Albanese Labor Government’s Second Budget

“Stronger Foundations for a better Future”

Treasurer Jim Chalmers has delivered Australia’s first budget surplus in 15 years. The slim surplus of $4 billion represents 0.2% of GDP and an approximate $40 billion turnaround from Labor’s mini-budget delivered last October.

Please note, these changes are proposals only and may or may not be made law.

A surplus is an important achievement for Labor. It is its first since 1989-1990.

This budget was delivered against the backdrop of challenging circumstances for the nation, including uncertain global economic conditions, increasing cost-of-living pressures and interest rates, and persistently high inflation.

Despite the boost that low employment and commodity prices have delivered to the budget bottom line, Labor has stuck to its budget repair strategy of modest tax changes, and reprioritisation of programs.

Prime Minister Albanese has described the budget as one aimed at “helping people struggling to make ends meet” without “pouring fuel on the inflation fire”, a narrow framework to manage.

Inflation is forecast to fall from 6% this financial year to 2.75% in 2024-25, while economic growth will drop from 3.25% this year to 1.5% next year. Unemployment is forecast to edge higher at 4.25% in 2023–24, and 4.5% the following year.

Like last October’s mini-budget, this budget keeps focus on core areas of spending – health, aged care, defence and the National Disability Insurance Scheme (NDIS).

It also includes significant funding for Australia’s clean energy transition and building industry capability in this area – an area the Treasurer described as Australia’s largest opportunity. Labor’s renewable energy commitments now total more than $40 billion.

This was not a budget that focused on productivity or business competitiveness outside energy transition measures and social spending priorities.

The budget has also shifted spending away from the former Coalition Government’s infrastructure priorities.

Labor has warned that the budget surplus will be short lived, with the budget returning to deficit next year. The budget remains in deficit over the forward estimates.

This will ensure ongoing focus on revenue measures, including taxation and tax concessions. For this budget the areas of superannuation, multinational business operations, the petroleum resource rent tax, tobacco, and tax compliance programs were the focus.

With an election due by 2025 and a narrow majority, this budget and future ones will be aimed at continuing to build a base of strong political support, while managing the much more complex economic outlook.

Key Announcements from the Treasurer

Cost of Living

• Federal and state governments will deliver up to $3 billion in energy bill relief for eligible households and small businesses.
• $1.3 billion will be invested in the Household Energy Upgrades Fund. $1 billion of this will be invested in the Clean Energy Finance Corporation to create low-interest loans for energy- saving home upgrades, and $300 million for upgrades to social housing to improve energy support.
• $1.9 billion over 5 years to expand access to Parenting Payment which will see eligible single parents receive Parenting Payment until their youngest child turns 14 (currently up to 8 years old).
• $4.9 billion over 5 years to increase the rate of income support payments by $40 per fortnight, while also expanding eligibility for the existing higher rate of JobSeeker to recipients 55+ and over (currently applies for 60+).

