The Federal Government has released its second Federal Budget for the financial year 2022-23. With the high rates and cost of living not showing any signs of a break, tough times are ahead for some Australians.
What is the current federal budget?
In his speech, Treasurer Jim Chalmers described his budget as a responsible, affordable, and sustainable response to the economy, but things look bleak for those who already struggle with higher mortgage payments and increased household spending.
Here, we unpack the winners and losers of the new federal budget:
There’s no denying that entering the property market is still a challenge for some Australians. Despite the decline in property prices, high prices of goods and the RBA’s six consecutive cash rate hikes dampen household budgets.
However, with the new federal budget, potential home buyers can expect some relief as the government will allocate $350 million to a new national Housing Accord. The Accord brings together governments, investors and industry to target 1 million new homes over five years from 2024.
The scheme will have ongoing availability payments over the longer term and deliver 10,000 additional affordable dwellings. Plus, the Accord will also establish the Housing Australia Future Fund wherein the returns from the fund will be used to build 30,000 new and affordable dwellings.
Aside from the Accord, the government will also provide $324.6 million over four years to establish the Help to Buy scheme. Under this scheme, 40,000 eligible home buyers can own their homes with lower deposits and home loans.
Meanwhile, the Regional First Home Buyer Guarantee will support 10,000 people who have lived outside the cities to purchase their first home in the regional area with a deposit as low as 5% without paying lenders’ mortgage insurance.
Students and teachers
The government will provide 480,000 fee-free Technical and Further Education (TAFE) and community-based vocational education places to support Australia’s future generations over the next four years. As part of the agreement, students who face barriers to work and study and industries and regions with extreme skill shortages will be prioritised.
Then, the government will also invest $485 million to fund an additional 20,000 Commonwealth-supported university places for students from disadvantaged groups. As stated by Chalmers, “Because no Australian should be denied — by poverty, by postcode, or by lack of privilege — their chance at a better future.”
To deal with the chronic teacher shortage in the country, scholarships will be offered to students enrolling in a teaching degree with an ATAR of 80 or higher. The funding covers $10,000 per year for 5,000 students, and an additional $2,000 will be available for those who complete their final placement year in a regional area.
However, the government is planning to scrap a policy that allows students to save 10% on their university course if they pay upfront rather than deferring payment through the HECS.
For parents and parents-to-be, things are also looking up.
One thing parents can look forward to is childcare. From July 2023, subsidy rates will increase to up to 90% for eligible families. Furthermore, existing subsidy rates can go up to 95% for second and subsequent children aged 5 and under in care.
In addition to childcare, the budget will also invest $530 million to expand the Paid Parental Leave scheme up to 26 weeks by 2026, making it the biggest reform to the scheme. Two-parent households can decide how they split the leave.
While pension rates remain the same, the government will devote $61.9 million to provide aged and veteran pensioners with a once-off credit worth $4,000. This lifts their earnings from $7,800 up to $11,800 before their pension is reduced.
For pensioners looking to downsize, the government will also extend the assets test exemption for home sale proceeds from 12 months to 24 months.
Additionally, the government will freeze social security deeming rates until 30 June 2024 to support older Australians who rely on income from financial investments and pensions. This is to help them deal with the rising cost of living
The budget also targets Indigenous Australians as the government dedicates $1.2 billion to Close the Gap for First Nations people and communities.
Of the allocation, almost $315 million will be set aside to strengthen health and well-being, including modern health clinics, traineeships in primary health care and Birthing on Country Centre of Excellence.
Moreover, the government will allocate $50.2 million to the Australian Electoral Commission for the referendum on enshrining an Indigenous Voice in Parliament while the government aims to address the underlying causes of incarceration to improve Indigenous justice.
Australians looking to downsize contributions to their superannuation are also in luck as the government decreases the minimum eligibility age from 60 to 55 years old. In turn, this boosts their one-off post-tax contribution of up to $300,000 per person from sold properties.
Based on the budget paper, “This measure provides greater flexibility to contribute to superannuation and aims to encourage older Australians to downsize sooner to a home that better suits their needs, thereby increasing the availability of suitable housing for Australian families.”
While some are winners, some are looking at a grim future. As Chalmers names inflation “public enemy number one,” wage growth falls behind. Unfortunately, it seems like Aussies can’t expect real wage increases until 2024.
“Wages are growing faster now than they were before the election, but that welcome news is tempered by rising electricity prices and grocery bills eating into pay packets,” Chalmers said.
Along with inflation hitting 7.3%, the highest level since 1990, households should also brace themselves for more financial pressure as household expenses soar. The Treasury expects an energy price hike of up to 20% in late 2022 to 30% in 2023-24. Petrol is also projected to increase by up to 44% in 18 months.
In his post-budget address to the National Press Club, Chalmers said, “These rising costs of energy come courtesy of the war in Europe, but a decade of energy policy chaos hasn’t helped either.”
For those trying to sneak past tax returns, the budget aims to deliver an extra $4.7 billion over four years as part of its crackdown plan on high-risk taxpayers.
The government will also extend the Australian Taxation Office’s power to scrutinize the shadow economy for avoiding tax, overclaiming of deductions and incorrect reporting of income.
Want to know how the federal budget affects you?
As the government struggles to get inflation under control, are you worried about how the new budget impacts you in the coming months? Contact It’s Simple, and let’s discuss your best options to safeguard and control your finance and mortgages.