Federal Budget 2024-25

Treasurer Jim Chalmers handed down the Labor government’s third federal budget last night, promising cost-of-living relief to struggling households while delivering a second consecutive surplus.

Labour had declared fighting inflation the “primary focus” of the budget, but the government had a fine line to walk keeping spending in check to stave off inflation while also delivering relief for the cost of living pressures Australians are facing.

The centrepiece of cost of living relief was the overhauled stage 3 tax cuts, already announced by Prime Minister Anthony Albanese in January.

The Reserve Bank’s inflation target is 2% to 3% and Treasury forecasts now predict that could be achieved by December. In March inflation was 3.6%.

During his budget speech, Treasurer Jim Chalmers underscored the government's commitment to restrained spending to better manage Australia’s debt as he announced a surplus of $9.3 billion.

When it comes to making big cuts, the government is looking close to home with plans to save $1 billion in 2024-25 by slashing the public budget for consultants following a series of scandals at big firms that has driven a rethink about the industry’s government contracts.

Treasury says 8700 jobs that were once contracted out to consultancies across the federal government have been brought in-house since Labor took office and this budget expands that.

Elsewhere, the National Disability Insurance Scheme (NDIS) will see an end to “top ups” aimed at reigning in the growth of the scheme, and the budget included money allocated to crack down on fraud in several areas including the child care subsidy.

Cost of living relief
One of the major changes in the budget is one we've known about for months — that all Australians will be getting a tax cut.

The reworked version of the cuts, which provide more money to those on low and middle incomes, will be worth around $1,929 a year to those earning $90,000 a year.

Under the previous government version of the tax cuts, those earning more than $140,000 would have been better off - but they’ll still get a cut under the revised scheme.

The tax cuts won't be delivered in a lump sum, they will be gradually subtracted from the tax on people's wages from 1 July as we all pay reduced income tax, acting like an "effective pay rise".

Every household will also see some relief in the form of a $300 rebate for energy bills. The $3.5 billion scheme also includes a $325 rebate for about one million eligible small businesses.

To address housing affordability, low income renters receiving the Commonwealth Rent Assistance payment got a 10% increase and a total of $6.2 billion has been allocated to building more homes. This includes deals between the federal, state and territory governments under National Housing Accords, which has committed to building 1.2 million homes by 2030.

Future Made in Australia
The other big area of spending in this budget was the Future Made in Australia initiative. Under this program, the government will spend $22.7 billion to turn Australia into a renewable energy superpower and strengthen our economic resilience.

This initiative is aimed at creating jobs and opening up investment opportunities while supporting Australia’s transition towards net zero by 2050.

This will see $1.1 billion to reform higher education and support future productivity and $466.4 million to advance Australia's quantum computing capabilities. It also includes $566.1 million to map Australia's geological potential, a $6.7 billion production tax incentive for the production of renewable hydrogen, and $1.5 billion to strengthen battery and solar supply chains.

Superannuation news
The government will spend $1.1 billion over four years to pay the superannuation guarantee on government-funded paid parental leave from July 2025.

Paying super on parental leave may go some way to addressing the disparity in retirement incomes between men and women which is now at 25%. This initiative was already announced but the costs have been included in this budget for the first time.

Beyond that, there weren’t many big changes for your super in this budget.

There’s an attempt to claw back unpaid super from businesses that are in liquidation or bankruptcy through the recalibration of the Fair Entitlements Guarantee Recovery Program. From 1 July 2024, this program will come into effect and it’s expected to achieve efficiencies of $13 million over four years.

There’s also funding for the SuperStream Gateway Network Governance Body, this will ensure the smooth operation and governance of the SuperStream system. SuperStream is how businesses pay the superannuation guarantee.

Fighting fraud in super is a priority too, with $187 million allocated to the ATO over four years from 1 July 2024 to strengthen its ability to fight fraud against the tax and superannuation systems.