Treasurer Jim Chalmers delivered his first proper May budget – not counting the quick October budget he brought down last year – in style. He delivered a small but impressive surplus, thanks to an enormous surprise in the revenue column.
A whopping $40 billion in unexpected revenue materialised since Treasury last ran its predictions and, even though the Treasurer spent a good chunk of that money, there was still enough left over to leave the budget bottom line in the black.
The government threw money at a range of problem areas to try to reduce the cost of living. There was:
A $40 increase to JobSeeker
A $93 increase in JobSeeker for those aged 55-60
A $31 increase to Commonwealth rent assistance
Money for energy efficiency in homes
Incentives to get more doctors to bulk bill
Cash discounts on energy bills, which will show up later this year
It sure looks comprehensive. But there’s a problem. The great leviathan in the Australian cost-of-living story is housing, and the government isn’t doing anything serious about that.
The issue isn’t a lack of awareness. The government knows there is a problem. The treasurer told us so.
“We know an essential part of the solution to pressures in the housing market is more homes for Australians,” Chalmers said.
Then he said something that’s frankly embarrassing.
“Our Housing Accord aims to build 1 million, new, well-located homes over five years from 2024.”
Well, truth be told, nobody thinks the Housing Accord is going to do anything. In fact, nobody talks about the Housing Accord except the treasurer, because the Housing Accord doesn’t really exist and isn’t really a thing. It is little more than an idea invented in 2022 to help compensate for the fact the Albanese government got elected without a well-developed policy platform.
A housing accord is not a bad idea – all levels of government agreeing to do something about housing, to build more – but this housing accord is nothing more than an idea. And that’s a disaster because the need for housing is acute right now.
Rents just went up by the largest amount on record, CoreLogic tells us. Capital city rents rose 11.7 per cent in the past year, even faster than our runaway inflation. And as rising rents spread, they will make it harder for the RBA to defeat inflation.
At the same time as the rent inflation monster begins to climb from the deep like an angry kaiju, the number of new dwellings being approved has fallen to its lowest levels since 2012, as the next chart shows.
That is a reaction to falling house prices, and it would be fine if population growth was tumbling. But, instead, it is surging. The budget papers reveal that the population of Australia is 1.5 per cent higher than thought at the last budget in October – more than 300,000 more people live here now than expected. And the surge is not over. The budget papers forecast an ongoing strong level of net overseas migration: an extra 315,000 new residents next year alone.
A strong migration program is helpful for reinvigorating the Australian economy, providing skills, underpinning growth and stuffing government coffers with revenue.
But in the rental market? All this population growth is likely to be inflationary. We aren’t ready to build enough to accommodate it.
The budget papers themselves tell the story. They anticipate the lower building approvals to translate into lower dwelling investment in the next few years. Dwelling investment is expected to fall by 2.5 per cent in 2022-23, by a further 3.5 per cent in 2023-24, and then again in 2024-25, by 1.5 per cent. That means fewer frames being put up on the outskirts of our cities and fewer cranes on the horizon in our city centres.
Also by Jason Murphy:
Will people go homeless? Some will, but not all. The market can solve the problem by putting more people per home. And if that few homes are built, it will need to. Kids will move out later and, when they do, they will move in with others. But when more people live together in a home, it increases the amount of disposable incomes that are available to rent that home, and tends to bid the price of renting up. As a result, woe betide the person who wants to rent without a flatmate.
The budget is a success if you judge it on its own terms. But when it comes to addressing the biggest cost-of-living issue in the Australian economy – housing, it fails to pull a rabbit out of the hat.