One of North Sydney's best-known commercial buildings could become hundreds of new homes, with insurance giant Zurich Australia lodging a State Significant Development Application (SSDA) to transform 5 Blue Street into a mixed-use residential development above North Sydney Station.

Rather than demolishing the existing building and starting again, Zurich is proposing an adaptive reuse project that would convert the landmark office building into a 15-level residential development delivering 62 apartments, 86 affordable co-living dwellings, activated retail and significant upgrades to the Blue Street Plaza.

The proposal reflects a growing trend of commercial property owners repositioning ageing office assets into residential housing as Sydney grapples with housing supply shortages and changing workplace demand.

<img alt="Zurich" data-entity-type="file" data-entity-uuid="0bba7d12-06dc-4375-aad7-238c94b21ac5" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-22%20at%2010.42.05%E2%80%AFAM.png?VersionId=NJl5oLAEBDGuPmY3RnyliKODjMc8lvRh" />

Located directly above North Sydney Metro and train station, the 3,051 sqm site occupies one of the most strategically positioned parcels of land on Sydney's Lower North Shore.

Designed by fjcstudio, the proposal seeks to retain and adapt much of the existing structure while creating a contemporary residential address that better connects with the public domain surrounding North Sydney Station.

The application proposes two basement levels, ground floor retail, affordable co-living accommodation across the podium levels, and apartments above, while preserving and enhancing the publicly accessible Blue Street Plaza.

Rather than pursuing maximum apartment numbers, Zurich has opted for a housing mix heavily weighted towards larger owner-occupier residences.

The proposal includes 62 build-to-sell apartments comprising 12 one-bedroom, 19 two-bedroom, 29 three-bedroom apartments and two premium penthouses. It also incorporates 86 affordable co-living dwellings, which would be managed in perpetuity by a Community Housing Provider.

That balance between traditional apartments and affordable housing reflects the NSW Government's push to increase housing diversity around major transport infrastructure.

The proposal has been lodged concurrently with a rezoning application, with Zurich arguing the site is ideally positioned to support additional housing given its immediate proximity to public transport, employment and services.

"The proposal aims to respond to the housing challenges facing Sydney through the delivery of diverse housing types in a highly accessible location," the design report by fjcstudio states. It also seeks to improve pedestrian amenity through upgrades to Blue Street Plaza while creating a high-performing residential building that responds to the surrounding context.

<img alt="Zurich" data-entity-type="file" data-entity-uuid="36082e15-c636-4481-bb68-5a5f6443fe39" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-22%20at%2010.41.36%E2%80%AFAM.png?VersionId=5P6VD.fvmqjQfIG3TWWMRXxQWiQBjeFB" />

Rather than replacing the commercial building, fjcstudio has developed a design that works with the existing structural framework above the rail corridor, an approach that significantly reduces demolition while allowing the site to be repositioned as a mixed-use residential precinct.

The existing structural constraints have informed much of the building's design, including its relationship with Blue Street and surrounding public spaces.

The building has been designed as a slender tower rising above a clearly defined podium, with vertically expressed façades intended to reduce the perceived bulk while reinforcing North Sydney's emerging skyline.

According to fjcstudio, the architectural language responds directly to the surrounding commercial towers while maintaining a finer grain expression more closely aligned with the neighbouring Lavender Bay streetscape.

The tower incorporates articulated façade elements, landscaped podium edges and recessed upper levels to soften its appearance and improve pedestrian amenity below.

A significant component of the proposal is the revitalisation of Blue Street Plaza.

The existing public space has long served as one of the primary pedestrian connections between North Sydney Station, Greenwood Plaza and Blue Street, yet its role is expected to become even more important following the opening of Sydney Metro.

Zurich's proposal seeks to strengthen that role by improving landscaping, introducing new retail frontages, enhancing pedestrian permeability and creating more active edges throughout the day and evening.

Ground floor retail would wrap the plaza, while separate residential and co-living entries have been designed to improve wayfinding without reducing street activation.

Landscape design has been integrated throughout the podium and public realm, softening what is currently one of the most heavily urbanised parts of North Sydney.

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fjcstudio has carefully oriented apartments towards Sydney Harbour and the CBD while using privacy blades and articulated façades to minimise overlooking between neighbouring buildings.

Large framed openings along the western elevation maximise harbour outlooks, while the eastern apartments have been angled towards the south-east to improve privacy from neighbouring development.

The project forms part of the continuing transformation of North Sydney from a predominantly commercial CBD into a genuine mixed-use city centre.

Since the completion of Victoria Cross Metro Station, developers have increasingly shifted their attention towards residential projects capable of leveraging the area's unparalleled transport connectivity.

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FiveX recently lodged plans for a 61-storey, 490-apartment tower that would become one of the tallest residential buildings in North Sydney if approved.

Aqualand continues to expand its Lower North Shore presence following the completion of AURA on Walker Street and its recent St Leonards and Roseville proposals.

Developers are also progressing projects throughout Walker Street, Miller Street and the Victoria Cross precinct as demand for well-located owner-occupier apartments continues to strengthen.

Joel Robinson

First look: Zurich targets North Sydney office conversion with 148-unit proposal above Metro station

Busy developer Aqualand Prestige has formally taken the next step in its expansion across Sydney's Lower North Shore, lodging a State Significant Development Application (SSDA) for its long-held Archer Street site in Chatswood.

The application covers <a href="https://www.apartments.com.au/new-apartments/51-55-archer-street-chatswood-nsw-2067">51-55 Archer Street</a>, a 1,767 sqm amalgamated site on the eastern edge of the Chatswood CBD, where the developer is seeking approval for a 45-level mixed-use tower delivering 114 apartments, including a significant affordable housing component, alongside retail, commercial space and six basement levels of parking.

The SSDA marks the latest milestone for a project Aqualand has been quietly progressing over the past two years. The developer first secured the site for its Aqualand Prestige platform before undertaking an alternative design excellence process with PTW Architects, ultimately avoiding a formal design competition through the Housing Delivery Authority pathway.

The proposal has evolved considerably from Aqualand's original concept. The revised scheme has been designed around larger owner-occupier product, with an unusually high proportion of three and four-bedroom apartments, targeting the more affluent buyer profile, and downsizer, emerging across the North Shore.

<img alt="Archer St" data-entity-type="file" data-entity-uuid="0171204c-5811-41b5-9b09-2335d1b7c3d0" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-22%20at%208.52.48%E2%80%AFAM.png?VersionId=6YTuxfq.puZo7k2wbfgemcO5K3QfXYGQ" />

The 114-apartment mix comprises six studios, 27 one-bedroom apartments, 18 two-bedroom apartments, 50 three-bedroom residences and 13 four-bedroom homes. A quarter of the building will be dedicated to affordable housing, well above the mandated 15 per cent&nbsp;

PTW has structured the building vertically, with affordable housing across levels one to six, premium apartments through levels seven to 31, duplex skyhomes on klevels 32 to 43, a penthouse on level 44, and a rooftop plant level above. Six basement levels will provide resident parking and servicing.

The tower is proposed to reach approximately 154 metres, placing it among a growing collection of residential high-rises transforming Chatswood's skyline.

Rather than competing purely on height, PTW says the design has been driven by creating a slimmer tower capable of delivering significantly larger apartments.

