As the Australian Government moves to start reducing the nation’s debt, it is forecasting unemployment to go as low as 3.75 per cent in the September quarter of this year – the lowest in 50 years.
That optimistic projection is helping improve the Federal Government’s balance sheet as it tries to reduce the yearly deficit (the amount it spends minus the amount it takes in) and start paying down debt.
The Budget projects the deficit for 2022-23 to be $78 billion or 3.4 per cent of GDP (gross domestic product) before halving to about 1.6 per cent of GDP by 2025-26.
Gross debt as a share of the economy is expected to peak at 44.9 per cent of GDP in 2025. While that sounds like a lot – and it is – that is 5.4 percentage points lower and four years earlier than projected in the Treasury’s last financial outlook.
The elephant in the room is inflation. The Government is projecting it to peak at 4.5 per cent this year before moderating to 3 per cent next year.
Meanwhile, the national debt is tipped to reach more than $1 trillion in the years ahead.
What the 2022-23 Budget means for you
If you want a higher wage
With unemployment currently at 4 per cent, the Government is projecting the Wage Price Index to increase from 2.75 per cent in 2021-22 to 3.25 per cent in 2022-23. That being said, its track record on predicting wage growth doesn’t inspire confidence.
If you want a tax cut
The low and middle income tax offset – which effectively acts as a temporary tax cut – won’t be extended next year. However, when you file your tax return, the offset will be topped up with an extra $420 reimbursement to help with the rising cost of living.
Here’s how that breaks down:
If you earn $37,000 or less
Your tax bill will be offset by up to $675.
If you earn $37,000-$48,000
The offset will rise at a rate of 7.5 cents per dollar, with the maximum offset capped at $1,500.
If you earn $48,000-$90,000
You’ll get the $1,500 offset.
If you earn $90,000-$126,000
The offset starts tapering off at a rate of 3 cents per dollar.
If you earn more than $126,000
There won’t be any tax offset for you.
If you’re on welfare
Those receiving a welfare payment including pensioners, veterans and concession card holders will get an automatic $250 payment to help with the rising cost of living.
If you’re unemployed
The latest Budget includes $153.5 million over five years to address workforce shortages, support job seekers to find employment, and make it easier for vulnerable Australians to participate in the workforce.
That includes subsidising low- and fee-free training places in aged care courses and support for businesses who employ mature-age Australians and people with a disability.
If you drive a car
The Government is cutting the tax on petrol by half, meaning it should shave 22 cents a litre at the bowser for the next six months. Provided petrol stations pass it all along, it should take at least a few days to materialise as inventory turns over.
If you use child care
While the Government last year spent $1.7 billion to improve childcare affordability, it’s focusing on regional and remote areas in 2022-23.
It has outlined $19.4 million to establish up to 20 childcare services in areas where there is an absence or limited supply of child care.
If you’re retired
At the beginning of the pandemic, the annual super drawdown rate – which dictates how much, in percentage terms, retirees must withdraw from super each year – was cut in half for all age groups.
That has again been extended, meaning retirees only have to withdraw 7 per cent a year to avoid tax implications.
If you’re an indigenous Australian
The Government is spending $1.5 billion over five years for a suite of measures to improve outcomes for Indigenous Australians. This is in addition to the $6.7 billion Indigenous Advancement Strategy.
If you have a disability
Over the past 12 months, the Government has provided $39.6 billion to support the continued implementation of the NDIS (National Disability Insurance Scheme) but no more money has been allocated.
If you live in aged care
The Government will provide an additional $458 million over the next five years to support older Australians in the aged care sector with managing the impacts of COVID-19. The biggest component of that is the recently announced $800 cash handout for those who work in the sector.
If you were affected by the floods
The Government expects to spend $6 billion on disaster relief resulting from the recent flooding events along the east coast.
It will include things like income support, temporary accomodation, payments for farmers to replace equipment, and clean-up efforts.
If you are trying to buy a home
The Government is expanding its Home Guarantee Scheme to allow 35,000 people to buy a home with a 5 per cent deposit and avoid lenders mortgage insurance by having the taxpayer go guarantor.
It is also introducing an additional 10,000 spots a year for people who want to buy in regional areas and a further 5,000 for single parents.
If you have a big mortgage
While there was nothing specifically in the Budget for you, the cash splashes and inflation projections means it won’t be long until official interest rates rise.
If you’re a new parent
The Budget includes $346 million over five years to introduce an enhanced Paid Parental Leave scheme for eligible working families, giving them new flexibility over how they use 20 weeks of paid paternity leave.
The move is aimed at improving the economic security of women, who are typically the primary care giver.
If you’re a business owner
Small businesses with annual turnover less than $50 million will be able to deduct a bonus 20 per cent of the cost of business expenses and depreciating assets that support digital improvements. Small businesses will be able to deduct the same amount for any training courses.
If you’re an apprentice or trainee
The Government is looking to simplify and streamline trade apprenticeships and has allocated a further $2.8 billion over five years to push people towards vital trades.
If you’re a tradie
The Government has announced an extra $17.9 billion on roads and rail projects on top of its $100 billion infrastructure pipeline.
In total, the infrastructure spending is aimed at supporting 35,000 projects, dating back to 2013-14, and is expected to support around 40,000 jobs over the lives of these projects.
If you work at a university
To help commercialise some of the most promising ideas coming out of our universities, the Government’s $2.2 billion University Research Commercialisation Action Plan includes $1.6 billion to drive research in clean energy, medical products, defence and other high-priority manufacturing areas.
If you get medicines through the PBS
The Government is reducing the Pharmaceutical Benefits Scheme (PBS) Safety Net thresholds, from $1,542.10 to $1,457.10 for general patients and from $326.40 to $244.80 for concessional patients.
The changes are expected to benefit around 2.4 million people by lowering the out-of-pocket costs for medicines.
If you’re worried about national security
Defence spending has risen to more than 2 per cent of GDP this financial year, up from about 1.6 per cent in 2014. Meanwhile The total the Defence workforce is projected to increase by 18,500 personnel by 2040, at a cost of at least $38 billion.
If you care about climate change
Not a lot to see here. Climate change was mentioned just once when Frydenberg handed down his Budget on Tuesday night. Any money related to climate change is focused on preserving the Great Barrier Reef.
If you’re worried about inflation
Described ahead of budget night by former independent for NSW Tony Windsor as a “drunken sailor budget”, some economists worried the cash splashes could add fuel to the inflation fire.
The Government doesn’t think so, predicting it will peak this year at 4.5 per cent. Should we see anything like what the US has experienced at 7.5 per cent or New Zealand at 5.9 per cent, Aussie workers will be going backwards.
If you’re a high-income earner
The richest Australians are still set to get income tax relief, with the Government’s stage 3 tax cuts to kick in from 2024-25.