Federal budget round-up: how the built environment sector reacted
Cameron Jewell | 10 May 2017
There’s been a mixed reaction to the federal budget, with mostly positive responses to a focus on infrastructure spending, mixed responses to housing affordability measures and dismay at the silence on the environment and climate change.
$75 billion in infrastructure funding and financing has been committed over the next 10 years.
Part of this is a $10 billion National Rail Program “to deliver rail projects that provide better connections for our cities and regions and create new opportunities to grow our economy”.
Treasurer Scott Morrison said projects that could be funded under the program included Adelink, Brisbane Metro, Tullamarine Rail link, Cross River Rail in Brisbane, and the Western Sydney Airport Rail link.
A new Infrastructure and Projects Financing Agency will help decide which projects are to receive funding.
The news was welcomed by the Property Council, which said getting cities working better was fundamental to productivity.
“That is why the decision of the Commonwealth to back-in metro rail lines in our cities is the right one, but we note that most of the promised $10 billion funding falls outside of the forward estimates,” chief executive Ken Morrison said.
The Green Building Council of Australia concurred.
“The government’s commitments to deliver jobs through infrastructure investments in rail, runways and roads will support better cities and regions across Australia,” GBCA chief executive Romilly Madew said.
Consult Australia said while the multi-billion dollars of government equity in big ticket infrastructure was welcome, there was a sense of missed opportunity in the short term.
“Historically low bond rates and a triple-A credit rating means there has never been a better time to borrow – to take on more good debt – yet as share of GDP spending will drop from 25.5 per cent to 25.2 per cent in 2020-21,” Consult Australia chief executive Megan Motto said.
“Real spend on infrastructure delivery will fall.”
Cynthia Mitchell, David Singleton and Jim Bentley, writing in the Conversation, said infrastructure investment needed to go further and have net-positive social, economic and ecological outcomes.
“Rather than settling for doing less bad, such as less environmental destruction or social disruption, we must aim from the outset to do more good. This net-positive approach requires us to restore, regenerate and increase social, cultural, natural and economic capital.”
There will be also be $472 million committed to a Regional Growth Fund, including $200 million to support another round of the Building Better Regions program, which funds infrastructure and community building projects in regional areas.
There was a mixed reaction on the measures to tackle housing affordability, which include:
- a first home super saving scheme to use voluntary super contributions for a housing deposit
- removing ability to claim travel and limiting plant and equipment depreciation for negative gearing
- a $1 billion National Housing Infrastructure Facility to fund “micro” city deals
- An online Commonwealth land registry detailing sites that can be made available for residential development
- allowing Managed Investment Trusts to be used to develop and own affordable housing
- individual investors getting a boost of Capital Gains Tax discount to 60 per cent for affordable housing investments
- new financing mechanisms to facilitate institutional investment in social and affordable housing through a National Housing Finance and Investment Corporation
- States and Territories to be encouraged to transfer public housing stock to the community housing sector
- a new national housing agreement on affordable housing and homelessness
- $375 million for a permanent extension of homelessness funding to the states
A common theme amongst industry commentary was support for the government tackling affordability at many different levels.
The Urban Development Industry of Australia said it was a “coordinated and targeted approach”.
“No stone has been left unturned as the package targets all sectors of the housing continuum from crisis housing through to social, affordable rental, private rental, assisted home ownership and home ownership,” UDIA national president Michael Corcoran said.
Architects call for focus on quality and density
Australian Institution of Architects national president Ken Maher said the Commonwealth land release scheme and the $1 billion National Housing Infrastructure Facility would create opportunities to boost supply.
However he said the government had not taken the package to “the next logical step” by ensuring quality built form outcomes.
“With tens of thousands of new homes needing to be built every year to keep up with demand, it is vital that we ensure those new residences are energy efficient, that due consideration is given to promoting quality, standardised design principles to address issues of accessibility and to facilitate ageing in place.”
He also said there needed to be a focus on density to go along with a renewed commitment to work with the states on planning, zoning and regulation.
“Infill has a vital role to play in the future of our cities. Ensuring this density is done well, integrated with well-designed transport including due consideration of amenity and well-designed public spaces, is the key to achieving successful and enduring city deals.”
Most contentious amongst the housing affordability package is the First Home Super Savers Scheme, which will allow voluntary contributions to superannuation of up to $15,000 a year and a maximum of $30,000 to be withdrawn for a house deposit, and taxed at 30 percentage points below the marginal rate. Contributions and earnings will be taxed at 15 per cent.
“Under this plan, most first home savers will be able accelerate their savings by at least 30 per cent,” the Treasurer said.
Downsizers over the age of 65 will also be able to make a non-concessional contribution of up to $300,000 into super from the sale of their principal home, which Mr Morrison said would help “free up the housing stock”.
Economics professor Richard Holden wrote in the Conversation that the plan would “do absolutely nothing to help first home owners”, while costing the government $250 million.
“We have seen this movie before, with 50 years of first home owner grants in one form or another. All that happens is that this subsidy goes into the price of existing housing. Sellers benefit, buyers get no joy,” he said.
Industry Super Australia was not impressed with the First Home Super Savers Scheme either.
“The proposal is deeply flawed and the thin end of the wedge for super savings – threatening workers future retirement,” ISA chief executive David Whiteley said.
