Struggling households will receive an extra $19 per fortnight in rental assistance payments on average in a bid to counter sky-rocketing housing costs.
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But with less than a third of renters eligible for the payments and no sign of an imminent increase in supply, housing affordability is unlikely to improve for years.
The Commonwealth Rent Assistance benefit will be increased by 10 per cent, the second boost to the payment in two years after a 15 per cent rise in 2023/24.
It would provide much-needed help for young people and renters of all ages doing it tough, Treasurer Jim Chalmers said as he delivered the federal budget on Tuesday.
"Rising rents are another big part of the inflation challenge, and we're supporting renters who need our help," he said.
Rents increased by 0.9 per cent over the December quarter, a major contributor to inflation continuing to remain above the Reserve Bank's two to three per cent target range.
Dr Chalmers said the $1.9 billion increase to rent assistance over five years would put downward pressure on inflation but Treasury has advised the increased money flowing into the housing market would place a modest upward impact on market rents.
That's unwelcome news for the more than two-thirds of renters who will not receive rent assistance, with no increase to eligibility despite calls from housing advocacy groups - such as Everybody's Home - to do so.
The Albanese government will seek to drive down housing costs by boosting housing supply, announcing fee-free TAFE courses for in-demand construction skills and an extra $1 billion to build infrastructure that enables new developments.
Spending money on housing-friendly infrastructure provided the best bang-for-buck investment for the government in terms of providing new housing supply, said Centre for Independent Studies chief economist Peter Tulip before the budget was released.
The government will also incentives build-to-rent developments by providing tax incentives, which analysis by the Property Council of Australia found would unlock 150,000 apartments over the next decade.
"We know that building homes is hard work," Housing Minister Julie Collins said.
"It won't happen overnight but increasing supply is the best and most lasting fix to Australia's housing shortage."
The government has also continued funding for the National Agreement on Social Housing with the states, that will result in $9.3 billion in funding for homelessness services over five years, including an extra $423.1 million in additional spend above indexation.
But these incentives may take some time to work through the system, with dwelling investment predicted to fall by three per cent this financial year as a result of higher interest rates and elevated construction costs, before picking up in 2025/26.
The government has a target to build 1.2 million homes over the next five years, but current forecasts show the industry falling over 100,000 dwellings short.
Australian Associated Press
