If John Howard was dead they'd call it his ghost. The former prime minister being very much alive, Canberra investors aren't sure what to call it, but the memory of Australia's old leader and his policies are certainly haunting the city.
With federal elections looking increasingly likely to produce a Coalition win this year, many are glancing back to how Canberra property performed when the liberals last seized power from a Labor government. The John Howard experience instantly comes to mind.
Back in 1996, when Howard came to power, a vast amount of public sector jobs were slashed. This sent the ACT property market into turmoil as jobless residents – mortgage payers and tenants alike – had no choice but to give up their properties. This caused a sudden glut of properties on the market just as demand plummeted. In this environment, property values fell considerably.
With Tony Abbot’s Liberals promising to cut back a large amount of public sector jobs if they win the September Federal Elections, there is a sense of déjà vu in the air. Many property observers are predicting the ACT housing market will return to its late-1990s rough patch.
ANZ’s latest ACT Outlook outlines just how much of an impact federal job cuts would make.
“The Liberal National Coalition have outlined their plan to reduce the size of the Commonwealth public service by around 20,000. This suggests around 6,400 job losses in Canberra, which is around 4% of its workforce,” says the report.
It adds that there are other things to consider were there major job cuts. “There would also likely be an indirect effect on use of professional and consulting services which contribute at least another 10% [to] ACT’s employment. Additionally, there will be a negative sentiment impact in the Territory.”
ANZ head of property research Paul Braddick says public sector jobs are the lifeblood of Canberra’s employment market.
“The public sector is extremely important for the ACT,” he says. “Canberra is a public sector driven territory. There is something of a commercial sector but there is virtually no industrial base to speak of. That commercial base that surrounds the broader public service is just there to supply and service that public sector. If you start seeing public sector job cuts, it will be a situation like Tasmania where a lot of younger professionals will leave the ACT.”
ANZ says that one factor that might offset the severity of job cuts is recent commitments to boost defense spending. The bank’s ACT Outlook report also points out that the current government has already made some heavy job cuts of its own. This has coincided with the ACT unemployment rate rising to 4.5%, as of January, a full percentage point higher than it was over mid-2012 and well above the 10-year average of 3.4%.
Starting this fiscal year, many departments have also received a 20% cut to their capital budgets.
These developments on their own make ANZ doubtful over Canberra prospects for strong economic growth over the year ahead. ACT Outlook forecasts growth of 1% in 2013-14.
“This will render the ACT one of the poorest performing Australian jurisdictions in 2013-14,” the report says.
Of course, the doom-and-gloom predictions for ACT perhaps need some perspective. In 1996-97, Howard cuts to public spending were pretty short lived. 2013 and 2014 promise a similar story.
ACT Outlook: “Any further cut backs to public spending, from either side of Government will likely be short-lived.”
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