Surplus
Treasurer Jim Chalmers has revealed the budget is set to show a $4bn surplus this financial year. Higher commodity prices, low unemployment and wage growth will pump more money into the coffers, leading to the projection.
If achieved, it will be the first budget surplus in 15 years. While it has prompted many jests about that time the Coalition prematurely ordered “back in black” mugs, Chalmers is unlikely to be that cocky about it, considering it won’t be long before Australia is back in deficit.
Welfare
This is one of the trickiest areas for the Australian government, with many people pressuring it to move on raising the base rate for all working aged welfare payments, given Labor’s rhetoric while in opposition.
So far, the government has confirmed it will scrap the ParentsNext program, ending compulsory mutual obligations for about 100,000 parents who were placed in the program. The program was costed at $484m over the forward estimates but won’t be scrapped entirely until the existing contracts end in the next financial year.
Single parents will remain on the single parenting payment until their youngest child turns 14, up from the previous cutoff, which was eight years old. That will mean an extra $176.90 a fortnight compared to the jobseeker payment. (But it is still short of the original cutoff, which was 16.)
Albanese confirmed the change on Monday morning, saying it would cost $1.9bn over four years and will kick in on 20 September, assuming the legislation passes parliament.
Mutual obligation requirements will stay in place.
The government is also expected to lower the threshold for older long-term unemployed people to receive a slightly higher base rate of jobseeker, moving it from 60 to 55.
The treasurer, Jim Chalmers, has emphasised that the cost of living relief will not all be limited by age and there will be “additional measures” for renters, meaning more rent assistance is on the table or even the base rate of jobseeker itself might be raised also for under 55s.
Cost of living
We know the total cost of the cost of living package is $14.6bn over four years. This includes previously announced energy relief for households and small businesses, investments in energy efficiency and cheaper medicines.
The energy rebates of up $500 will go to 5.5m eligible households on government payments, and 1m small businesses. How big a discount you receive on your power bill will depend on what state you live in.
Coupled with that is the low-income and rental household electrification package the Greens won as part of negotiations with the government on its energy price cap legislation.
The changes to dispensing rules at pharmacies mean people will be able to buy two months of certain medications for the price of a single prescription. That is expected to save about $1.2bn, which the government has said it will reinvest in community pharmacies (although pharmacies are very much against the move).
Taxes
On Sunday the government announced a plan to collect $2.4bn more in petroleum resource rent tax over four years by capping the proportion of PRRT assessable income that can be offset by deductions to 90%.
The Albanese government has agreed to an Organisation for Economic Co-operation and Development push for a minimum 15% tax rate and limit on debt-related deductions. In April 2022 these measures were estimated to raise $1.89bn over four years, estimates that will be updated in the budget.
The health minister, Mark Butler, has said the tax on tobacco will rise by 5% a year over the next three years, raising an additional $3.3bn over four years.
From 1 July 2025, the tax rate applied to future earnings of superannuation balances above $3m will be 30%. The measure will raise $900m over the next four years and $3.2bn over the next five years.
Health
There is a lot of pressure on the government to commit to more health funding to fix systemic problems with hospitals and general practice, but it is uncertain whether this will be the budget that delivers all that is needed.
The government has committed to a $2.2bn primary health care services package, which will be the start of the Medicare reforms promised by Mark Butler and Labor, as well as to take pressure off the hospital system.
GPs will have access to a $220m grant program to expand community primary health care and local services.
The government has also announced a $234m war chest to combat vaping, which includes $63m for an information campaign.
Childcare
The implementation of the cheaper childcare package, passed in November, will see total spending on subsidies of $55.3bn in the four years from 2023-24, up by $9bn since the Coalition’s March 2022 budget.
Despite recommendations from the women’s economic equality taskforce and economic inclusion advisory committee, this budget is not expected to abolish the activity test for childcare subsidies.
The budget contains $72.4m over five years for skills and training of early childhood and care workers.
Aged care
There will be $11.3bn to fund a 15% pay rise for aged care workers. This will meet the ruling of the Fair Work Commission, which ordered the whole pay rise be delivered at once, overruling the government’s plan to split the 15% over two years. The government hopes the pay rise will attract many thousands of workers to the sector, in an effort to get closer to its promise to staff aged care homes with nurses on a 24/7 basis.
NDIS
The NDIS minister, Bill Shorten, has promised a fresh crackdown on providers price-gouging products and services for people with a disability, sharing information about companies putting big markups on simple products like chairs and walking sticks.
National cabinet last week agreed to a cap on the growth of the scheme, to 8% a year, to keep a handle on rising costs in an effort to keep the system “sustainable”. The NDIS was the fastest-growing expense in the October budget, outside interest payments on the national debt.
Defence
The government has estimated the cost of implementing the recently released defence strategic review’s recommendations will be about $19bn over the initial four-year budget period. This includes $9bn towards the Aukus nuclear-powered submarine project and $4.1bn for missiles and manufacturing.
But the task of making this all add up isn’t a short-term problem for the treasurer and finance minister. That is because Labor argues the $19bn initial cost is fully funded, through a combination of existing budget allocations and $7.8bn in savings within the defence portfolio (such as scaling back the infantry fighting vehicle plans). The decade ahead, however, will start to see defence costs really ramp up.
Meanwhile, the government is earmarking nearly $500m to take majority ownership of a Canberra-based contractor that makes radar systems.
Foreign affairs and aid
The government has signalled that the budget is likely to earmark funds for engagement in Asia and the Pacific, although it is unclear whether that means more diplomats, more foreign aid or both. While most of the headlines out of the defence strategic review were about military hardware, the document also called for the Department of Foreign Affairs and Trade to be given the resources it needs to “lead a whole-of-government statecraft effort in the Indo-Pacific”.
Energy transition
Anthony Albanese has promised “further measures” on energy transition, which has come in the form of a “net zero authority” which will cost $23m in the first year.
Initially, it will set up an agency to start work by 1 July that will advise the government on the final design of a national net zero authority that will be legislated.
Chalmers has said the energy transition will be “front and centre” as “the most important part” of investments to drive growth and tackle inflationary pressures – specifically, electricity prices.
There will also be $400m from the Powering the Regions Fund to be administered by the Australian Renewable Energy Agency.
Education and training
In April, the Albanese government announced it is prepared to invest an additional $3.7bn for a five-year national skills agreement to be negotiated with states and territories, in addition to $400m to support another 300,000 Tafe and vocational education and training fee-free places.
Housing
The budget will contain “new tax breaks for investment in build-to-rent housing”, the treasurer, Jim Chalmers, told Guardian Australia on Saturday.
Referendum
The government will commit nearly $1.5m to the Museum of Australian Democracy and Constitution Education Fund Australia to spread awareness of referendum processes before the Indigenous voice campaign, through a “grassroots civics program” with “neutral and easy-to-understand information”.
