Cost-of-living relief has formed the centrepiece of Jim Chalmers’ second Federal Budget in under a year, with the treasurer delivering a surplus for the first time in 15 years.
That surplus of $4.2 billion (0.2 per cent of GDP) forecast for 2022-2023 is set to be short-lived though, with the Budget predicting a $13.9 billion (0.5 percent of GDP) deficit in 2023-2024.
Mr Chalmers said the Budget was both responsible and affordable, and prioritised those most in need.
He said the $14.6 million cost-of-living plan would help Australians with power bills, bring down out-of-pocket health costs, support vulnerable Australians, boost wages and create more affordable housing.
Among the headline packages was that for energy bill relief.
“We are delivering up to $3 billion in direct energy bill relief for eligible households and small businesses co-funded with the states and territories,” Mr Chalmers said.
“More than five million households will have up to $500 deducted from their power bills in the next financial year.
“Real relief right off your power bill, right when you need it.”
Relief will be targeted to pensioners, seniors health card holders and households receiving income support including Family Tax Benefit A and B.
There will also be increased support for about 1.1 million Australians on income support payments such as JobSeeker, Austudy and Youth Allowance, with the Government increasing the base rate of these payments by $40 per fortnight.
There will also be targeted support for older job seekers, with the government expanding the eligibility for the existing higher rate of JobSeeker to recipients 55 and over who have received the payment for nine or more continuous months, which currently applies to those 60 and over.
Around 52,000 eligible recipients will receive an increase in their base rate of payment of $92.10 per fortnight. Payments will also continue to be automatically indexed to reflect changes in consumer prices.
“We seek to strike a considered methodical balance between spending restraint to keep the pressure of inflation while doing what we can to help people struggling to make ends meet,” Mr Chalmers said.
“Making sure that vital services like Medicare and the National Disability Insurance Scheme are secure, reliable and sustainable.
“And dealing with immediate near-term challenges while investing in our long-term national economic success, seeing our people through the hard times and setting our country up for a better future.”
Mr Chalmers said the global economy was slowing due to persistent inflation, higher interest rates and financial sector strains.
He said the next two years would be the weakest for global growth and Australia would not be immune.
“Our economic growth is expected to slow from 3.25 per cent this year to 1.5 per cent next year, before recovering to 2.25 per cent the one after,” Mr Chalmers said.
The treasurer said inflation remained the country’s primary economic challenge, but it would return to the RBA’s target range in the coming years.
“It drives rate rises and it erodes real wages, which is why this budget is carefully calibrated to alleviate inflationary pressures not add to them,” Mr Chalmers said.
“Our policies to ease the pressure on households will take three-quarters of a percentage point off inflation in 2023-2024, which is expected to fall from 6 per cent this year to 3.25 per cent next year.
“Returning to the Reserve Bank’s target band in 2024-2025.
“It’s still higher than we’d like for longer than we’d like, but tracking in the right direction.”
Initiatives for housing and real estate
One of the biggest announcements concerning housing in the Budget was that the maximum rate of Commonwealth Rent Assistance would be increased 15 per cent at a cost of $2.7 billion over five years.
Mr Chalmers said about 1.1 million households would be better off.
“For too long, secure, affordable housing has been out of reach for too many Australians tonight to help ease the pressure on people feeling the pain of rising rents,” Mr Chalmers said.
“We are increasing the maximum rates of Commonwealth Rent Assistance by 15 per cent.
“This will provide up to $31 extra a fortnight for people renting in the private market and community housing – the largest increase in more than 30 years.”
Household Energy Upgrades Fund
The Government will also invest in energy improvements for households with the $1.3 billion Household Energy Upgrades Fund, which will create low‑interest loans and fund upgrades to social housing to improve energy performance.
The Fund will inject $1 billion into the Clean Energy Finance Corporation to unlock more than 110,000 low‑interest loans for energy‑saving home upgrades, in partnership with private lenders.
