Between 2022 and 2024, the Australian federal government implemented a range of measures to alleviate cost of living pressures. These policies targeted wage growth, tax cuts, energy bill relief, adjustments to higher education loans, cheaper medicines, and more affordable childcare. Together, they aimed to reduce financial strain on households and improve economic conditions nationwide.
Recent analysis by the Federal Treasury reveals that the average dual-income household would have been $7,200 worse off without these measures. Queensland households would have faced the largest impact, with a projected loss of $8,900.
The effectiveness of these policies is underscored by broader economic indicators: a reduction in inflation from 6.6% in 2022 to 3.2% in 2024, a low unemployment rate of 4.1% in 2024, and consecutive budget surpluses in the 2022–23 and 2023–24 fiscal years.
Wage growth
In 2022, wages increased modestly, with the annual Wage Price Index (WPI) rising by 3.1%. However, inflation at 6.6% eroded purchasing power, leaving many Australians with stagnant or declining real wages.
By 2024, wage growth accelerated, with the WPI rising by 3.5%, supported by a reduction in inflation to 3.2%. This contributed to higher real household incomes.
However, wage growth had begun to moderate by mid-2024, falling below the peak annual increase of 4.1% recorded in the year to June.
Tax cuts
From 1 July 2024, the federal government introduced significant tax cuts where they reduced the 19% tax rate to 16%; reduced the 32.5% tax rate to 30%; increased the income threshold for the 37% tax rate from $120,000 to $135,000 and increased the income threshold for the 45% tax rate from $180,000 to $190,000.
On average, taxpayers will receive a tax cut of $1,888 in 2024–25.
Energy bill relief
Energy prices emerged as a significant burden in 2022, with limited government intervention to address rising costs. In response, the federal government introduced a $300 energy bill rebate for all households in 2024, offering direct financial relief and helping ease cost of living pressures.
Higher education loan relief
In 2022, HECS-HELP (Higher Education Contribution Scheme-Higher Education Loan Program) debts were indexed annually based on the Consumer Price Index (CPI), leading to a huge increase in line with the high rate of inflation in that year.
In 2024, the federal government capped HECS-HELP indexation on 1 June each year at the lower of CPI or the WPI, aiming to reduce the financial burden on graduates.
As an outcome, over 3 million Australians had their HECS-HELP debts slashed by $1,200 on average in 2024 and, due to the back-dating of the measure to 1 June 2023, over $3 billion debts were wiped out from the higher education loans.
Cheaper medicines
In 2022, the maximum general co-payment for Pharmaceutical Benefits Scheme (PBS) prescriptions was $42.50.
By 2024, the government reduced this to $30, making essential medicines more affordable for Australians and significantly lowering out of pocket healthcare costs.
Affordable childcare
In 2022, childcare fees had been rising faster than inflation and wage growth over the preceding four years, increasing by approximately 20%. In the same year, the Child Care Subsidy (CCS) provided varying levels of financial assistance based on family income, with a maximum subsidy rate of 85% for families earning up to $80,000.
From 1 July 2023, the federal government increased CCS rates as follows: families earning less than $80,000 received a 90% subsidy; subsidy rates tapered down by 1% for each additional $5,000 in income, reaching zero for families earning $530,000 or more and higher subsidy rates of up to 95% continued for second and subsequent children aged five and under in care.
Challenges remain
Despite these measures, Australian households, particularly mortgage holders, continued to face cost of living pressures in 2024 due to high interest rates. Core inflation remained above the Reserve Bank of Australia’s target range of 2–3%, underscoring the ongoing complexity of balancing fiscal support with broader economic conditions.
The cost of living is a big challenge for many Australians, and it’s good to see fiscal support helping households. However, more needs to be done for small businesses too. Access to short-term business loans can help them stay afloat and keep people employed during tough times. Balanced support is key!
Agreed. The government must do more to support small businesses which are the backbone of the economy. Support around short term loans would be of high value for these businesses in these difficult times of cost of living pressures.