The five-minute budget: Everything you need to know

The five-minute budget: Everything you need to know

Source:Theage

Here is your quick guide to the measures in this year’s budget that will affect you most.

Economy

Treasury is warning global economic growth will drop to its weakest level in more than two decades, due largely to higher interest rates. This will hit Australia, as real GDP growth drops from 3.25 per cent this year to 1.5 per cent in 2023-24 before recovering to 2.25 per cent the following year.
The unemployment rate is expected to rise from a near-record low of 3.5 per cent to 4.25 per cent next year, then hover in the mid-four per cent range for a few years.
Consumer price growth is forecast to fall from 6 per cent this year to just over 3 per cent next year and then back into the Reserve Bank’s 2-3 per cent target band.
- Over the same period, wages growth is expected to rise from 3.75 per cent to 4 per cent, before stabilising at about 3.5 per cent. It is expected to outstrip inflation from 2023-24 for the first time in many years.
What you should know: The scourge of inflation is finally set to ease as high interest rates curtail spending. The government claims its cost-of-living relief measures will reduce inflation by a quarter of a percentage point, but some economists have cast doubt on this claim, which will be key to the government’s economic narrative. The economy will slow markedly, but unemployment shouldn’t rise dramatically.

Debt and deficit

The government expects to deliver a surplus of $4.2 billion this financial year – the first time a federal government has spent less than it has raised in more than 15 years. This is a $41 billion turnaround from the government’s October predictions.
However, deficits will return from next financial year. The 2023-24 deficit is expected to be $14 billion before increasing for two years into the mid-30s then narrowing to $28.5 billion in 2026-27.
Over five years, the cumulative deficit is expected to be $126 billion better than previously forecast; of this amount, $114 billion is from more people paying income tax and resource companies paying tax on record commodity profits.

What you should know: The first surplus since the Howard government is the stuff of Labor dreams. The Coalition will argue the turnaround was driven by higher revenue from high commodity prices, but Labor will hammer home the fact that it banked nearly 90 per cent of the revenue rises. Deficits in future years are much smaller than expected, meaning future surpluses could be secured if the government chooses to wind back controversial income tax cuts or tax concessions.

Cost of living

Vulnerable Australians will receive rebates on their energy bills worth up to $500, with the $3 billion cost jointly funded with state and territory governments.
Nearly $5 billion will be spent over five years increasing the rate of JobSeeker – for people of all ages – and Youth Allowance by $40 a fortnight from September. A higher rate of JobSeeker, currently available for people aged over 60, will also be made available for over-55s, who find it more difficult to break into the job market.
About $2 billion will be spent over five years expanding access to the single parent welfare benefit until a recipient’s youngest child turns 14. Nearly 60,000 parents, who can currently claim the payment only until their child turns eight, will claim the extra money from September.

The government claims its cost-of-living relief measures will reduce inflation, but some economists have cast doubt on this claim.CREDIT:PENNY STEPHENS

What you should know: A modest, across-the-board rise in unemployment benefits has been announced after sharp criticism of mooted plans to grant a rise only to older Australians. After commodity prices massively boosted the budget bottom line, expect the Greens and others to accuse Labor of depriving the most needy.

Health

The government will spend about $3.5 billion over five years increasing the money paid to doctors – by $20 in cities and $40 in regions – who bulk-bill, the rate of which has sharply declined.
Going to the pharmacist will be made cheaper by allowing people to buy two months’ worth of medicine for the price of a one-month prescription. The government says this will save consumers $1.6 billion and free up GP appointments. The government will reinvest $1.2 billion into pharmacies as part of the deal, allowing them to administer vaccines free of charge and doubling incentives for regional pharmacies.
- Nearly $250 million will be spent clamping down on the black market for vapes and rolling out a new anti-smoking campaign.
What you should know: State premiers have used their pulpits to pressure the federal government to spend big on fixing Australia’s broken primary healthcare network. A large increase in spending to encourage bulk-billing was one of the key demands of doctors’ groups and some states.

Climate and energy

Hydrogen Headstart, a $2 billion policy to support large-scale hydrogen production contracts, will help make it easier for projects to get off the ground. The government hopes a gigawatt of electrolyser capacity will be created, allowing Australia to take advantage of the emerging technology.
About $1.3 billion will be invested in the Household Energy Upgrades Fund to partner with banks and other lenders on upgrading homes with solar panels, modern appliances and other energy-efficient improvements.
A new body, the Net Zero Authority, will be established with a $400 million investment to help workers, industries and communities are supported through any disruption caused by phasing out fossil fuels.

Vulnerable Australians will receive rebates on their energy bills worth up to $500, with the $3 billion cost jointly funded with state and territory governments.CREDIT:LUIS ENRIQUE ASCUI

What you should know: Significant new spending on climate measures – a key plank in the government’s political agenda that differentiates it from the Coalition and helps stimulate growth in future industries.

Housing

The government will increase rent assistance by 15 per cent for more than a million Australians at a cost of $2.7 billion over five years.
Another $2 billion will be unlocked for spending on social and affordable housing by increasing the guaranteed liabilities of the National Housing Finance and Investment Corporation.
The First Home Guarantee will be expanded to any two eligible borrowers, rather than only spouses or de facto partners.

What you should know: The government’s major policy to drive investment in social housing is deadlocked in a Senate standoff with the Greens. Rental assistance will be welcomed by advocates, but a minor expansion of a first home buyers’ scheme is unlikely to make a dramatic difference to housing affordability.

Defence

Nearly $20 billion will be spent over the next four years implementing the aims of the Defence Strategic Review.
This includes $9 billion for the AUKUS nuclear-powered submarine program, $4.1 billion for long-range strike capabilities, $3.8 billion for defence bases in Australia’s north, and $400 million for bonuses to attract defence personnel.
Over the next decade, $3.4 billion will be spent to establish the Advanced Strategic Capabilities Accelerator to drive innovation in Australian defence technologies to try and match strategic rivals.

What you should know: The Defence Strategic Review recommended a sweeping overhaul of the nation’s military in response to challenges in the region (read: the rise of China), but the government has been restrained in terms of new spending promises. Too restrained, according to defence experts. Defence spending is growing along its previous trajectory but will begin to balloon in coming decades as the AUKUS submarine program ramps up.

Infrastructure

The Coalition’s use of grants has been a frequent target of political attacks by Labor. The government will create a $200 million Thriving Suburbs Program to hand out “merit-based and locally driven grants that address shortfalls in priority community infrastructure”. It will form part of a new National Urban Policy to address the needs of our major cities.
$200 million for the Major Projects Business Case to work on the development of future transport projects.
Up to $1 billion in additional funding for smaller upgrades or new facilities for the Brisbane Olympics, on top of the $2.5 billion already committed over 10 years, including for an upgrade to the Gabba. About $240 million will be invested in a new Hobart stadium, where an AFL team will be based.

What you should know: The government has launched a snap review of its entire infrastructure pipeline, which it says blew out under the Coalition. While some overspending was no doubt due to poor planning, major road and rail projects are facing cost pressures including from overseas supply shocks. Deals with the Queensland government to fund the Olympics, which Labor says the Morrison government failed to properly fund, are proving costly.