“A big part of making sure that energy bills are more affordable into the future is improving the energy efficiency of Australian homes and not just new builds,” Mr Chalmers said.
“Through this budget, we are investing a billion dollars to help provide low-cost loans for double glazing and solar panels and other improvements that will make homes easier and cheaper to keep cool in summer and warm in winter.”
The Fund will also provide $300 million to partner with states and territories to make energy performance upgrades to social housing.
This energy investment in social housing is expected to cut the energy needed by 60,000 social housing properties by one‑third and give tenants savings on their energy bills.
Better information on energy saving opportunities
The Government will improve the Nationwide House Energy Rating Scheme and expand it to existing homes, meaning people can soon get a star rating of their home’s energy performance — helping Australians make the best choices for their hip pocket when it comes to renting, purchasing or renovating their homes.
Home Guarantee Scheme
The Albanese Government has significantly expanded the eligibility criteria for all elements of the Home Guarantee Scheme.
This includes the First Home Guarantee, the Regional First Home Buyer Guarantee and the Family Home Guarantee.
From July 1 this year, friends, siblings, and other family members will be eligible for joint applications under the First Home Guarantee and the Regional First Home Buyer Guarantee.
These guarantees had previously been restricted to people that were married or in a de‑facto relationship, in addition to single applicants.
The guarantees will also be expanded to non‑first home buyers who haven’t owned a property in Australia in the past 10 years to support those who have fallen out of homeownership, often due to financial crisis or relationship breakdown.
For the First Home Guarantee and the Regional First Home Buyer Guarantee the Federal Government acts as guarantor on up to 15 per cent of the purchase price, with a deposit as low as five per cent.
The criteria for the Family Home Guarantee will also be expanded to eligible borrowers who are single legal guardians of children, such as aunts, uncles and grandparents.
Previously only single natural or adoptive parents with children could apply.
For the Family Home Guarantee the Federal Government acts as guarantor on up to 18 per cent of the loan, so buyers can have as little as a 2 per cent deposit without having to pay lenders mortgage insurance.
Each year there are 35,000 First Home Guarantee spots available, while up until June 30, 2025, there are 10,000 Regional First Home Buyer Guarantee places.
There are 5000 places per year under the Family Home Guarantee.
Boost to social and affordable rental housing
To improve the supply of rental housing, including more social and affordable rental housing, the Federal Government will increase the National Housing Finance and Investment Corporation’s liability cap from $5.5 billion to $7.5 billion from July 1.
This will enable the NHFIC to support more social and affordable rental homes by providing lower cost and longer-term finance to community housing providers.
Build-to-rent tax breaks
The government will offer incentive to increase the supply of rental homes through changing the investment arrangements in build-to-rent accommodation.
This includes increasing the depreciation rate from 2.5 per cent to 4 per cent per year for eligible new build-to-rent projects.
In addition, the government will reduce the withholding tax rate for eligible fund payments from managed investment trusts to foreign residents on income from newly constructed residential properties from 30 per cent to 15 per cent.
This will come in after July 1, 2024.
Other Budget highlights:
- Cutting the cost of medicine by up to half for at least six million Australians.
- Supporting 57,000 single parents by expanding eligibility for Parenting Payment (Single).
- Delivering a 15 per cent pay rise on award wages for aged care workers and getting wages moving again.
- Investing an historic $5.7 billion to strengthen Medicare.
- Making it cheaper and easier to see a doctor by tripling bulk billing incentives, with immediate benefits for more than 11 million Australians.
- Funding for more Medicare Urgent Care Clinics; and after hours primary care.
- Improving access through digital health and expansion of general practice.
- Committing a further $4 billion to our renewable energy superpower plan.
- A plan to make Australia a world leading hydrogen producer.
- $500 million to modernise and grow Australia’s industrial capabilities.
- New tax breaks for small business.
- Building up our defence industry.
- Supporting quality training and addressing skills needs.