Energy and Renewables

• $2 billion to position Australia as a world leader in hydrogen production.
• Funding for the Capacity Investment Scheme’s first initial auctions to unlock new investment in firmed renewable generation.
• Leveraging of existing funds to allocate $12 billion to transformational transmission projects and over $1.4 billion to regional net-zero growth opportunities.
• $400 million to fund a Net Zero Authority to help workers, communities, and investors in their decarbonisation efforts.
• $46.5 million to the Australian Energy Regulator to regulate energy markets and protect consumers.
• $1 billion to Tasmania’s Battery of the Nation projects.
• $1.5 billion to renewable energy zones and offshore wind in Victoria.
• $4.7 billion to unlock critical transmission in NSW.
• $1.3 billion investment in Household Energy Upgrades Fund.
• $7.4 million to support the introduction of a Fuel Efficiency Standard.
• Extension of the clean building managed investment trust withholding tax concession to eligible data centres and warehouses where construction commenced after Budget night.
• Developing a Future Gas Strategy to support Australia’s energy system to reach 82% renewables by 2030.
• $57.1 million to develop Critical Minerals International Partnerships.
• $38.2 million to establish a Guarantee of Origin scheme to underpin markets for green energy, including hydrogen and other low emissions products.
• $14.8 million to establish the Powering Australia Industry Growth Centre to support Australian businesses to manufacture, commercialise and adopt renewable technologies.
• $400 million under the Powering the Regions Fund to be allocated to the Industrial Transformation Stream to support the growth of new clean energy industries in regional areas and decarbonise existing activities.
• $400 million under the Powering the Regions Fund to the Critical Inputs to Clean Energy Industries stream to provide grant funding to support the development of clean energy industries by investing in sovereign manufacturing capability of critical inputs, such as steel, cement, lime, and aluminium.
• $600 million under the Powering the Regions Fund to the Safeguard Transformation Stream to support trade exposed facilities covered by the safeguard mechanism to reduce their onsite emissions and boost competitiveness.

Health

• $5.7 billion over 5 years to strengthen Medicare.
• $3.5 billion to triple the bulk billing incentive paid to GPs to bulk bill consultations for families with children under 16, pensioners and other concession card holders.
• $824.4 million in digital health, including funding to make the Australian Digital Health Agency ongoing, plus an upgrade for My Health Record.
• A series of measures aimed at reducing the prevalence of vaping and smoking, which includes
• $63.4 million for national public health campaigns, $141.2 million to expand the Tackling Indigenous Smoking program, and $29.5 million to increase and enhance supports to quit.
• $263.8 million over 4 years (and up to $101.1 million per year ongoing) to establish and maintain a national lung cancer screening program.
• $358.5 million for Medicare Urgent Care Clinics, which will fund 8 new clinics.
• Pharmacy dispensing regulations will be modified to enable approximately 6 million individuals to purchase two months’ worth of medication for the cost of one prescription. The resulting budget savings of $1.2 billion that will be redirected to community pharmacies.
• $2.2 billion over 5 years for new and amended listings to the PBS and a further $449.4 million for new and amended listings to the National Immunisation Program.
• $91.1 million to commence the establishment of the Australian Centre for Disease Control.

Aged Care

• $11.3 billion package will be delivered to fund the Albanese Government’s pledge to deliver on the Fair Work Commission ruling that lifts workers’ pay for residential aged care and in-home care which will see more than 250,000 frontline aged care staff receive 15% pay rises from 1 July.

Disability

• $31.4 million to improve the National Disability Data Asset and $57 million to enable the supported employment sector to evolve.
• $732.9 million in initiatives developed with the National Disability Insurance Agency in consultation with the NDIS Review Co-Chairs. This will improve capability and systems, as well as better support participants to manage their plans and fight fraud.

Industry

• $15 billion for the National Reconstruction Fund to diversify and transform Australia’s industry and economy, through investment in priority areas of renewables and low emissions technologies, medical science, transport, value-add in agriculture, forestry, and fisheries, value- add in resources, defence capability and enabling capabilities.
• $392.4 million will fund a new Industry Growth Program to support Australian small to medium- sized enterprises and startups to commercialise their ideas and grow their operations.
• $286 million to renew and revive Australia’s arts, entertainment and cultural sector through its landmark National Cultural Policy Revive: a place for every story, a story for every place.

