Everything you need to know about the $300 energy rebate

Australians found out on Tuesday night that every single household will get $300 off their power bill.

Treasurer Jim Chalmers said the $3.5 billion energy bill relief package would help everyone struggling with cost-of-living pressures, while also reducing inflation.

Here’s how the government will deliver that relief, and what it could mean for inflation.

What is the $300 energy rebate?

The federal government is giving all 10 million Australian households and about 1 million small businesses energy bill relief in the coming financial year.

Households will receive $300 off their electricity bills for the 2024-25 financial year, while eligible small businesses will get $325.

This could knock a decent chunk off the average annual electricity bill.

According to the Australian Energy Regulator, the annual cost of electricity for an average-income household in New South Wales in the past financial year was between $1891 and $2505. In Queensland, those prices ranged between $1944 and $1951, and in Victoria, it was between $1304 and $1745.

How does it work, and how will it be paid?

The main thing is that the rebate will be applied automatically to electricity bills by energy retailers, so people won’t need to apply.

For households that pay power bills quarterly, they’ll get $75 off each bill in the next financial year.

For those who get more frequent bills, a $75 credit will also be applied to their account each quarter. So for someone who pays monthly, they’ll receive a credit for roughly every third bill. If that bill is less than $75, the remaining credit will carry over onto the next bill.

Can you get two rebates if you have two homes?

But what about if you own a home and a separate holiday home, with electricity bills for both properties? Will you get rebates on both? It’s very likely. It would require some kind of national overview of how many people pay power bills at more than one address, but that detail is unclear at this stage.

Why is the rebate going to everyone?

Finance Minister Katy Gallagher said it was simply the easiest way to provide cost-of-living relief quickly. The government also wanted to help more households than just those with concession cards.

“We looked at … the best way, the most efficient way, that we could provide that relief over the short term – so, it’s over the next 12 months – in a way that reached more people than concession card-holders,” she said on ABC News Radio the day after the budget.

“The best and most efficient way to reach those households was through a broad-based energy rebate. And that’s why we’ve taken the decision to do it that way, because we acknowledge people who sit above the concession thresholds, but don’t receive any of that support, deserve support as well.”

The quickest way to give a greater spread of households that rebate was to do it through the energy retailers. The government will hand over the rebate to retailers, who will then apply it to all of their residential customers’ bills.

It does mean that wealthier Australians will benefit from the relief, as well as low- and middle-income households.

Will the rebate fight inflation?

Treasury estimated that the energy bill relief and the increase in rent assistance would reduce inflation by half a percentage point in the coming financial year.

But economists say its impact on inflation is more complex.

KPMG chief economist Brendan Rynne said that while it was technically correct that cutting energy bills would directly cut inflation, the rebates do nothing to reduce the production costs associated with supplying energy.

“As soon as the rebate is withdrawn, the prices paid by households will rebound (assuming there has been no change in the production cost of electricity), and inflation will kick up again. A case of ‘now you see inflation, now you don’t’,” he said.

It’s worth noting that inflation in electricity prices has recently started to ease — falling to 2 per cent in the year to March, down from 6.9 per cent in 2023, according to the Australian Bureau of Statistics.

And from the start of the next financial year, electricity prices are set to fall — even without the energy bill relief — because the regulator has decided to reduce consumer price caps.

But while electricity price inflation may not rise, Commonwealth Bank chief economist Stephen Halmarick said the rebates might affect inflation in other ways.

“[It] will mean more disposable income and spending power than otherwise. And there is an argument that this will add to demand in the economy, thereby exacerbating current inflationary pressures,” he said.

“Another factor to consider is that a lower headline [inflation] means that wages, costs and prices that are indexed to it will also be lower, helping contain inflation and wage expectations.”

What is certain, Halmarick says, is that the rebates will make the monthly inflation figures more volatile.

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