"The primary objective of this project was to create a distinctive building that stands out from the recently approved or built structures in the Chatswood area," the design report states, noting the structural efficiency allows greater investment into apartment quality and resident amenity.

Residents would have access to more than 450 sqm of communal open space including landscaped gardens, swimming pool, rooftop entertaining areas, fitness spaces, community gardens, children's play areas and barbecue facilities.

A major focus of the design has been the public domain.

The ground plane has been opened up through landscaped terraces inspired by Willoughby's sandstone ridges, with native planting, public seating, artwork, retail activation and a series of gathering spaces intended to soften what has traditionally been a hard commercial streetscape.

The landscape strategy references Blue Gum forests once common throughout the area, while incorporating Indigenous storytelling, public art and lighting installations to strengthen the connection to Country.

Chatswood has been one of Sydney's busiest apartment markets over the past 12 months, with a steady pipeline of both new project launches and fresh development applications.

Hyecorp recently launched Celine, a 122-apartment development just along Archer Street, while Changfa and Huirong Group are progressing The Anderson, an 84-apartment project on Anderson Street.

Develotek recently secured approval for a 101-apartment tower on Pacific Highway, while Tian An LFD received the green light for Hammond Greens, its apartment development on the edge of the Chatswood Bowling Club.

Commercial property developer FiveX is also making its move into the residential market. Last month it lodged plans for a 61-storey tower with 490 apartments, which, if approved, would become one of the tallest residential buildings in Chatswood.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/first-look-fivex-targets-chatswood-skyline-with-61-storey-tower-after-north-sydney-plans">First look: FiveX targets Chatswood skyline with 61-storey tower after North Sydney plans</a>

Aqualand is also expanding its development pipeline following the launch of its luxury residential brand, Aqualand Prestige. The developer has delivered a string of high-end apartment projects across Sydney's affluent suburbs over the past decade, most recently AURA by Aqualand on Walker Street in North Sydney.

[smartcode_project:default project_id=30959 project_image_fid=292863]

It has since quietly assembled its next wave of projects.

Earlier this year Aqualand launched Boronia in Roseville, a boutique 111-apartment development on Larkin Street. The project is one of the first significant apartment developments to launch in the suburb ahead of what is expected to become one of Sydney's most active new housing precincts under the NSW Government's Low and Mid-Rise Housing reforms, which allow greater density around train stations.

[smartcode_project:default project_id=152095 project_image_fid=373685]

The developer has also lodged plans for a two-tower, 413-apartment development on Herbert Street in nearby St Leonards, further strengthening its presence across the Lower North Shore.

Beyond that, Aqualand remains behind the final stage of Barangaroo, where plans will deliver a five-hectare mixed-use precinct comprising new homes, retail, hospitality and community facilities, alongside a new Metro entrance and more than two hectares of public open space, completing the Barangaroo precinct.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/central-barangaroo-development-takes-big-step-with-concept-proposal-approval">Central Barangaroo development takes big step with concept proposal approval</a>

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/first-look-aqualand-joins-st-leonards-apartment-party">First look: Aqualand joins St Leonards apartment party</a> 
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First look: Aqualand pushes ahead with Chatswood apartment tower as SSDA lodged for Archer Street

Mass timber is becoming an increasingly popular construction material in apartment developments, but Adelaide developer <a href="https://www.apartments.com.au/developers/otello">Otello</a> is taking the approach a step further.

At its new <a href="https://www.apartments.com.au/new-apartments/flowe-bowden-18-gibson-street-bowden-sa-5007">Flowe Bowden</a> development, the exposed cross-laminated timber (CLT) structure isn't just about reducing the building's environmental footprint. It also forms the foundation of a broader wellness strategy, influencing everything from indoor air quality and natural materials to the way residents move through and experience the building.

The 115-apartment mixed-use development, designed by Melbourne-based architecture practice Fieldwork, will occupy a prominent island site opposite Bowden Village Reserve, combining one, two and three-bedroom apartments with retail and a dedicated wellness destination.

[smartcode_project:default project_id=152022 project_image_fid=375528]

Wellness isn't confined to a gym or shared resident facility at Flowe. Instead, Fieldwork embedded the concept into the building itself.

The development has been split into two residential wings connected by a naturally ventilated central breezeway, replacing traditional enclosed corridors with open-air walkways that improve natural light, encourage cross ventilation and create more opportunities for neighbourly interaction.

"Rather than treating wellness as something that only happens on the ground floor, our response integrates it throughout the building, which led us to ask what it really means to design a healthy building," Fieldwork Director Quino Holland said.

[smartcode_project:default project_id=152022 project_image_fid=375531]

The building's architecture also reflects Bowden's industrial heritage. The lower podium references the area's historic brick and sandstone buildings, while the upper levels transition to exposed CLT, allowing the timber structure to become a defining feature throughout the apartments and shared spaces.

The use of mass timber sits alongside a range of sustainability initiatives, including a fully electric, gas-free design, rooftop solar and a targeted 5 Star Green Star rating.

[smartcode_project:default project_id=152022 project_image_fid=375524]

Inside the residences, the focus remains on natural, durable materials. Blackbutt engineered timber flooring, exposed CLT ceilings, porcelain surfaces and warm timber joinery create a calming interior palette, while low-VOC finishes and responsibly sourced materials have been selected to improve indoor air quality.

Kitchens have been designed as the centrepiece of each apartment, featuring porcelain island benchtops, timber-look cabinetry and brushed steel tapware, with layouts that maximise natural light and ventilation.

[smartcode_project:default project_id=152022 project_image_fid=375530]

The more traditional interpretation of wellness comes in the form of Level Eleven, a two-storey wellness club spanning the ground floor, mezzanine and first floor.

The facility will include a gym, yoga and reformer Pilates studios, Finnish and infrared saunas, magnesium hot and cold plunge pools, and dedicated recovery spaces. Unlike many residential wellness facilities, Level Eleven will also operate commercially, allowing the broader Bowden community to access the venue while giving residents exclusive membership benefits.

The ground floor has also been designed around everyday living. A café overlooking Bowden Village Reserve will activate the street frontage, while a bike workshop with tool storage, co-working space and dog wash has been incorporated to support daily routines and encourage interaction between residents.

"Flowe brings together my two biggest passions, creating places and creating healthier lives," Otello founder Daniel Harris said.

"We wanted to create something Adelaide hasn't seen before, a genuinely healthy building, where the way you live is lifted without even trying."

Flowe is positioned directly opposite Bowden Village Reserve and within walking distance of Bowden Railway Station and the Adelaide Entertainment Centre, placing future residents just minutes from the Adelaide CBD while remaining connected to one of the city's most established urban renewal precincts.

[smartcode_project_cta:default project_id=152022]

Otello launches wellness-focused Flowe Bowden with Adelaide-first mass timber apartment design

Not all apartment amenities are immediately visible.

Swimming pools, gyms, rooftop terraces and residents' lounges have long featured on buyers' wishlists, but as the way Australians live has changed, so too have the features that make apartment living more convenient.

Increasingly, buyers are placing value on the practical aspects of day-to-day life. Fast internet, EV charging, secure bike storage, flexible workspaces and parcel management are becoming just as relevant as lifestyle amenities, reflecting changing habits and expectations.

Online shopping has been one of the biggest drivers of that shift.