Defence and Strategic Policy

• $19 billion will be allocated to the Defence Strategic Review’s (DSR) recommendations.
• $3.4 billion over 10 years from 2023–24 to establish the Advanced Strategic Capabilities Accelerator within the Department of Defence to lift capacity to translate disruptive new technologies into Defence capability rapidly, in close partnership with Australian industry.
• $4.5 billion over 10 years from 2023–24 (and $482.7 million per year ongoing) to support the initial steps in Australia’s acquisition of a conventionally-armed, nuclear-powered submarine capability.
• $397.4 million over two years from 2023–24 to support the retention of Defence personnel and the achievement of Defence’s workforce growth target.
• $1.9 billion over 5 years to expand Australia’s engagement with Pacific Island countries.
• $376.9 million over 4 years (and $77.3 million per year ongoing) to maintain and improve delivery of core activities of the Department of Foreign Affairs and Trade.
• $101.6 million over 5 years (and $11.8 million per year ongoing) to support and uplift cyber security in Australia. Including $46.5 million over 4 years from 2023–24 (and $11.8 million per year ongoing) to establish the Coordinator for Cyber Security to ensure that the Commonwealth’s cyber security efforts are strategic, coordinated, timely and effective.
• $34.2 million over 3 years for the Australian Space Agency to continue to lead the national policy and strategy coordination of Australia’s civil space sector activities.
• $80.5 million over 4 years from 2023–24 to support the Australian critical minerals sector to build diverse and competitive supply chains, attract international investment and transition to net zero.

Tax

• The Government is reforming the Petroleum Resource Rent Tax to ensure a fairer return to the Australian community from Australia’s liquefied natural gas resources while providing certainty to industry and investors to support domestic gas supply and ensure Australia remains a reliable trade and investment partner. From 1 July 2023, the Government will cap the level of deductions that PRRT LNG projects can use to ensure that projects pay PRRT sooner.
• From 1 January 2024, large Australian multinationals and the Australian operations of large foreign multinationals will pay an effective tax rate of at least 15%. From 1 January 2025, Australia will also tax the foreign operations of large foreign multinationals that operate in Australia to ensure they pay at least 15% tax in line with the OECD’s proposed minimum international corporate tax reforms.
• The Government is proposing to reduce superannuation earnings tax concessions for those with superannuation balances exceeding $3 million. From 1 July 2025, earnings on balances exceeding $3 million are proposed to attract an increased concessional tax rate of 30%. In that scenario earnings on balances below $3 million would continue to be taxed at the concessional rate of 15%.

Data and Digital Economy

• $2 billion in modernising outdated legacy platforms, foundational work, and new digital solutions to enhance service delivery and maximise future investment value for taxpayers.
• $86.5 million to establish a National Anti-Scam Centre, boost the Australian Securities and Investments Commission’s work to disrupt investment scam websites, and establish Australia’s first SMS Sender ID Registry to prevent scammers imitating trusted brand names.
• $44.3 million to the Office of the Australian Information Commissioner to take appropriate regulatory action, enhance its data and analytics capability, and support a standalone Privacy Commissioner.
• $26.9 million in 2023-24 to expand Digital ID which is a secure and voluntary way to verify a person’s identity online, while minimising the collection of personal details.
• $88.8 million over 2 years in the Consumer Data Right to support the CDR in banking, energy, and the non-bank lending sectors and deliver a cyber security uplift.
• $101.2 million over 5 years to support the development and uptake of technologies that are enabling capabilities across Australian industries – commencing in quantum and artificial intelligence.

Women

• The government will abolish ParentsNext from 1 July 2024 and develop a replacement voluntary program, to provide high-quality pre-employment support.
• From July 2023, the Government’s Cheaper Child Care and Paid Parental Leave changes will take effect.
• The Government is investing in affordable, high-quality health care for women and girls. The government will support research and data collection for women and girls’ health outcomes and will make it cheaper to test for the risk of recurrent breast cancer.
• $589.3 million for women’s safety, which includes supporting implementation of the National Plan to End Violence Against Women and Children 2022-23 that builds on the $1.7 billion provided in the October Budget. This includes $194 million for a dedicated Aboriginal and Torres Strait Islander Action Plan, as well as $68.6 million over 2 years to support the Family Violence Prevention Legal Services providers to deliver legal and non-legal support for First Nations victim-survivors of family, domestic and sexual violence.