“If implemented, the policy is likely to be expensive to administer and will impact the ability of fund trustees to invest contributions over the long term. Funds will need to maintain more liquid asset allocations to deal with unpredictable withdrawals.
“There is merit in assisting first home buyers, but this is not the way.”
The Property Council’s chief executive Ken Morrison, meanwhile, said the architecture of the scheme appeared to be “a non-inflationary measure that will help hundreds of thousands of Australians save for a deposit for their first home”.
However, the PCA has questioned the downsizing plan.
“Retirees and pensioners don’t deserve to be penalised for making housing choices that suit their needs, and this policy helps to address that penalty,” PCA executive director – retirement living Ben Myers said.
“But what it doesn’t do is address the inequality in the aged pension assets test, which the Property Council estimates is blocking upwards of 50,000 people a year from making the move to smaller and more manageable homes.”
The bond aggregator to attract institutional investment and provide community housing providers with access to cheap finance was applauded, however whether it will lead to greater stock depends on governments meeting the funding gap of what it costs to run this housing and how much can be gained from rental payments.
“Cheap financing on its own will not build social and affordable homes,” NSW Federation of Housing Associations head of policy and communications Deborah Georgiou said.
PowerHousing Australia agreed.
“Community Housing Providers can build affordable homes at scale but we need to ensure the renegotiated [National Affordable Housing Agreement] doesn’t leave a funding gap when it comes to the weekly rental payments for struggling Aussies – such a gap would put shovel ready sites on hold indefinitely,” its chief executive Nicholas Proud said.
The level of funding for public and community housing and homelessness services will be maintained in real terms, with the Treasurer announcing a new National Housing and Homelessness Agreement to replace the current National Affordable Housing Agreement and National Partnership Agreement on Homelessness.
Homelessness Australia said that homelessness would continue to rise under what it said was an “unfair” budget.
“While the increased security of funding for homelessness services is very welcome, the fact remains that we can’t house the 105,000 Australians experiencing homelessness each night until there is a real increase in public housing to get 200,000 people off waiting lists,” Homelessness Australia chair Jenny Smith said.
She said the budget was not fair because it encouraged investors to own more than one house while 105,000 had no home at all.
“Maintaining the existing funding levels will allow homelessness services to keep the lights on, but they’ll still be turning away 275 people every day, and we’ll continue to see homelessness numbers climb.
“At the root of the homelessness problem is a chronic shortage of affordable housing for people on low incomes, and until we see bold and courageous leadership in this area, we will never end homelessness in Australia.”
The big ticket item was the announcement that the federal government would buy the Snowy Mountains Hydro Scheme from NSW and Victoria, as part of its already announced plan to expand the system to provide more stability to the National Electricity Market.
The buy-back could add an additional $5 billion to the $2 billion already proposed for the upgrade.
And, in a what must have been a difficult sentence for a Liberal Treasurer, Mr Morrison said: “Snowy Hydro would have to remain in public hands.”
Meanwhile, the Lock the Gate Alliance is worried about $90 million announced to increase gas supply.
“The budget says $30 million will go to increasing gas supply in three regions but does not specify where these three regions are,” Lock the Gate’s Phil Laird said.
“Community opposition to fracking is overwhelming and communities need to be respected and properly consulted.”
Speaking of the environment, there was absolutely no mention of climate in the Treasurer’s budget speech, nor mention of the environment. In fact, the only time “environment” was mentioned was in regards to expediting and streamlining environmental approvals for the Snowy 2.0 scheme.
Looking further into the budget, there has been $1 billion over five years allocated to Landcare.
“This funding will put the NLP in an even stronger position to continue to deliver for our nation’s environment, including the Great Barrier Reef,” environment minister Josh Frydenberg said.
The University of Queensland’s Global Change Institute deputy director Professor Karen Hussey said the budget revealed a “remarkable parochialism and short-termism”.
“There is no mention of climate change, there’s a $300 million cut to the foreign aid budget, a 2.5 per cent efficiency dividend imposed on universities that will further stretch our science and research capacity, and an emphasis on securing energy supplies through last century’s technologies,” she said.
GBCA chief executive Romilly Madew said it was disappointing the budget appeared to defer new funding for policy responding to climate change “pending the various policy reviews currently underway”.
“The government should not miss the opportunity to capture the benefits of the investments announced tonight, leveraging new commitments in our regions and in infrastructure to help reduce our emissions and build resilience across our communities,” she said.
While the commitment the the Snowy Hydro project was generally welcomed, many see the budget as ignoring clean tech.
Associate Professor Martina Linnenluecke from the UQ Business School said the budget was a missed opportunity for Australia to become a leading nation in clean technology.
“There is compelling evidence for an upcoming technological breakthrough in clean technology that will drive wealth and growth for the decades to come,” she said. “Australia continues to delay commitment to a clean tech future and thus risks falling behind other countries with more expansionist policies.”
Science and innovation
Science commentators said there was not a lot in the budget for the sector, with small decreases in indexation of funding meaning agencies like CSIRO and the Australian Research Council would be worse off.
Science and Technology Australia chief executive Kylie Walker said the organisation was disappointed that after recent cuts and salary freezes there would be decreases of funding for CSIRO.
“Though small, this represents a continued erosion of their budget in real terms.”