This spending is welcome to support recovery, jobs and transitioning the economy to the future, but it is, as always important to ensure that the outcome of Government policies is efficient and drives a productivity or social dividend.
While housing affordability is a critical social issue, the new housing policy aimed at single parents is one example where we can anticipate the unintended consequences – being some of society’s most financially vulnerable people burdened with a 98 per cent loan-to-value ratio at a time when housing is running hot.
Australia’s housing market hit $8.1 trillion in value last month, surpassing the combined values of listed shares, superannuation, and commercial real estate by $1 trillion. Introducing more policies targeting an economically unproductive asset does little to improve the business dynamism that Australia needs to become future ready and won’t do much for accessibility either.
Business to do some heavy lifting
What was unexpected about this budget, and requires further unpicking, are the Government’s own surprisingly optimistic predictions about non-mining investment. We know that business confidence and conditions have hit record highs, but that doesn’t necessarily translate to higher investment and higher risk taking in business decisions.
Yet Treasury forecasts assume private businesses will go through significant economic transformation over the next three years, increasing investment to not just bounce back from the pandemic but surpass pre-pandemic levels.
Indeed, the lift in economic growth over the next few years relies on non-mining business investment, which the government is forecasting will lift by a punchy 1½ per cent in FY22 and 12½ per cent in FY23. While we have seen a bring-forward of some investment in response to the tax incentives, further out a hole likely remains - Consensus Economics long term forecasts show a much lower profile for business investment over the next 10 years compared to a year ago.