A housing affordability package. A looming fight with Catholic schools over funding. A major infrastructure spend. Much is already known about Scott Morrison’s second budget as Treasurer on Tuesday.
What is yet to be revealed is the extent of the “good” and “bad” debt within the nation’s accounts, what tax rises are in store, and just how ugly the deficit situation will get over the next four years.
Under the microscope: Treasurer Scott Morrison. Photo: Andrew Meares
Citi economist Josh Williamson points out the government’s pledge to return the budget to surplus by 2021 will be under the microscope from Tuesday, as that financial year will now form part of the official four-year “forward estimates”. While a temporary rise in iron ore and mineral prices helping the national coffers, the government faces a difficult challenge to keep that pledge.
“The government is quite hamstrung,” Mr Williamson said. “It is going to be a small-target budget, they are going to have to thread the needle.”
It’s a view shared by AMP Capital chief economist Shane Oliver, who estimates additional revenue from iron ore exports alone could total $5.2 billion over the current financial year and next. However, those gains are likely to be offset by a decline in personal taxes because of limp wage growth. “The big uncertainty in the budget relates to where the savings will come from. Overall, we are looking at a gap over four years that needs to be filled,” he said.
Times may be tight, but the business community is calling on the government to put its finances in order. “The task of getting Australia’s budget back in order is now urgent. Parliament must ensure the Australian people receive much better value for the $440 billion spent each year,” peak lobby group Business Council of Australia has warned in its pre-budget submission.
The cornerstones of Tuesday’s budget will be a housing affordability package and an estimated $18 billion infrastructure spend.
That spend, according to Westpac chief economist Bill Evans, will include $5 billion for a second Sydney airport, $10 billion for an inland freight link and a $2 billion upgrade to Snowy Hydro.
But it’s housing that looms as the centrepiece on Tuesday. An ANU survey released last week revealed that one-fifth of Australians are struggling to meet mortgage or rent payments, with 2 per cent having fallen behind. Nearly a quarter said they would be in quite a bit or a lot of difficulty if interest rates jump by 2 percentage points, while nearly 90 per cent are concerned that future generations won’t be able to afford to buy a house. Amid the growing crisis, Treasurer Scott Morrison and Finance Minister Mathias Cormann went on a Sunday morning television charm offensive.
Mr Morrison said policies aimed at first-home buyers looking to buy and retirees looking to downsize would both be included in the the budget.
“The approach we will be taking in the budget is comprehensive,” Mr Morrison told Nine’s Weekend Today program. “It will work with states and territories. It will address everything from the needs of those who don’t even have a roof over their head to those who are trying to buy one to put over their head, and it will even deal with those who later in life are looking to change their housing arrangements.”
Mr Cormann appeared on Sky News and declared that housing affordability was one of the main areas of focus of the federal budget. “It will be a very practical budget,” Mr Cormann said. “It will focus on housing affordability. It will focus on energy security. It will focus on a whole range of issues that people across Australia expect us to focus on.”
Last week, Mr Morrison signalled that first home buyers would be likely to receive assistance from the federal government to buy a house. On Sunday, he confirmed that budget measures would also extend to assistance for renters and measures to help the homeless. “If you are trying to save to buy a home, if you are on a housing waiting list, if you are homeless, if you are paying 50 per cent or more of your income on rent, housing is a big issue for you,” Mr Morrison said. “That means it’s a big issue for me and the Prime Minister. You need a comprehensive plan. You can’t solve housing affordability, but you can do things which reduce the pressure. I think Australians expect governments to do that. I don’t think they expect us to shirk these issues because they are too politically hard.”
Amid speculation the budget would provide further financial assistance for first home buyers, the government has faced criticism that such measures merely drive house prices even higher.
“There are elements of public policy that will have an impact on these sorts of dynamics and you will find out in the budget on Tuesday night the policy work that the government has done on how we believe we can best put downward pressure on housing affordability,” Mr Cormann said.
When asked if the budget would cause any Australians pain, Mr Morrison replied: “You’ve got to pay for what you spend.”