Federal Budget 2024-25: Easing the Squeeze?

14 May 2024

Handing down the Labor Government’s third budget this evening, Treasurer Jim Chalmers described it as “a responsible Budget that helps people under pressure today”, which invests in the nation’s long-term priorities while avoiding inflationary pressures. Dr Chalmers stated the priorities of the Budget included providing cost of living relief, building more homes, investing in Australia’s future, and strengthening the healthcare system.

The Treasurer confirmed that the Budget forecasts a surplus of $9.3 billion for 2023-24 – the second surplus delivered by the Albanese Government – but stated that a deficit of $28.3 billion is expected to follow in 2024-25. While economic growth for 2023-24 is anticipated to be 1.75 per cent, it is forecast to grow to 2 per cent in 2024-25. The surplus is largely supported by an increase in revenue due to strong commodity prices and steady workforce figures.

As anticipated, the centrepiece of the Federal Budget is the $22.7 billion ‘Future Made in Australia’ package. The package brings together a range of pre-budget announcements, including investments in the PsiQuantum quantum computer, Solar Sunshot Program, improving environmental approvals processes, mapping the Australian continent for critical materials, and funding for several rare earth metals production and processing projects. The Budget also establishes the $1.7 billion Future Made in Australia Innovation Fund, $523.2 million for the Battery Breakthrough Initiative, and $68 million to attract investment in key industries to support the Future Made in Australia initiative.

The Treasurer emphasised the Government’s priority of easing inflationary pressure on households. He indicated that Treasury forecasts inflation to decline to 2.75 per cent in 2024-25, falling within the Reserve Bank’s target range, however, the RBA does not appear as optimistic. Australia’s unemployment rate is expected to increase by 0.5 per cent to 4.5 per cent in 2024-25. Finally, the Budget forecasts that wage growth will slow by 0.75 per cent to 3.25 per cent in 2024-25.

Cost of living relief remains a key feature of the 2024-25 Budget, underpinned by the Government’s changes to the stage three tax cuts. The tax cut is expected to benefit most taxpayers and provide on average $1,888 per year, per person. The Budget also includes $3.5 billion which will provide a $300 energy bill rebate for every Australian household and a $325 rebate for one million eligible small businesses. Additionally, the Government will invest $1.9 billion over five years to increase the Commonwealth Rent Assistance by 10 per cent.

Australians with student loans are also set to share in some relief as the Albanese Government has promised $3 billion to change the way indexation is applied to the Higher Education Loan Program (HELP). The Government has promised to cap the HELP indexation rate to be the lower of either the Consumer Price Index or the Wage Price Index, which will be backdated to 1 June 2023. Additionally, the Government has announced it will establish a Commonwealth Prac Payment, which will provide $319.50 per week to 68,000 eligible higher education students and over 5,000 VET students each year during their clinical and professional placement periods.

The Government will also invest in several infrastructure projects across Australia, including an additional $3.3 billion for the North East Link project in Victoria, $2 billion towards 14 new road projects in Western Sydney, and an additional $1.2 billion for the Sunshine Coast Rail Line. Importantly, the Budget delivers an additional $1.9 billion in loans which the Government hopes will build 40,000 social and affordable homes across Australia. Finally, the Government will provide $1 billion for accommodation for women and children fleeing domestic violence.

For Australia’s healthcare services, the Federal Government will invest $1.2 billion in funding to address pressures in the healthcare system. This will include $882.2 million to support older Australians to avoid hospital admission, be discharged earlier, and improve their transition out of hospital; and $227 million to deliver a further 29 Medicare Urgent Care Clinics. Dr Chalmers also announced the Government will invest $1.6 billion over 13 years in funding for the Medical Research Future Fund, which will include $1.1 billion for existing research, $300 million for two new research ‘Missions’, and an additional $411 million for the Investigator Grants Scheme. Finally, to make the National Disability Insurance Scheme (NDIS) more sustainable, the Government will invest $214 million to combat fraud and to co-design NDIS reforms with participants. It will also invest $160.7 million to upgrade the NDIS Quality and Safeguards Commission’s technology systems.

As anticipated, Australia’s defence spending will increase from 2.1 per cent of GDP to 2.4 per cent by 2033-34 and is expected to reach $765 billion over the decade. The Government will invest $50.3 billion over ten years to implement its response to the 2024 National Defence Strategy.

In other measures, the Government will provide $17.3 million to promote the development of sustainable finance markets in Australia. This will include additional funding for the Australian Securities and Investments Commission to investigate and take enforcement action against businesses engaging in greenwashing. However, the Government will also achieve savings of $1 billion by reducing its spending on consultants, contractors and labour hire firms, bringing its total savings across these areas to $4 billion since 2022–23.

For further information on key portfolio measures, please refer to GRACosway’s detailed briefings:

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