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2022 Budget Analysis
What you need to know about the 2022 Budget
After two consecutive budgets heavily focused on spending, it may have seemed like now would be the time to focus on budget repair. That hasn’t occurred. Instead, the government appears to be courting voters in the lead up to the election with a combination of $8.6 billion in payments, tax rebates and cuts to the fuel excise to put more money directly in the hands of voters.
The Australian economy has performed strongly, growing by 4.25% following the Delta and Omicron waves. There has been a 2.75% increase in wages, but this has been offset by a growth in inflation to 4.25%.
In the year ahead, Treasury is forecasting economic growth of 3.5% and stronger wage growth of 3.25%. Strong jobs growth is forecast off the back of a fall in unemployment. Unemployment is already low at 4% and is forecast to reach 3.75%, much better than the predicted 5.5% in last year’s budget. The government is expecting that budget measures will cut inflation by one-quarter of a percentage point.
Government’s debt position
Australia’s net debt will reach $714.9 billion by June 2023, reaching a peak in 2025, before beginning to decline.
Despite the additional spending, the government expects to shrink the annual budget deficit from $134.2 billion last year to $79.8 billion this financial year; a big improvement on the forecasted $99.2 billion deficit expected last December. A surge in tax revenue of $33 billion above last year’s predictions is contributing to budget repair.
The fuel excise will be halved from 44.2¢ to 22.1¢ a litre for a period of six months. That will save motorists about $11 on a 50 litre tank of petrol.
6 million Australians including those on the full age pension and pensioner concession cardholders as well as those on the carer allowance, disability support pension, JobSeeker, youth allowance and other income support will receive cash payments of $250 over the next four weeks to assist with cost of living pressures.
The low and middle income tax offset will be increased from $1080 to $1500, delivering an additional $420 into the pockets of 10 million taxpayers. This will serve as a cost-of-living payment which will be delivered as a tax refund to families at tax time.
Small businesses will receive tax deductions for investment in training and technology to the tune of $120 for every $100 they spend up to $100,000.
$17.9 billion has been committed to infrastructure projects including $3.1 billion for two Melbourne intermodal rail terminals, $1 billion for faster rail between Sydney and Newcastle and $2.7 billion for faster rail between Brisbane, the Gold Coast and the Sunshine Coast.
600 initiatives will boost regional communities and industries. That includes $7.4 billion committed for water projects and $1.3 billion committed to improving mobile phone coverage along regional roads. $2 billion has been committed to regional skills development, education infrastructure and more.
Education & training
New apprentices will receive $5000 payments over two years. Employers will receive wage subsidies for apprentices of up to 10%.
$2.2 billion has been committed to commercialise university research, and 30,000 more university places than last year have been announced for the year ahead.
The Home Guarantee Scheme will double to 50,000 places per year. First-home buyers will only require a deposit of 5% and single parents will only require a deposit of 2%.
Women and families
An additional $1.3 billion will be spent on measures to address violence against women and children including front-line services, emergency accommodation and access to legal advice.
Paid parental leave will become more flexible, with couples able to decide how they will share the 20 weeks and single parents will be able to claim the full 20 weeks.
$6 billion has been committed to the COVID-19 response, including $1 billion for the vaccine roll out. The Pharmaceutical Benefits Scheme safety net will be reduced, reducing the cost of medicines for over 2 million Australians.
More money has been committed to mental health including Headspace and community-based treatment programs.
$38 billion has been committed to increase the defence force to 80,000 people. $9.9 billion has been committed to boost Australia’s cyber capabilities over ten years.
Despite committing to net zero emissions by 2050, the government has announced no new initiatives or funding to reach that target.
For more information on the budget, check out the government’s budget overview.
If you have any questions surrounding the 2022 budget or would like to discuss how the budget may affect you, please get in touch with our team.