Australians spent a record $82.6 billion shopping online in 2025, with almost one in every four retail dollars now spent digitally, making parcel deliveries a routine part of everyday life rather than an occasional convenience.

For apartment residents, however, receiving those deliveries isn't always straightforward.

Without someone home to accept a parcel, deliveries can be redirected to a nearby Post Office, left in building foyers or common areas, or require building management to temporarily store packages. As apartment living continues to grow across Australia's cities, parcel management has become an increasingly important consideration for both residents and developers.

Australia Post's Parcel Locker network is one response to that shift.

<iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen="" frameborder="0" height="315" referrerpolicy="strict-origin-when-cross-origin" src="https://www.youtube.com/embed/KPZ9j5FRdsQ?si=Qztc1dNP3ZvEIUhb" title="YouTube video player" width="560"></iframe>

Rather than relying on home delivery, eligible parcels can be directed to a nominated Parcel Locker, where they're securely stored until collected. Once a parcel arrives, residents receive a notification through the AusPost app or SMS and can retrieve it using a one-time code or QR code at a time that suits them.

The network has expanded to more than 1,500 locations nationwide, with Parcel Lockers positioned at Post Offices, shopping centres, supermarkets, transport hubs and, increasingly, within or alongside residential developments.

That growing presence reflects a broader change in how apartment buildings are being planned.

Developers are increasingly considering the operational side of apartment living alongside traditional lifestyle amenities. Just as secure mailrooms, bicycle storage and EV charging have become more common inclusions, parcel management is emerging as another feature that supports everyday convenience.

It also helps preserve the arrival experience within a building. Carefully designed lobbies and communal spaces can quickly become cluttered when deliveries accumulate, while secure parcel solutions reduce the likelihood of missed deliveries or parcels being left unattended.

For buyers comparing apartments, these everyday details are becoming part of the decision-making process.

Location, floorplans and finishes remain fundamental, but the features that simplify daily life are carrying greater weight than they once did. As online shopping continues to shape consumer behaviour, secure parcel delivery is increasingly becoming another amenity worth looking for.

Parcel delivery is joining the apartment amenity checklist

Inca Property Group has lodged a State Significant Development Application (SSDA) for Dawn, a 53-apartment oceanfront development overlooking Mona Vale Beach.

The proposal, at 35-39 Darley Street East, would replace an existing 18-apartment strata building with a new owner-occupier-focused development comprising 53 two and three-bedroom apartments, including nine affordable built-to-rent residences delivered under the State's infill affordable housing scheme.

Positioned on a 2,679 sqm elevated site around 280 metres from Mona Vale Beach, the development has been designed to maximise panoramic ocean views while responding to the site's sloping topography.

<a href="https://www.apartments.com.au/developers/inca-property-group">Inca Property Group</a> Managing Director Josh Thompson said the State Significant pathway provided greater certainty for projects of this scale.

"This State Significant pathway gives the team real certainty to progress <a href="https://www.apartments.com.au/new-apartments/dawn-35-39-darley-street-east-mona-vale-nsw-2103">Dawn</a> through to completion," Thompson said.

"It allows us to acquire a one-off site, design it carefully and deliver the right offering for the suburb, assessed by the NSW Government's planning department."

The project is one of the first developments in the area to be assessed under the NSW Government's Low and Mid-Rise Housing policy, with the site sitting on the edge of the policy's designated inner area.

The proposal includes three basement levels providing 124 car spaces, alongside a range of resident amenities including a swimming pool, gym, sauna, wellness facilities and private plunge pools for selected ground-floor and penthouse apartments.

<img alt="Dawn" data-entity-type="file" data-entity-uuid="fc1a1daf-0ce4-4f12-9076-b1fa553c7a91" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-21%20at%208.42.11%E2%80%AFAM.png?VersionId=4GZ9h.gpNkTljbxyAET8Jfhv51XUamDm" />

Thompson said Dawn had been designed specifically for owner-occupiers and downsizers, a buyer profile that has driven demand across Inca's recent Upper North Shore developments.

"The majority of buyers in our recent North Shore projects have been downsizers, and we are learning exactly what this market is looking for. Beyond the location itself, we have included resort-style amenities to deliver a genuine lifestyle offering," Thompson said.

Located within walking distance of Mona Vale Beach, the town centre, Mona Vale Golf Club and the Royal Motor Yacht Club, Dawn represents Inca's first Northern Beaches project following the sell-out of Tara on Park in Waitara and Ellis Residences, currently under construction in St Ives.

Construction will be undertaken by Inca's in-house construction arm, GOP Constructions.

Dawn is the latest major apartment proposal for Mona Vale, with the suburb emerging as one of the key beneficiaries of the NSW Government's new Low and Mid-Rise Housing policy.

New developer One Living, led by industry veteran Joseph Scuderi, recently secured a site on Mona Vale Road, on the border of Mona Vale and Pymble, where it is planning around 140 apartments.

IPM is also planning its third project in Mona Vale, significantly increasing the scale of its previous developments with an 82-apartment proposal at <a href="https://www.apartments.com.au/new-apartments/159-167-darley-street-west-mona-vale-nsw-2103">159-167 Darley Street West</a>, opposite Bayview Golf Course and less than 800 metres from Mona Vale town centre.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/one-living-enters-sydneys-new-apartment-market-with-northern-beaches-site-acquisition">One Living enters Sydney's new apartment market with Northern Beaches site acquisition</a>

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/first-look-ipm-plans-third-mona-vale-project">First look: IPM plans third Mona Vale project</a>

