Over the past few years I’ve opted to save my Federal budget comments until after the first flurry of media has been published.

2019 is a little different because it’s a pre-election Federal Budget. The tax cuts for millions and infrastructure measures are central to the housing market, and importantly both have the direct potential for impact the housing market.

Income tax changes are vital as they put more money into the economy, into people’s pockets, they may well help to supercharge parts of the economy and that’s linked to jobs. However, Australian wages have been declining for almost a decade or have been at best stagnate.

Stagnate wage growth directly contributes to lower affordability. The cuts could deliver $1,080 for singles and $2,160 for two-income families. However further cuts (from 1 July 2024) could see those earning $45k—$200k have their tax rate cut from 32.5% to 30%.

But that’s a way off and will have need to escape the rigour of two more election cycles, and we already have the Federal opposition suggesting different options. However, whoever governs in Canberra it looks like personal income taxes will be cut.

The company tax rate will also fall, again this could be a possible boost for employment. The rate drops from 30% to 27.5%; down again to 25% by 2021–22. But it’s impact may be limited.

Other measures aimed at business include a new $2b fund to increase SME access to finance. In addition, for SME’s turning over less than $50 million, an instant write-off will increase from $25k to $30k. There’s a target to create eighty thousand new apprenticeships via a $525m budget allocation.

Combined these measures all have the potential to boost wages and employment and both are contributors to demand for housing.

Investing in infrastructure

When Treasurer, Josh Frydenberg introduced the Federal budget he said – “A strong economy needs ongoing investment in roads, rail, bridges, dams and ports.

Then adding – “Tonight, I can announce that the Coalition Government is boosting our infrastructure spending to $100 billion over the decade. Without increasing taxes.”

Leaving no doubt about the importance of infrastructure spending, not only in the current budget and economic cycle but for the future, he went onto further expand in more details how, in his own words – “Cranes, hard hats and heavy machinery will be seen across the country, as we build Australia for current and future generations.”

The budget’s aim for infrastructure are essential to the orderly development of our urban and rural cities and towns and regional areas, and infrastructure is central to how the housing market functions.

This budget places the spotlight firmly on many aspects of infrastructure that influence the housing market with a range of projects that will help to deliver more liveable cities that are better able to accommodate today’s residents and importantly future growth.

The Treasurer spoke about new infrastructure projects that would ease congestion in our cities, unlock regional potential and better manage population growth. He also announced a four-fold increase in the Urban Congestion Fund from $1 billion to $4 billion.

For anyone living in Sydney, Melbourne or Brisbane, removing traffic bottlenecks and improved travel times would make life easier, and in many cases would improve the appeal of new more affordable growth-areas. And to help, the budget includes $500 million Commuter Car Park Fund that will improve access to public transport hubs.

It was also interesting that the ‘dream’ of a fast-train network was included in the budget infrastructure plans.

However, this is not a new idea. Consider the 1980’s vision of Paul Wild, then head of the CSIRO, after he returned from an inspiring trip to Japan, where two decades the fast-train had become a reality.

He then suggested the idea of a high-speed railway between Sydney, Canberra and Melbourne. The plan remained just that and Australia’s first high-speed train remains a dream however, that may be about to change.

Infrastructure plans now include a long-term fast-rail vision for Australia starting with $2 billion in the Budget for fast-rail between Melbourne and Geelong.

Work is also underway to develop fast-rail corridors in other areas:

Sydney to Wollongong, Newcastle, Bathurst, Orange and Parkes as well as Brisbane to the Sunshine Coast and Gold Coast and Melbourne to Shepparton, Traralgon and Wodonga.

The shape of urban planning and future housing supply would be revolutionised if these plans were to become a reality.

Again, to quote Josh Frydenberg – “It is not a fanciful vision to better connect Sydney and Melbourne, which would double down on the population pressures in our two major cities. It is a plan to grow our regions and take the strain of our most congested areas.”

However, what is now a reality, is Sydney’s second airport but only after 50 years of debate has construction finally started on the Nancy-Bird Walton Airport in Western Sydney. The new airport will be easily the biggest infrastructure project in the region will transform property markets.

The IMF Agrees

The budget’s emphasis on infrastructure has been welcomed by the IMF as a buffer for the economy as the housing market cools. Beyond the above projects the budget covers many other projects from the $5 billion Melbourne airport rail link to the $1.4 billion to build Snowy 2.0 AND $100 million for regional airports.

The Federal budget is always an important policy setting however, this year’s decade long boost to infrastructure will be central to the housing market. Not only because it aims to help cure everyday woes like traffic congestion and unlock regional potential, but infrastructure spending delivers a reboot to the economy.

For every infrastructure dollar spent there is according to a speech by the Treasurer made at the National Press Club, a four dollar pay-off for the wider economy all of which builds employment are benefits the housing market.