Australia to tackle ‘unacceptable’ housing market

[SYDNEY] Australia’s upcoming budget will take aim at soaring home prices and seek to make it easier for people to gain a foothold in the housing market, Treasurer Jim Chalmers said.

“The housing market is one of the defining anxieties that people have about our economy and about our society,” he said in an interview in Canberra on Sunday (May 10), two days before he unveils his fifth annual budget. “It’s very clear to me now –  increasingly clear – that the status quo in housing and in the tax system is unfair and unacceptable.”

The government is mulling changes to long-debated tax concessions – including negative gearing and capital gains tax – which have been widely viewed as favouring property investors, according to recent press reports.

The backdrop is a deepening housing crisis in Australia, where soaring home prices and a dearth of supply have locked many younger buyers out of the market.

The focus of Tuesday’s budget will shift beyond earlier fiscal priorities centred on boosting housing supply, turning instead to measures aimed at creating a fairer playing field for all buyers, Chalmers told Sky News.

“I’m increasingly of the view that we need to go beyond supply,” he said. “It’s not the only priority in making this housing market fairer. We don’t have enough homes, too many people are locked out of housing and we need to address both of those concerns at once.”

The government this weekend also announced A$2 billion (S$1.83 billion) in funding over the next four years for roads, water, power and sewerage to support new housing developments nationwide, backing the construction of about 65,000 homes.

Another core focus at the Budget will be trying to contain the “substantial” inflation which has been supercharged by the war in Iran.

“We had some inflationary pressures before the war in the Middle East, but the war has made them much more substantial,” Chalmers said, adding that “the inflationary challenges are serious and they are a big focus on the budget,” he said, with A$64 billion in gross savings to be announced on Tuesday.

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Australia was grappling with inflation even before the US-Israeli attack on Iran at the end of February.

The ensuing energy supply shock has exacerbated pressures, with both factors prompting the Reserve Bank to raise interest rates three times. Last week’s hike was accompanied by a forecast that headline inflation will peak in the middle of this year at 4.2 per cent, well above target.

“One of the key defining influences on the budget that we hand down on Tuesday night will be what’s happening with all of this volatility and unpredictability and uncertainty in the global economy,” Chalmers said. 

Australia was better placed to deal with that than many other nations, he said, though the government expects there to be “a long tail” of problems even after the war in the Middle East ends. BLOOMBERG