First look: Inca eyes Mona Vale with State Significant DA for Dawn apartments

Budget

<html><body>
GUEST OBSERVATION
The tens of thousands of young people who were protesting at the school climate strike two weeks ago know that they are being left a stinking great environmental mess to clean up.
But I suspect that many are yet to appreciate that this is not the only mess they’ll be left with.
Australia’s tax and welfare system is built around an <a href="https://grattan.edu.au/report/the-wealth-of-generations/" target="_blank">implicit generational bargain</a>. Working-age Australians, as a group, are net contributors to the budget – they pay more in taxes than they receive in either benefits or spending. These contributions support older Australians who take a lot more out in spending and pension payments than they contribute in taxes.
Today’s working-age Australians expect the generation after them to support them in the same way as they age. But this longstanding bargain is under threat.
A bargain betrayed
The number of working-age Australians for every person aged 65 and over fell from 7.4 in the mid-1970s to 4.4 in 2015, and is projected to fall to just <a href="https://treasury.gov.au/publication/2015-igr">3.2</a> in 2055.
This could be seen as just bad luck for today’s young people. There are swings and roundabouts we all have to live with.
But what’s less easy to accept is a series of policy decisions that have substantially increased the size of the transfers workers will have to make to older people – expanding their good fortune at the expense of the generations who come out of them.
Let me tell you how.
Budgets have been tilting the scales
First, future pension costs have climbed as a result of deliberate policy decisions to boost the rate and eligibility for the pension. As a share of average weekly earnings it has climbed <a href="https://www.propertyobserver.com.au/https://www.abs.gov.au/ausstats/abs@.nsf/mf/6302.0" target="_blank">from 30% to 37%</a> over the past two decades.
The ever-widening gap between the rate of the pension and Newstart, and the increasing ease with which retirees can get at least some pension, speaks to the political perception that there are deserving and undeserving welfare recipients, “lifters” and “leaners,” in the words used by Treasurer Joe Hockey in the 2014 budget.
Newstart recipients now live on A$40 a day compared to <a href="https://www.propertyobserver.com.au/http://guides.dss.gov.au/guide-social-security-law/5/1/8/20" target="_blank">A$65 for full-rate pensioners</a>.
Second, health spending is climbing. Commonwealth health spending has been climbing by 3% a year over and above inflation for the past decade.
State health spending has climbed 3.7% a year.
The increase has been particularly stark for those in their 70s and 80s – with average health spend per person increasing by over A$4,000 <a href="https://www.propertyobserver.com.au/https://www.abs.gov.au/AUSSTATS/abs@.nsf/mf/6537.0" target="_blank">in just twelve years</a>.
Most Australians support increased health and pensions spending. They might not, or might not support it as much, if they realised where it was coming from.
A series of tax policy decisions over the past two decades – tax-free superannuation income in retirement, refundable franking credits and special tax offsets for seniors – have meant we now ask older Australians to contribute a lot less than we once did.
Incomes for households over 65 have <a href="https://www.propertyobserver.com.au/https://www.abs.gov.au/AUSSTATS/abs@.nsf/mf/6537.0" target="_blank">more than doubled</a> over the past 25 years, substantially faster growth than for households under 55.
But households over 65 pay virtually <a href="https://www.propertyobserver.com.au/https://www.abs.gov.au/AUSSTATS/abs@.nsf/mf/6537.0" target="_blank">no more income tax</a> than people that age did 25 years ago. Indeed, the share of older households paying any tax has fallen from 27% in the mid 1990s to 17% today.
And that has contributed to a tax system where someone’s date of birth is almost as important as someone’s income in determining their tax contribution.
An older household earning A$100,000 a year pays on average less than half the total tax of a working-age household earning the same amount. Considered another way, an older household on A$100,000 pays about the same tax as a working-age household on A$50,000.
And these calculations exclude dividend imputation franking credit refunds that largely benefit older Australians. There is simply no policy justification for this degree of age segregation in the system.
We are facing intergenerational theft
One argument that is sometimes advanced to defend age-based tax breaks is that older Australians have “paid their taxes”. But in a generational sense, this argument does not hold water. Younger households today are underwriting the standard of living of older households to a much greater extent than in the past.
People born in the late 1940s, at the beginning of the baby boom generation, reached their peak contribution to the tax system in their early forties – and at that point they were contributing an average of A$3,200 a year to support older generations in retirement. An average 40-year-old today, born at the tail end of Generation X, is paying an inflation-adjusted <a href="https://www.propertyobserver.com.au/https://www.abs.gov.au/AUSSTATS/abs@.nsf/mf/6537.0" target="_blank">A$7,300 a year</a>.
That is <a href="https://www.propertyobserver.com.au/https://www.abs.gov.au/ausstats/abs@.nsf/mf/6302.0" target="_blank">more</a> than they are contributing to their own retirement through compulsory superannuation.
Under current policy settings, the child of today’s 40-year-old will need to pay around A$11,400 a year by the time he or she reaches 40 just to sustain the current levels of benefits in retirement.
And ever-bigger budget deficits
In an economy that is growing, it can be sustainable for each generation to take out more than it put in, knowing it will be easier for the next one to put money in, but the sheer size of this growth in payments far exceeds that capacity.
That’s why the treasury produces an <a href="https://treasury.gov.au/publication/2015-igr" target="_blank">Intergenerational Report</a> every five years to remind us how ugly business-as-usual looks.
Without policy changes, budget deficits are set to grow ever bigger (even after what will probably be the temporary return to surplus promised in Tuesday’s budget) and net debt will expand to uncomfortable levels.
The unwanted fiscal inheritance will fall on the generation of Australians that have seen its incomes and wealth stagnate – the generation that has missed the property boom and is entering the workforce during a period of flatlining real wages.
So what would a budget that seriously tackles these issues look like?
We could still put things right
First, it would wind back some of the tax concessions for older Australians who can afford to make a contribution. It is simply <a href="https://grattan.edu.au/report/age-of-entitlement/" target="_blank">no longer sustainable</a> for comfortably off older Australians to opt out of taxes for two or three decades they are in retirement. The obvious place to start would be a <a href="https://grattan.edu.au/report/super-tax-targeting/" target="_blank">tax on superannuation earnings</a>, and winding back the <a href="https://grattan.edu.au/report/money-in-retirement/" target="_blank">seniors and pensioners tax offset</a>.
The politics isn’t easy. The reaction to Labor’s franking credit policy gives a sense of what governments face when trying to wind back these transfers. The public hearings for the inquiry into the franking credits policy sometimes looked more like the frontline in a generational war than a staid government inquiry.
Here the contrast with the climate strike is difficult to ignore: while older Australians picket for their franking credits, young people are protesting for their very future.
Second, there would be no decisions that further undermine the structural position of the budget. If there is one lesson to take from the past two decades it is that commodity windfalls come and go. We should not lock in higher recurrent spending, or offer another round of tax cuts, every time revenues surprise on the upside. Nor should we pile uneconomic infrastructure investments off budget. To do so is to further weaken the generational bargain.
What if Tuesday’s budget was a start?
Ahead of tomorrow’s budget I should say that I hope I’m wrong.
I hope this government will use this budget and its election commitments to address our long-term challenges. I hope we can discuss generational fairness without it descending into generational warfare.
I hope none of us would want our legacy to be mortgaging our children’s environment and their economic future.
<hr>
Danielle Wood presented a longer version of this article as part of the <a href="https://esawen.org.au/" target="_blank">Women In Economics</a> federal budget perspectives event at the National Press Club in Canberra on Wednesday March 27, 2019. <a href="https://iview.abc.net.au/show/national-press-club-address" target="_blank">Watch the discussion here</a>.<img src="https://counter.theconversation.com/content/114508/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;">
Danielle Wood, Program Director, Budget Policy and Institutional Reform, Grattan Institute
This article is republished from <a href="http://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/expect-a-budget-that-breaks-the-intergenerational-bargain-like-the-one-before-it-and-before-that-114508" target="_blank">original article</a>.
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j.ballantyne1990-6AQqhLzZaK

Expect a budget that breaks the intergenerational bargain, like the one before it, and before that