Housing

• Increase to the maximum rates of Commonwealth Rent Assistance by 15% at a cost of $2.7 billion over 5 years.
• Renters’ rights to be enhanced through the National Cabinet commissioned reforms to strengthen renters’ rights.
• Encouraging build-to-rent by reducing the withholding tax rate for eligible fund payments from managed investment trusts attributed to newly constructed build-to-rent developments from 30 to 15%.
• Encouraging build-to-rent by increasing the capital works tax deduction rate from 2.5% to 4% per year, increasing the after-tax returns for newly constructed build-to-rent developments.
• Investing in social and affordable housing with an increase to the National Housing Finance and Investment Corporation’s liability cap by $2 billion to a total of $7.5 billion.
• Expanding eligibility criteria of the Home Guarantee Scheme and Regional First Home Guarantee to any 2 eligible borrowers beyond married and de facto couples, and non-first home buyers who have not owned a property in Australia in the preceding 10 years, including for Australian Permanent Residents.

Childcare and Parental Leave

• $72.4 million to build and support the skills of early childhood education and care workforce
• From 1 July 2023, Parental Leave Pay and Dad and Partner Pay will combine into a single 20- week payment with a new family income test of $350,000 seeing an additional 3,000 parents eligible.
• Commitment to increase Paid Parental Leave to 26 weeks by 2026.

Environment

• $200 million to support projects that improve Australia’s resilience against natural disasters. Additional allocations under the government’s 5-year $1.1 billion dollar commitment to the National Heritage Trust to protect threatened species and habitats.
• $262.3 million for Commonwealth National Parks.
• $1 billion in additional funding for biosecurity.

Education

• Funding for a further 300,000 TAFE and vocational education training places to become fee- free.
• The Australian Skills Guarantee will set national targets for apprentices plus specific targets for women apprentices and trainees on major Government-funded construction and ICT projects. These targets will aim to double women in apprenticeship and traineeship roles in construction projects, and triple trade apprenticeships roles by 2030.
• $9.3 million, on top of $328 million previously announced for the National Teacher Workforce Action Plan. These investments are designed to attract, train and retain people in the teaching profession.
• $40.4 million to improve school attendance, engagement and learning outcomes for students in Central Australian schools.
• $38.4 million to pilot community-led and culturally appropriate distance learning models in remote locations.
• $21.6 million will extend the Indigenous Boarding Providers grants program for one year.

Migration

• Allocating around 70% of places in the 2023–24 permanent Migration Program to skilled migrants.
• An extra 2 years of post-study work rights to Temporary Graduate visa holders with select degrees, to improve the pipeline of skilled labour in key sectors.
• Increasing the Temporary Skilled Migration Income Threshold to $70,000.
• Exempting international students working in the aged care sector from the capped fortnightly work hour limit until 31 December 2023.
• Additional training places for Pacific Australia Labour Mobility scheme workers in priority sectors for the Pacific and Timor-Leste and where there are job shortages in Australia. Re-scoping 2 Skills Assessment Pilots to provide onshore migrants with fast-tracked skills assessments, free employability assessments, and access to further training.
• Mechanism for the Mutual Recognition of Qualifications will ensure students from India and Australia will have greater certainty that the qualifications they attain will be recognised by both countries.

Aboriginal and Torres Strait Islander Communities

• $250 million to deliver the plan for A Better, Safer Future for Central Australia. In partnership with local First Nations communities, the Government will work to address the decline in services and investments in the region over the past decade.
• $1.9 billion over 5 years from 2022–23 to help closing the gap by delivering sustained, practical actions to improve the lives and economic opportunities of Aboriginal and Torres Strait Islander people.

The above budget initiatives have the potential to deliver benefits to you depending on your financial situation, personal circumstances and stage in life.

Please contact us if you would like to discuss any of this further.

As usual, we are looking forward to continuing to assist you confirm the important financial strategy areas relevant to you and provide advice to maximise your outcomes in the long term future.