Treasurer Jim Chalmers recently presented the Australian Federal Budget for 2024-25, and given the unstable economic climate of late, it has generated much conversation with Australians from all walks of life.
The sizeable document carefully outlines the government’s upcoming plans for revenue and expenditure, which many of us consider dense reading. However, understanding the budget is vital for all Australians. It’s going to impact various aspects of our daily lives, from the cost of living to our business operations.
To help you better understand what was covered, our experts at Aspire2 Wealth Advisers have compiled everything you need to know about the Federal Budget 2024-25.
Key Highlights of What is in the Federal Budget 2024-25
The Federal Budget announcement reveals an expected surplus of $9.3 billion for 2023-24, marking a $10.4 billion improvement from the mid-year forecast. Despite several avenues of economic strain across various sectors, such a positive outcome is largely due to higher commodity prices and an increase in personal income tax receipts.
Other points of note include:
- Federal Government Debt: Federal Government net debt is projected to stay stable at 20-22% of GDP over the forward estimates.
- Inflation and Energy Relief: Treasury forecasts inflation to drop below 3% annually for 2024-25 and beyond, aided by the extension of the Energy Bill Relief Fund, which provides $3.5 billion in support through 2025-26.
- Future Made in Australia Initiative: The Future Made in Australia initiative focuses on clean energy and critical minerals, allocating over $13 billion up to 2034. Most spending, including tax incentives for production, is planned after the current inflation period.
- Housing Infrastructure and Rent Assistance: The Budget also allocates additional funds for social and affordable housing infrastructure over the next decade, aiming to boost productivity by enabling workers to live closer to their jobs. Increased Commonwealth Rent Assistance complements these measures.
- Superannuation and Parental Leave: From 1 July 2025, superannuation contributions will be included in government-paid parental leave, supporting gender equality in retirement.
- Artificial Intelligence Development: Another positive announcement is the development of policies and capabilities for safe and responsible AI adoption.
- Impact on Households and Productivity: Overall, the Budget’s measures on energy and housing affordability, along with personal income tax cuts starting 1 July 2024, aim to alleviate cost-of-living pressures and boost household confidence.
- Coordinated Policy Efforts for Future Success: The success of the Future Made in Australia initiative depends on coordinated efforts in education, training, migration, and industrial and fiscal policies. Achieving this could bring substantial benefits to Australia.
Focus Areas of the 2024 Federal Budget Announcement
The Federal Budget & Cost of Living Relief
In response to the rising cost of living, the budget will allocate $3.3 billion for energy and rental subsidies. Every Australian household will receive a $300 energy bill rebate, while some small businesses will benefit from a $325 rebate. These measures aim to provide immediate financial relief to those affected by high living costs. Additionally, the budget includes significant funding to help renters and low-income households, recognising the financial strain many Australians face.
Commonwealth rent assistance will increase, providing much-needed support to those struggling with housing costs. Assistance is particularly needed in the current economic climate, where rent prices have surged in many parts of the country. By offering this relief, the government aims to alleviate some of the financial burdens on Australian families and individuals.
The Federal Budget & Tax Cuts and Benefits
One of the major highlights is the implementation of stage three tax cuts, which will benefit 13.6 million taxpayers starting July 1, 2024. The average tax cut will be $1888 per year, translating to approximately $36 per week. The cuts are designed to put more money back into the pockets of working Australians, thereby boosting disposable income and stimulating economic activity.
Additionally, the budget includes increased Commonwealth rent assistance, providing further financial support to renters. New measures are part of a broader strategy to address housing affordability and ensure that vulnerable populations can access secure and affordable housing.
The Federal Budget & Support for Small Businesses
The budget extends the $20,000 instant tax write-off until next year, allowing small businesses to continue investing in essential equipment and resources without facing immediate tax liabilities. However, there are concerns that the budget offers limited support for small businesses, particularly those struggling with high energy costs and thin profit margins. While the instant write-offs and energy subsidies are welcome, more comprehensive support is being called upon for small businesses to thrive.
Small businesses are the backbone of the Australian economy, and their success directly influences the nation’s overall economic health. Despite the extensions of the tax write-off and energy subsidies, many small business owners feel these measures fall short of addressing their challenges, such as high operational costs, particularly in energy-intensive industries. More robust support mechanisms and incentives for innovation and technology adoption will ensure the competitiveness and sustainability of small businesses in Australia.
The Federal Budget & Investment in Future Made in Australia
A massive portion of the budget is dedicated to the Future Made in Australia initiative, with $22.7 billion earmarked for business investment and incentives. The initiative covers $13.7 billion in tax credits to produce critical minerals and green hydrogen. It aims to boost local manufacturing and sustainable energy production, positioning Australia as a leader in the green energy sector, and reducing reliance on imported resources.
The Future Made in Australia initiative also includes substantial research and development funding, supporting the growth of innovative industries and creating high-tech jobs. By focusing on critical minerals and green hydrogen, the government aims to develop a robust supply chain that supports both domestic needs and export opportunities, driving long-term economic growth and establishing Australia as a key player in the global green energy market.
The Federal Budget & Health and Aged Care
The federal budget allocates $500 million for 24,100 additional home care packages and $610 million to help older patients discharged from hospitals earlier. These measures aim to improve the quality of care for the elderly and reduce the burden on hospital resources. Furthermore, the cost of medicines under the Pharmaceutical Benefits Scheme (PBS) will be frozen, providing significant savings for patients.
The focus on aged care is a response to the growing needs of Australia’s aging population. By increasing funding for home care packages and facilitating earlier hospital discharges, the government addresses older Australians’ immediate and long-term healthcare needs. Freezing the cost of PBS-listed medicines ensures that essential medications remain affordable, reducing financial stress for those with chronic conditions.
The Federal Budget & NDIS
The government continues its crackdown on fraudulent NDIS providers, with $23.5 million dedicated to fraud detection and $240 million for improved technology to combat fraud. This initiative ensures that funds are properly utilised to support individuals with disabilities.
The NDIS has been a transformative program for many Australians with disabilities, providing essential support and services. However, fraudulent activities undermine the program’s effectiveness and erode public confidence. By allocating significant resources to fraud detection and prevention, the government is taking strong steps to protect the integrity of the NDIS and ensure that it continues to serve its intended purpose.
The Federal Budget & Economic Outlook
The Treasury forecasts a 2% economic growth rate for the upcoming year, with inflation expected to fall within the Reserve Bank’s target range by late 2024. The unemployment rate is still projected to rise to 4.5% next year, though, as economic conditions tighten. These projections underscore the importance of prudent financial management and the need for policies that support job creation and economic stability.
The forecasted economic slowdown highlights the challenges ahead, including managing inflation and supporting employment. While the expected fall in inflation is a positive development, the anticipated rise in unemployment calls for targeted interventions to support job seekers and stimulate job creation.
The Federal Budget & Housing/Social Services
An additional $4.3 billion has been allocated for housing, including $1 billion this financial year, to assist states in building more homes. The budget also provides $423.1 million for social housing and homelessness services, partially addressing the need for affordable housing by increasing housing supply, improving affordability, and supporting vulnerable populations.
Housing affordability and availability remain pressing issues in Australia. The budget’s allocation for housing aims to address these challenges by increasing the supply of affordable homes and providing support for social housing and homelessness services. These
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