Stamp of approval for Treasurer

HOUSING affordability has long been a problem, especially in the big cities such as Sydney.

That is why the decision to ease the burden of stamp duty should be applauded. It is the major announcement to come out of the NSW budget, if not for the cost impact then certainly for the role it will play in countering a range of challenges the state will face in the years to come.

It might even force other states to look to do the same.

At the moment, it is only listed as a temporary measure: for the next two years anyone buying a new home (off the plan) worth less than $600,000 won't have to pay stamp duty; anyone over 65 building a new home also won't have to pay it.

There is no guarantee the changes will be extended beyond two years and there are no provisions for the price point at which they apply to be lifted as inflation and house prices grow. That aspect of the announcement is disappointing.

The aim of these moves is triangular: to lower the costs of building for home buyers to help stimulate the housing industry in increasingly uncertain economic times; to encourage downsizing by the elderly to free up family homes at a time of rapid population growth; and, assuming the Coalition wins next year's election, to wedge it in its first term of government when it will be looking for revenue to fund its own election commitments.

New home buyers will stand to save a little more than $20,000 because of the stamp duty cuts. It will encourage people to take the plunge and purchase off the plan, which will give the building industry a leg up at the same time.

The government has been worried NSW might lag behind some states in the years to come as part of the emerging two-speed economy. But this measure should help a sector that traditionally comes under pressure when that happens.

The ageing population is upon us, and in a time of rapid population growth, a policy that encourages older people to downsize helps both to make old age more affordable (through lowering large home costs) and to give new-generation Australians adequate housing to grow a family. The federal government wants the fertility rate to stay high and that is more likely if people can find family housing. The two-year limit to the stamp duty cuts might be good politics - it will put pressure on an O'Farrell government to maintain the cuts, which don't sit in the long-term budget forecasts - but it is poor policy. This type of initiative should be for the long term.

Eric Roozendaal has managed to deliver a fairly good budget in what is likely to be Labor's last full year in office.