posted in: Building Wealth
Everything you need to know about the 2022 budget
The first budget under the Albanese government has been sold as a budget focussed on reducing cost-of-living pressures, amid rising inflation and the global energy crisis. However, the government is somewhat hamstrung on this issue. They can’t provide cash relief to Australians as that money would be spent, further fuelling inflation. Instead, the budget is more focused on the budget deficit, taking initial steps towards budget repair by cutting $22 billion from spending while still delivering on election promises.
Inflation continues to be a concern, with it likely to remain above the RBA’s target rate for at least 12 months longer than originally anticipated.
While wages growth is expected to reach between 3 and 3.75 per cent over the next four years, high inflation will essentially mean this won’t equate to a real wage rise for at least a year. Economic growth is expected to reach 3.25 per cent in 2022-23 and then reduce in 2023-24.
Unemployment is at record lows. It is expected to fall to 3.75 per cent this year, before rising to 4.5 per cent in the next two years.
Government’s debt position
Australia’s net debt is expected to reach $572.2 billion in 2022-23, which is significantly down on March’s forecast of $714.9 billion. Net debt is projected to reach $766.8 billion by 2025-26, also down from the previously forecast $864.7 billion.
Higher commodity prices, record low unemployment and the $22 billion in spending cuts is expected to help drive the reduction in net debt.
Many have speculated whether the Coalition’s stage three tax cuts will be scrapped under an Albanese government. While this hasn’t occurred in this budget, in all likelihood this will be announced down the track. The tax cuts would likely aggravate existing issues with inflation and the budget deficit, but to drop them would involve breaking an election promise. The government appears to be delaying the decision until a time when they can convince Australians that the policy shouldn’t be a priority.
$8.1 billion has been dedicated to rail and road projects, including nearly $2.6 billion for Victoria, just under $2.1 billion for Queensland, $1.4 billion for NSW and $630 million for Western Australia.
Key projects include $2.2 billion for Melbourne’s Suburban Rail Loop, $866 million for Queensland’s Bruce Highway, $500 million for high-speed rail from Sydney to Newcastle, and $400 million for an Alice Springs to Halls Creek corridor upgrade.
Funding for new dams has been cut by $1.7 billion over four years.
$20 billion has been dedicated to the “Rewiring the Nation” scheme intended to fix the electricity grid.
$1.5 billion has been dedicated to renewable energy projects in Victoria.
$15 billion has been dedicated to a National Reconstruction Fund, designed to create critical manufacturing capacity by partnering on private sector investments in manufacturing.
Education & training
480,000 fee-free places at TAFE have been funded, with the first 180,000 places set to be available from 1 January at a cost of $1 billion. Indigenous Australians, young people, jobseekers, unpaid carers and people with a disability will be given priority access.
20,000 extra University places will be funded over two years, at a cost of $485.5 million. Health, education, engineering and technology courses will be given priority.
10,000 “new energy apprenticeships” will be offered for apprentice electricians, with support payments of up to $10,000.
A new National Housing Accord between governments, investors and industry aims to get 1 million new homes built over five years from 2024. An initial $350 million has been dedicated to pay for the first 10,000 affordable homes.
The Housing Australia Future Fund aims to build an extra 30,000 social and affordable homes.
A Help to Buy scheme has been designed to help 40,000 eligible Australians buy a home with a lower deposit.
A Regional First Home Buyer guarantee will aim to enable 10,000 regional Australians to purchase their first home each year.
Women & families
Paid parental leave has been expanded to six months, at a cost of $530 million, with the changes to take effect from 2026. In a bid to encourage both parents to take leave, a portion of leave will be reserved for each parent.
In a bid to make childcare more affordable, the government will spend $4.7 billion over four years to increase the subsidy received by 96 per cent of families, with the changes taking effect from July 1, 2023.
From January 1, the PBS maximum co-payment to get a script filled will fall from $42.50 to $30.
$235 million over four years has been dedicated to urgent care clinics to reduce pressure on public hospitals.
$2.6 billion has been dedicated to COVID-19 vaccines and treatments for people who are at risk.
Total funding for the NDIS will reach $166.6 billion over 4 years; an increase of $8.8 billion.
Funding for defence has risen 8 per cent in 2022-23; representing more than 2 per cent of GDP over the next four years.
$1.4 billion over four years has been dedicated to aid funding with $900 million allocated to the Pacific and $470 million to South-East Asia.
The government has already legislated an emissions reduction target of 43 per cent by 2030 and net zero by 2050. To achieve this, they are investing $42.6 million to restore the Climate Change Authority, as well as dedicating $275 million to encourage the use of electric vehicles and $225 million for community batteries and household solar. $200 million will be put into a disaster-ready fund for prevention and resilience.
For more information on the budget, check out the government’s budget overview.
If you have any questions surrounding the October 2022 budget or would like to discuss how the budget may affect you, please get in touch with our team.