The federal budget is likely to be broadly neutral for the inflation outlook, while offering some welcome cost-of-living relief for squeezed renters and mortgage holders, says Westpac Group Senior Economist Pat Bustamante.
In a podcast interview, Bustamante also discusses government measures to help small businesses, and what support for more housing construction could mean for housing affordability.
Here are some of Pat’s key insights:
- While the budget contains measures that will reduce the out-of-pocket cost of essential items such as electricity and medicine, this will also free up income for households to spend elsewhere, so the net effect on inflation evens out.
- The government has earmarked $1.2 billion over five years to build more homes and train more construction workers to support social and affordable housing. That is a good start in addressing the supply shortage that is keeping property and rental prices elevated, but it will take time for supply to increase in a meaningful way.
- Small businesses will get a boost from the extension of the instant asset write-off scheme, which allows eligible businesses to claim an immediate deduction for investments of up to $20,000. Furthermore, around a million small businesses will also receive a $325 rebate on their energy bills.
- Support provided through the Future Made in Australia scheme in excess of $20 billion is “ambitious”, Bustamante says, with a significant portion to be allocated to progressing the clean energy transition. But with much of the support flowing in future years, it doesn’t raise any immediate inflationary concerns, with the focus more on value for money.
James Thornhill was appointed as editor of Westpac Wire in May 2022. Prior to joining the bank, he was a business and financial journalist with more than two decades of experience with international newswires. Most recently, he was a resources correspondent for Bloomberg, covering the mining and energy sectors, and previously reported on a broad range of topics from economics and politics to currency and bond markets. Originally from the UK, he’s had stints working in London, New York and Singapore, but is now happily settled in Sydney.
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