4 key takeaways from the Treasurer

1. Property taxes will be a hot federal election issue

Negative gearing is “an important feature of the housing market”, from Mr Frydenberg’s perspective.

While Labor has publicly shelved plans to ditch negative gearing if they are elected into office, the Treasurer said: “No doubt you’ll see at the next election; another battle line between us and the Labor party on taxes, because they revealed what they really think and will do at the last election.”

Reflecting on the previous election, he stated that the issue of negative gearing had been a “real battle”.

He argued that Labor’s previous planned changes “would have punished not just the 1.3 million people who had negatively geared properties but also everyone who had equity in their home because when they eventually sell their home, they will [be] doing so in a market with potentially fewer buyers”.

Describing negative gearing as an opportunity for people to get into the housing market to get access to an asset which would help them build their economic security, Mr Frydenberg said: “It was something that the Labor Party was seeking to stamp out in their war on aspiration, and we fought it very hard at the last election, but they’ve always got secret plans, despite what they say today.”

2. Projections about the Australian economy have to change

With population growth at its lowest level in a century, the federal Treasurer has acknowledged that previous economic forecasts and growth predictions will have to change. 

He conceded that while Australia will be able to pick up its immigration levels into the future, “we may not necessarily pick up the numbers of people who otherwise would have come if the borders had remained open over the course of the pandemic”.

This means that projections about the size of the Australian economy will have to change, and the predicted size of the population will have to change.

He also noted that the pandemic had caused labour force shortages across various sectors of the economy and that there would be a need to bring back skilled migrants, which is going to be important for Australia’s economic growth into the future.

“We will look for those opportunities to start bringing in students, to start bringing in skilled workers, and obviously to enable Australians to more freely and easily move in and out of the country.”

Since then, NSW Premier Dominic Perrottet has revealed that NSW will be opening its border to international travel with no restrictions for fully vaccinated travellers as at 1 November 2021. 

3. Home ownership schemes are driving economic activity

“We have seen a very strong property market, and that’s been reflected in price movements, and it’s a $10 trillion housing sector,” the Treasurer professed.

“We have obviously supported the construction industry and the housing sector with the HomeBuilder program. We’ve committed over two-and-a-half billion dollars to that particular program, we saw over 130,000 applications, and it was expected to support more than $30 billion in residential construction.”

The Treasurer touted the combination of historically low interest rates, as well as HomeBuilder, First Home Super Saver scheme, and the Home Guarantee scheme as having been “very important in driving economic activity, and driving greater home ownership”.

One of the key indicators of this cycle is that there’s been more than 170,000 first home buyers in the year to July 2021, Mr Frydenberg said.

“Now, the 10-year average across the country has been around 100,000,” he then countered.

“This is a big jump in first home buyers, and we welcome that.

“And the fact that people get a toe into the market, or a foothold in the market, if you want to use another analogy, then I think it’s a good thing because it helps set them up for greater economic security into the future.”

4. The pandemic will remain front and centre for a while yet

“We don’t know what’s around the corner,” Mr Frydenberg conceded. 

“There could very well be new variants of the vaccine. And that’s why we’ve secured booster vaccines. And that’s why we continue to invest in research. And that’s why we continue to work closely with our medical experts, because it is primarily a health crisis that has caused a very severe economic crisis.”

Even so, the Treasurer flagged that “our economy is larger than it was going into the pandemic”.

From his perspective, it “does give people confidence that we have got through this crisis in a position that is stronger than that of many other comparable jurisdictions”. 

But that’s still not cause for complacency – “far from it”.

“You know, I’m expecting to see contraction in the September quarter, off the back of the lockdowns in New South Wales and Victoria. But at the same time, once restrictions ease, I’m confident that going forward, the economy will continue to strengthen and grow.”

You can listen to the full conversation with Josh Frydenberg here. 

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