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EXPERT OBSERVATION
New Zealand’s Labour-led coalition government used its first budget to drive step changes in social and environmental outcomes. The investment approach to public policy has become the new orthodoxy for governance.
The investment approach can be defined as using evidence to quantify a public problem and then fund interventions that are likely to improve outcomes and therefore reduce future costs to government.
When the government released its first budget yesterday, Prime Minister Jacinda Ardern and Finance Minister Grant Robertson delivered a document that stands in stark contrast to those of the National government that led the country from 2008 to 2017. This is most apparent in its approaches to social services and environmental protection.
Political and economic context
The coalition government comprises three parts. The centre-left Labour Party is joined by New Zealand First, which espouses economic nationalism. The Green Party, which emphasises good environmental stewardship, agreed to give confidence and supply. The budget could easily have been a train wreck. Its coherence is a major accomplishment.
With the New Zealand economy nearing a decade of continuous growth, the government’s revenue base is sound. This has allowed it to fund new initiatives while keeping the budget in surplus. The government has shown a strong desire to maintain sound economic management, but it is not prepared to sacrifice other valued outcomes to hasten the paying off of government debt. As Robertson said in his budget speech:
"We are committed to being responsible – not just fiscally, but socially and environmentally."
Big priorities
The budget brought good news for health, education, housing, transport and the environment. It also heralded more incentives for business innovation.
In health, the big news concerned reducing the cost of visiting a doctor and improving access to primary care, as well as extending cancer screening and easing access to mental health services.
In education, the government had previously announced its fee-free post-school training and education policy. This means people will be able to attend university and undergo other tertiary training without having to pay fees for the first year. Education also got a boost for the early years, with a large amount of new funding to meet increasing demands for early childhood education.
Auckland’s recent immigration-driven population growth and soaring property prices have had two adverse effects. Homelessness has become an acute problem and bottlenecks have arisen across transportation networks. The 2018 budget made provision for increasing the stock of state housing – the previous government had started selling it off. The budget also provided large amounts for transport infrastructure.
The Greens received their wish, with a $181.6 million funding boost for the Department of Conservation. This was the largest increase since 2002.
Investment approach
In its first budget, the government has adopted the language of investment. This represents both continuity and change.
Under the previous National government, New Zealand experimented with treating public policies as investments. Datasets were developed to gain insights into how various risk factors in young people translated into subsequent costs for taxpayers. Armed with these insights, the government redesigned social services to better meet the needs of those at risk. Australia emulated some of this.
Public policies that help people participate in society and contribute to the workforce generally meet popular support. But the National government didn’t gain that popularity dividend. The likely reason is that its leaders focused on the fiscal savings to be achieved. Individual and social well-being got short shrift.
Times have changed. Grant Robertson made this very clear. Note the language: "Budget 2018 lays the foundations for New Zealanders to have better lives in the decades to come."
Talking of education, he said: "Better education leads to better lives, and today we begin those investments with new energy."
About addressing child poverty he said the aim was that: "New Zealand truly becomes the best place in the world to be a child … if we improve the well-being of our children, we will be a rich society indeed."
Robertson applied the language of investment in talking about rehabilitating prisoners, addressing climate change and foreign policy. The investment approach being proposed is in accord with international evidence of good practice.
<img src="https://counter.theconversation.com/content/96811/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">With its 2018 budget, this New Zealand government has emphasised that it does things differently. While building on established policy frameworks, Jacinda Ardern and her colleagues are showing how responsible economic management and adoption of public policies that are known to be effective can improve the well-being of all citizens.
Michael Mintrom, Professor of Public Sector Management, Monash University
This article was originally published on <a href="http://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/nz-budget-2018-government-adopts-investment-approach-to-achieve-valued-outcomes-96811" target="_blank">original article</a>.
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NZ budget 2018: government adopts investment approach to achieve valued outcomes

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A new property survey by lender ME reveals 22% of home buyers exceed their spending limit when they purchased their property.
Almost half, some 46% exceeded it by $30,000 or more.
Some 30% exceeded their budget by $50,000 or more.
There were 10% exceeded their budget by $150,000 or more. 
The most common reasons for exceeding their self-imposed limit were:
+ falling in love with the property (52%);
+ underestimating the budget required (28%);
+ impatience (20%);
+ underquoting by an agent (15%);
and getting caught up in a bidding war (12%). 
Some two thirds of those who went over their budget admitted some kind of negative consequence as a result, either financial or emotional.
ME Head of Home Loans, Patrick Nolan, said it was important "to stick to your spending limits.”
He added banks were legally obligated to only lend an amount you can afford to repay over the life of the loan, including at a higher interest rate.
ME’s survey is based on a representative sample of 1,000 Australian property buyers; completed in March 2018.
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Underquoting by estate agents blamed by 15 percent of buyers for exceeding their property purchasing budget

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The West Australian government is predicting the state's five-year residential property downturn is set to end.
Forecasts in the McGowan government's maiden budget suggest a modest rebound in Perth's median house price in 2018.
The government budget papers tip the median house price to improve 0.7 per cent next year then 1.5 per cent in 2019-20 and 2.7 per cent in 2020-21.
This follows a 1.3 per cent fall during this financial year. 
House prices also fell 2.8 per cent in 2016 and 1.2 per cent in 2015. 
The government blamed the downturn on a housing oversupply between 2013 and 2016.
The government will impose a 4 per cent tax on property purchases by offshore buyers from January 1 2019, which will generate $49 million over the forward estimates. 
Lino Iacomella, Property Council WA Executive Director said the McGowan State government has delivered a fair budget for tough times.
“The decision not to increase key WA property taxes in the 2017/18 budget is welcome and it recognises that the property sector has carried its fair share of the burden in earlier budgets," he said.
“Not increasing key property taxes like land tax and stamp duty will give added confidence to the recovery in WA’s property market.
“The focus on METRONET and infrastructure in the WA Budget is welcome news for the property and construction industry."
</div>
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WA budget tips modest price recovery for Perth

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<img src="https://counter.theconversation.edu.au/content/80200/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Government strategies to manage population ageing largely assume that older Australians are home owners.
There is often an implied association between home ownership and ageing well: that is, older Australians who own homes are seen as having made the right choices and as being less of a budget burden. 
The problem with this approach is that not everyone is or can be a home owner. A great many households are, for many reasons, locked out of home ownership.
My analysis of 20 years of federal government ageing strategies and age-focused analyses of the housing system shows that Australian governments of all persuasions have shared three common beliefs about the economic value of home ownership in later life. They have promoted home ownership as:
<ul>
<li>
somewhere to live;
</li>
<li>
an asset to rent or sell; and
</li>
<li>
a way to access and spend equity.
</li>
</ul>
<h2>Somewhere to live</h2>
Australian governments have valued and promoted home ownership because it provides somewhere to live in later life, with no regular ongoing costs such as rent.
As a 2015 Productivity Commission report argued:
"Because the majority of older Australian households own their homes outright, their housing costs are typically very low, yet they enjoy the benefits from continuing to live in their homes. […] This source of value (relative to overall household expenditure) becomes markedly more important with increasing age."
Owning a home is seen as largely cost-neutral, though the costs of maintaining housing are recognised in some documents. In contrast, the privately rented home is discussed as an ongoing financial burden. 
Home ownership is seen to provide economic security by freeing up income, so that people have greater disposable income for discretionary lifestyle spending in later life.
In other words, owning a home enables home owners to be consumers. While this can be seen as ensuring quality of life in older age, it also connects strongly with a broader government goal of growth in consumer spending.
<h2>An asset to rent or sell</h2>
Governments have also valued home ownership as an asset that people can rent out or sell so they can pay for costs associated with moving to “age-appropriate” housing. This includes paying bonds for retirement villages or nursing homes.
It has been suggested that older home owners are better equipped than, say, renters with the financial resources to make “appropriate” choices for housing and care in later life. 
For example, they might be able to afford to buy housing within an “active lifestyle community”. And any leftover funds can fund higher levels of consumption in retirement.
So, home ownership has been understood as an individualised way of managing the risks of ageing.
People who own higher-value housing are better off in this scenario, as they will reap greater profits if they sell their home, or secure a higher income if they rent it out. 
However, these benefits can be difficult to access. This is due to the very high costs of housing in some cities, and the risks associated with some retirement housing.
<h2>Accessing (and spending) housing equity</h2>
The third way governments have seen value in home ownership is through new financial products that enable home owners to access – and spend – home equity.
Emphasis is usually placed on the capacity to make a proportion of the home “liquid” while retaining overall ownership and the ongoing right to live in the house. For governments, this has two benefits:
<ul>
<li>
It enables older people to pay for more of the costs of older age, including for aged care. This is a way of shifting these costs away from the government in situations where people are seen as having the capacity to co-contribute.
</li>
<li>
It enables home owners “to pay for additional services over and above the approved care”, according to the Productivity Commission. This supports government goals for economic growth by expanding the aged care market.
</li>
</ul>
Funds released in this way enable lifestyle “choice” and better care in older age.
<h2>Home owners are winners</h2>
These three benefits suggest a system in which home owners are equipped with greater spending power – and hence choice – in older age. They are likely to have access to higher levels of care, and to be more able to make choices that enable them to age “well”.
Quite curiously, in some documents baby boomers are distinguished as desiring higher-quality services in later life. The capacity to access and spend home equity is seen as enabling this possibility.
The promotion of home ownership as a way of funding care in later life is part of a broader policy trend toward making people personally responsible for the opportunities they have in life. While this may make intuitive sense, it is unjust because it ignores factors that shape income and investment opportunities, including home ownership, over the life course.
Data from the 2016 Census show that households living on the median single-person income could not afford the median rent in Australia, and that home ownership is increasingly out of reach. 
Single older women are among the fastest-growing group of homeless people in Australia. And, for non-home owners, poverty in later life is on the rise.
Australia needs ageing strategies that do more than assume everyone is a home owner – or that home ownership is a simple choice.
<a href="https://theconversation.com/profiles/emma-power-250930" target="_blank">Emma Power</a> is Senior Research Fellow, Geography and Urban Studies, Western Sydney University and author for <a href="https://theconversation.com/au" target="_blank">The Conversation</a>.
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jchancellor-FAypfDUnLy

