Economists are warning that an economic imbalance could result from stimulus measures designed to respond to the pandemic.
Speaking at The Urban Developer’s Australian Property Development Outlook vSummit on Thursday, ANZ senior economist Felicity Emmett said removing stimulus packages including Jobseeker, Jobkeeper and HomeBuilder could cause a surprise surge in house prices beyond the current boom.
“The biggest mistake that any policymakers could make would be to withdraw stimulus policies too early and start to focus on budget repair before the economy’s really in good shape,” Emmett said.
“Having a situation where withdrawing stimulus while interest rates remain very low for a very long time is likely to create imbalances in the economy, contributing to surging house prices.”
The key concern among economists is a growing divergence between rising home values and the need for budget deficit repair.
Emmett said she had been surprised at how quickly the federal government had moved to “reframe the discussion around debt reduction and balance sheet repair”.
The prime minister flagged the federal government would start to look at budget repair measures once unemployment was below 6 per cent.
“The RBA thinks we need unemployment down around 4.5 per cent to generate appropriate wage growth to achieve their inflation target."
Corelogic head researcher Tim Lawless said there was no evidence of a housing bubble yet, but said he expected things would change when the HomeBuilder stimulus package was withdrawn.
“First home buyer activity will fade in the second half of the year,” Lawless said.
“When we combine those economic stimulus packages together it is a loss of a leg up which will result in less first home buyer activity.”
Managing director of Chinese-backed property group Jinding Liz Ronson spoke on a panel and said they were anticipating a “slow down” when HomeBuilder and stamp duty concessions in Victoria dried up.
“HomeBuilder has been so significant for everyone in the house and land space,” Ronson said.
“Stamp duty and the pull forward it had for first home buyers has been incredible. I’m not concerned about (the withdrawal of stimulus packages) yet.
“In Victoria in the land space there has been an 11.5 per cent increase in the last six months, a huge uptick, but not over what it was in 2017.”
“There will be a slow down…there will be a bit of a lag when we come off that stamp duty [concession]. But we are seeing investors starting to come back into the market.”