A $300 energy bill credit for every household, a 10 per cent increase to Commonwealth rent assistance and capped PBS medicine prices headline a budget aimed at easing living costs and bolstering the government's pre-election standing.
The 2024-25 federal budget has the government offering measures it says will cut inflation, which it hopes will prompt the Reserve Bank to cut interest rates before voters go to back to the polls next year.
Jim Chalmers's third budget, propped up significantly thanks to high commodity prices and low unemployment, has the treasurer entering rare air by delivering a second consecutive surplus — Australia's first in almost two decades.
But it signals tough economic times ahead, with unemployment forecast to rise in the next year and real wages not expected to reach 1 per cent growth until 2026-27.
"This budget shows we are realistic about the pressures people face now — and optimistic about the future," Mr Chalmers said.
Short-term cost-of-living relief
Compared to December's mid-year budget update, the government is spending an extra $11.7 billion in 2024-25 financial year, including $1.1 billion in unannounced measures.Over the next four years, the budget includes an extra $32.5 billion in new spending and $8 billion in savings.
From July, all taxpayers will receive a tax cut, as part of the government's already announced revised stage 3 tax plan.
The energy bill relief, which will be $300 for households and $325 for around 1 million small businesses, will go straight onto bills, meaning people won't receive the cash but will receive a discount.
While the amount of bill relief is lower than similar measures in last year's budget, this year it goes to everyone, rather than the 5 million eligible households in 2023-24.
Nearly 1 million people receiving the full Commonwealth rent assistance will receive an extra 10 per cent in their payment.
Treasury forecasts those two measures combined will cut 0.5 percentage points off inflation in 2024-25.
With inflation at 3.6 per cent in the year to March, the government hopes its measures will help bring headline inflation below 3 per cent before Christmas, increasing the likelihood of a rate cut.
"Treasury is now forecasting inflation could return to target earlier, perhaps even by the end of this year," Mr Chalmers said.
Medicines listed on the Pharmaceutical Benefit Scheme will be capped at a maximum cost of $31.60 for two years. For pensioners and concession card holders, they will pay no more than $7.70 per medicine for five years.
The government will also continue to freeze the deeming rates for another year. If the government had lifted the deeming rates, it would have meant 876,000 income support recipients, more than half of whom are on the aged pension, likely would have seen a fall in welfare payments.
The government has trumpeted expanding eligibility for the higher rate of JobSeeker as a cost-of-living measure but the budget papers show it will only affect 4,700 people with a limited ability to work.
Future Made in Australia
Labor's centrepiece policy is its Future Made in Australia plan, which until now has been an ill-defined bid to boost local construction and transition the economy to net-zero by 2050.
Mr Chalmers said $22.7 billion would be spent over the decade to attract and enable investment in the net-zero economy.
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The budget foreshadows future new tax incentives for critical minerals producersthat not only process but refine the minerals needed for batteries and clean energy technologies. The scheme is yet to be developed and would take years to come into force.
Geoscience Australia will also receive half a billion dollars over a decade to map the country's rare earths and critical minerals deposits, to encourage prospective miners.
The budget also includes both tax incentives and more than $1 billion in grants for Australia's emerging hydrogen industry.
Budget fundamentals
The budget includes a $10 billion improvement in the bottom line, with the 2023-24 deficit forecast in December now slated for a $9.3 billion surplus.
"But pressures on the budget intensify after that, rather than ease," Mr Chalmers said.
High inflation has helped the government deliver its surplus, with high commodity prices adding unexpected billions to the budget bottom line. Low unemployment also helps because it bolsters the government's personal income tax take and lowers the amount it needs to pay in welfare.
This financial year's surplus is forecast to be the last for a decade, with deficits in the future years now tipped to be bigger than originally forecast. The deficit is forecast to be $28.3 billion next year and $42.8 billion the year after.
The treasurer said the government would bank 96 per cent of its better bottom line in the short term.
But net debt will still be slightly up on earlier forecasts this year, to just shy of $500 billion, rising to $552 billion next year. Gross debt is expected to hit $1 trillion in 2025-26.
Labor seeking to cut migration
Migration, and the broader impact its had on housing supply and affordability, has caused political pain for Labor after record levels of arrivals post-COVID.
The budget expects net overseas migration to be 395,000 this year, after 528,000 last year. The government is forecasting that to fall to 260,000 next year, falling to 255,000 and 235,000 in the following years.
The government will cap permanent migration at 185,000 places, of which 132,000 will be allocated to its skills stream. The government is also proposing a cap on international students but is yet to set a figure.
The budget includes conservative estimates of commodity prices, forecasting thermal coal and iron ore to halve in price between now and March next year. This helps generate unexpected budget windfalls, with each $10/tonne increase in the iron ore price above the forecast delivering an extra half a billion dollars to the budget.
Over the course of the budget period, Labor has committed $6.67 billion in unannounced spending.
Interest payments on debt are forecast to remain the fastest-growing annual expense over the next decade. Treasury expects interest payments to grow 9.9 per cent each year.
The National Disability Insurance Scheme is the second fastest growing payment. It's forecast to grow 9.2 per cent each year, down from the 10.1 per cent forecast in December. Since December, Treasury has forecast an extra $14 billion in NDIS-related spending but the government says it has legislation to offset most of those costs.
Defence, hospitals, medical benefits and aged care are the next four fastest-growing payments behind interest and NDIS.
Asset write offs, Medicare for Israel-Gaza visa recipients
The federal government's $20,000 instant asset write-off will continue for another year.
The budget also includes almost $1 million over two years to extend Medicare eligibility for Bridging Visa E holders, for people arriving from significantly affected parts of Israel and the Occupied Palestinian Territories. There will also be $2 million for the Red Cross to provide emergency financial assistance for recent arrivals as a result of the conflict.
Combatting Antisemitism Fund Limited could be among three groups to receive charity status, allowing for deductible gift receipts.
There will be a pre-application ballot, initially charged at $25, for a work and holiday visa program for China, Vietnam and India.
Snowy Hydro will receive a $4.5 billion construction loan over four years and $2.6 billion over two years.
There will also be $1 billion over five years for the Administrative Review Tribunal, which replaced the Administrative Appeals Tribunal, to address court backlogs associated with migration decisions.
About 18 months after the government halved subsidised mental health visits to psychologist, Labor has announced $585 million over eight years for digital mental health services.
The government has already also announced $3 billon for wiping student debt, a commitment to lower the rate that debt indexes at and paid placements for students in healthcare and teaching.
The government last week announced it would offer fee-free TAFE and VET courses for people to get into construction work, fearing its 1.2 million house pledge wouldn't be realised without more workers.
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