Three reasons the government promotes home ownership for older Australians

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The federal budget measures and state announcements to make housing more affordable seems to be having little impact on single people and the younger generation, a recent survey has found.
Although both NSW and Victoria have abolished stamp duty for first home buyers on properties up to 650,000 and 600,000 respectively, the fact is that home prices in the popular suburbs are almost always above these levels.
Any reduced or full stamp duty for properties exceeding these prices will still be hefty.
With it now taking an average of 8.4 years for a couple to raise the $214,600 deposit required for a median-price house in Sydney, single people in particular, who are having to stump up most of the cash on their own, might continue to struggle to get into the market as the new financial year progresses.
A recent Galaxy Research survey of 1,006 people for debt solutions company Fox Symes found that significantly more single people (27 per cent) say the issue of housing affordability is having a major impact on their life right now compared to couples (15 per cent).
In addition, home ownership continues to worry young people. A large 40 per cent of respondents aged 18 – 24 name it as their biggest financial concern, followed by 29 per cent of those aged 24 – 34, and 21 per cent of Gen X-ers aged 35-49. 
Some 19 per cent of Australians overall are stressed about the issue with the highest percentage (26 per cent) among those in NSW, where housing prices are the most expensive. This was followed by Queensland (17 per cent), Victoria (16 per cent), South Australia (15 per cent) and WA (11 per cent).
“Whilst some new budgetary reforms are now taking place including restrictions on foreign investment, I still think we need to have ongoing discussions regarding housing affordability,” said Fox Symes director Deborah Southon. 
“Nowadays it can be very difficult for people who are on their own to get into the housing market and remain there comfortably. Even if they do manage to scrape up the deposit and take the plunge, they may end up taking on a mortgage they can’t really afford. This could land them in debt if they’re forced to rely on credit cards to help pay for expenses.”
Southon suggested that single people may have into alternative strategies such as buying into the market with a friend or relative, or buying a cheaper investment property whilst continuing to rent in their desired area. 
“We need to continue to create more solutions to address this problem which could only worsen in years to come and lead to financial stress for many. The issue is far from over.”
Earlier this year, an HSBC survey found that home ownership among Australian millennials was among the lowest, with less than a third (28 percent) owning one. A majority cited high property prices as a major barrier.
The survey also found that nearly one in 10 Australians (8 per cent) also say uncertainty over whether banks will raise interest rates is making them nervous. New levies set for big banks could also be passed onto customers in the form of increased banking charges.
Other costs currently stressing people out which could escalate are electricity and gas costs (17 per cent) - set to rise with big providers AGL, EnergyAustralia and Origin Energy poised to hike prices up to 20 per cent extra, and education (5 per cent) which may result in fee increases for some schools under Gonski 2.0. 
Private health insurance costs (23 per cent), grocery prices (11 per cent) and childcare fees (4 per cent) are also causing headaches for Aussies.
“Unfortunately, debt is the inevitable outcome when we spend more than we earn and with so many costs on the rise it’s a very easy trap to fall into,” Southon says. “If we want to live within our means then we need to budget and consistently monitor what we spend – now more than ever.” 
Galaxy Research conducted the online survey amongst a nationally representative sample of 1,006 Australians aged 18 years and older covering: NSW, ACT, VIC, TAS, QLD, SA and WA.
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jonathanchancellor-7SQnKwU6yx

