Australia's housing market collapse could destroy small businesses and hit family budgets, treasurer warns ahead of federal election
- Josh Frydenberg warned housing market collapse could ruin small businesses
- The treasurer falling prices will cause shift of focus at this year's federal budget
- Shadow Treasurer Chris Bowen claimed government is using scare campaigns
Treasurer Josh Frydenberg has warned Australia's housing market collapse could destroy small businesses and hit family budgets ahead of the next federal election.
House prices have plunged by around 15 per cent in parts of Sydney and Melbourne in recent months amid fears the fall will harm the wider economy.
In particular, small business owners that took out loans against the value of their houses may be badly affected.
Treasurer Josh Frydenberg (pictured) has warned Australia's housing market collapse could destroy small businesses and hit family budgets ahead of the next federal election
House prices have plunged by around 15 per cent in parts of Sydney and Melbourne in recent months amid fears the fall will harm the wider economy (stock image)
'People are concerned about the impact of lower prices on the future of the real economy and particularly that spill-over into household consumption and into the ability of small business to grow and expand and invest,' Mr Frydenberg told The Sunday Age.
Mr Frydenberg said people are more concerned about the impact of lower prices and how it will affect family budgets and small business' ability to grow and expand
CoreLogic data showed house prices in the treasurer's seat of Kooyong in Melbourne plunged by 14 per cent, while PM Scott Morrison's seat of Cook in Sydney was down 13 per cent.
A panel of eight experts enlisted by the publication predicted additional price falls, with Sydney to fall by another 8.7 per cent and Melbourne by 9.7 per cent this year.
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Shadow Treasurer Chris Bowen, whose western Sydney electorate of McMahon plunged by nine per cent, said price falls meant the Coalition has lost its upper hand.
'It used to be we've got a scalpel the other side have got a sledgehammer. They don't say that anymore. They can't,' Mr Bowen said.
He said the banking regulator's crackdown on investor loans to local and foreign buyers meant there was also an increase in owner-occupiers and first-home buyers.
Mr Bowen said it used to be the case where constituents would frequently stop him to talk about 'crazy prices', whereas now they aren't as concerned over falling prices.
Shadow Treasurer Chris Bowen (pictured) dismissed the treasurer's claims as 'shrill, ridiculous, scaremongering'
Mr Frydenberg said he is concerned that if Labor is voted in at the next election the risk of the housing collapse affecting the greater economy would also increase.
He said if the Labor Party get their chance to abolish negative gearing and increase capital gains tax, it will drive prices down with a spillover into the real economy.
Mr Bowen dismissed the treasurer's claims as 'shrill, ridiculous, scaremongering'.
'If there are fewer landlords that means there are more owner-occupiers by definition. A new owner occupier is almost by definition a former renter,' he said.
The shadow treasurer claimed the government is using scare campaigns to make people believe when house prices go up, so will rental prices.
When asked about impending changes for negative gearing, Mr Bowen suggested a one-year lead time between the election and the policy's start date.
Mr Frydenberg argued the timing of the policy was dangerous in a falling market and he believes it should not be adopted any time.
'It is particularly egregious of labor to pretend that it works in both a falling housing market and a rising housing market. It's illogical,' he said.
But Mr Bowen said fewer investors meant the time was right for change.
