Does a budget surplus mean anything for the property market?
finance-advice
1 minute read

Does a budget surplus mean anything for the property market?

Does a budget surplus mean anything for the property market?

by Katarina Taurian | April 03, 2019 | 1 minute read

The Morrison government forecasts a budget surplus for the next financial year, which has got property investors asking: so what?

Aerial shot of a suburb
April 03, 2019

Josh Frydenberg delivered his first budget as federal treasurer last night, and he’s forecasting a $7.1 billion surplus. If it comes to fruition, it’ll be the first surplus in 12 years.

A surplus is good news for the national accounts. It gives us cash in the bank to withstand economic headwinds, like the housing market drops which are yet to bottom out.

However, it’s questionable whether the long-touted “return to surplus” will have a real world impact on Australian property investors.

A healthy economy and appetite for spending is what stimulates the housing market, having a knock-on effect to housing prices. Deloitte Access Economics’ Chris Richardson points out that a surplus budget is not necessarily a sign of a healthy economy.

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“The budget is getting better but the economy is getting worse,” he said in the lead up to the budget’s release.

In fact, Australia has been in a per capita recession for the last two quarters for the first time since 2006, according to the estimations of AMP Capital’s chief economist Shane Oliver.

What may stimulate spending is the spate of personal income tax cuts, which are due to start from this tax time. They are the most significant since the era of Howard and Costello, and will most apply to middle-income earners.

Under the Treasurer’s proposal, low and middle-income earners will have their tax reduced by up to $1,080 for single earners and up to $2,160 for dual income families.

The flow-on impact of more cash in the bank for taxpayers could be felt in the property market, but like the surplus, at this stage these are merely projections.

One final, significant point. The government is touting it's “back in the black,” which will be true for the 2019/20 financial year, if the surplus materialises. As it stands, Australia remains in the red, and will finish this financial year in deficit. The surplus forecast is reasonable and supported, but it is just that: a forecast.

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