Budget moves fail to ease housing affordability concerns for singles, young 

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The new financial year has started with a slew of new or amended taxes, rules, grants and concessions, related to property, especially for foreign investors.
Federal changes  
<ul>
<li>First home buyers will be able to access specific voluntary contributions made in to superannuation after 1 July 2017. The voluntary contributions will be accessible by individuals from 1 July 2018. </li>
<li>There is a cap of $15,000 per year on the contribution to superannuation and a total of $30,000 can be contributed to the super fund. </li>
<li>Foreign tax residents will be charged a higher Capital Gains Tax withholding rate of 12.5%, up from 10%, and a reduced CGT withholding threshold of $750,000 (down from $2 million).</li>
<li>ATO will disallow deductions for travel expenses relating to inspecting, maintaining, or collecting rent for a residential rental property.</li>
<li>The major banks CBA, Westpac, NAB, ANZ and Macquarie will be charged a levy that is expected to add raise more than $6 billion and it is anticipated that there will be flow on increases in home and commercial lending rates.</li>
<li>In addition to these federal tax changes, there are state tax changes as well that will come into force from July 1.</li>
</ul>
NSW
<ul>
<li>The biggest changes are stamp duty concessions in NSW, with the tax abolished for first home buyers on existing and new properties up to $650,000 while discounts apply for properties up to $800,000. The First Home Owners grant is also available to new homes up to $600,000.</li>
<li>Also, only FHBs benefit with concession on residential off-the-plan purchases, getting up to 12 months to pay.</li>
<li>Application fees for foreign purchases of residential properties worth less than $10 million will also rise by 10 percent on the current fees.</li>
<li>In addition, vacancy taxes kick in for unoccupied properties more than six months. The charge will be equivalent to the relevant foreign investment application fee imposed on the property at the time it was bought by the foreign investor.</li>
</ul>
VICTORIA
<ul>
<li>First-home buyers in the city can get a $10,000 First Home Owner Grant but the state has incentivised buying in regional Victoria with a doubling of the grant.</li>
<li>Stamp duty abolished for first-home buyers for homes up to $600,000 and reduced for homes priced up to $750,000.</li>
<li>Victoria also launched a ‘Homes for Victorians’ pilot scheme where the state will co-purchase the home with the state government</li>
<li>For off-the-plan concessions, only first home buyers who entered into contracts from 1 July 2017 will be eligible.</li>
<li>The existing stamp duty exemption for transfers of properties between spouses will be removed (but the existing stamp duty exemption applicable to transfers of principal places of residence between spouses, and transfers following a relationship breakdown, will remain).</li>
<li>The state also announced earlier this year a vacancy tax to charge investors who leave their properties vacant for a length of time as a means to increase supply.</li>
</ul>
ACT
<ul>
<li>The ACT has also announced a land tax on vacant properties from July 2018.</li>
<li>Meanwhile, there will a rate rise of 7 percent on average from what the  government collects for Canberra homes. Unit rates will rise by an even higher 19 percent the coming financial year as the government changes the way it calculates rates for apartments and units. However, there is a $100 rebate to unit and apartment owners.</li>
</ul>
QUEENSLAND
<ul>
<li>In Queensland there will be a 1.5% surcharge for absentee payers of land tax, applying to land holdings of $350,000 or higher in addition to other land tax payable (does not apply to Queensland residents but anticipated to impact on property investment), according to a blog on Queensland Economic Advocacy Solutions (QEAS).</li>
<li>The state has also completely cut stamp duty on first-home buyer purchases of $600,000 or less and reduced it for homes priced up to $750,000.</li>
<li>To assist first home buyers entering the housing market, the Queensland First Home Owners’ Grant is being temporarily increased from $15,000 to $20,000 for contracts on newly constructed homes entered into between 1 July 2017 and 31 December 2017.  </li>
</ul>
NT
<ul>
<li>There’s an increase in the maximum stamp duty rate (from 5.45 percent to 5.95 percent) for conveyances, including landholder duty, for contracts signed on or after 1 July 2017 where the dutiable value is $3 million or more but less than $5 million, the rate is 5.75 percent of the dutiable value and where the dutiable value is $5m or more, the rate is 5.95 percent of the dutiable value, the eliteagent.com.au reported citing KPMG.</li>
<li>Meanwhile, first home buyers will see stamp duty abolished on purchases of homes up to $500,000, while discounts would be applied for properties up to $650,000, on established homes. </li>
</ul>
TASMANIA
<ul>
<li>The fee for issuing a Land Tax Search certificate will increase from $11.47 to $11.62 from 1 July 2017.</li>
<li>The first home owner grant of $20,000 has been extended one year from 1 July 2017 to 30 June 2018.</li>
<li>The Tasmanian government announced partial duty relief for most types of house and land package purchases, through amendments to be made to section 19(2) of the Duties Act 2001 which come into effect on 1 July. These are mostly to do with calculations as they relate to improvements, the Elite Agent said citing the state Treasury and Finance department.</li>
</ul>
SOUTH AUSTRALIA 
<ul>
<li>Foreign investors have been slugged with a 4 percent conveyance duty surcharge on residential properties from 1 Jan 2018.</li>
<li>Stamp duty concessions of $15,500 for off the plan apartments have got a one-year extension.</li>
<li>Further, first homebuyers who purchase off-the-plan could be entitled to more than $40,000 in assistance under state government measures to stimulate jobs and activity in the building industry. People who have previously owned a home will be eligible to receive up to $25,500.</li>
<li>In a reprieve to investors, there will be no land tax for five years if they buy eligible off-the-plan apartments.</li>
<li>A new $10,000 pre-construction grant for the next three months for off the plan apartments in buildings yet to be built is being introduced.</li>
</ul>
 WA
<ul>
<li>First home buyers will see their grant being slashed to $10,000 from the current $15,000. </li>
<li>First home buyers purchasing a new or established home will continue to be exempt from duty on homes valued up to $430,000 or vacant land valued up to $300,000, and to receive a concessional rate of duty on homes valued up to $530,000 or vacant land valued up to $400,000.</li>
</ul>
In addition, there are other changes as well. 
The National Housing and Homelessness Agreement (NHHA) will replace the National Affordable Housing Agreement (NAHA) from 1 July 2018 and will combine funding currently allocated under the National Affordable Housing Specific Purpose Payment (NAHSPP) and the National Partnership Agreement on Homelessness (NPAH).
The NHHA will target jurisdiction-specific priorities including supply targets, planning and zoning reforms and renewal of public housing stock while also supporting the delivery of frontline homelessness services. Funding for both the housing and homelessness sectors will be ongoing and indexed.
 
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Foreign investors to feel the heat most from July 1 tax changes

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<img src="https://counter.theconversation.edu.au/content/78452/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Contrary to what Labor and the banks have predicted, revenue from the bank levy will likely be higher, even with deductions.
In this year’s budget papers, Treasury estimated that the bank levy will collect about A$1.5 billion in each of the next four years for the government. But this is actually a conservative estimate.
Labor has argued there will be a A$2 billion dollar hole in the bank tax revenue. This is based on the disclosure to the ASX of four of the five affected banks, on what they will likely pay government.
But the banks’ numbers assume there won’t be change to any decisions in response to the bank levy. Research shows this is highly unlikely, as bank customers have worn the cost for bank taxes like this, imposed after the global financial crisis in the UK.
In fact, if the economy keeps growing as many have predicted, and banks grow too, then the amount of revenue the government collects from the levy may even be bigger than Treasury estimates.
<h2>What we know about the bank levy</h2>
When it comes to what revenue the government can get from the bank levy, both the taxable sum, and the tax rate applied, determine what gets collected.
The budget papers specify the taxable sum as including “items such as corporate bonds, commercial paper, certificates of deposit, and Tier 2 capital instruments” but not “Tier 1 capital and deposits of individuals, businesses and other entities protected by the Financial Claims Scheme”. The bank levy will be an annualised rate of 0.06%, applicable for all licensed entity liabilities of at least A$100 billion from July 1, 2017. Small banks and foreign banks are exempt.
Although it is possible the bank levy would not be a deductible expense in calculating corporate income, precedent and statements by government indicate the levy will be deductible. Special taxes on the mining industry (including royalties and the petroleum resource rent tax), state payroll, land taxes, stamp duties and indirect taxes such as petroleum excise are all deductions in the calculation of taxable corporate income.
<h2>Errors in the assumptions about banks</h2>
Labor and banks also assume that the bank levy is a deduction in assessing corporate income. The preliminary data made public by four of the five affected banks indicates the gross revenue gain of the bank levy, less the reduction in corporate tax, will be less than the budget numbers.
That is, the net revenue reflects a 0.042% levy rather than the 0.06% rate. This also assumes shareholders will bear all of the net additional taxation.
But it also assumes the banks will not change any decisions. This is both a simplistic and an unlikely scenario.
In essence, the bank levy is a selective indirect tax on one of the inputs used by the large banks to provide financial services to their customers.
A more likely scenario is that the banks will seek to, and succeed in, passing forward most of the new indirect tax to their customers as a combination of higher interest rates and fees. From past experience, banks pass forward higher Reserve Bank of Australia (RBA) interest rates, just as they pass forward lower rates.
Given that the affected five banks account for over 80% of the market, together with the reluctance of most Australian business and household customers to switch banks, there is a high probability that most of the levy will be passed forward as higher bank interest rates and fees.
Should the banks pass forward most of the levy to their customers, the increase in bank revenue will match the increase of bank costs caused by the levy. That is, taxable corporate income will remain about the same. Then, the overall government revenue gain is given by the gross 0.06% bank levy.
<h2>The bank levy could even collect more</h2>
If the output and incomes of the five banks to pay the levy expand over the next four years, then we would expect additional revenue to be collected by government to increase over time. The budget papers, the RBA, international agencies and private sector economists all forecast economic growth. It’s unlikely that the big five banks would not also experience economic growth.
So the budget paper forecast that the bank levy revenue collection of about A$1.5 billion a year for each of the next four years, has to be on the conservative side.
The revenue estimates for the levy are forecasts or projections compiled in a world of uncertainty. So a lot is still up for debate, including not only the design of the levy but the future path of the economy in general and for the large banks in particular.
Details and assumptions underlying government estimates of the revenue from the bank levy are unclear. It would be an unusual precedent not to allow the levy to be a deduction in calculating corporate income tax, and so reducing the net revenue gain. But the implicit assumption of the bank released numbers of no decision changes by the banks is unrealistic.
If banks, as businesses in general, pass forward to customers much of an input tax, a large part of the first-round fall in corporate income, is offset by higher revenue. Government forward estimates of additional government tax revenue collected by the levy likely are on the conservative side.
John Freebairn is a Professor in Department of Economics, University of Melbourne and the author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/john-freebairn-90" target="_blank">here</a>.
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The government will likely get more from the bank levy than Labor or the big four think: John Freebairn

