On Tuesday the 9th of May 2023, the Australian Treasurer Jim Chalmers handed down the Federal Budget for 2023-24. The Labor Government’s fiscal expenditure focuses primarily on building “Stronger Foundations for a Better Future,” through responding to immediate challenges the domestic economy is facing whilst simultaneously outlining long-term economic objectives.
At its core, the Federal Budget is an incredibly vital aspect of Fiscal Policy, a countercyclical macroeconomic policy that encompasses government expenditure and taxation to influence aggregate demand and wider objectives of economic growth, unemployment, resource allocation, income distribution and external stability. Ergo, the Budget refers to a forecast of fiscal expenditure and revenue that will occur in the following financial year.
At a glance, the Government is striving for more responsible economic and fiscal management by strengthening the fiscal position such that lower deficit and debt can be anticipated in future years. Notably, the underlying cash balance is projected to improve by $125.9 million over the five years to 2026-27, the biggest fiscal improvement on record. Further fiscal repair has been effective as the budget surplus is forecasted for 2022-23, a turn-around from the $77.9 billion deficit inherited from 2021-22. The Budget extends to prioritise strengthening Medicare, delivering cost-of-living relief and broadening job opportunities.
Global and Domestic Economic Outlook
The Australian Economy is expected to outperform all major advanced economies yet is gradually slowing in the face of a deteriorating global economy, high inflationary pressures, interest rates and cost-of-living issues. Therefore, Australia’s Real GDP growth is expected to slow to 1.5% in 2023-24 before recovering in 2024-25. Globally, ongoing volatility in the financial sector could hurt consumer and business confidence, especially in the USA and Europe. The Global Economy is further at risk as a result of the likelihood of future interruptions to global food and energy supplies stemming from Russia’s invasion of Ukraine.
To support the population, the Budget outlines key initiatives to deliver cost-of-living relief. Notably, the Government aims to provide energy bill relief to around 5 million households and 1 million small businesses, alongside supporting 57,000 single parents by expanding eligibility for parenting payments and additional targeted assistance for JobSeeker Payment recipients 55 years of age and older. Alongside this, the base rate of JobSeeker and other payments for 1.1 million people will also be responsibly increased. .
Pursuing greater economic development, the Government is investing $5.7 billion over 5 years from 2023 to strengthen the Medicare program to improve accessibility to doctor’s appointments. This is aligned with the Budget tripling the incentive paid to GPs to bulk bill consultations for families with children under 16, pensioners and Commonwealth Concession holders at a cost of $3.5 billion, estimated to support 11.6 million Australians.
Further Medicare reforms primarily focus on increasing access to primary care with coordinated teams through measures such as investing $445.1 million over 5 years to enable GPs to have nurses and allied health professionals assisting their work. The Budget will continue its objective of strengthening Medicare by investing $824.4 million in digital health to modernise the My Health Record system and funding other digital health initiatives.
Coinciding with the announcement of new laws regarding disposable vapes, the Budget allocates a further $25.9 million to increase and enhance support for quitting as well as an additional $263.8 million over 4 years to establish and maintain a national lung cancer screening program.
A Stronger and More Secure Economy
Domestically, the economy is focalising heavily on ecologically sustainable development which aligns with the Budget investing $4 billion in Australia’s ambitions to become a renewable energy superpower. A further $2 billion is being allocated to the Hydrogen Headstart initiative as well as $10 billion in the Capacity Investment Scheme’s initial auctions, summing Australia’s investment into renewable energy to total over $40 billion. A $1.1 billion over 5 years investment will be made to the National Heritage Trust to help protect threatened and endangered species, coinciding with a further $200 million towards the Disaster Ready Fund to strengthen the domestic economy’s financial stability in regard to natural disasters such as bushfires.
The Government aims to support and strengthen small businesses through a plethora of incentives including the introduction of the ‘Small Business Energy Incentive’ to provide $310 million in tax relief to support up to 3.8 million businesses to invest in capital.
The Budget also outlines negotiating a new 5-year National Skills Agreement to commence from the start of 2024, estimated to fund an additional 300,000 TAFE and vocational education training institutions to become fee-free, strengthening the quality of education and labour within the domestic economy.
The Migration System will also be invested in to ensure that Australia has the skills to support the economy by allocating around 70% of places in the 2023-24 permanent Migration Program to skilled migrants as well as providing additional training places for the Pacific Australia Labour Mobility Scheme workers in priority sectors.
Funding our Priorities
To support older Australians wishing to remain at home for longer, the Government is investing $166.8 million to provide an additional 9,500 home care packages alongside $52.1 million to increase the funding available to aged care providers in remote areas, $1.7 million to appoint an interim First Nations Aged Care Commissioner and $487 million to extend the Disability Support for Older Australians Program.
Notably, the superannuation system will experience reform to ensure that Australians are paid the super they earn through initiatives such as investing $27 million in 2023-24 for the ATO to improve data capabilities, a further $13.2 million to consult and co-design with stakeholders on a new ATO compliance system as well as from July 1st 2025, ensuring that earnings on balances exceeding $3 million will attract an increased concession tax rate of 30% whereas earnings below will continue to be taxed at the 15% rate, estimated to affect around 80,000 people.