The Australian federal budget 2023-2024 presented on Tuesday 9 May by the Treasurer Jim Chalmers is prudently calibrated for providing cost of living relief while not making Australia’s inflation problem worse in the economy. The centrepiece of the budget is the $14.6 billion cost of living relief package aimed at supporting households and small businesses.

These substantial relief measures will boost overall disposable income in the economy and it can add to inflation next year, even if fairly immaterially.

After 15 years, Australian federal budget is back in black with a modest surplus of $4.2 billion in 2022-23.

The economic growth is expected to slow to 1.5% in 2023–24, before recovering to 2.25% in 2024–25. In 2023-24, inflation is expected to be 3.25%, wage growth is 4% and the rate of unemployment is 4.25%.

The salient measures of the budget are briefly provided below:

Healthcare

The budget allocated $3.5 billion over 5 years to provide free bulk-billed consultations to about 12 million pensioners, concession cardholders and children under the age of 16. From 1 September 2023, over 6 million Australians with chronic diseases will be eligible to get two month’s supply of vital medicines for the price of one prescription.

Environment

The Budget invests $4 billion in Australia’s plan to become a renewable energy superpower which would position us to be a world leading hydrogen producer at places like Wollongong.

It allocated $1 billion to provide low-cost loans for double-glazing, solar panels and other improvements that will make homes cool in summer and warm in winter.

It made an allocation of $302 million to help farmers transition to a low-emission future and lift agricultural sustainability; $310 million in tax incentives for small businesses to invest in energy efficiency and $121 million to establish a federal agency called Environmental Protection Australia.

Defence

The budget allocated $2 billion to upgrade Australian Defence Force bases in the north including Darwin, Townsville and the Keeling Islands; $2.5 billion to manufacture guided weapons for sea mines; $1.6 billion for long-range strike missiles and systems and $591 million is given to Advance Strategic Capabilities Accelerator for Defence innovation, science and technology programs.

To curb China’s regional ambitions in the Pacific, the budget allocated an economic and security package of $2 billion for 2023-24 which will allow more people-to-people programs and deployments of soldiers, sailors and police in this region.

Aged care

From 1 July 2023, over 250,000 aged care employees will receive a 15% pay rise which would average around $200 a week. This will cost the federal government $11.3 billion over the next 4 years, till 30 June 2027. The budget allocates $169 million for 9,500 home care packages, giving elderly Australians access to be cared for at home.

Childcare

From 1 July 2023, over 1.2 million families will pay less for childcare, covering up to 90% for those eligible, costing $9 billion over the next 4 years. Up to 75,000 early childhood educators can access paid professional development at the cost of $72.4 million. Over 180,000 families will benefit under Paid Parental Leave of 20 weeks at a cost of $532 million over the next 4 years.

Rental assistance

Commonwealth rental assistance will be increased by 15% or $31 extra a fortnight for people renting in the private real estate market and community housing sector. This will benefit over 1.1 million households, rising their rental assistance from $157.20 to $180.80 for singles and $208.74 to $240.10 for tenants with 3 or more children at a total cost of $2.7 billion over the next 5 years.

First Home Buyer Guarantee Scheme

From 1 July 2023, this scheme including the Regional First Home Buyer Guarantee Scheme, which allows couples to purchase a house with a 5% deposit, will be expanded to include any two eligible borrowers such as siblings and friends. It will no longer be limited to a spouse and de facto couples.

The scheme is also expanded to non-first home buyers who have not held a property interest in Australia within the previous 10 years and permanent residents. The budget allocated $2 billion to the National Housing Finance and Investment Corporation for building more social and affordable housing for Australians.

Welfare payments

From 20 September 2023, over 1.1 million Australians receiving JobSeeker, Austudy, Youth Allowance and other income support will take home an extra $40 a fortnight. Income support recipients aged over 55 will receive an extra $92.10 a fortnight.

This measure will cost the taxpayers $4.9 billion over the next 5 years. Parents receiving the Single Parenting Payment will receive $922.10 a fortnight until their youngest child turns the age of 14, increased from the age of 8. Over 57,000 single parents will benefit from this measure with an outlay of $1.9 billion in the next 5 years.

Superannuation

From 1 July 2026, employers will be required to pay superannuation contributions to superannuation funds at the same time as wages are paid, weekly or fortnightly, benefiting over 8.9 million Australian superannuation account holders.

An allocation of $40 million is made for a broader crackdown on unpaid superannuation and tax by medium and large businesses which is forecast to raise over $440 million in the next 4 years.

Taxes

From 1 July 2024, to enhance supply of rental properties the budget provides a new tax incentive for built-to-rent houses/units, cutting the foreign owned Managed Investment Scheme withholding tax from 30% to 15%. Depreciation rate will be increased from 2.5% to 4% for new built-to-rent properties when construction starts after 9 May 2023.

From 1 July 2026, earnings on superannuation account balances exceeding $3 million will attract a tax rate of 30%. Earnings on balances below $3 million will continue to be taxed at the concessional rate of 15%. Approximately, 0.5% of Australians or around 80,000 people will be subject to this measure.

Tobacco tax will be increased by 5% annually in the next 3 years. 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 July 2023, changes in Petroleum Resource Rent Tax will generate an additional $2.4 billion for the budget. From 1 July 2023, small business Instant Asset Write-off Scheme will be lowered from $150,000 to $20,000. Only businesses with maximum annual turnover of $10 million will qualify, down from $500 million.

Migration

Australia is expecting over 1.5 million migrants in the next 4 years, to 30 June 2027. Of which, NSW is expected to receive over 578,000 migrants in the same period. In 2022-23, around 400,000 people arrived in Australia which will gradually reduce to around 260,000 people a year.

Other measures

From 1 July 2023, ASIO is provided $130 million over the next 2 years to track high-risk terror offenders after they have been released at the end of their sentences; $365 million is allocated for the referendum on introducing an Aboriginal and Torres Strait Islander Voice to the Parliament; $733 million over the next 3 years is given to National Disability Insurance Scheme to rein in its costly and problem-plagued operations; $112 million to support the operations of the National Australia Day celebrations; $45 million for the preservation of Sydney Harbour and $102 million to support Australian businesses for integrating quantum computing and artificial intelligence into their operations.