Compass Housing’s Group Managing Director Greg Budworth has had an opinion piece published in the Fifth Estate.
Despite growing consensus Australia’s housing system is broken, it failed to rate a mention in this year’s federal budget. It’s a remarkable oversight given the threat the housing crisis poses to the economy.
Australia faces a shortfall of half a million social and affordable dwellings. Around 35 per cent of Australian renters are in rental stress. Aussie households have almost two dollars of debt for every dollar of disposable income. Home ownership levels among younger people have collapsed, and Australian real estate is the second most expensive in the world. Yet in terms of policies that would boost the supply of social and affordable housing, provide relief for private renters or improve home ownership rates, the budget contained nothing.
Instead, the big-ticket item was relatively modest cuts to personal income tax for low-to-moderate income earners, and the promise of bigger cuts in seven years’ time. While some tax relief is welcome, it pales into insignificance in the face of Australia’s housing crisis. For a median income family, the proposed tax cut of $515 a year would barely cover one week’s rent. It is equivalent to 0.04 per cent of the deposit required to purchase a median-priced home in Sydney. Better than nothing, certainly, but only just.
The omission of housing from the budget is particularly remarkable given the threat out of control housing costs poses to the economy. Households in rental stress inevitably cut back on consumption as do those with heavy debt loads who face the added threat of possible interest rate hikes. Both groups are highly sensitive to cost of living pressures. Any substantial decline in consumption risks sending the economy into a downward spiral as businesses cut costs by shedding staff, thereby reducing economic activity even further. Reduced economic activity has a flow-on impact on tax revenue, increasing the likelihood of additional borrowing to sustain services.