Budget spending bomb
There weren't too may Federal Budget surprises, given that most of it is pre-leaked these days, and certainly markets weren't much moved by the release of the Budget Papers.
Every household in the country will get a $300 discount from their power bills, with no means-testing, and small businesses will get $325.
This is in addition to the state discounts of $1,000 (Queensland), $400 (Victoria), and $400 (Western Australia).
Power might almost be free for those of us living up north, and I suppose this is one way the government can achieve its election pledge to reduce power bills by $275 by 2025...by giving money away.
1 million households will also qualify for 10 per cent increase in the Commonwealth Rent Assistance.
Mechanically reduced inflation
The cost of living relief measures are forecast by Treasury to reduce consumer price inflation by ¾ of a percentage point, and to push headline inflation down to under 3 per cent by Christmas, much earlier than the Reserve Bank's forecasts for late 2025.
Of course, sceptics may well argue that this could stimulate spending elsewhere, and that underlying inflation might not prove to be so easily tamed.
You can see what Labor is aiming to do here, which is hopefully tee up an interest rate cut or two before the next election in May 2025 (and if not, at least be able to point to these measures as a sweetener for households, alongside the Stage 3 tax cuts).
Despite the righteous fury online, I actually don't reckon it's too bad a bet - many households have seen their mortgage repayments double in recent months, and I don't believe many observers have understood just how great an impact this is going to have on discretionary spending in the second half of calendar year 2024 and beyond.
Housing shortage to persist
There was surprisingly little news for housing, except for talk about infrastructure in Western Sydney and the Sunshine Coast rail project.
Even Build to Rent didn't really get a look in, probably because the returns just aren't that attractive when the risk free rate is above 4 per cent.
Higher education facilities may see international student numbers capped until more student accommodation is provided, which was probably the most tangible announced measure for housing supply.
Although a modest surplus will be banked this year, mainly thanks to very conservative iron ore price forecasts, the years ahead are a sea of deficits and red ink, as government spending increases.
Source: Treasury
By rights we shouldn't be seeing structural deficits like this - and there's a stupendous amount of waste through NDIS and other projects - but I guess Australia is pretty lucky to have such low government debt compared to so many other developed countries.
As expected there was a good deal of talk about the Stage 3 tax cuts, which kick in from 1 July, HECS debt relief, the 'Future Made in Australia' subsidies for solar and defence, and the small business tax write-off policy was extended for another year as expected.
Treasurer Chalmers will hope for an interest rate cut before the next election, but if it doesn't come off he will at least be able to point the modest financial benefit from today's announced measures for households.
We covered this in real-time as a live webinar, so I'll aim to throw up the recording tomorrow, with a particular focus on property.
