Federal Budget 2015 – Summary and Property Outlook
In this article we summarize what the 2015 Federal Budget means for consumers and businesses. We also provide an outlook on what the roll-on effect of this year’s budget is for the Property and Construction sectors.
The 2015 fiscal estimate presented this week has 3 key objectives:
- Incentivising the growth of the economy
- Making cost savings where possible with a view to minimising political fallout.
The federal budget in high level terms:
- Provides an incentive for small businesses to make capital purchases
- Provides a tax cut for small business
- Provides additional child care funding (to encourage parents to work)
- Reduces the pension payments to wealthier self-funded retirees
- Targets large companies with tax avoidance schemes (new laws to be introduced)
- Encourages people to “get out there and have a go”
What this year’s budget means for the Property and Construction Sector
Economic growth is expected to improve, with real GDP forecast to grow from 2.5 per cent this financial year to 2.75 next year, before climbing to 3.25 and then 3.5 per cent. At the same time the budget deficit will gradually reduce from the present $39 billion to $23billion in FY 2017.
This is despite the significant fall in investment in the mining industry which is forecast to get worse before it gets better. The Government is basing the forecasts on the growth of the economy in non-mining sectors including the property sector.
The present low interest rate environment is attracting investment and owner occupiers into the residential and non-residential property sector which in turn results in growth in the building related industries.
Activity in property construction has picked up in recent times. The number of cranes operating in Australia’s key cities increased by 39 per cent in the past twelve months, according to the Rider Levett Bucknall Crane Index for Q2 2015. Although the index provides a simplistic measure only, it nevertheless shows the construction industry to be good in health, particularly in the key markets of Sydney, Melbourne, Brisbane and Perth.
The budget was silent on any changes to negative gearing and if the property sector is to drive economic growth then it is unlikely that any changes would be made to remove the incentive for property investment.
The general outlook for the property markets is sound, although based on the recent strong price escalations (particularly Sydney and Melbourne), there is likely to be a period of flattening or consolidation in the foreseeable future.
We would like to hear your thoughts on this year’s budget in context with the Property and Construction Sector. Feel free to leave your comments below.
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