Federal Budget Analysis 2024: Winners And Losers
Treasurer Jim Chalmers recently presented the second full-year Budget for the Albanese Government, focusing on alleviating inflationary pressures. As per the report by Forbes.com on Winners And Losers, the Budget aims to address the rising cost of living through various measures, including tax cuts, energy rebates extension, and rent assistance.
Chalmers emphasized the importance of easing the financial burden on Australians while ensuring responsible fiscal management. Notably, the Budget forecasts a surplus of $9.3 billion, marking a positive turn since the last surplus in 2007/2008.
Shadow treasurer Angus Taylor raised concerns about the government’s spending trajectory, attributing the surplus to favorable economic conditions rather than prudent financial management.
Let’s delve into the winners and losers of the 2024 Federal Budget:
2024 Budget Winners
Australian Taxpayers
Australian taxpayers received a significant boost during the Budget night on May 14, mainly through the implementation of stage three tax cuts. These cuts, initially proposed by the former Morrison government and later supported by Labor, have been adjusted to benefit lower and middle-income earners more. However, this adjustment has stirred controversy, with the Liberal Party accusing the government of deviating from its election promise.
Under these new tax cuts, which were reluctantly approved by the Opposition earlier this year, Australian workers will see a reduction in their income tax starting from July 1. It is anticipated that these cuts will amount to $324 billion over the next decade. For instance, a worker earning $90,000 annually can expect a tax cut of around $1929. This reduction in taxes is expected to contribute to an average disposable income growth of 3.5% this year, benefiting approximately 14 million taxpayers.
For more information on how these tax cuts may affect you personally, refer to our Guide to Stage Three Tax Cuts.
University Students
The government has announced plans to reduce student debts by $3 billion, effective from June last year. This reduction will be achieved by indexing HECS and HELP debts to either the consumer price index or the wage price index, whichever is lower.
Previously, all payments were indexed solely to inflation. With the new rules, students with an average HECS debt of approximately $26,000 can expect a reduction of about $1200 in their debt, according to government estimates. This change is expected to benefit around three million students.
Additionally, starting from July 2025, approximately 70,000 student nurses, midwives, teachers, and social workers will receive nearly $320 per week during their mandatory work placements
Tafes and Schools
The government is taking steps to enhance vocational education and schooling opportunities. They plan to introduce 15,000 fee-free Tafe positions and approximately 5,000 pre-apprenticeships to encourage more individuals to pursue careers in the construction and housing sectors.
Furthermore, the federal government aims to address funding gaps in schools by negotiating with states to cover a portion of a 5% shortfall. Additionally, they intend to increase federal funding for state schools from 20% to 22.5%, as part of a $60 billion package spanning four years. During the Budget speech, Chalmers highlighted a $350 million investment in fee-free courses designed to prepare individuals for university, particularly benefiting those who may have missed out on a university placement.
Chalmers emphasized the government’s commitment to raising the national tertiary qualification attainment rate to eight out of 10 workers by 2050, with new funding reforms to support this objective.
Hospitals
Public hospitals are set to receive increased funding, as the government finalizes a new five-year funding deal with states and territories starting next year. In the Budget, the Commonwealth has allocated an additional $4 billion in funding for the 2025-26 agreement, along with a further boost of $13 billion over the subsequent five years.
Moreover, the Medical Research Future Fund will see a significant injection of funds. Over $1.1 billion has been allocated for ongoing research, $500 million for new research projects, and $300 million specifically designated to investigate cancers with high fatality rates and healthcare system inequalities.
Bill-Paying Households
Last year, rebates of up to $500 per household were targeted at the most vulnerable, providing crucial relief. This year, as part of a $3.5 billion package, every Australian will receive $300 to alleviate bill burdens, with an additional $20 for one million small businesses.
During his speech, Chalmers highlighted the correlation between reducing energy bills and curbing inflation. He pointed out that while electricity bills increased by 2% last year, the rise would have been more substantial without government relief measures.
Unfortunately, electricity prices are expected to rise again this year, following the Australian Energy Regulator’s approval of price hikes by electricity distributors over the next five years. These distributors, covering regions in The Northern Territory, New South Wales, and Tasmania, cite inflationary pressures as justification. Notably, small businesses in the NT could face the steepest increases, with electricity costs projected to rise by $332 annually.
Also read : Unlocking Financial Freedom: Budget 2024 Delivers Energy Relief and Rent Assistance Surge
Childcare Workers
The Budget’s provision of incentives for childcare workers came as no surprise, considering the sector’s challenges with understaffing and low morale. Many childcare workers have left the industry, with some transitioning to the aged-care sector following the government’s wage improvements in the previous Budget.
To address this exodus, Chalmers announced an increase in childcare wages, although the specific amount remains undecided. Details regarding the wage rise are expected to be finalized after the Fair Work Commission processes.
