Budget surplus rests on a healthy housing market

Today's federal budget and its growth projections are heavily reliant on Australia's falling housing markets holding up, according to the Property Council of Australia

"This is a budget set for growth, but behind every number in the budget is the unknown effect of the housing downturn," Mr Morrison said.

"The headlines of surplus, infrastructure and tax relief are welcome, but falling house prices are clearly Treasury's economic wildcard.

"The Government and the Parliament must have a laser-like focus on the housing sector and be ready with a contingency plan if these forecasts aren't met."

The Budget papers highlight the downside risk of a further deterioration in housing prices on dwelling investment and household consumption, noting that if consumption dropped one per cent as a result, this would shave a quarter of a per cent from GDP growth.

Treasury says new dwelling investment will only grow 0.5 per cent this year, before dropping by 7 per cent in 2019-20 and a further 4 per cent in 2020-21 as existing projects are completed.

"Australia's housing sector is worth $7 trillion – more than twice the size of the share market – so Treasury are right to flag the risks for the economy," Mr Morrison said.

"It also reinforces our warnings about the impact of changes to negative gearing and capital gains tax, particularly at this uncertain time in the property cycle."

The Property Council welcomed the big increase in infrastructure spending announced in the budget.

"The Budget delivers a $100 billion investment over the decade to meet the needs of our growing cities and regions, including projects to break urban congestion and improve regional connections," Mr Morrison said.

"The personal income tax cuts targeted at low to middle income earners should provide some relief from cost of living increases.

"The measures targeted at small to medium size businesses will also provide some much-needed confidence," Mr Morrison said.

The Budget papers highlight the strong contribution made by the property industry in the pick-up in non-mining business investment which grew by 9.7 per cent in 2017-18, compared to average annual growth of 1.5 per cent over the previous decade.

Investment in non-residential buildings made a particularly large contribution to business investment, including investment in hotels and aged care facilities while office building activity also lifted during 2017-18.