Australia’s 2023 Federal Budget aims to ease cost-of-living pressures with a $14.6 billion package of cost cuts, including energy bill relief, reduced medical costs and increased welfare payments. The Albanese Government has aimed to assist the disadvantaged while planning for renewable energy, defense, and the arts, all while maintaining spending control and delivering a $4.2 billion surplus.
The Big Picture
The budget surplus is cause for celebration, but it may be short-lived due to the global economy’s slowdown caused by persistent inflation and higher interest rates. Australia’s economic growth is projected to slow down from 3.25% to 1.5% in the following year before recovering to 2.25%.
In this scenario, Treasurer Jim Chalmers continues to prioritize inflation as the primary economic challenge, stating that the budget aims to alleviate, not add to, inflationary pressures.
Although inflation is falling slightly faster than expected, it is still expected to be around 4.5% by year-end, a significant drop from the previous year’s CPI rate of 7.8%.
Easing The Costs of Living
The Government’s $14.6 billion cost-cutting package is aimed at aiding those affected most by increasing costs in energy bills, health and medical services, and welfare payments.
Around five million households and one million small businesses will receive energy bill relief, with eligible households and businesses receiving up to $500 and $650, respectively, from July 2023.
The package includes energy-saving programs such as low-interest loans, upgrades to social housing, and access to energy bill reduction information for households.
Health & Medical
The Government is addressing high health and medical costs by investing billions of dollars in providing incentives to doctors for bulk billing Concession Card holders and children under 16, helping around 11.6 million people.
Additionally, patients with chronic health conditions will be eligible to receive two months’ worth of medicine instead of one month’s worth, reducing the number of visits to GPs and pharmacies and halving medicine bills for at least six million people.
The Government is also allocating $2.2 billion over five years to add new treatments to the PBS, including cystic fibrosis treatment, and investing $358.5 million in eight Urgent Care Clinics that will bulk bill and operate for extended hours to improve access to care and reduce pressure on hospitals.
The Government’s limited assistance to renters is expected to see an increase of 15% in Commonwealth Rent Assistance payments starting September 20, 2023.
Furthermore, the eligibility for the Home Guarantee Scheme will be extended beyond first home buyers to include non-first home buyers who have not owned a property in Australia in the last decade.
The Government is focusing on medium to long-term solutions for the housing crisis, with new tax incentives to encourage build-to-rent developments and more support for lending to community housing providers.
Pay Rise for Aged Care Workers
Severe staff shortages in the aged care sector, largely driven by low wages, may abate a little with the Government’s commitment to fund a pay rise.
More than $11 billion has been allocated to support an interim 15 per cent increase in award wages.
Support for Families
Childcare costs will drop significantly from July 10, as the Government subsidy for families with a combined income of $80,000 or less increases to 90%.
The subsidy rate for families earning over $80,000 will reduce by 1 percentage point for every additional $5,000 of family income, with a cap of 0% for families earning $530,000.
In addition, a more generous Paid Parental Leave scheme will begin in July, with a new family income test of $350,000 per annum making nearly 3,000 additional parents eligible for the entitlement.
The Government has announced changes to superannuation that will primarily affect those with larger balances.
Those with balances over $3 million will see an increase in concessional tax to 30% from July 2025, while those with balances below $3 million will continue to be taxed at the concessional rate of 15%.
Additionally, starting from July 2026, employers will be required to pay their employees’ super at the same time they pay their wages, which will help ensure employees receive their full super entitlements.
These changes will particularly benefit our older client base who may have larger super balances and rely on their super for their retirement income.
In these uncertain economic times, it’s important to have a financial plan in place to protect yourself and your loved ones.
Our team of financial advisers can help you navigate the current landscape and prepare for the future.
Contact us today to schedule a consultation and take control of your financial future.