Those Who Rely on Medications
Chalmers estimated that six out of 10 PBS scripts are prescribed to pensioners and concession card holders. To alleviate the burden of prescription costs, the Budget allocates $3 billion to freeze the maximum amount these vulnerable groups will pay for their prescriptions for five years.
This means that no pensioner or concession cardholder will pay more than $7.70 for the medicine they require, ensuring affordable access to essential medications.
Working Parents
While Treasurer Chalmers isn’t reviving the ‘Baby Bonus’ policy from 2002, aimed at incentivizing childbirth, he aims to support families, particularly working parents.
Acknowledging that individuals should have the freedom to make their own family decisions, Chalmers emphasizes the government’s role in facilitating larger families if desired. He stated, “I know that people will make their own choices… but we want to make it easier for people to have bigger families if they want to.”
In line with this, the government has allocated $1.1 billion for superannuation on government-funded Parental Leave. Chalmers emphasizes the importance of being present during the first months of a child’s life, stating, “When it comes to those first months of your child’s life, you can’t put a price on being there. And you shouldn’t pay a price for being there.”
Low-Income Renters
Renters have faced challenging times in recent years, with landlords increasing rents by 11.5% over the past year alone, as reported by PropTrack’s Rental Report.
In an effort to address this issue and stimulate housing supply, the government has unveiled a $12.3 billion housing package, building upon last year’s $10 billion Housing Australia Future Fund initiative aimed at constructing 30,000 social and affordable rentals.
The new package encompasses various initiatives, including a $9.3 billion five-year agreement with states on social housing and homelessness, $1 billion allocated for states and territories to expedite infrastructure development for housing projects, and an additional $1 billion for crisis accommodation, particularly for women and children fleeing domestic violence. Notably, the Leaving Violence Program, providing support to women leaving abusive relationships, will become a permanent fixture.
Despite these efforts, Stephen Glackin, a senior researcher at Swinburne University of Technology, remains skeptical about the package’s impact on the housing crisis. He notes the economic inelasticity of housing, suggesting that increased supply may not necessarily lead to reduced prices unless the number of available houses is significantly increased.
While Glackin appreciates the focus on social housing, he highlights the complexities involved in its implementation, suggesting that it may take years to yield tangible results.
Additionally, Commonwealth rent assistance received a 15% increase in last year’s Budget, with Treasurer Chalmers committing to a further 10% rise this year, amounting to a $1.9 billion package. This assistance aims to support eligible pensioners and Centrelink recipients in meeting their tenancy costs.
East Coast State Roads
The government has allocated significant funding to upgrade infrastructure along the east coast of Australia. This includes:
- Upgrading the Bruce Highway in Queensland with a commitment of $467 million.
- Initiating new road projects in Western Sydney with an investment of $1.9 billion.
- Providing funding for Melbourne’s North East Link project, totaling $3.25 billion.
Infrastructure and Healthcare
Funding has been allocated for essential infrastructure projects, including road upgrades and urgent care clinics. This investment ensures better access and quality of care for all Australians, addressing critical healthcare needs across the nation.
Currently, there are 58 Medicare Urgent Care Clinics spread across the country, offering free, walk-in medical assistance to patients during after-hours and weekends, alleviating pressure on emergency departments. Under the Budget’s $8.5 billion health package, the number of these clinics will be expanded to 87, with a focus on increasing their presence in regional and rural areas.
Moreover, the $227 million package includes provisions for extended treatment options for women. The Medicare rebate for 45-minute gynaecology appointments will be raised to encourage more general practitioners to offer bulk-billing services. Additionally, $361 million will be allocated to bolstering the mental health system. This includes the establishment of a national digital mental health service, providing free support to approximately 150,000 Australians annually. Also read the full report Australia Reveals 2024-2025 Healthcare Budget: Prioritizing Medicare Expansion and Mental Health Support
Green Businesses
The Albanese Government has introduced the Future Made in Australia program, aiming to revitalize Australian manufacturing and safeguard against future global supply disruptions.
Green initiatives will be a focal point of this program, with significant funding allocations:
- $1 billion for the Solar Sunshot project, focusing on the production of solar panels in the Hunter Region of NSW.
- $6.7 billion over the next decade for a Hydrogen Production Tax Incentive, encouraging local hydrogen and renewable energy projects.
- Nearly $1 billion investment in PsiQuantum’s quantum computer in Brisbane, marking a world-first initiative.
- $566 million allocated for Geoscience Australia to map Australia’s soil and seabed under the Resourcing Australia’s Prosperity (RAP) initiative.
Prime Minister Anthony Albanese emphasized the long-term sustainability of this funding, ensuring RAP’s full funding for 35 years. Additionally, RAP will expand to map offshore areas, facilitating carbon capture and storage initiatives and clean hydrogen projects.
To expedite environmental approvals for green projects, $100 million will be available, enabling quicker project commencements. Furthermore, $1.5 billion will be directed towards enhancing Australia’s manufacturing capacity for medical supplies.
