2024/25 Federal Budget - Recap

Written by Dylan Sinclair

On Tuesday evening, Treasurer Jim Chalmers presented to the Parliament and the Australian public the 2024/25 Federal Budget. Although quite a safe and neutral budget, it was made clear that the main aspects of the budget were to provide cost of living relief to Australians, while maintaining strong fiscal control over the economy, without exacerbating inflation. This year marks the government's second consecutive budget surplus, totalling $9.3 billion, a milestone not seen in nearly two decades. However, the next few years will return budget deficits due to the government’s claimed unavoidable costs such as defence, debt interest repayments, etc.

 

Key Features:

1.      Cost of Living Relief and Tax Cuts.

2.      Small Business Measures.

3.      Housing and Infrastructure Funding.

4.      Higher Education and HECS Amendments.

5.      Other

 

1. Cost of Living Relief and Tax Cuts

  • Every Australian household will be receiving a $300 credit to their electricity bills to provide some relief from the cost of living. This credit will be automatically applied to electricity bills, and it is expected to reduce headline inflation. Small businesses will also receive a $325 credit to their electricity bills in the same way households will receive theirs.

  • The Stage 3 Tax Cuts have been amended as per previous legislation. These Tax Cuts will come into effect from 1 July 2024 providing tax relief for all Australians. The average household will be $1,900 better off annually due to the Tax Cuts. The Tax Cuts also hope to stimulate spending within the economy, however Chief Economist at NAB, Alan Oster, states that he is unsure whether it will be effective as they predict half of Australians will use the money to save. Read our article here for an in-depth look at the Tax Cuts.

2. Small Business Measure:

  • There will be a temporary increase to the instant asset write-off scheme for small business entities. Under the current legislation, the threshold stands at $1,000, but it is slated to rise to $20,000 for the 2025 income year. Small businesses, with an aggregated annual turnover of less than $10 million, will typically have the option to immediately deduct the entire expense of eligible assets valued at less than $20,000. This threshold is applicable to each individual asset, enabling small businesses to immediately depreciate numerous assets.

  • Increased cyber resilience was announced for small businesses as cyber-crime continues to pose a serious threat. Executive Business Specialist at NAB, Julie Rynski, claims that more needs to be done in combatting cyber-crime as it is increasingly becoming small businesses primary concern. However, Denton Pugh, Small Business Banking at NAB, highlights that combatting cyber-crime is a team sport and education is the best alternative to solving this prominent issue within Australia businesses. The government will introduce the Cyber Wardens program which will offer free online training to foster cyber-safe practices among Australian small businesses. Additionally, the Small Business Cyber Resilience Service will aid in building resilience and provide support during cyber incidents, and the Cyber Health Check tool will enable self-assessment of cybersecurity maturity for Small and Medium-sized Businesses.

3. Housing and Infrastructure Funding:

  • Significant investment has been reserved for housing and infrastructure funding. $6.2 billion will be added in new investments to the $32 billion Homes for Australia Plan. This will clear local infrastructure bottlenecks, provide more housing for students, and fund more social/affordable housing. Additionally, the government will spend almost $1 billion to provide financial support and social services for people leaving abusive relationships.

  • A pivotal component of the budget is the allocation of $22.7 billion towards the Future Made Australia initiative, designed to propel the nation into an era of technological advancement and sustainable growth. With investments earmarked for green infrastructure, renewable energy projects, and research and development, the government aims to position Australia as a global leader in innovation and environmental stewardship. $3.2 billion will be spent particularly to accelerate investment in renewable energy supply chains such as hydrogen and solar.

4. Higher Education and HECs Amendments:

  • Changes to the HECS debt indexation were cemented, which puts a cap on HECS loans to either the Consumer Price Index or the Wage Price Index, whichever is lower. This has already been backdated to the middle of 2023. As such, it will wipe $3 billion in student debt for over 3 million Australians and save the average person around $1,200.

  • Funding for teaching, nursing, and social service students during placements will aim to reduce the significant financial burdens placed on students. This will be paid at $319.50 a week for placements, effectively bridging a significant affordability gap for students obligated to undertake placements as part of their academic curriculum, but find themselves unable to maintain their usual employment during this period.

5. Other

  • Superannuation on Paid Parental Leave: Starting from July 2025, superannuation will now be added to Commonwealth-funded paid parental leave. The initiative, costing $1.1 billion over four years and $623.1 million annually thereafter, addresses pay inequity concerns, particularly for women who lose super contributions during parental leave. This will align with the government's plan to extend paid leave to 26 weeks by mid-2026.

  • Defence: There will be a significant increase in defence spending, aimed at strengthening Australia's armed forces through investments in naval expansion, shoreline warfare readiness, and long-range strike capabilities. This significantly contribute to the deficits in the budgets for the years to follow.

  • Health: New funding is directed towards urgent care clinics and mental health services, including the establishment of a national digital service for mental health support. However, criticisms emerge over the adequacy of funding in addressing mental health issues.

  • Aged-Care: A significant portion of the budget is allocated to aged care, with substantial funding earmarked for additional home care packages, hospital discharge initiatives, and the redesign of the Transition Care Programme. These measures, decided upon by the National Cabinet, are aimed at bolstering aged care services in the country.

  • Banning Live Sheep Exports: The government, fulfilling a pre-election pledge, plans to halt live sheep exports by May 2028, allocating $107 million in the federal budget to aid the industry's transition. Animal welfare advocates celebrate, while farmers lament the loss of what they claim a legitimate trade. However, analysts suggest that the slow transition period should allow to alleviate some of the concerns for farmers needing to amend their business operations.

 

Despite forecasted deficits in subsequent years, the government highlights a significant cumulative improvement over six years compared to earlier forecasts. This improvement is attributed to enhanced commodity prices and robust tax intake, with the tax cuts to hopefully further bolster the economy. Unemployment is forecast to slightly rise, and interest rates will hopefully ease, which will significantly alleviate the current economic pressure being placed on Australians. Described as both interventionist and expansionary, the budget employs these tactics to spur economic growth, focusing on sectors like infrastructure, defence, and renewable energy. While intended to generate jobs and innovation, economists express divided opinions on its effectiveness and potential long-term impacts, raising concerns over unintended consequences and sustainability. All things considered, the budget has been played quite safe and there have not been any major impacts to the domestic markets since last night’s announcement.

Jenni Anderson