Jim Chalmers claimed his fifth Federal Budget was his most important and ambitious. In reality it was his worst, built on lies and false assumptions – and it was clear from his Budget speech that the Treasurer himself struggled to believe his own rhetoric.
It was also apparent that, sitting just behind him in the chamber, Anthony Albanese was equally unconvinced. The Prime Minister sat stony-faced, seldom animated, while Jim Chalmers tried to make a virtue of a blatant betrayal of a key election promise, that property taxes would not be changed.
This Betrayal Budget had failed even before the Federal Treasurer stood up in Parliament to deliver a notably wooden and unconvincing speech – with $77 billion of net tax increases and years of ongoing deficits, while throwing a meagre bone to wage earners: a $5 a week tax cut.
It failed – and has been widely criticised in all forms of media – because it was constructed on a series of lies.
Lie No.1 – our economic problems have been caused by the Iran war
Chalmers repeatedly referenced “the global oil shock”. But, as the RBA governor has made clear, inflation was rising in Australia before oil prices impacted.
Lie No.2 – inflation is spiking across the globe and many nations are lifting their interest rates
In reality, Australia is an outlier on mortgage rates.
Lie No.3 – young Australians are locked out of the housing market
On the contrary, first-home buyers are highly active and their buying, boosted by government incentives, is pushing up house prices.
Lie No.4 – price rises have been caused by property investors via the CGT and negative gearing settings
In truth, investors are only 30% of the market and the most tax-advantaged cohort in the market is, in fact, first-home buyers.
Lie No.5 – that property investment is dominated by baby boomers
Most people seeking to buy investment properties are the cohorts the Government claims it wants to benefit, the Millennials and Gen Z people (those in their twenties, thirties and forties).
Lie No.6 – changing investor tax settings will propel tens of thousands of young Australians into homes
Those numbers were not justified by the Federal Treasurer, who apparently plucked them out of hot air.
Lie No. 7 – the Government hasn’t broken a promise, it has chosen to do the right thing
I would contend that breaking solemn election promises is never the right thing – it’s more aptly regarded as a breach of contract with the Australian people.
Here’s the reality of the real estate situation, based on the facts admitted on Budget night by the Federal Treasurer, who is now the highest taxing Treasurer in history.
As a result of his new promise-busting measures:
- 35,000 fewer homes will be built
- There will be fewer rental homes and rents will continue to rise
- House prices will not fall – but they will rise more slowly
Given those admitted realities, this Budget and its property tax measures fails to fulfil the stated goals of:
- A fairer deal in the housing market for young Australians
- Helping young Australians into their first home, by levelling the playing field
- Intergenerational fairness, with Gen Z and Millennials to be the main beneficiaries, according to Jim Chalmers
Media reaction
The Betrayal Budget has rapidly become the most criticised Budget in memory. Media reaction has been overwhelmingly negative.
The Financial Review reported:
“Treasurer Jim Chalmers’ fifth budget locks in Australia’s status as a high-taxing jurisdiction and was a missed opportunity to deliver reforms that would boost investment and productivity.”
Veteran Budget analyst Chris Richardson told the media:
“It’s a tax grab, rather than a fix for the housing market.”
Even ABC pontificator Alan Kohler, a noted anti-investor campaigner, was unimpressed:
“Will these measures solve the housing crisis? No, not on their own. Unless governments get back into the business of large-scale public housing, real estate has to be a better investment for investors and developers.”
The consequences
These Budget measures will do the opposite.
Affordability will not improve because, as Chalmers admitted, property prices will not fall.
The chronic shortage will not be remedied because, as he admitted, 35,000 fewer homes will be built.
Rental supply will worsen and prices will keep rising, because his measures will remove landlords from the market.
The Government apparently hopes investors will rush out and build new homes, but the Betrayal Budget doesn’t deal with the greatest impediment to that – how long it takes and how much it costs to build new homes.
The median cost of a new house and land package in capital city Australia is $950,000 and most investors can’t afford that.
The Government also has to explain why they are handing massive tax incentives to big business, including multi-national corporations, to provide residential rental properties to the market, while reducing incentives for mum-and-dad investors to provide rental properties – given that small investors provide over 90% of the homes Australians rent.
The Federal Government apparently wants big business to become the landlords to Australian households.
Final point
The inescapable conclusion is that young Australians will suffer the most from the Betrayal Budget.
- Rents will rise further
- Supply will diminish
- House prices will keep rising
And, in contrast to the Federal Government’s belief that baby boomers dominate property investment, the market reality is that Millennials and Gen Z are the most active investors – and are the ones most hurt by the tax assault.
