October 2022-23 Federal Budget Overview

As was foreshadowed in the lead-up to the budget, the new Australian government has taken a highly restrained approach to spending in its first fiscal blueprint. While election promises such as increased parental leave and childcare subsidies have been fully costed and included in this budget, other direct cost-of-living relief has been notably absent. Instead, the government is banking the windfall revenue gain of over $40 billion that has been added to the budget since the former Coalition government’s May 2022-23 Budget.

GDP AND EMPLOYMENT

• Recent floods are expected to decrease GDP growth and increase inflation in the short term, while investment to re-build after the floods is assumed to offset these effects in the medium term.  
• The return of international students and tourists is expected to boost services recovery. 
• LNG and coal prices are assumed to stay elevated over the next 2 years, passing on these prices to households and continuing to drive inflation.  
• The cash rate is assumed to peak at 3.35% in the first half of 2023. 

MIGRATION 

• Migration is assumed to return to the full 195,000 cap in the 2023-24 fiscal year. Combined with returning citizens, it is anticipated that annual population growth of 235,000 will be attributed to overseas migration over the forward estimates period to 2025-26. 
• Migrants on student visas have had their relaxation of work restrictions extended until 30 June 2023 to assist with short-term labour shortages. 
• $175 million over four years has been pledged to boost permanent migration to Australia by creating a new Pacific Engagement Visa for nationals of Pacific Island countries and Timor-Leste. Audit efficiencies will also see more resources directed to visa processing. 

COST OF LIVING RELIEF 

• Affordable childcare for 1.26 million families from 2022-23 through investing $4.6 billion to increase the Child Care Subsidy. 
• Paid parental leave expanded to 26 weeks 
• Housing Accord: One million new homes over 5 years, including 10,000 affordable dwellings.  

• Housing Australia Future Fund to provide sustainable funding source to increase housing supply through 20,0000 new social housing developments and 10,000 affordable dwellings. 
• The rule of thumb for affordable housing is that it costs no more than 30% of household income. 

RESILIENCE AND LOW CARBON FUTURE 

• $20 billion for upgrading outdated electricity grid. 

• $500 million to reduce transport emissions, including EV charging infrastructure at 117 highway sites and hydrogen highways for key freight routes. 
• $200 million per year on prevention and resilience initiatives through the Disaster Ready Fund. 
• $15 billion of capital through the National Reconstruction Fund to transform and strengthen priority industries, including resources, transport and renewables and low emission technologies. 
• $2.4 billion investment in NBN Co to extend fibre access, including to over 660,000 regional homes. 
• $1.2 billion in the Better Connectivity for Regional and Rural Australia Plan to enhance connectivity, including improved mobile coverage in regional and rural areas and improving resilience against natural disasters. 

HEALTH 

• $2.5 billion to fund more employment and higher wages in aged care  
• Increased funding to NDIS of $385 million in 2023-24 
• $1.7 billion in Woman’s safety at home, work, and the community 
• Cutting the cost of PBS (Pharmaceutical Benefits Scheme) general prescriptions through a decrease in the in the maximum co-payment from $42.50 to $30 per script 

FIRST NATIONS 

• Uluru Statement from the Heart 
• Referendum to enshrine a First Nations Voice to Parliament in the Constitution 
• $9.4 million to partner with First Nations Communities to trial a new jobs program 

TRAINING AND EDUCATION 

• 480,000 free TAFE places over 4 years in areas of critical shortage 
• 20,000 extra University places over 2 years with a focus on areas with a skills shortage including health, education, engineering, and technology. 

INFRASTRUCTURE 

• Infrastructure ‘reprioritisation’ has been a tenant of the new government, and this has shown in the budget papers. 
• It is notable that the sixth round of the Building Better Regions Fund has been suspended, equivalent to a funding loss of $250 million to regional Australia, however this has been replaced by a new $1 billion regional development fund. 
• Much of the spending on infrastructure in regional areas has been postponed, pending further feasibility and benefits assessments. 
• Infrastructure spending has been heavily targeted to regions with large populations or that are key supply-chain players, with roads, inland rail and suburban rail getting the lion’s share of immediate funding. 
• Initial funding and heads of agreement for the National Housing Accord, which will see 1 million additional social and affordable houses built from 2024 onwards 

EQUALITY 

• Prohibiting pay secrecy clauses in employment contracts 
• Public reporting of large company’s gender pay gaps 
• Independent Women’s Economic Equality Taskforce 
• $262.6 million for establishment and ongoing operation of the Federal Anti-Corruption Commission 

Global and domestic headwinds are clearly playing out in the first budget for the new government, and the approach to overcoming these headwinds is notably different. To prevent fuelling further inflation, the government has opted to take a conservative approach to cost-of-living relief by targeting productivity- and participation-improving programs. In doing so, this budget shows there will be short term pain particularly for lower- and middle-income earners as we get inflation under control. By banking windfall income from resources, low unemployment and company profits, the government has given themselves some latitude to act on any significantly negative outcomes that may emerge. 

In terms of a wellbeing budget, the government certainly has much more to do on this front, if Australia is to adopt a similar approach to New Zealand’s ‘Living Standards Framework.’ Under this approach, all new policy proposals must specify their contribution to wellbeing and be evaluated on this basis; at this stage, the Australian government is still working on smoothing and testing the narrative.