In his first budget on Tuesday, Treasurer Jim Chalmers handed down a conservative budget as Labor sought to meet its pre-election commitments. While the conservative nature of the budget may have been a way to combat the Liberal Party’s scare campaign of a free spending government, they will have undoubtedly taken note of what happened to the UK’s ex-Prime Minister Liz Truss, following her ill-fated mini budget last month.
A deficit of $37bn is forecast for 2022/23, down from an expected $80bn as recently as April 2022, thanks to increased revenue from mining royalties due to the large increase in commodity prices. This revenue boost is expected to wane over the next few years as commodity prices revert to normal ranges.
Key policy changes were largely confined to the Government’s election promises including expanded childcare subsidies ($4.7b), aged care reforms ($2.5b), university and vocational education places ($1.4b) and lowering prescription costs ($0.8b).
One area that the government has received criticism over, was over the election promise to save families $275 annually by lowering energy costs. The budget papers, in fact, noted that energy costs are expected to rise by 56% over the next two years. So far, all the government has said is that they will consider all options to reduce these increases.
Key Points
While the list below is not exhaustive, we provide some of the key takeaways from the night.
Cost of living
- A commitment of $4.7 billion over 4 years from 1 July 2023 to lower the cost of childcare. This includes raising the maximum Child Care Subsidy rate from 85% to 90% for families earning up to $80,000. The upper earnings limit to qualify for some assistance has increased to $530,000.
- The Government announced that from 1 July 2023 it will combine the Parental Leave Pay and the Dad and Partner pay as a single scheme providing up to 20 weeks in a shareable scheme for eligible parents. The amount of leave will increase by 2 weeks in 2024/25, 2025/26 and 2026/27 to a total of 26 weeks leave.
- The Commonwealth Seniors Health Card income threshold will increase to $90,000 for singles and $144,000 for couples. It is forecast that this will allow an additional 50,000 self-funded retirees to qualify for the scheme.
- $787.7 million has been committed to reduce the maximum co-payments for medicines under the Pharmaceutical Benefits Scheme (PBS) from $42.50 per script to $30.00 per script.
Economy
- Inflation is forecast to peak at 7.75% by year’s end, before falling to 3.5% next year.
- Unemployment is forecast to rise from 3.75% currently to 4.5% by 2023/24.
- Due to rising interest costs, debt is set to climb to $927 billion next year and continue climbing over the forward estimates.
- Pressures on the federal health and aged care budget are mounting in the wake of COVID and an $8.8 billion blowout in the NDIS budget which will reach $166.4 billion over four years. An extra 380 staff will be hired at a cost of $158.2 million to speed up claims and make the system more efficient.
Infrastructure
- An additional $8.1 billion over 10 years for priority rail and road infrastructure across Australia.
- The Government will also provide $20 billion in funding to establish ‘Rewiring the Nation’, a fund to modernise Australia’s electricity grid and storage in line with the expansion of renewable energy.
Housing
- The Help to Buy program will be expanded and be available to 10,000 Australians each year. The scheme aims to get more people into housing sooner by cutting the cost of buying a home by the Government making an equity contribution of up to 40% of the purchase price of a new home or 30% of an existing home.
- A new $10 billion Housing Australia Fund will be established to provide funding to increase housing supply, including 20,000 new social housing dwellings, 4,000 of which will be allocated to women and children impacted by family and domestic violence.
Tax
- From 1 July 2022 no Fringe Benefits Tax (FBT) will be payable where an employee chooses to salary package an electric vehicle with their employer. To qualify, the car must be purchased after 1 July 2022 and must have a first retail price below the luxury car tax threshold for fuel-efficient cars ($84,916 for 2022/23).
Super
- The government announced a reduction in the minimum eligibility age from 60 to 55 for downsizer contributions. The downsizer contributions allow eligible individuals to make a one-off after-tax contribution to their superannuation of up to $300,000 per person from the proceeds of the sale of their house.
Other
- The Government will provide $2.5 billion over 4 years from 2022/23 to improve the quality of care in residential aged care. From 1 January 2023 the Government will have the power to cap the fees that home care providers can charge and will ban exit fees.
- The Government announced they will provide funding for an additional 500 service and community workers to support women and children experiencing family, domestic and sexual abuse.
- $871.7 million over 5 years to provide 480,000 fee free TAFE places.
- $485.5 million has been committed to provide an additional 20,000 Commonwealth supported places at universities and higher education providers.
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