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GUEST OBSERVER
The Federal Government should reconsider changes announced in the 2017 Budget to allowable deductions for investment property related to depreciation and travel to inspect property, according to the Real Estate Institute of Australia (REIA). 
Whilst REIA supports the curbing of abuse of deductions, these two initiatives are contrary to the principles of a good tax system and the ATO has existing means for addressing abuses and excesses.
One of these principles is neutrality which in essence means that two tax payers in similar circumstances should be treated the same. These initiatives are contrary to this principle with the budget initiative of not allowing for travel to inspect residential investment property meaning that an investor who owns a commercial investment property can claim deductions for their annual site inspection travel costs but an investor who owns a residential property cannot. 
As the ATO itself points out on its website there are many valid reasons why an owner of investment property would incur costs travelling to a residential rental property. 
Whilst abuses and excesses should be eliminated there are other ways of achieving this through the ATO. The ATO has a myriad of information available to identify questionable claims. Conversely it will adversely impact those tax payers who are not abusing the system. 
Ironically these changes will do nothing to improve affordability in Sydney and Melbourne and indeed it may make it worse as investors in these two cities are discouraged from investing in locations other than their home towns. 
Anecdotal evidence is indicating that as Sydney and Melbourne prices have increased investors are turning to non-metropolitan locations. This regional investment brings employment for a multitude of regional services. This measure will put a brake on this trend. 
Regarding the proposal to restrict depreciation claims to items purchased and installed in the property by the claiming taxpayer, REIA believes, like travel, it doesn’t treat the investor buying a property that is 12 months old the same as one buying a new property. 
The ATO has monitored this area and has the ability to identify abuses and excesses and deal with them. We believe it will distort the market by making properties that are not new less desirable, and the impact on affordability is questionable and may even worsen affordability as existing investors hold on to their property and new investors push up the price of new property which are currently showing signs of easing. 
These changes appear to be more about politics than good policy.
Malcolm Gunning is president of the Real Estate Institute of Australia and can be contacted <a href="https://reia.asn.au" target="_blank">here</a>.
 
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Federal Government should rethink deductibility of investment outgoings, travel: REIA

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The federal government’s much-hyped budget measures to improve housing affordability completely skirted the topic of its large immigrant intake which affects home prices, according to a senior journalist.  
The Australian’s Judith Sloan said while the Treasurer Scott Morrison said before the budget that social housing and renters would be a focus of the affordability measures,  the budget failed to address the fact that rapid population growth causes a housing price surge as supply fails to keep up with demand.  
The much-awaited housing affordability package was “just too meagre to warrant the big sell”, says Sloan. 
A recent op-ed piece by Michael Sukkar, Assistant Minister to the Treasurer, about the government’s measures was “feeble” she says.
The government has said it will free up some Defence land for housing, has tasked Treasury to set up the National Housing Finance and Investment Corporation which will operate an affordable housing bond aggregator.  
A first home super saver scheme will allow voluntary superannuation contributions of $15 000 per annum and cumulative maximum of $30 000 in total (per person if in a couple) for first home buyers. 
Others such as concessions for wealthy retirees to downsize and penalties for foreign investors if they left their houses vacant were too meagre, she says.
Property Observer had earlier reported that there had been mixed reactions to the budget's housing measures. 
“The list may seem long but the impact on housing affordability will be negligible and the government knows that,” says Sloan. 
In reality, most of the real determinants of housing affordability are not controlled by the federal government: land release, planning and development approval processes, interest rate policy and availability of credit. 
However, it does control migration, and that lever can impact housing prices simply because of the demand-supply equation.  
Sloan said there had been no change to the migration numbers under the skilled and family reunion categories. Australia will take in 190,000 a year for the coming financial year and in the next three. 
She says there was no mention of this fact in the budget papers and it “was an attempt to hide this fact”.
Sloan likens Immigration Minister Peter Dutton to a tough cop when it comes to certain immigrants. 
“But we are effectively being asked to look over there — we are deporting a few hundred failed asylum-seekers — while the large-scale immigration program is simply allowed to roll on without adjustment,”  says Sloan. 
At 190,000 a year, immigration now makes up more than half of our population growth, and Australia has one of the highest rates of population growth among developed economies.
In fact, Australia’s population growth of almost 1.7 per cent is more than double the growth rate of many other countries, including Germany and the US.
“So why wouldn’t the government make the obvious call and reduce this number, particularly as this would have given substance to the claim that the pressing issue of housing affordability is being ­addressed?,” she asks. 
Among the reasons is Treasury’s advice to the government that reducing the number of immigrants would hit GDP growth, but the real measure that should be considered is GDP per head of population and it is not at all clear that high rates of immigration are associated with growth in the preferred figure.
While Australia hasn’t had a recession in more than 25 years, the story for GDP per capita is different. 
“There have been at least two episodes in the past 25 years when we have experienced technical recessions in GDP per capita (two successive quarters of negative growth).” 
Another reason was the lobbying by the business sector to keep the numbers high.  
“After all, if your firm is in the game of property development… what’s not to love about high immigration?,” she says.
Then there are the firms that find it easier to recruit migrant workers than train up the locals, says Sloan.
Also, for universities to sell “overpriced degrees to overseas students, it is necessary to be able to offer the byproduct of permanent residence for graduates,” argues Sloan. 
Any reduction in immigration numbers would make that sell harder and she says there was likely a bit of “wink-and-nod” between the government and the vice-chancellors on this topic. 
If the government really wanted to show its commitment to improve housing affordability, it would have slashed the migration programme numbers, but vested interests had their way, Sloan concludes.
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