Does a budget surplus mean anything for the property market?

However, it’s questionable whether the long-touted “return to surplus” will have a real world impact on Australian property investors.

A healthy economy and appetite for spending is what stimulates the housing market, having a knock-on effect to housing prices. Deloitte Access Economics’ Chris Richardson points out that a surplus budget is not necessarily a sign of a healthy economy.

“The budget is getting better but the economy is getting worse,” he said in the lead up to the budget’s release.

In fact, Australia has been in a per capita recession for the last two quarters for the first time since 2006, according to the estimations of AMP Capital’s chief economist Shane Oliver.

What may stimulate spending is the spate of personal income tax cuts, which are due to start from this tax time. They are the most significant since the era of Howard and Costello, and will most apply to middle-income earners.

Under the Treasurer’s proposal, low and middle-income earners will have their tax reduced by up to $1,080 for single earners and up to $2,160 for dual income families.

The flow-on impact of more cash in the bank for taxpayers could be felt in the property market, but like the surplus, at this stage these are merely projections.

One final, significant point. The government is touting it's “back in the black,” which will be true for the 2019/20 financial year, if the surplus materialises. As it stands, Australia remains in the red, and will finish this financial year in deficit. The surplus forecast is reasonable and supported, but it is just that: a forecast.

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