Jim Chalmers had a plan to fix housing, reward aspiration and win over young Australia. According to the polls, he’s managed to annoy just about everyone instead – including the very people the Budget was supposed to help.
The Chalmers Budget diagnosis is in, and voters have given the ‘thumbs down’ to its major changes. But the Government is hanging tough, undoubtedly believing the only poll that counts is two years away. In fact, Treasurer Chalmers seemingly is saying if you can cop these changes to negative gearing, trusts and the capital gains tax (CGT) discount, there’ll be tax cuts after the next election!
One could easily think that the Albanese Government is a little bit drunk on the power that Australian voters gave them at last year’s election, with a 96-seat haul out of a possible 150 seats. Clearly, these controversial changes that look anti-investor, anti-business builder and anti those Aussies who are aspirational, are a consequence of the disarray the Coalition finds itself in and the rise of popularity for alternative parties, such as One Nation and the looming Teal Party, if that’s what they call it.
The AFR’s Phil Coorey has looked at the survey work of JWS Research as the Opposition threatens to delay the passing of the NDIS changes in the unpopular fiscal plan for Jim Chalmers’ and his boss, Anthony Albanese.
This is what the researcher found in its True Issues survey:
1. The most popular measure was $25 billion for public hospitals over four years, with 79% support.
2. Next most favoured was a 78% approval for 5,000 aged care beds for dementia sufferers.
3. 72% liked banning foreigners buying existing homes for the next two years.
4. The least popular measure was replacing the 50% CGT discount with an inflation-adjusted alternative. Only 36% supported it, while 36% opposed it – a net zero approval rating.
5. Negative gearing only applying to new homes after Budget night was the next most unpopular rating, which gained a low 7% net approval figure.
6. The next most unpopular proposal was the minimum 30% tax slug on discretionary trusts.
Interestingly, the big tax changes were designed to help young people, yet they recorded a net negative approval rating among that group.
Only 36% supported the negative gearing changes and 40% approved of the CGT reforms.
The survey also found that 59% preferred the Albanese Government to cut spending compared to the 21% who thought it was OK to raise revenue by the tax changes.
My take on the effects of the Budget’s changes are the following:
1. House prices will fall, with SQM Research tipping a 9% fall in house prices in Sydney and Melbourne, with existing homes less popular for investors.
2. Rents will rise.
3. Investors will chase new homes to access negative gearing and the 50% CGT discount, so the young buyer will have competition for these properties.
4. Housing supply will increase but only slowly.
5. Industry super funds will benefit from property investing becoming less attractive, which will please Labor’s mates in this sector.
6. The changes won’t help investing in start-up businesses because the CGT discount was a big incentive for the reward for taking risks and creating new job-making, profit-creating and tax-paying operations.
7. Given the CGT changes for entrepreneurs there will be a bigger drive for these business builders to use AI to replace workers.
While slowing down house price rises is an acceptable goal, doing more to increase the supply of homes would’ve been a smarter play.
Meanwhile, for a country crying out for productivity, punishing the productivity creators i.e. entrepreneurs looks shortsighted.
Finally, until we see more housing supply and new buyers having access to some of their super that takes 12% of their pay each year, I can’t see big growth in home ownership for young Aussies.
All this disappointment with this Budget is a consequence of unimpressive leadership across both sides of our parliament.
I can’t help but ask: “Who is Jim Chalmers talking to when he makes these big decisions?”
He seems to be influenced more by politics, rather than the economic and business implications of his decisions. Right now, we have rising inflation, a slowing economy, falling business and consumer confidence, and the Treasurer, who’s the main driver of the policy that affects the economy, is promising future tax cuts to win support for his Budget. And do you think those tax cuts won’t be inflationary?
You have to do better than that Jim. I’d suggest you start hanging out with better people to improve your decision-making process. Ultimately, we’re all judged by the company we keep.
