Industry leaders share their views on Federal Budget

Mortgage and finance industry experts have given the 2024-25 Federal Budget a mixed scorecard, praising some of its measures but saying the federal government needs to do more to help homebuyers and small businesses.

Industry leaders who provided their thoughts on the Budget included MFAA CEO Anja Pannek, Lendi Group CEO David Hyman, CreditorWatch chief economist Anneke Thompson, NAB chief economist Alan Oster and Connective executive director Mark Haron.

Among the key features of the Budget, announced by Treasurer Jim Chalmers on Tuesday night, were Stage 3 tax cuts, extended to include low and middle-income earners, with an average cut of about $1,888 each.

For housing, the Budget provides $11.3 billion to build 1.2 million homes by the end of the decade for women in crisis, the homeless and low-income families; $1.9bn in loans to build 40,000 social and affordable homes, and $1.9bn to boost maximum rates of Commonwealth Rent Assistance by 10%.

Almost $90m has also been set aside for 20,000 fee-free places at TAFE for construction courses, with the aim of reducing labour shortages in the construction sector.

The main item to assist Australians coping with a cost of living crisis is a $300 energy bill rebate ($75 per quarter) for all households and a $325 rebate for one million small businesses.

SMEs will also benefit from the extension of the instant asset write-off – those businesses with a turnover of less than $10m can deduct assets costing less than $20,000 until June 30, 2025.

In education, more than three million students with HECS debts will have $3bn worth of those debts wiped as the government changes indexing of loans to either the wage price index or CPI, whichever is lower.

Budget reaction: Anja Pannek, MFAA

MFAA CEO Anja Pannek (pictured above left) attended the exclusive Budget lock-up in Canberra. 

Pannek said it was not surprising that the government had focused on cost-of-living relief for everyday Australians, including energy cost of living relief, waiving student debts and addressing national housing pressures. 

“Australian small businesses were also a clear focus for the government with $641.4m in targeted support, that will benefit not only brokers, who are themselves small business owners, but also their small business clients,” Pannek said.

She said the MFAA welcomed the follow Budget measures that would benefit our members and their clients whether they were homebuyers, property investors or small business owners including:

• cost of living relief for homeowners and small business owners through energy incentives with $3.5bn for $300 in energy bill relief to all Australian households plus relief for one million small businesses;
• extension of the instant asset write-off of $20,000 for small businesses;
• changes to the HECS indexation calculation, which will have a marked impact on the ‘home loan serviceability’ assessment for many of our members’ clients;
• a further $6.2bn in specific housing initiatives, taking the government's total new investment since 2022 to $32bn.

The housing initiatives include:

• helping more Australians into homeownership through the Home Guarantee Scheme, in addition to the Help to Buy scheme to support eligible households to purchase a home;
• $3bn in incentive payments through the New Homes Bonus to be shared amongst all states and territories to reach the target for 1.2 million new, well-located homes;  
• a further $1bn to states and territories to deliver new housing – including for connecting essential services such as water, power, sewerage and roads; and
• funding 40,000 new social and affordable homes.

“Our members have told us that serviceability is the number one reason their clients have been unable to refinance, or in some cases access a home loan at all,” Pannek said.

“Cost of living relief through this year’s budget, combined with Stage 3 tax cuts and HECS indexation measures will no doubt assist first home buyers and other borrowers who have been challenged with serviceability.” 

Pannek said housing supply remain a key issue for Australia and it was pleasing to see the Government continue to remain focused on this in the Budget, addressing construction hurdles, investment in social and affordable housing and schemes designed to help Australians buy their own home.

The current economic environment had been challenging for small businesses, including MFAA members, the majority of whom were small business owners themselves, or worked in a small business.

“We are pleased to see the importance of small business to the Australian economy recognised with $290 million to extend the $20,000 instant asset write-off for 12 months, as well as $10.8 million to support the mental and financial wellbeing of small business owners.”  

Pannek said cyber-attacks could be devasting for small businesses and the support to expand Digital ID into a whole-of-economy service was sensible for the long-term protection of brokers who were required to deal with their clients’ personal ID.

The government was committed to reaching its net zero targets, evident in its funding for renewable energy and net-zero trade and engagement in the region.

“This is also a focus area for the MFAA. Our members are in a unique position to support uptake of ‘green lending products’, for example loans for clients to make energy efficient upgrades to their homes,” Pannek said.

“We are also members of the Residential Energy Efficiency Disclosure Initiative (REEDI) to ensure that the role of brokers in reaching the goal of net-zero is not underestimated.”

Budget reaction: David Hyman, Lendi Group

David Hyman (pictured above second from left), the CEO of broker network Lendi Group, which includes Lendi and Aussie Home Loans, said the Budget was “tough reading for homeowners and first home buyers,  especially on the back of the RBA holding interest rates”.

“First home buyers are facing two key issues, affordability and availability,” Hyman said.

“These are linked due to housing prices remaining high and demand outstripping supply. While it’s great to see to the first $500 million of the $10 billion HAFF [Housing Australia Future Fund] be disbursed across 2024-25, more needs to be done for housing supply to keep up with demand.

“This is particularly so with growing post-COVID migration levels and perhaps more incentivising to enable building could assist here.”

In terms of housing affordability, Hyman said there was no updated on the federal government’s first home buyer scheme and no additional funding was announced.

To date the scheme had assisted one in three first home buyers across 2022 and 2023.

“Our brokers are continuing to see first home buyers try and access every avenue possible to them through these schemes, and many are limited by income thresholds in other schemes such as Help to Buy.

“We’ll still continue to see first home buyers need as much assistance as possible from mortgage experts to get a foot in the door.”

