At 7:30pm tonight, Jim Chalmers delivered his first budget as the new Australian Treasurer announcing that “this is a responsible budget that is right for the times and readies us for the future. It delivers on the priorities of the Australian people, and it repays their faith in a new Government.”

The Treasurer said that the Labor Government’s first budget does three things:

1. It provides cost of living relief, which is responsible not reckless, to make life easier for Australians without adding to inflation;
2. It targets investments in a stronger, more resilient, more modern economy;
3. It begins the hard yards of budget repair.

Key Forecasts

• $36.9B deficit for 2022-23, $44B deficit for 2023-24, $51.3B deficit for 2024-25, and $49.6B deficit for 2025-26;
• 3.25% GDP growth for 2022-23, 1.5% GDP growth for 2023-24, 2.25% GDP growth for 2024-25, and 2.5% GDP growth for 2025-26;
• Inflation is expected to peak at 7.75% in late 2022, forecast inflation for 2022-23 is 5.75%, 3.5% for 2023-24, 2.5% for 2024-25, and 2.5% for 2025-26;
• The RBA cash rate is expected to peak at 3.35%;
• $572.2B net debt for 2022-23, $634.1B net debt for 2023-24, $702.8B net debt for 2024-25, and $766.8B net debt for 2025-26;
• 3.75% unemployment is expected for 2022-23, 4.5% for 2023-24, 4.5% for 2024-25, and 4.25% for 2025-26;
• 3.75% wages growth is expected for 2022-23, 3.75% for 2023-24, 3.25% for 2024-25, and 3.5% for 2025-26.

Key Announcements

This budget is focused around reducing cost of living and the Treasurer announced the following to achieve cost of living savings:

• From 1 January 2023, Australians who need prescription medication on the pharmaceutical benefits scheme will benefit as the maximum co-payment will drop from $42.50 to $30.
• From July 2023, families with a household income of less than $530,000 per year will receive a higher child care subsidy rate. Families earning less than $80,000 per year, will receive the maximum 90% subsidy, which increases from 85%;
• From 1 July 2024, the Australian paid parental leave scheme will be extended by 2 weeks per year until it reaches 26 weeks or 6 months in July 2026. Also, couples will be assessed on a combined income of up to $350,000 to be eligible for paid parental leave;
• The Government has pledged 480,000 fee free vocational education places (TAFE) and 20,000 additional university places to tackle areas where there are particular skills shortages;
• The Government announced a new National Housing Accord between governments, investors and industry to build 1 million new affordable homes over five years from 2024;
• The previous Government’s stage 3 tax cuts, which were expected to be abolished by the Labor Government, have not been abolished in this budget. These tax cuts remove the 37% tax bracket, reduce the 32.5% tax rate to 30%, and increase the income threshold for the 45% tax bracket from $180,000 to $200,000. These tax cuts come into effect from 1 July 2024;
• The minimum eligibility age to make a downsizer superannuation contribution when selling a home will reduce from 60 to 55.