Several members of the mortgage broking industry have voiced support of the Coalition government’s budget for 2019-20 but lamented the lack of stimulus for the property market.
The budget 2019-20 was released on Tuesday evening (2 April) and sets out what the government will spend over the coming years should it be re-elected following the federal election next month.
Given that the budget falls ahead of a federal election (and one which could result in major changes to broker remuneration given Liberal and Labor’s differing stances on the time frame for abolishing trail commission), the broking industry has been carefully watching what each political party will announce or intend to deliver once in power.
While the Coalition government’s budget does not make mention of mortgage broking, there are several initiatives that will benefit the broking community – including tax relief for those earning under $126,000 and the extension and expansion of the instant asset write-off.
The Coalition government has said it will immediately increase the instant asset write-off from $25,000 to $30,000 and expand this out until 30 June 2020.
Speaking of the budget, the managing director of the Finance Brokers Association of Australia (FBAA), Peter White, said that he welcomed several parts of the budget but would have liked to see more assistance for struggling home buyers, particularly given the declining home values in some areas combined with persistent global uncertainty.
“The government, and all major political parties, must examine what they can do to stimulate the housing market, not suppress it, and that includes any change to negative gearing and capital gains tax,” Mr White said.
One of the areas that Mr White particularly welcomed was the budget funding commitment enabling ASIC and APRA to respond appropriately to the recommendations of the banking royal commission.
The Coalition government has said that it will spend $606.7 million over five years (from 2018-19) to “facilitate the government’s response” to the royal commission, with ASIC receiving $404.8 million over four years from 2019-20 and the Australian Prudential Regulation Authority (APRA) getting $145.0 million over four years from 2019-20.
“This will strengthen the financial system and deliver better outcomes for all Australians,” Mr Frydenberg said in his budget speech.
The FBAA’s managing director suggested that “indications are little or none of this additional enforcement funding will be spent on actions against brokers, rather additional action to reign in the banks,” particularly as ASIC has reduced the cost of acting as a credit representative from $104 to just $14.33, as the cost of enforcement drops.
“The total cost of legal enforcements against mortgage brokers has reduced to a third of the original cost in a little over 12 months, and now further again, and that’s because brokers are doing the right thing by clients,” Mr White noted.
However, Mr White said he had strong reservations about the need for a review of broker remuneration in three years’ time (as recommended by both Liberal and Labor parties to fulfil the royal commission recommendation), saying: “After years of uncertainty, we will not support a review, which again puts in doubt the continuity of broker commissions and the ability of a broker to earn a reasonable income.”
Meanwhile, the CEO of brokerage Mortgage Choice, Susan Mitchell, commented: “Mr Frydenberg has handed down what many are describing as an ‘election year’ budget.”
“However, Australians are well aware that the likelihood of these budget initiatives are subject to the Coalition winning the upcoming federal election, which is due to be called in a matter of days.”
Like Mr White, the Mortgage Choice CEO said “unfortunately, this was not the federal budget for home owners or the property sector, as no initiatives were announced that provide direct stimulus to the property market”.
However, she added that policy measures that improve infrastructure could have a positive long-term impact on housing affordability.
“The $500 million fund to invest in car parks at train stations will reduce traffic, allow for more affordable commutes and significantly reduce travel times to metro centres across the country,” Ms Mitchell said.
“The budget also includes $3.5 billion for the first stage of the Western Sydney Rail North South Rail Link and $2 billion for fast rail from Geelong to Melbourne.
“With the current softening in property prices, this investment may have a positive double whammy effect for working families who can achieve a better work-life balance and increase their chances at achieving the Australian dream of owning a house on a quarter acre block,” she added.
Noting the tax cuts, Ms Mitchell welcomed the move to help low and middle-income families save up to $1,080, adding that “for Australians feeling the pinch of higher living costs, the extra cash can be put into [their] mortgage to reduce the principal and interest payments, or it can boost your savings and go towards [their] deposit for [their] first home.”
The Mortgage Choice CEO also welcomed the extension and increase of the instant asset write-off and changes to superannuation that will, from 2020-21, enable 65 and 66-year-olds to make voluntary superannuation contributions without meeting the current work test.
In conclusion, Ms Mitchell said: “All in all, this was a federal budget to appeal to the masses and to neutralise some of the benefits that voters would gain under Labor.
“Now it’s up to the Australian public who go to the polls next month to decide if this federal budget will become the country’s new economic template from which to drive sustainable growth,” she said.
Find out more about the measures announced in the budget 2019-20 on our sister title, Mortgage Business, which includes a special Mortgage Business Uncut podcast episode with Peter White about more of his initial reaction to the budget.
[Related: Budget 2019-20 released]