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How the Federal Budget will impact the Melbourne construction and property sector

This year’s Federal Budget will be unveiled tomorrow, before Australians head to the polls in May for the Federal election.

With a better than expected surplus predicted, Treasurer Josh Frydenberg has confirmed the surplus would be accompanied by “responsible targeted spending”, including major infrastructure investments to boost productivity growth.

A quick Google search will show you the predictions for this year’s budget break down of expenditure and tax cuts, but how will this directly affect the Melbournian’s who work in the construction and property sector?

If last year’s budget is anything to go by, infrastructure will play a key role in expenditure to provide communities with solutions for congestion, housing affordability, and inequitable access to infrastructure, amenities and services.

This year’s budget is predicted to continue this growth with a further $75 billion allocated on infrastructure projects across the states over the next 10 years, with Geelong on the list to receive a slice, and a possible $2 billion to build a fast rail between Geelong and Melbourne.

Other construction projects include $496 million towards Victorian cancer research, services and facilities, plus a $60 million indigenous education hub.

As a result, employment will remain buoyant in the sector, particularly for local Government contractors.

As for Melbourne’s residential property market, whilst it remains firmly in a correction phase, the full extent of price adjustment remains uncertain, with several regulatory and political factors muddying the waters.

If tomorrow’s budget doesn’t go down well with the public and the Federal election is won by the Australian Labor Party, it could result in significant changes to negative gearing and capital gains tax discounts on investment property. Labor’s proposed policy changes will limit negative gearing to new rental dwellings and also halve the capital gains tax discount from 50% to 25%.

The proposed changes to capital gains and negative gearing legislation are ultimately designed to encourage new supply. Given that new supply will be the exclusive domain for negative gearing, this may well encourage new supply and will benefit residential developers.

So we’ll be watching tomorrow’s budget release with great interest, and the election next month just as closely to see how it all unfolds.

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