Alan Oster, NAB’s Chief Economist. Source: ‘How is the Australian economy tracking?’ NAB website video.
  • Alan Oster gives his insights on what the upcoming budget will focus on
  • Oster says the budget will be focused on growth as opposed to keeping businesses afloat like last time
  • There is some overlap of expectations from property advocacy groups and Mr Oster

Well, there goes Josh Frydenberg’s promised budget surplus.

With the Federal Government making clear plans to dish out a massive Keynesian spending spree – leaving fiscal repair and austerity out of the question until the unemployment rate is low enough to lift wages and inflation – this could well be good news for many Australian businesses, according to NAB‘s Chief Economist, Alan Oster.

Putting aside the macroeconomic risks posed by higher levels of government debt (an entire separate article could be dedicated to that), Mr Oster has made some insightful predictions into what to expect from the next Federal Budget – and what this means for the property market.

Although a cash splash is fully expected, Mr Oster said it won’t be as large as last year’s October budget. That budget delivered a massive lifeline to businesses, this year’s budget will be one that “encourages growth”.

He expects measures to improve productivity, including the government enhancing supply chains, and cutting red tape (which was discussed with regards to the housing market in this article).

“One of the things they need to do is to get business investment going,” says Oster, who believes it’s far below where it should be. “So perhaps they can look at tax depreciation or some sort of investment depreciation allowance as well.”

Meanwhile, Mr Oster, alongside key property advocacy groups such as Master Builders Australia and the Property Council of Australia (PCA) is keen to see the government using infrastructure to boost economic recovery.

Although the PCA is calling on the Government to prioritise major urban infrastructure such as metro rail and freight projects, Mr Oster is doubtful the issue of faster trains will be looked at. Instead, he envisages a government-funded building program primarily focussed on roads. This would be good news for Master Builders Australia, which represents the $200 billion construction industry – and any other businesses able to benefit directly or indirectly on the supply and support side.

And while the property advocacy groups are focussing most of their lobbying efforts on improving the private housing market, Mr Oster is also hopeful any program might include public housing.

However, he has less hope for one of Master Builders Australias’ call to reduce the company tax rate to 25% to encourage investment – particularly in the construction and property sector.

“A lot have moved their corporate taxes higher again” Oster explained. “The US, for instance, went from 35 percent down to 21 but is now set to go back up to 28 per cent. That provides little incentive to reduce our own taxes.”

Overall, businesses unlikely to be in the spotlight this budget has everything to do with their current performance.

“Our data indicates that small business is actually doing very well at present… better than corporates,” Mr Oster said.

“That may be hard to understand, but the fact is business conditions are at record highs. And that’s great news – for business and the economy.”

And when the economy does well, so does the property sector.

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