Office Market Monitor | 2022 14 The recent Federal 2022-23 Budget update (October 2022) came with some fairly sobering updates on inflation and the economic outlook for 2023. The forecast inflation peak has been revised up, and the Treasurer was quite blunt in his assessment that 2023 was going to result in much slower economic growth in Australia, and indeed around the world. In many ways, this is required to get inflation under control, and the Federal Government must contribute to the fight against inflation by reducing spending. Therefore, spending on infrastructure going forward is likely to be far less liberal than what it has been over the last 10 years. This is also as a result of the rising costs of all of these projects. Cost increases for federally funded projects usually are expressed in terms of billions of dollars, so have massive impacts on both construction costs locally and government spending. The impact for the commercial property market will be seen in 2024 and beyond. With infrastructure projects reducing in size and quantity, the likely beneficiary will be CBD markets, where infrastructure is already quite good and centralised. In addition, Sydney and Melbourne CBDs will benefit from their respective metro projects reaching completion, with these already underway and funding locked-in. Legislative and infrastructure update Selected Economic Forecasts - October Federal Budget 2022/23 OUTCOMES FORECASTS 2021-22 2022-23 2023-24 Real GDP 3.9 3.25 1.5 Household Consumption 4.1 6.5 1.25 Dwelling Investment 2.8 -2 -1 Consumer Price Index 6.1 5.75 3.5 Wage Price Index 2.6 3.75 3.75 Unemployment Rate 3.8 3.75 4.5 Net Overseas Migration 150,000 235,000 235,000 % change p.a. except Net Overseas Migration Source: Australian Federal Government budget papers 2022/23
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