FEDERAL budget 2018/2019
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FEDERAL budget 2018/2019
Market Update
A budget for everyone Budget deficit of $14.5b expected in 2018/19, returning to a surplus of $2.2b next year in 2019/20. Personal tax cuts for low and middle-income earners with potential saving of $530 per year. Seven-year personal income tax plan to eventually abolish the 37% tax bracket. Denial of deductions for expenses associated with holding vacant land. $25 billion in road and rail infrastructure announcements including $5 billion for the Melbourne airport to CBD rail link. Additional home care packages to help support older people to stay at home longer.
The last Budget before the next Federal Election has seen the government come out with plenty of sweeteners for households, baby boomers, low and middle-income earners and businesses right across the country. Personal tax cuts, major infrastructure spending announcements and support for aged care are the backbone of this year’s budget. Property market implications After last year’s commitments to address housing affordability, this year’s budget contains little direct property market policies. Indirectly, personal tax cuts will help household budgets which should assist with mortgage and rental payments and other cost of living pressures. Commercial real estate markets will benefit from additional infrastructure commitments designed to boost the efficiency and lower the cost of transporting freight. This will particularly benefit industrial property in and around intermodal terminals, airports, ports and freight rail interchanges. Seven-year personal income tax plan The centre piece of this year’s budget is the Federal Governments sevenyear plan to reduce and flatten personal tax thresholds. The first part of this plan will deliver a potential tax saving of $530 for low and middle-income earners in 2018/19 and will be followed by a lifting of the 32.5% tax bracket to $90,000. The final stage is the abolition of the 37% tax bracket in 2024. Deny deductions on vacant land The only major negative impact for property is for those that own vacant land. The Government will now deny deductions for expenses associated with holding vacant land. This is over concerns that deductions are being improperly claimed where the land is not genuinely held for the purpose of earning an income. The Government also expects that this measure will reduce the tax incentives for land banking.
2018/19 FEDERAL BUDGET ECONOMIC INDICATORS ACTUAL
ESTIMATES
2016/17
2017/18
2018/19
Budget position (underlying cash balance)
-$33.2b
-$18.2b
-$14.5b
Economic growth (Real GDP)
2.10%
2.75%
Inflation (CPI)
1.90%
Wage growth
2019/20
PROJECTIONS
2020/21
2010/22
$2.2b
$11.0b
$16.6b
3.00%
3.00%
3.00%
3.00%
2.00%
2.25%
2.50%
2.50%
2.50%
1.90%
2.25%
2.75%
3.25%
3.50%
3.50%
Unemployment rate
5.06%
5.50%
5.25%
5.25%
5.25%
5.00%
Employment growth
1.90%
2.75%
1.50%
1.50%
1.25%
1.25%
Source: The Commonwealth of Australia (www.budget.gov.au/2018-19)
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FEDERAL budget 2018/2019
Other housing related changes Assisting older Australians to stay at home -the Government will deliver an additional 14,000 new high-level home care packages over four years from 2018/19. Additional spending on remote Indigenous housing - the Government will provide $550 million over five years for a new agreement with the Northern Territory Government on Remote Indigenous Housing. Improving housing and property related research and data – the budget has committed $4.8 million over 4 years to the Australian Bureau of Statistics to better estimate the stock of affordable housing and for planning, zoning and construction cost data. A further $5.5 million has been allocated to continue funding of the National Housing Research program which provides evidence based support to develop housing, urban development and homelessness policies. Infrastructure Infrastructure is vital to ensure our cities work efficiently and that all Australians are provided with basic services. Well-funded and planned infrastructure helps reduce commute times, increases productivity, boosts local employment opportunities and makes outer-ring suburbs more accessible and attractive. The 2018/19 Federal Budget outlines $24.5 billion in transport projects as part of this decade long infrastructure works program. Rail NSW
$400 million for the Port Botany freight rail line duplication between Mascot and Botany and $50 million for a business case into a rail link from St Mary’s to the future Western Sydney Airport.
WA
$1 billion for Metronet in Perth.
QLD
$390 million for the Beerburrum to Nambour Rail Upgrade and $300 million for the Brisbane Metro.
SA
$220 million for the Gawler Rail Line electrification.
VIC
A $5 billion commitment to the Melbourne Airport to Melbourne CBD rail link and $475 million for planning and pre construction of a rail connection to the Monash employment centre.
Road ACT
$100 million for Monaro Highway upgrades and $100 million for the Barton Highway.
NSW
$971 million for the Coffs Harbour bypass on the Pacific Highway.
NT
$180 million for the Central Arnhem Road upgrade and $100 million for the Buntine Highway upgrade.
QLD
$3.3 billion for Bruce Highway upgrades and $1 billion for the M1 Pacific Motorway.
SA
$1.4 billion for Adelaide North South Corridor future priorities.
TAS
$461 million for the Bridgewater Bridge Replacement.
VIC
$1.75 billion for the North East Link and $132 million for the Princes Highway duplication between Traralgon and Sale.
WA
$580.5 million for the Tonkin Highway, $560 million for the Bunbury Outer Ring Road, $144 million for the Roe Highway and $220.0 million for the Bindoon Bypass.
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FEDERAL budget 2018/2019
Source: The Commonwealth of Australia (www.budget.gov.au/2018-19)
Mathew Tiller Head of Research LJ Hooker M: 0434 562 073 E: mtiller@ljhooker.com
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