Hyman said many homeowners would gain some relief by way of tax cuts.

“But there’s certainly much onus on mortgage-holders right now to take control of their home loan as best they can – especially with the Budget papers hinting that the cash rate is assumed to gradually ease from around the middle of 2025.”

Hyman said in this higher rate market, borrowers needed to actively pursue all avenues to alleviate their mortgage stress right now, “not remaining loyal to their existing lender if there are better offers out there, and certainly not waiting on a potential drop in rates”.

Budget reaction: Anneke Thompson, CreditorWatch

Anneke Thompson (pictured above second from right), chief economist at commercial credit reporting bureau CreditorWatch said of all the measures announced in the Budget, the average Australian was likely to focus on one – the $300 energy bill rebate for each household.

“In conjunction with a boost to Rent Assistance, these are the key pillars of the government’s attempts to help with ‘cost of living’ pressures,” said Thompson.

“The Treasurer is attempting to ‘thread the needle’ here – helping Australians with their bills while not making the shorter-term fight against inflation harder. Of course, we won’t know if the Treasurer will be successful until early 2025, tellingly just before the federal election which needs to be held by May.”

Thompson said even if these measures helped to bring inflation down to within striking distance of the 2% to 3% target band by the end of 2024, the Reserve Bank of Australia was unlikely to view this as enough to start cutting the cash rate.

“The RBA will look through these short-term impacts, much like they do with volatile items like fuel and fruit and vegetables.”

Looking at Australia’s SMEs, CreditorWatch’s latest B2B trade payment defaults data was at record highs, and had been elevated for three straight months, after being on a slow rising trend over 2023.

Thompson said the Budge’s $325 energy bill relief for businesses on smaller electricity plans, as well as extending the $20,000 instant asset write off scheme were small measures to help businesses.

“But what businesses really need, especially the struggling food and beverage and construction sectors, is more confident consumers, as well home borrowers who can afford to engage builders to build houses. Unfortunately, this is unlikely to occur until the RBA begins to reduce the cash rate.:

Thompson said energy relief payments, even in conjunction with tax cuts from July 2024, were unlikely to convince shoppers to go out and spend again.

“Inflation is still too far out of the target band, and the last thing the RBA wants is for goods inflation to take off again.

The RBA would also be watching services inflation closely, particularly in health and education, and the Budget “does little to ease pressures here”.

“It will be a non-budget measure – reigning in population growth – that will have the biggest impact here. And the good news is, the forecasts for population are showing much lower growth over the next few years.”

Thompson said the government had a great deal of control in this, and had already made it clear that it was reducing student visa numbers dramatically.

“For mine, this is where the inflation fight will be won or lost, and it appears that we are finally now on the right path.”

Budget reaction: Alan Oster, NAB

NAB chief economist Alan Oster (pictured above right) said the Budget was interventionist in its strategy – aiming to boost growth in critical areas and directly ease cost of living pressures.

In addition to the stage 3 tax cuts, Oster said cost of living relief would come via energy bill relief packages ($3.4bn) and the rental assistance package ($2bn).

There were also large spending programs on funding wage increases in aged-care and childcare sectors.

“With added spending in these areas and the increased drag from lower commodity prices and a weaker labour market alongside the stage 3 tax cuts the Budget surplus of around $9.3bn in 2023-24 quickly returns to deficits of around $28.3bn in 2024-25 and nearer $43bn in 2025-26,” Oster said.

“The potential for more election-related spending remains a risk.”

Oster said while the decisions taken in the Budget were on balance a loosening in policy, they only marginally added to the RBA’s difficulty in returning inflation to target.

“Our initial assessment is they do not have a material impact on our expectations for the growth outlook or the path of inflation and monetary policy.”

When it came to the economic outlook, Oster said the Treasury’s forecasts was broadly similar to NAB’s.

“Treasury expected GDP growth around 2% in 2024/25 and 2.3% in 2025- 26. We are at 1.9% and 2.3% in 2025-26.

“We are however more concerned about the very short run outlook (Treasury 1.75%, NAB 1.5%). Our labour market outlook is similar to the Treasury with unemployment peaking around 4.5% by mid-2024, and likewise we see wage growth peaking around current growth rates (4.25%) and edging down somewhat in the out years.”

Oster said the Budget forecasted a more rapid improvement in inflation in the near term than NAB or the RBA expected – headline inflation of 2.75% by mid-2025 (NAB 3.0%, RBA 3.2%).

“This largely reflects the impact of energy and rent subsidies on measured inflation – an effect which the RBA is certain to look through when setting monetary policy.

“Nonetheless, at this stage we don’t see the fiscal deterioration as being sufficient to change our rate view, still seeing rates on hold until late this year.”

Budget reaction: Mark Haron, Connective

Mark Haron (pictured below), executive director of aggregator Connective said the Federal Budget included welcome investments in training, social housing and affordable homes but missed on specific measures that would further support homebuyers in the short-term.

“However, there are positive takeaways and now is the time for brokers to engage with their clients on the additional measures,” Haron said.

 “The investment in the Housing Support Program will enable infrastructure to unlock more homes. This, coupled with the construction worker boost, shows a commitment to increasing housing supply in the mid- to long-term, which can ultimately benefit buyers.

Haron said the extra $5.5bn committed towards the Help to Buy scheme offered a crucial opportunity for more Aussies to enter the market.

“This scheme, with its government equity contribution of up to 40% of the purchase price for new homes and 30% of the price of existing homes, can help bridge the deposit gap for home buyers with low and moderate incomes.

“Brokers have a valuable role in informing and educating clients about macro changes. Brokers need partners, tools, and insights that will support them through this.”

What do you think of the Federal Budget? Comment below