The Federal Budget 2022-23 was handed down by Treasurer, Jim Chalmers on the night of 25th October, 2022. This is the first budget delivered by a Labor government in 10 years, amid global economic and political uncertainties, as well as domestic economic and social challenges that include the deterioration of living standards due to high housing costs, foods and energy prices.
In this commentary, our senior economist, Dr. Kevin Hoang will analyse the initiatives that aim to tackle housing shortage and housing unaffordability as well as policies to boost productivity through the implementation of critical infrastructure projects.
Housing
A highlight of the budget is a plan to build 1 million new homes in well-located regions in the 5 year period between 2024 and 2029 as part of a “historic” accord between the federal government, states, private investors and the construction sector. In addition, the Commonwealth would support an additional 10,000 affordable dwellings in that timeframe, costing the budget $350 million, with the states and territories expected to deliver the same number (i.e. 10,000) of homes for low to moderate income households.
In addition, the government also continues to support the previously announced initiatives, including the Help to Buy scheme, which allows the government to make an equity contribution of up to 40% of the purchase price of a new home and 30% of the purchase price of existing home, as well as the First Home Guarantee Scheme and the Regional First Home Support Scheme, which are open to 40,000 and 10,000 eligible Australians, respectively.
However, it is clear that the number of new homes is largely consistent with the historical trends when in the 5 years prior to the pandemic, almost 1 million homes were built. Therefore, this budget has not created any significant and materialised boost to the housing supply at large. In addition, the planned 20,000 affordable homes over 5 years, equivalent to just 2% of total new homes, will not solve the housing affordability and shortage problem for low and moderate income families.
Therefore, in the context of an high population increase of approximately 350,000 persons per year, equivalent to 1.75 million people in the next 5 years, stagnant income growth and most of the new and existing policies focusing on the demand side by enabling more people to enter the market, housing shortage is predicted to remain an ongoing issue that will promote house price growth in the next 5-10 years.
Infrastructure
Infrastructure plays a critical role in boosting productivity and economic linkages between the major and regional metropolitan cities.
The Government is delivering on its election promises as part of the $120 billion pipeline of investment in transport infrastructure over the next 10 years.
New South Wales
$500 million for corridor acquisition, planning and early works on high-speed rail between Sydney and Newcastle
$300 million for the Western Sydney Roads Package
Victoria
$2.2 billion investment in the Suburban Rail Loop East over the next 5 years
$125 million for the Barwon Heads Road Upgrade - Stage 2
Queensland
$586.4 million to upgrade the Bruce Highway through Brisbane's outer northern suburbs
$210 million to upgrade the Kuranda Range Road
South Australia
$400 million for upgrades to the Dukes, Stuart and Augusta Highways
$60 million to deliver on and off ramps to the Southern Expressway and Majors Road interchange
Western Australia
$400 million to upgrade the Tanami Road
$125 million for electric bus charging infrastructure in Perth
Tasmania
$540 million to upgrade Tasmania's key road corridors, including the Bass and Tasman Highways
Northern Territory
$350 million in additional funding to upgrade and seal the Tanami Road and Central Arnhem Road
$332 million towards the NT Strategic Roads Package, including upgrading the Santa Teresa and Mereenie Loop Roads
Australian Capital Territory
$85.9 million in funding for Canberra Light Rail Stage 2
The NBN and mobile connectivity
In the context of rapid adoption of the digital economy is the “new normal”, fast and reliable internet is essential to help regions to thrive, and to some extent, to ease the population increase pressure in large cities by retaining and attracting more people to live in regional cities.
A $2.4 billion investment in NBN Co will extend fibre access to 1.5 million more premises, including over 660,000 homes in regional Australia. A year of free broadband for up to 30,000 unconnected families will help students access learning materials from home. A further $1.2 billion in the Better Connectivity for Regional and Rural Australia Plan will enhance connectivity.
Conclusion
Housing shortage has been and will continue to be an important issue in the government agenda. This is a complex issue to solve that requires a holistic coordination between different levels of government and a large number of stakeholders. In light of the budget 2022-2023, it is predicted that housing problems may not be solved any time soon unless more radical changes are implemented that include significant changes of zoning that allow high housing density in well-located regions, especially in major capital cities. Likewise, measures to fast-track the approval process and the adoption of new technologies to build new homes such as prefabricated homes or small homes to suit different needs.
To put Australia in a global perspective, the population density in Sydney, the most populous city in Australia, is only 440 persons/km2, which is equal to a fraction of other global cities (Tokyo: 6,152 persons/km2, New York: 11,000 persons/km2; Seoul: 16,000 persons/km2). This evidence demonstrates that there is definitely much more room to solve the housing supply problems in Australia.
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