PowerHousing Australia attended a much depleted group of 50 peak bodies at Budget lockup in Canberra last night for arguably the first of five of the most challenging Federal Budgets that Australia will ever face.
A key outcome from last night’s budget sought is to provide direct measures and a whole of economy response that can inspire confidence, both in consumers and in business.
Creating confidence where there is mounting risks for all Australians to have safe secure housing will be a challenge unlike no other. There is scope through NHFIC financing to supply additional housing, but with an immediate change and renegotiation in the National Housing and Homelessness Agreement required, the potential for these arrangements to subsidise additional housing will need ongoing attention.
The cost of the budget and loss of revenue have seen a significant write down in the budget position with a deficit of more than $213.7 billion projected, with the economy forecast to fall by 3.75% this calendar year but projected to bounce back with the economy forecast to grow by 4.25% in the 2021 calendar year. Unemployment is tipped to peak at 8% in the December quarter and then fall to 6.5% by the June quarter 2022.
With the backdrop of: Net Overseas Migration falling from around 154,000 persons in 2019-20 to around -72,000 persons in 2020-21 and then around -22,000 in 2021-22; the next ABS housing activity to report 193,000 completions for FY2020; 450,000 not paying their mortgages today; and JobKeeper wind down, the requirement for housing supports will become evident in the coming months.
Whilst tax cuts have been brought forward, these measures can be less effective than a stimulus measure than direct payments or increases to welfare benefits, because more of the tax cuts will be saved. That said, the backdating would act as a windfall and thus may increase the likelihood of people opening their wallets.
The increase of the Government NHFIC guarantee from $2 billion to 3 billion for the Australian Housing Bond Aggregator will allow certainty for all the current loans and additional lending to be provided to Commonwealth, State, Local Government and CHP investments which is a strong commitment to the Sector.
The $1 billion increase to the NHFIC Australian Bond Aggregator supports more low cost, long term finance for an additional affordable housing. With State Governments today looking to partner with CHPs and NHFIC there could be 2-3000 new affordable dwellings, 5-6,000 current dwellings financed from the full finance pool of $3 billion that has been assured in the Budget. There is more to be done here and this will become evident for the CHP sector to play a greater role in due course that will see some tough days ahead at least in the next 6-12 months.
As per the budget documents there is a declining population like almost never before and there is massive flow through of new homes will have a market impact. There is a need to be precise in any Federal and State investment and particularly watching the housing market for stability.
From the broader numbers and updated reports outside of tonight’s budget there are around 450,000 mortgagees that are currently not paying back their loans. In many cases, the homes securitise small business loans, other loans and investment properties. Of these, there will be a number that default and with JobKeeper winding down, there will no doubt be additional demand for social and affordable housing by the close of 2020.
It is worth reflecting that there were already 200,000 people on the national housing waiting lists as we headed into 2020 and well over 100,000 defined as homeless at the last census.
Whilst these numbers will place additional strain on housing, the budget papers present a decline and shift the budget for homelessness in the next twelve months and remote services funding changes over the coming two years. The changes to the National Housing and Homelessness Agreement and how this impacts the state partnership homelessness services needs attention in renegotiation.
There will need to be partnerships, policy and private industry capacity brought online to support those who are facing challenges to see job creating and social demand busting measures underpin a stable housing system.
Rebuild in two phases:
- Boosting consumer and business confidence, growing the economy and creating jobs; and
- Stabilising then shifting from providing temporary and targeted support and stabilising gross and net debt to rebuilding fiscal buffers for the next shock.
Headline Economic Forecasts:
- The economy is forecast to fall by 3.75% this calendar year but forecast to bounce back with the economy forecast to grow by 4.25% in the 2021 calendar year;
- Unemployment is expected to peak at 8 per cent in the December quarter and fall to 6.5% by June quarter 2022. Underemployment and a higher effective unemployment rates to be watched;
- Wage price index forecast to grow by 1.25% for the year ending June 2021 and by 1.5% through to June 2022;
- Australian population growth to slow to its lowest rate in over 100 years, falling from 1.2 per cent in 2019-20 to .2 % in 2020-21 and .4% in 2021-22;
- Growth slowing due to falling NOM from around 154,000 persons in 2019-20 to around -72,000 persons in 2020-21 and then around -22,000 in 2021-22;
- Dwelling investment – 2019-20 = -8.8%, 2020-21 = -11%, 2021-22 = 7%.
The key measures that have been handed down include:
- NHFIC Government Guarantee for the Australian Affordable Housing Bond Aggregator raised from $2 billion to $3 billion;
- $150 million Indigenous Home Ownership Program created to construct new homes in regional areas to provide shared equity ownership outcomes;
- National Housing and Homelessness Agreement
- $1.3 billion for manufacturing in six key areas;
- Tax breaks for businesses with an aggregated annual turnover between $10 million and $50 million;
- Personal income tax cuts to be brought forward and backdated to this financial year;
- First Home Loan Deposit Scheme will be extended to help an extra 10,000 people;
- $1.2 billion for a 50 per cent wage subsidy of up to 100,000 new apprentices;
- $2.8 billion to protect 180,000 apprenticeships and trainees;
- $1 billion Job Trainer fund to create up to 340,000 free or low cost training places for school leavers and job seekers;
- $4 billion JobMaker hiring credit payable for up to twelve months and immediately available to employers who hire those on JobSeeker aged 16-35;
- $14 billion for major infrastructure projects;
- $16 billion to tackle COVID-19.
Key measures (housing specific)
Australian Housing Bond Aggregator – Guarantee raised
National Housing Bond aggregator boosted
- NHFIC Government Guarantee for the Australian Affordable Housing Bond Aggregator raised to $3b. This allows CHPs to take an additional $1 billion in concessional finance to construct more affordable housing.
Indigenous Shared Equity
- $150 million provided to create the Indigenous Home Ownership Program to construct new homes in regional areas, creating jobs and helping hundreds of indigenous families buy their own home.
First Home Loan Deposit Scheme
Expansion of the First Home Buyer scheme
- First Home Loan Deposit Scheme will be extended to help an extra 10,000 people