Menu

Politically safe Budget much ado about nothing – though it may assist the lower end of the property market

May 10, 2012

The Federal Treasurer has shown little vision, with few if any initiatives in the Budget that will stimulate economic growth. The best that can be said is he has provided assistance to very low income householders and that by finally returning the Budget to a very modest surplus next year, the Government is creating room for the Reserve Bank to cut interest rates further. However, lower rates are a sign of economic weakness, so this is a mixed blessing.

The Budget will have very little impact on the majority of home buyers or property investors. Changes announced to income tax and family payments will see a modest increase in the disposable income of those families earning less than $80,000 and that, in conjunction with lower interest rates may see a small boost to the property market in the sub-$500,000 range in coming months.

Of course, there are countervailing forces: continuing economic uncertainty abroad, the impact of the carbon tax – perceived or real – and a cynicism about the Government that damages confidence.  Further, people are also conscious that the Government doesn’t have the resources it inherited in 2007 from the Howard Government – a large surplus – to bail us out of another global financial crisis, should one occur. Consequently, there is a sense that we as individuals have to make more of our own provision for bad times, and hence consumers and investors are being more cautious.

Photo: graur razvan ionut