Budget: Cost Of Living Relief With Careful Revenue Raising Measures

The measures announced in the May 2023 budget were mainly as expected. The largest of the surprises was the additional $5.6bn over 5 years of Medicare spending. The $14.6bn cost-of-living package was as expected. Treasurer Chalmers reiterated that 82% of the revenue windfall had been saved. The debate as to whether the net stimulus will be inflationary continues between the government and others.

• Treasury is forecasting the RBA cash rate to fall to 3% by June 2025 while interest costs on the debt are expected to be $115bn over 5 years.
• Energy bill relief of $500 per household will be available to 5.5mn households and will cost the government $1.5bn. Electricity and gas price forecasts have also been revised down substantially by 25pp and 16pp respectively.
• JobSeeker and Youth Allowance payments will be increased $40/fortnight and the higher rate will be extended to the over 55s, costing $4.9bn over 5 years. The single parent payment will now be available until the youngest child is 14 up from 8 and this will cost $1.9bn. Rent assistance will rise 15% worth $2.7bn. There are other measures to increase the affordable housing stock. Plus $1.9bn for indigenous services.
• The government is expecting net overseas migration to rise 400k this FY and then 315k the year after. At the same time visa charges will rise raising $1.28bn.
• There will be a $2.2bn Medicare overhaul plus a tripling of the bulk billing incentive payment costing $3.6bn. Cheaper medicines are to cost $2.2bn. The spending cap on the NDIS will be reduced to 8%/year from 14%.
• $2bn will be available for Hydrogen programmes and there will be incentives for small businesses to invest in energy efficiency.
• The already announced increase to the childcare subsidy from July 1 will cost $55.3bn and impact 1.2mn families.
• On the revenue side, there were no surprises with the increased tobacco tax to raise an additional $3bn over 4 years, changes to the petroleum tax $2.4bn, increased tax compliance $9bn, increase in heavy vehicle road charge $1.1bn, changes to super concessions $0.9bn and introduction of minimum 15% tax rate for mulitnationals $0.26bn.
• A cap on cost growth is to be introduced by 2026.
• See Budget Forecasts: Policy Measures Have Net Positive Economic Effect for projections.

Source: MNI - Market News/Commonwealth of Australia