Small Businesses
The instant asset write-off program is extended for another year, providing continued support to small and medium-sized businesses. This measure enables businesses to invest in assets for growth and expansion, contributing to economic recovery and stability.
Last year, the federal government implemented a temporary increase in the instant assets write-off program threshold, raising it from $1,000 to $20,000. This initiative targeted small and medium-sized businesses with an annual turnover of less than $10 million.
Under this program, businesses were allowed to deduct the cost of assets used for business purposes, such as cars, equipment, or office supplies, in a single tax return. Each asset valued at less than $20,000 could be written off, enabling businesses to potentially claim deductions on significant amounts of equipment and supplies.
Initially applicable to items used between July 1, 2023, and June 30, 2024, this temporary measure was set to revert to the original $1,000 threshold for the upcoming financial year. However, as part of the Budget, it has been extended for another year.
2024 Budget Losers
Some Jobseeker Recipients:
It’s undeniable that living on the federal government’s Jobseeker payment can be challenging. The Economic Inclusion Advisory Committee proposed raising Jobseeker to 90% of the age pension, which would have increased the current fortnightly payment of $762.70 for singles to $1004.67.
However, this proposal was deemed ambitious and was ruled out by Chalmers before the Budget night. Unfortunately, there was no significant increase to the Jobseeker payment in the Budget, a decision criticized by The Antipoverty Centre. They argued that unemployed individuals were not contributing to inflation and emphasized that leaving people in poverty was not a responsible budgeting approach.
Chalmers defended the budget, highlighting the allocation of an additional $41 million to extend eligibility for the higher rate of Jobseeker. He noted that individuals who can only work up to 14 hours a week would see their payment increase by at least $54.90 per fortnight.
High-Earning Australians:
From July 1, all Australians will benefit from a tax cut, but individuals earning over $145,000 annually will see less favorable outcomes under the Albanese Government’s updated stage three tax cuts compared to the original scheme.
For instance, under the previous plan by the Morrison Government, someone earning more than $200,000 per year would have received a tax cut of $9,075. However, with the revised plan, they will only receive $4,529—a difference of $4,546.
In response, the Labor Party has highlighted that over 80% of employees will actually fare better under its adjusted tax plan.
Large Corporates:
Hopes for a reduction in company tax rates were not met, with cuts to tax rates and other measures for businesses not included in the budget. Prior to the Budget announcement, there were calls from tax leaders to lower the company tax rate from 30% to 25%, aligning with the Morrison government’s Enterprise Tax Plan.
Liam Telford, the national tax technical director at RSM Australia, emphasized the importance of addressing both household cost-of-living pressures and mounting business expenses. He highlighted that reducing the corporate income tax rate to 25% would bring Australia closer to the OECD average of 23.73% and enhance the competitiveness of Australian businesses against foreign multinational corporations.
Additionally, RSM advocated for the permanency of the ‘loss carry back’ rule, which allows for a refundable tax offset introduced during the COVID-19 pandemic.
However, neither of these proposals was included in the Budget announced on Tuesday night.
Certain Defence Projects
Some defense investments are being cut, including the acquisition of aircraft and navy vessels, potentially affecting defense capabilities and strategic priorities.
Amidst the fervor surrounding the Aukus nuclear-powered submarine deal in defense circles, it’s crucial not to overlook certain areas where defense investment is actually decreasing.
Although the total defense expenditure is projected to increase to 2.4% by 2033-34 from the current 2.1%, there are also budget cuts aimed at saving approximately $73 billion. These cuts include canceling the acquisition of a fourth squadron of F-25 aircraft and two large navy support vessels. Additionally, upgrades to defense facilities in Canberra are being delayed as part of these cost-saving measures.
External Consultants
The government is reducing the use of external consultants, saving costs but potentially impacting the quality of services and advice provided.
Finance Minister Katy Gallagher has identified areas for cost reduction in the government’s reliance on external consultants. In the latest Budget, there have been ongoing cuts to the utilization of the Big Four consultancy firms. These measures are expected to save the Budget an estimated $1 billion.
NDIS Fraudsters
The National Disability Insurance Scheme (NDIS) has undoubtedly made a significant impact on the lives of many individuals who rely on it. However, the scheme is also encountering challenges such as cost overruns and allegations of fraud.
In response to these challenges, the Budget has earmarked $469 million to continue collaborating with the disability community, as well as with states and territories, to address fraud and exploitation within the system. These new compliance measures aim to save $14.4 billion by enhancing oversight and ensuring the integrity of the NDIS.
In conclusion, the 2024 Budget brings both positive and negative outcomes for various sectors of society. While there are significant wins in terms of tax cuts, education, healthcare, and support for small businesses, there are also challenges and areas where improvements are needed. It’s essential to analyze the budget comprehensively and consider its implications for individuals, businesses, and the economy as a whole.
For a deeper understanding of how the budget impacts your property investment or sale, don’t hesitate to reach out to our experienced real estate agents at Best Property Agent.
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