Insights from Zagga’s Investor Webinar with Stephen Koukoulas, Alan Greenstein and Frank Hageali
Australia’s Federal Budget has triggered wide‑ranging debate across markets, households and the property sector. In a recent investor webinar, Stephen Koukoulas, Zagga’s Economist‑in‑Residence, joined Zagga CEO & Co‑Founder Alan Greenstein and Executive Director Frank Hageali to unpack what the budget means for inflation, interest rates, housing, and the real estate private credit landscape.
Below is a summary of the key themes discussed during the session.
The Budget in Context: Policy, Politics and the Macro Backdrop
Stephen Koukoulas opened by framing the budget as an important policy development, but not one that exists in isolation. While tax changes and spending restraint dominated headlines, broader macro forces remain central to the economic outlook — particularly inflation, interest rates and global energy prices.
Treasurer, Jim Chalmer’s stated objective was to limit additional government spending while reshaping tax settings to support revenue over the medium term. Stephen noted that, due to extensive grandfathering provisions, the near‑term fiscal impact of proposed changes to negative gearing, capital gains tax and trusts is relatively small, with effects building gradually over time.
Importantly, he emphasised that the budget remains a proposal, with legislation yet to pass through Parliament and likely to be amended following consultation — particularly around capital gains tax.
Inflation Remains the Central Policy Challenge
Inflation was consistently identified as the key issue shaping monetary policy. Headline inflation remains elevated, driven in part by oil price shocks and broader cost pressures, while underlying inflation is still above the Reserve Bank of Australia’s target.
Stephen highlighted the RBA’s clear stance: inflation must return to 2.5%, even if that requires weaker growth in the near term. As he noted, this reflects a deliberate “fight inflation first” approach, with policy expected to remain tight for longer.
While the economy is slowing, Stephen does not expect a full contraction. Business investment — particularly in areas such as data centres, hotels, warehouses and machinery — continues to support growth, offsetting weaker household demand.
Stagflation Risks, but Not a Base Case
A recurring question from investors was whether Australia faces stagflation — a combination of weak growth and high inflation. Stephen described stagflation as a “central bank’s worst nightmare,” but stressed that Australia is not there yet.
The economy continues to grow, unemployment remains contained, and several sectors are still performing reasonably well. However, he cautioned that if inflation persists while unemployment rises materially, policy trade‑offs would become significantly more difficult.
Housing: Diverging Markets and Structural Pressures
Housing conditions remain highly uneven across Australia. Stephen pointed to stark divergence between cities, with strong price growth in Perth, Adelaide and Brisbane over recent years, contrasted with far more subdued outcomes in Melbourne.
Recent high‑frequency data suggests housing momentum is weakening across major capitals, with Sydney and Melbourne already recording price declines and growth elsewhere slowing towards zero. Auction clearance rates and consumer sentiment indicators reinforce this softer outlook.
On the supply side, dwelling approvals and starts have improved from post‑COVID lows, supported by planning reforms and reduced red tape. At the same time, net overseas migration is normalising after a sharp post‑pandemic surge. However, rising construction costs and labour shortages continue to challenge feasibility.
As Stephen observed, “while we want more supply, it isn’t going to happen if developers can’t recoup rising costs in a weakening price environment.”
Zagga’s Perspective: Opportunity in a Higher‑Rate Environment
From Zagga’s perspective as a real estate private credit manager, Alan Greenstein emphasised that tighter credit conditions and higher interest rates can create selective origination opportunities.
Zagga remains focused on high‑quality borrowers, strong sponsors and asset‑backed lending in deep, liquid markets. Residential real estate — particularly in New South Wales — continues to sit at the core of this strategy due to persistent supply shortages, demographic growth and liquidity at exit.
Alan highlighted that Australia is expected to add millions of people over coming decades, requiring substantial new housing supply alongside supporting infrastructure such as retail, industrial and accommodation assets.
Developers, Feasibility and the Budget’s Incentives
During Q&A, Frank Hageali addressed how proposed tax changes may affect developers. He noted that incentives favouring new and off‑the‑plan construction could support demand, provided projects remain financially viable amid elevated input costs.
Grandfathering provisions and the ongoing exemption of principal places of residence were highlighted as mitigating factors that may limit disruption to development site availability. Ultimately, feasibility — rather than access to sites — remains the key constraint.
Private Credit and Portfolio Construction
In closing, the speakers reinforced that while economic conditions are tightening and uncertainty remains elevated, the Australian economy is still moving. Inflation control remains the priority for policymakers, housing shortages persist, and selective opportunities continue to emerge in real estate private credit.
