- Budget measures for parents
- Budget measures for pensioners and retirees
- Budget measures for first home buyers
It seems counterintuitive to the current actions of the RBA to rein-in inflation through austere measures, but the Federal Budget is tackling cost of living pressures by lining savers' pockets with handouts and targeted cost-of-living relief measures.
As we saw in the pandemic, mis-targeted JobKeeper saw up to $38 billion wasted (Treasury estimates) and $300 billion was written in government bonds, which both coincided with a peak in the savings ratio of more than 20%.
As a consequence, inflation - which is a measure of too much money chasing too few goods - elevated to 30-year highs and real wages-growth plummeted to decade lows.
Treasurer Dr Jim Chalmers said the targeted cost-of-living relief will lower inflation, because a large part of it is targeting energy costs, which contribute up to a third of the high inflationary figure.
It's true that handouts lower headline inflation - we saw that in mid-2020 where childcare subsidies kicked-in, which saw the headline figure actually enter negative territory or 'deflation'.
However, the underlying figure discounts short-term seasonal impacts, and this figure will likely remain higher than the RBA's target of 2-3%. and will give the RBA little cause for a cash rate pause or a cut over the coming months.
Energy bill relief
There will be more than $1.6 billion spent on delivering energy saving upgrades for homes, businesses and social housing.
Part of this includes up to $500 per household in energy bill relief from July 2023.
More details are expected to be announced, including eligible households, in the coming days.
The government will increase the base rate of JobSeeker, Austudy and Youth Allowance by $40 per fortnight for eligible people.
The maximum rate of a single with no children is $693.10 per fortnight.
It will also expand eligibility for the higher rate of JobSeeker to those aged 55 and over for nine continuous months, as opposed to 60 years and over.
Rent assistance boosted
Commonwealth Rent Assistance will increase by 15%, which will benefit up to 1.1 million households.
The maximum fortnightly payment currently is $157.20 for a single living alone whose rent is more than $350 a fortnight.
Greater amounts of up to 300 medicines on the Pharmaceutical Benefits Scheme (PBS) will be able to be dispensed in greater quantities from 1 September.
Some patients will be able to get two months' worth of medicine at a time, estimated to save up to $180 per year per person.
Treatments for cystic fibrosis will also be added to the PBS.
Over a five year period $3.5 billion will be invested to incentivise doctors to bulk bill, with a tripling of bulk billing available for common consultations for children under the age of 16, pensioners, and concession card holders.
Income tax cuts staying, but not a priority
Dr Chalmers indicated this budget will be more about "helping the vulnerable", so there wasn't too much credence put on the legislated and controversial tax cuts taking effect from next year.
Speaking of tax, with the budget to post a $4.2 billion surplus by 30 June, the Treasurer said up to 40% of the revenue upgrade is off the back of strong employment growth and stronger wages growth, pushing employees into higher tax brackets - called bracket creep.
It's estimated 1.9 million workers earning between $88,000 and $120,000 will avoid wages growth-led bracket creep when the 37c bracket is axed - real wages growth is at a 10-year low due to high inflation.
Someone earning $125,000 a year currently pays $31,317 in income tax per year, not including the Medicare Levy or surcharge.
Seeing the 37c bracket scrapped and the 32.5c bracket lowered to 30c would see that tax bill amount to $29,092 - a saving of approximately $42.80 per week.
Due to higher interest rates, interest paid on government debts now consists of more than $600 of the average (mean) full time salary's tax bill, which is generally higher than expenditure on federal roads, unemployment benefits, and other key sectors.
More to come...
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Head photo via Jim Chalmers on Twitter