Federal budget helps borrowers, businesses

Industry welcomes boosts to housing schemes, SME support

Federal budget helps borrowers, businesses

The mortgage and finance industry is sharing its views on the 2023 federal budget, saying that cost of living and housing initiatives will help more Australians and ease interest rate pressures.

But mortgage broker Mike Davies from Nectar Mortgages is concerned that budget measures may increase inflationary pressures despite the government’s intentions to alleviate them, and Prospa believes small businesses need further support. 

The federal budget for the 2023-24 financial year, handed down by Treasurer Jim Chalmers on Tuesday night, includes a $14.6 billion cost of living relief package aimed at boosting affordable housing and supporting more vulnerable Australians.  A 15% increase in award wages for aged-care workers, subsidised energy bills, strengthened Medicare and an extra $40 per fortnight for JobSeeker recipients are among the measures introduced.

Along with wider criteria for accessing the Home Guarantee and Regional First Home Buyer Guarantee schemes, Budget 2023/24 included a 15% increase to the maximum rate for Commonwealth Rent Assistance, halving of the withholding tax rate on eligible fund payments for residential build-to-rent projects and $2bn to support the National Housing Finance and Investment Corporation (NHFIC) to increase supply of social and affordable rentals.

AFG CEO David Bailey (pictured above left) said measures introduced to help with cost of living pressures would be welcomed by mortgage holders.

“The blunt instrument of increasing interest rates means there is an imbalance against mortgage holders who are forced to shoulder more of the responsibility in curbing inflation,” Bailey said.

He hopes that participation in all government funding schemes, including through the NHFIC, and loans to improve energy efficiency for homeowners, are opened up to lenders beyond the big four banks.

“We certainly hope that the finance can be facilitated through brokers, who are the only ones with the client’s best interests at the core of everything they do,” Bailey said.

Incentives for the private sector to undertake build-to-rent projects would be “interesting to watch”, he said, adding that expansion of the First Home Guarantee and Regional First Home Buyer schemes – and the increase to the Commonwealth Rent Assistance program – were “good news”.

“Government needs to act to increase housing supply and there is going to be more pressure on the housing sector with significant numbers of new migrants expected over the next two years,” Bailey said.

In response to the expanded homeownership schemes, Davies (pictured above, second from left) told MPA that the changes would help more Australians move from renting into homeownership.

“We’re seeing a lot of single buyers at the moment come through that (due to increases in interest rates and servicing), even on incomes of $80,000 to $90,000 can’t do anything,” Davies said.

From July 1, the criteria for the government schemes will be widened beyond spouses and de-facto partners, to include any two eligible borrowers (e.g. friends and siblings), as well as permanent residents, legal guardians and previous homeowners (providing they haven’t owned a property in Australia in the last 10 years).

“I have a customer who has been out of the market for a long time, and this is definitely a foot back in the door,” Davies said.

As the scheme criteria would now allow eligible buyers to team up with a friend, Davies said that the purchasing options were wider, enabling buyers to get onto the property ladder faster.

“We have been working with the former First Home Deposit Scheme for a number of years … now there are more places and by widening the criteria, that’s only going to help a lot more people,” Davies said.

The incoming requirement for employers to pay staff superannuation in the same pay run as their salary or wages (effective July 2026) is positive news, as is the increase in the concessional tax rate for superannuation balances above $3m (effective July 2025), he said.

With inflation still high (7% in the March 2023 quarter), Davies said his concern was that many of the budget measures could keep interest rates high for longer.

“I’m concerned for my clients who can’t afford their loans or are on the borderline,” he said.

SME support welcomed

The federal budget included support for the country’s small business, including a $20,000 instant asset write-off, an energy incentive to support investment in power saving assets and digital technology assistance.

For assets costing less than $20,000, businesses with an annual turnover of up to $10m will be able to write-off the full cost of assets (up to the threshold) against their tax bill, providing they are installed or ready for use between July 1, 2023, and June 30, 2024.

Prospa co-founder and chief revenue officer Beau Bertoli (pictured above, second from right) described the temporary increase to the $20,000 instant asset write-off threshold as a “welcome measure” for the country’s small businesses.

Bertoli said the write-off would enable SME owners to reinvest in their business and grow but said that more needed to be done to equip the small business community with the resources required “not only to survive but thrive” in today’s environment.

“According to Prospa commissioned research, 84% of business owners said they were expecting major challenges over the next 12 months, driven by increased operating costs (42%), higher inflation (35%) and increased costs of freight and transport due to rising fuel costs (30%),” Bertoli said.

He was pleased to see the government’s commitment to bolster SMEs in-house capabilities to protect their businesses from cyberattacks.

“By investing in the resilience of our small business sector, we can help ensure their continued success and contribution to the Australian economy," Bertoli said.

Australian Banking Association CEO Anna Bligh (pictured above right) said that the peak body for the banking industry welcomed budget investment into fighting scams and fraud, improving online safety and increased gambling protections.

Among the initiatives announced in the budget were a $86.5m package to combat scams and online fraud, including $58m to build a national Anti-Scam Centre.

“This is a budget that prioritises customer safety,” Bligh said. “Given the scourge of scams on our society, the federal government clearly understands that combating scams needs to be a cross-sector fight.” 

ANZ head of Australian economics Adam Boyton acknowledged that the budget offered a range of targeted relief for households.

Commenting on inflation pressures, he said that with a small surplus in 2022-23 (0.2% of GDP), and small projected deficits in coming years (peaking at 1.3% of GDP in 2024-25 and 2025-26), the budget was unlikely to impact views on the inflation outlook.

“Inflation remains one of the key challenges for all Australians as it impacts cost of living through higher prices and impacts mortgage holders as interest rates rise to bring inflation back down,” Boyton said.

The Treasury’s forecast is for inflation to moderate to 3.25% year-on-year by mid-2024 and 2.75% year-on-year by mid-2025, with real wage growth turning positive in 2023-24, he said.

“At ANZ Research we think that inflation could be a little stickier than this and we only expect rate cuts to begin from late-2024,” Boyton said. “Bringing inflation back down would be a positive  for mortgage holders.”