Budget 2021: How the experts reacted

author-avatar By on May 12, 2021
Budget 2021: How the experts reacted

Treasurer Josh Frydenberg has revealed the details of the Federal Government's budget and expert reactions have been mixed.

Headlining last night's announcement were personal income tax cuts, extension and modification of existing home-buying schemes, changes to superannuation rules, and an almost $2 billion investment in childcare. 

The word of the evening was "recovery", with the Treasurer stating Australia had been a global leader in its COVID-recovery and forecast this year's budget would consolidate the rebound. 

So what did experts make of Mr Frydenberg's financial plan for the nation?


Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval

VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
VariableMore details
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^

Rates correct as of October 26, 2021. View disclaimer.

Housing affordability measures largely welcomed but debt concerns remain 

The Government announced an extension to the First Home Loan Deposit Scheme (FHLDS), increased and extended the First Home Super Saver Scheme (FHSS), and created the Family Home Guarantee. 

The latter will allow single parent households to buy a property with as little as a 2% deposit. 

Eliza Owen, CoreLogic Head of Research Australia, said the low deposit meant more debt would accrue but the long term benefits would likely outweigh this. 

"Taking on more debt may still be worthwhile if the borrower is otherwise spending tens of thousands of dollars on each year on rent," Ms Owen said.

"Even more beneficial could be the long term gains in real assets that come from accessing ownership earlier with a lower deposit, which could outweigh the additional interest paid." 

Chief economist at Archistar, Dr Andrew Wilson, said the extension of the FHLDS would be welcome news to many, but noted the success of the HomeBuilder scheme may hinder those in metropolitan areas. 

"Although this scheme, building on its previous success, will provide more opportunities for first home buyers, the current boom in new house construction is set to lead to supply constraints and higher building costs, and clearly favours those content with outer-suburban fringe living," Dr Wilson said.

"Nonetheless the big picture is the policy’s clear potential for the ongoing economic stimulus provided by the residential construction industry - and that is still a main game in Australia’s ongoing covid recovery." 

Mission Australia chief executive, James Toomey, acknowledged the policies would help many Australians but said more needed to be done to address housing and homelessness. 

“The grim shortage of social housing and affordable rentals, high levels of housing stress, punitive rate of JobSeeker and other income support payments and a job market topped up with insecure, short term jobs is triggering a spike in financial distress, housing insecurity and homelessness," Mr Toomey said.

“One of the most effective things that our Federal Government can do to ensure people are safely housed and to prevent people becoming homeless is to create the conditions for innovations which will increase the supply of affordable housing options, including social housing." 

Tax cuts more of a "deferral of a tax rise" 

The Low and Middle-Income Tax Offset (LMITO) has been extended for another 12 months to cover the 2021/22 financial year. 

This means when individuals lodge their 2021/22 tax return next year, they'll receive an offset worth up to $1,080. 

But Director of Tax Communications at H&R Block, Mark Chapman, questioned the validity of the Government naming this a tax cut and said workers were unlikely to see any of the cash in their back pocket. 

"This measure ensures that 10.2 million low and middle income Australians will not see a tax hike of up to $1,080 next year. However, let’s call this what it is and ignore the government spin; this isn’t a tax cut, it's simply the deferral of a tax rise," Mr Chapman said.

"Nobody should be counting the extra dollars in next year’s pay packets because there aren’t any; the tax burden for low and middle income individuals next year is exactly the same as it was this year." 

Australian Council of Social Service CEO, Dr Cassandra Goldie, questioned why the Government was giving out tax incentives while seemingly ignoring those experiencing financial hardship. 

"So far the government has given around $20 billion dollars in personal tax cuts to people already in paid jobs for the next financial year, plus tens of billions in business tax incentives," Dr Goldie said.

"But not a single cent more to people living in deep poverty, including women on low incomes." 

Super changes get the green light but questions remain over impact

A slew of changes to superannuation were headlined by the repeal of the work test for 67 to 74 year olds to make non-concessional or salary sacrificed contrbution, removal of the minimum income threshold for super guarantee, and reduction of the downsizer contribution age. 

Ms Owen said the latter policy may free up more established housing, but said any impact was unlikely to be seen prior to its introduction in July 2022. 

"This means motivated downsizers aged 60 to 64 may wait for the scheme to come into effect before selling, and any impact of increased listings as a result would only impact the housing market then," she said.

"It also worth noting that in the almost three years since the scheme was implemented, only around 22,000 individuals have accessed it, so this may not add materially to supply."

Dr Wilson also noted the little success the scheme had, and said it had been impeded by the lack of suitable next-stage downsizer accommodation. 

"The reduced age eligibility will only exacerbate this issue, with the clear shortage of reasonably affordable, medium-density and larger higher-density dwellings in established middle and inner suburbs," he said.

"The availability of appropriate suburban downsizer accommodation likely takes priority over financial incentives, particularly for a younger demographic." 


Photo source: Twitter

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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Alex joined Savings.com.au as a finance journalist in 2019. He enjoys covering in-depth economical releases and breaking down how they might affect the everyday punter. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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