Albanese Government Hands Down Third Budget Focused on Inflation and Cost of Living

Treasurer Jim Chalmers will deliver the Albanese government's third federal budget, promising cost-of-living relief without fueling inflation. The budget includes tax cuts, energy bill relief, and investments in education, housing, and green energy.

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Nitish Verma
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Albanese Government Hands Down Third Budget Focused on Inflation and Cost of Living

Albanese Government Hands Down Third Budget Focused on Inflation and Cost of Living

Treasurer Jim Chalmers will deliver the Albanese government's third federal budget on Tuesday night, promising nationwide cost-of-living relief without fueling inflation. The budget, which is expected to forecast a second successive surplus of $9.3 billion, aims to reshape the economy with the Future Made in Australia industry package while easing the financial burden on Australians.

Why this matters: This budget has significant implications for the Australian economy, as it attempts to balance cost-of-living relief with measures to control inflation, which could have a ripple effect on the global economy. The success or failure of this budget will be closely watched by economists and policymakers worldwide, as it could provide valuable lessons for addressing similar challenges in other countries.

The centerpiece of the budget is the reworked stage 3 tax cuts, which will come into effect on July 1. The changes will benefit all Australian taxpayers who earn more than $18,200, with a person earning between $50,000 and $120,000 receiving a tax cut of $804. Other cost-of-living measures include energy bill relief, adjustments to rent assistance, and increases to JobSeeker and the aged pension.

In a significant move, the government will wipe out $3 billion worth of HECS debt, benefiting over 3 million Australians, with an average student receiving an indexation credit of about $1,200 for the past two years. Apprentices who owe money through the VET Student Loan program or the Australian Apprenticeship Support Loan will also receive debt relief. Additionally, the government will provide financial support to students to help make ends meet while they complete practical hands-on training as part of their course, with a focus on nursing, teaching, and social work.

The Future Made in Australia policy will include tax concessions, direct subsidies, and grants aimed at new industries, with already pledged support of $1 billion for a quantum-computing facility in Brisbane and $1 billion towards a solar panel plant in NSW's Hunter Valley. However, the policy has drawn criticism from economists and Productivity Commission chair Danielle Wood, who warns that it may create a class of businesses reliant on government subsidies. "If we are supporting industries that don't have a long-term competitive advantage, that can be an ongoing cost," Wood cautioned.

Housing is a key priority in the budget, with the government committing roughly $11.3 billion towards delivering its promised 1.2 million new homes by 2030. This includes $1 billion for crisis and transitional accommodation for women and children fleeing family violence and youth through the National Housing Infrastructure Facility. An additional $9.3 billion will be committed to states and territories under a new five-year agreement to combat homelessness, assist in crisis support, and to build and repair social housing.

The budget's impact on inflation will be a key aspect, with the Reserve Bank forecasting inflation to rise from 3.6% to 3.8% through the second half of this year. Treasurer Chalmers will reveal that inflation could fall to the target band by the end of this year and be down to 2.75% by the middle of 2025 as the government's various cost-of-living measures take effect. "The forecasted surplus has come on top, not at the expense, of helping those doing it tough. The budget will ease cost-of-living pressures, not add to them, and incentivise investment in a Future Made in Australia," Chalmers stated.

The Albanese government's third budget aims to strike a balance between providing relief to Australians struggling with the cost of living and investing in the nation's future through targeted industry support. With a focus on education, housing, and green energy, the budget seeks to lay the foundation for long-term economic growth while navigating the challenges posed by inflation. As the budget takes effect on July 1, its success will be measured by its ability to deliver on the promise of making life more affordable for all Australians.

Key Takeaways

  • Australia's 2024 budget forecasts a $9.3 billion surplus and aims to ease cost-of-living pressures.
  • Reworked stage 3 tax cuts will benefit all taxpayers, with those earning $50,000-$120,000 getting $804 relief.
  • $3 billion in HECS debt will be wiped out, benefiting 3 million Australians, with average indexation credit of $1,200.
  • The Future Made in Australia policy will provide tax concessions, subsidies, and grants for new industries.
  • $11.3 billion will be committed to delivering 1.2 million new homes by 2030, with a focus on affordable housing.