Lady Luck has smiled on Australia once again, with the first budget surplus in 15 years, thanks to higher tax revenue and increased job numbers. However, there are concerns about how long this good fortune will last.
Economy
The expected domestic economic growth is likely to slow down due to higher interest rates, and annual gross domestic product is projected to fall to just 1.5% in 2023-2024, with a slight recovery to 2.25% the following year. This is lower than the current rate of 3.25%.
Moreover, despite an anticipated increase in immigration to 300,000, inflation is predicted to remain at around 6% for 2022-2023, which could lead to stagflation hampering economic growth.
Individuals
The Budget has some good news for low-income households, with an increase in Job Seeker payments by $40 per fortnight, greater rent assistance, energy subsidies, lower medicine costs, and cheaper doctor visits for all Australians. It also includes increased wage payments for aged care workers and childcare subsidies, which should help ease the financial pressures on working families.
Additionally, single parents will now be able to claim the Single Parent welfare payment benefit lifting the eligible age of the youngest child from 8 to 14 years old, and the Government has allocated some $4 billion to support green energy programs, such as large-scale hydrogen production and the Household Energy Upgrades Fund.
Business
The Budget doesn’t offer much support for businesses, as the instant asset write-off has been reduced in terms of eligibility and total cost claimable, with the latter decreasing from $150,000 to $20,000 for equipment starting from 1st July 2023. However, the government has introduced a Small Business Energy Incentive that grants eligible businesses a 20% tax deduction bonus for depreciating assets up to $100,000 for energy-saving upgrades. Additionally, the government is supporting small businesses to enhance their resilience to cyber threats.
Housing
To ease the pressure on housing, the government plans to promote investment in rental housing by decreasing the withholding tax rate on eligible fund payments from managed investment trusts from 30% to 15%, hoping to stimulate supply.
Defence
There is an increase in Defence spending, with $20 billion expected to be spent over the next four years, including $9 billion on new AUKUS nuclear-powered submarines.
Summary
Overall, there is concern that the Budget doesn’t address the structural challenges in the economy, and there are calls for more measures to assist vulnerable people facing rising costs of living.
If you have any questions about how these Budget announcements might impact you, please don’t hesitate to contact our office. At FWD Financial, we are always here to help you navigate the complex world of financial markets and finance with transparency and integrity.
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