiatives
- 2021-22 Federal Budget
- COBA (Customer Owned Banking Association) Budget Briefing 2021
- Photograph of New Parliament House, Canberra – Andy Wang for Unsplash