A note on the Commonwealth Rent Assistance announcement in the Federal Budget 2023

Today’s budget announcement to lift the maximum rate of Commonwealth Rent Assistance (CRA) by 15 per cent will provide relief to renters and is a step in the right direction.

But it is worth putting the CRA increase in context. The recent BCEC Building for the Future report shows that median rents have risen by up to $150 per week since the start of the pandemic and by around $55 per week over the past year alone.

The 15 per cent CRA increase adds $31 per fortnight or $15.50 per week to the maximum CRA rate – around one tenth of the median rental cost increase over the past two years.

There is a case to reconsider the structure of the CRA system so that it keeps pace with prevailing rental market conditions.

But such measures would need to be considered alongside other regulatory reforms to circumvent concerns that increasing CRA might drive rental cost inflation.

Incentivising build-to-rent projects that increase the supply of rental housing through more generous tax breaks are well intentioned, and we know that loans to housing investors have dropped by a third over the past two years.

But housing stimulus measures introduced through the pandemic have contributed to backlogs and delays in delivering new housing stock.

It’s worth considering whether the housing and construction sectors can handle further stimulus, at least over the shorter term.

Professor Alan Duncan
Director
Bankwest Curtin Economics Centre