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Last night’s Budget announcement has been labelled many things over the past twelve hours, but what does it actually mean for brokers and their clients?
Loan Market broker, Marios Rokka, says he was impressed by the level of honesty portrayed in the state of the nation, but that he was surprised by the deficit and the fact that Australia won’t likely see a surplus until 2016/17.
“The way the budget was delivered spoke volumes about our economy…This clearly shows that we are not in a strong economic position and although we are not in a weak position either, the government is telling us that this is just where we are at. With some structure and no-nonsense cuts, we will not worsen the economic position of the country.”
Independent Mortgage Planners managing director, Craig Morgan, largely agrees, but says he’s not convinced the cut-back measures go far enough.
#pb#“My initial thoughts are there’s been, thankfully, some necessary pulling back of certain long-term commitments that were sustainable; things like tax cuts. It’s not going to make most people happy, I know, but the reality is that it’s like running a household: You can’t keep spending more than you earn and hope it’s going to get better,” says Morgan.
“I’m not sure whether all of that’s gone far enough and I’m a bit concerned that they’ve still gone forward with some big ticket long-term expenditure that, right now, it’s hard to see how that’s going to be funded. Things like the baby bonuses and tax cuts that the country can’t afford are being wound back, but the incoming government is going to have a few more cuts they’re going to be forced to make.”
In terms of how the announcements will affect the home loan market, but Morgan and Rokka remain cautiously optimistic.
“I feel that the Budget will cause further household tightening and give people more opportunity to repay debt and secure rates at historic lows. This could keep our rates at historic lows a little longer than previously expected,” says Rokka, who’s also pleased with the outcomes for pensioners.
#pb#“The Budget’s housing centrepiece is a $112 million trial program to assist the elderly to downsize their homes without affecting pensions, via a means test exemption of up to $200,000 for ten years. It is designed to remove the disincentive for seniors to relocate to more age-appropriate housing, but will also open up more suburbs for gentrification and redevelopment,” he says.
Morgan adds that, a year or so ago, he would have said anything that told Australians they were going to get ‘a few less hand-outs’ would have dampened the market.
“There’re other positive signs coming through though,” he says, “including the easing pressures on the Australian dollar. So I think, particularly if we get another rate cut, which seems to be fairly likely, I think the forces will balance each other. In fact, if anything, I suspect there’s going to be a steady uplift in demand this year from investors…All in all, it’s still pretty positive going forward.”
