2023-24 Federal Budget Overview

Adjustments to superannuation and LNG taxation alongside the introduction of the NDIS Financial Sustainability Framework suggest a growing attention given to the structural risks facing the budget. Rapidly rising costs across the NDIS, health and defence may yet prompt further structural changes to support long term fiscal sustainability.

GDP and Employment

• Commodity prices are assumed to return to their long-run level over the year to March quarter 2024.
• Cash rates assumed to remain at 3.85% until early 2024, before being gradually reduced to 3% by June 2025.
• Mining and rural export volumes assumed to recover after weather-related disruptions.
• Labour market assumed to ease as demand slows.
• Fair Work Commission Minimum Wage determination and Aged Care Work Value Case expected to contribute to wage growth in the near term.
• Energy prices are not expected to significantly contribute to inflation in 2024-25.

Population

• The total population is expected to be 750,000 people (2.5%) lower in June 2031 compared to pre-pandemic forecasts, driven by a lower fertility rate.
• Net overseas migration has recovered faster than expected but is assumed to slow before returning to its medium-term level of 235,000 per year from 2024-25.
• The annual population growth in 2023-34 has been revised up to 7%, attributed to a faster than expected rate of recovery in temporary migration.

Cost of Living Relief

• $3 Billion for $500 energy bill relief for eligible households and $650 for eligible small business. Eligible households include pensioners and low-income families.
• $6 million to Australian Energy Regulator to regulate energy markets.
• $40 increase in Jobseeker Payments
• Bulk Billing incentive tripled for children and pensioners.
• $2.2 billion for new and amended listings on the Pharmaceutical Benefits Scheme
• Single Parenting Payment extended to child is 14 years old (from 8 years).
• Increase in maximum rates for Commonwealth Rent Assistance by 15%.
• $2.8 million to increase Childcare Subsidy.

Affordable Housing

• $2.7 billion over 5 years, and $0.7 billion per year ongoing to increase the maximum rates of Commonwealth Rent Assistance (CRA) allowances by 15%.
• $1.9 billion in funding for state affordable housing services. This includes $1.7 billion through the National Housing and Homelessness Agreement (NHHA) and $187.5 million through National Partnership payments.
• $2.7 million in 2023–24 to the Treasury to support delivery of priority housing measures.
• The Australian Government will increase the capital works tax deduction rate (depreciation) to 4% per year and reduce the final withholding tax rate on eligible fund payments from managed investment trust (MIT) investments from 30% to 15% for eligible new build-to-rent projects, encouraging investment and construction in the build-to-rent sector.

ESG

Environmental

• $2.0 billion to accelerate Australia’s Hydrogen industry development.
• $1.3 billion Household Energy Upgrades Fund to support home upgrades that improve energy performance.
• $1.9 billion for decarbonisation of existing industries and development of clean energy industries.
• $83.2 million for the establishment of the Net Zero Authority. This government agency promotes orderly and positive economic transformation to decarbonisation and renewable energy.
• $148.6 million to re-evaluate the sustainability of the Murray-Darling Basin.
• $1 million to Independent Review of Australia’s Carbon Credit Units.
• $355.1 million to Commonwealth National Parks.

Governance

• Increased superannuation tax to 30% for those with superannuation accounts over $3 million.
• Increasing payment frequency of Superannuation Guarantee (SG)
• Petroleum Resource Rent Tax amendments increasing tax revenue from LNG (Liquefied Natural Gas) producers.

Social is covered through health and cost of living.

Health

• LGBTQIA+ Health and Wellbeing $0.9 million to develop 10 Year National Action Plan and establish a LGBTQIA+ Health Advisory Group.
• Implement recommendations from the Aged Care Royal Commission $309.3 Million.
• Pay increase for aged care workers of 15%.
• $338.7 million in-home aged care.
• Covid-19 Aged Care Response $591.3 Million.
• $556.2 million for Mental Health and Suicide Prevention.
• $5.7 billion to Strengthen Medicare through better access and more affordable care.
• Vaping Regulation: $511.1 million for new lung cancer screening program.
• $732.9 million for growing NDIS.

First Nations

• $435 million to provide housing for First Nations Australians in remote Northern Territory communities, addressing issues such as overcrowding, homelessness, poor housing conditions, and severe housing shortages.
• $363.1 million to Close the Gap in First Nations health and wellbeing.
• $285.5 million to improve First Nations cancer outcomes through building capability and growing the healthcare workforce.
• $150 million to the National Water Grid fund. Additionally, $9.2 million will be provided to consult and design a sustainable arrangement for Aboriginal and Torres Strait Islander peoples to own, access, and manage water resources.

Training and Education

• $29.1 billion in funding to support state education services, which includes $28.3 billion for Quality Schools and $829.4 million through National Partnership payments.
• $1.9 billion to support state skills and workforce development services. $1.7 billion through the National Skills and Workforce Development Specific Purpose Payment (SPP) and $230.2 million through National Partnership payments.
• $550.1 million for the 12-Month Skills Agreement, which includes $493.3 million for fee-free TAFE places that will be matched by the states.
• $265.8 million to the Schools Upgrade Fund, which supports capital projects to ensure the safety of students and school staff.

Infrastructure and Urban Policy

• $15.5 billion to support state infrastructure projects.
• Establishment of the Cities and Suburbs Unit, tasked with taking a national approach to urban development and policy.
• $3.4 billion for infrastructure investment to support the delivery of the Brisbane 2032 Olympic and Paralympic Games.
• $3.2 billion over 12 years from 2022–23 to expand water infrastructure projects and support regional community development.
• $1.1 billion in 2032–33 to continue existing road maintenance and safety programs, with $500 million for the Roads to Recovery Program and $350 million for national road network maintenance.
• $240 millionto support development at Macquarie Point in Hobart. This investment is a broader urban renewal precinct, including construction of affordable housing and Macquarie Point Stadium.
• $230 million over 5 years for the delivery of 2 major construction projects in Cairns: expanding Cairns Marine Precinct ($30M added in this Budget) and building a new Central Queensland University campus in Cairns CBD.
• The Thriving Suburbs Program will receive $200 million in funding over two years, beginning in 2024-25. The program will provide merit-based and locally driven grants aimed at addressing priority community infrastructure shortfalls in urban and suburban communities.

With inflation expected to still bite into the pockets of the most vulnerable, modest increases in Jobseeker, rent assistance and aged pension rates, alongside expanded criteria mean that more money will be flowing to those who need it most in the short term. Modest funding has been allocated so as not to fuel inflation, including direct energy bill reductions which will bring down costs for consumers. To pay for these, tax increases have been placed on those with large super balances and an increased Resource Rent Tax has been put in place.

Time will tell if this budget has indeed avoided putting inflationary pressure on the economy. Regardless, Australia is predicted to continue to see robust growth and low unemployment, bolstering the government’s bottom line and allowing more time for structural pressures on the budget to be dealt with later.

Housing delivery and enabling infrastructure are a key focus between now and the next budget. 1,200 houses have been promised in each state and territory in this budget, and the National Housing Affordability Future Fund is a key priority. However, as Australia rapidly grows over the next year this may not be enough to subdue cost-of-living pressures.

This budget instead treads carefully in assisting those struggling to meet cost-of-living pressures and to catalyse building Australia’s sustainable future by providing both funding and skills needed across key programs.

We expect next years’ budget will need to make more of the challenging decisions.