The three-minute budget: Everything you need to know

The Labor government has unveiled its economic plan for the next four years and beyond in its latest budget. Here is a quick rundown of what you need to know.

Credit: Marija Ercegovac

Cost of living

• Changes to the stage 3 tax cuts are the centrepiece of the government’s cost-of-living measures. From July 1, 13.6 million workers will get an average benefit of $1888 a year, or $36 a week.
• From July 1, all Australian households will receive a $300 energy bill rebate, while some small businesses will receive a $325 rebate as part of a $3.5 billion measure over three years.
• Labor is wiping $3 billion in tertiary student debt, which is estimated to save the average person around $1200, after changing the rate of indexation.
• Commonwealth rent assistance will increase by another 10 per cent after the government previously increased the payment by 15 per cent in the previous budget, the first back-to-back increase in the measure in more than 30 years.

What you need to know: The Albanese government was under pressure to produce a cost-of-living budget amid persistently high inflation and high interest rates. Treasurer Jim Chalmers said the government would address the cost of living without adding to inflation.

Economy

• The budget will reduce the forecast for economic growth to 2 per cent for the coming financial year and then 2.25 per cent for 2025-26, lower than forecast in the mid-year update. Globally, growth is expected to remain flat at 3.5 per cent over the next three years, with concerns that geopolitical tensions could harm recovery.
• A slowdown in economic growth would ordinarily push up the jobless rate. The unemployment rate of 3.8 per cent will lift to 4 per cent by June 30, then 4.5 per cent next year.
• Treasury is forecasting inflation could fall to the target band by the end of this year, and be down to 2.75 per cent by the middle of 2025. The Reserve Bank forecasts inflation to still be at 3.2 per cent in June next year, but that was before the budget.

What you should know: Reducing inflation is the main game of this budget. Chalmers said the budget was walking the fine line between bringing inflation under control without hurting the economy. The government will likely face criticism from those who say more money should be spent easing cost-of-living pressures, while being warned by others that undisciplined spending could increase inflation.

Debt and deficit

• The government expects to deliver a $9.3 billion surplus, its second successive surplus after banking a record $22.1 billion the previous year. The projection represents a $10.5 billion improvement in the budget bottom line from what Labor forecast in the mid-year update and a $54 billion turnaround on what was expected at the 2022 election.
• But the surplus is expected to disappear in the coming financial year as a forecast fall in commodity prices, a softer jobs market and a slowdown in wages reduce tax receipts.

What you should know: Chalmers has joined an exclusive club with just three other treasurers – Peter Costello, Paul Keating and Frank Crean – who have delivered successive surpluses since 1970. Chalmers will argue the deterioration in the budget between 2024-25 and 2026-27 is due to “unavoidable spending”, such as funding aged care.

Future made in Australia

• Overall the government is spending $22.7 billion over the next decade to invest in local manufacturing to buffer the Australian economy from global pressures.
• It has pledged $1 billion in government support for a quantum computing facility in Brisbane and $1 billion towards a solar panel plant in NSW’s Hunter Valley.
• The government will also spend $13.7 billion to create tax incentives for processing green hydrogen and critical minerals to help industries scale up their operations.

What you should know: The prime minister has spoken at length about boosting Australia’s manufacturing capabilities, particularly to aid the nation’s green energy transition. However, the announcement of his plan last month attracted early warnings from Productivity Commission head Danielle Wood that the policy risked creating a new class of companies that could not survive without taxpayer aid.

Health

• $3.4 billion will be spent over five years from 2023-24 for new and adjusted drug listings on the Pharmaceutical Benefits Scheme, which include newly subsidised treatments for chronic heart failure, chronic kidney disease and breast cancer.
• Labor is also freezing the maximum cost of PBS-listed drugs for this year and next year at $31.60, at a cost of $318 million over the five years from 2023-24, while for pensioners and concession card holders it will be frozen at $7.70 for five years.
• At a cost of $588.5 million, the government is also establishing a free digital service for people with less intense mental health needs, which they can call at any time. It will be established by January 2026.

What you should know: The government’s announcement boosts medicines funding, which has been recommended by the independent Pharmaceutical Benefits Advisory Committee, and gives $3 billion to pharmacies in a deal negotiated with their lobby group. The new mental health funding follows years of demands to improve the system, but there is less in this budget for GPs, who are also under pressure.

Housing

• Labor is spending an additional $6.2 billion in housing, including $1 billion this financial year to help states and territories build more homes.
• The funding also including $423.1 million over five years from 2024-25 in additional funding for social housing and homelessness services for states and territories.
• Amid community concern over the pressure migration is having on housing, the government is also capping international student numbers, and requiring universities to build more student housing if they want to increase their foreign enrolments.

What you should know: Housing affordability will become a core election issue. The measures come off the back of a recent analysis National Housing Supply and Affordability Council that said the government would fall short of its 2029 projections by 300,000 homes. Labour supply is also a critical issue, with the government funding 20,000 additional fee-free TAFE and VET places for construction jobs.

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