Federal Budget 2024: Energy rebates, tax cuts and new homes

Federal Treasurer Jim Chalmers has handed down another surplus budget - one that walks a fine line between supporting Australians in a cost of living crisis, and fanning the flames of inflation. Let's unpack the key issues. 

Tax cuts for 13 million Australians 

After weeks of drip-feeding a range of Budget measures to the media, there were no major surprises on Tuesday night when Dr Chalmers unveiled the 2024 Budget.  

The Stage 3 tax cuts that kick in from 1 July, are now well-documented, and expected to bring tax relief to 13.6 million Australians.  

Tax savings will be welcomed by all Australians, but for many workers the impact on regular take-home pay will be modest.  

The average tax saving amounts to $1,888 annually or $36 a week. If the extra cash is not needed for essentials then be sure to not let this get lost in regular spending. Use it to grow your investments or add to your super through salary sacrificing. It can be a great way to take advantage of dollar cost averaging. 

The tax cuts will provide greater protection against bracket creep, particularly for low- to middle-income taxpayers. This is definitely a plus for investors as portfolio returns can easily push people into the next tax bracket, eroding after-tax gains. 

$300 energy rebate for all 

One unexpected perk of the 2024 Budget is the $300 household energy rebate. From July, a $300 annual credit will automatically be applied to household power bills, lowering quarterly bills by $75 throughout 2024-2025. Small businesses will receive $325 off their electricity bills throughout the year. 

Previous energy relief measures have targeted households receiving government payments. As Dr Chalmers explained, the Budget has gone broad with energy rebates this year as the rising cost of electricity is being felt up and down the income ladder. 

$3 billion wiped from student debt 

For students, and the 3 million Australians with HECS debt, the Budget brings a modest level of relief - and it's much-needed after we saw student debt increase by over 7% in 2023 in line with inflation.  

Indexation of student loans will now be capped to the lower of the Consumer Price Index or the Wage Price Index. Moreover, this will be backdated to mid-2023, wiping $3 billion in total student debt and saving someone with a HECS debt of $40,000 around $1,200. 

Super to be part of parental leave 

The Budget offers a long overdue benefit for women, with superannuation to be paid on government-funded Paid Parental Leave (PPL) for parents of babies born or adopted on or after 1 July 2025. 

With around 95% of primary care PPL taken by mothers, this initiative will make the super system fairer by reducing the impact of career breaks to care for young children on women's super balances. This measure is expected to benefit 180,000 families a year. 

Deeming rates frozen 

The Budget sees a freeze on social security deeming rates, which will stay at their current levels for another year. The lower deeming rate will remain at 0.25%, with the upper rate to stay at 2.25%.  

As a guide to the impact, a single age pension recipient with deemed assets of $250,000 can benefit by more than $2,300 annually. 

1.2 million new homes 

The Budget reiterated the government's pledge to build 1.2 million new homes over the next five years. There's no doubt that an undersupply of housing has contributed to soaring property values. But question marks remain over how achievable the target is.  

The Housing Industry Association says it's "possible" to build 1.2 million homes by 2029, but it will require significant lowering of taxes on home building, easing pressures on construction costs, and decreasing land costs.  

BuildSkills estimates an additional 90,000 workers are needed to meet the Housing Accord target. Frankly, it's hard to see where all the tradespeople needed to build these new homes will come from, especially as the Budget reaffirms major infrastructure projects including a new $1.4 billion rail line between Brisbane and the Sunshine Coast as well as the $2.3 billion being spent on the new Western Sydney airport and associated transport links.  

It's also fair to say that while immigration levels remain high, housing demand will continue to rise, putting further pressure on property prices. 

$22.7 billion Future Made in Australia package  

One of the more contentious aspects of this year's Budget is the $22.7 billion devoted to the Future Made in Australia (FMIA) package.

It's essentially a mix of subsidies, tax breaks, cheap loans and cutting of red tape to support quantum computing and 'clean' technology across several key industries including renewable hydrogen, processing and refining critical minerals, and clean energy manufacturing including battery and solar panels. 

The FMIA initiative may appeal to investors as it lends support to the relevant sectors. But it's not hard to see how the big mining companies are likely to be among the main beneficiaries. Still, growing numbers of investors are looking to 'green' their portfolios, and the FMIA may expand the choice of eco-friendly options. 

Differing views of inflation 

More broadly, the Budget points to fairly lacklustre economic growth over the next few years. Real GDP is expected to grow by just 1.75% in 2023-24, increase by 2.0% in the next financial year, and rise by 2.25% in 2025-26. 

The picture on inflation is less clear. The Budget papers claim "inflation is expected to be lower in 2023-24", while the Reserve Bank says "inflation remains high".  

Exactly how inflation moves will play a critical role in deciding interest rates. And this is likely to have a bigger impact on household spending - and share market movements - over the short term than a helping hand with power bills and grand plans for quantum computing.  

The losers 

Those on JobSeeker would be pretty disappointed to learn that there was no boost to their payment rates. Despite pressure from economists and consumer advocates the government has kept payments the same. 

Other groups that may not be too happy include motorists and small businesses (no cuts to the fuel excise), Aussies who like a drink or two (no relief in alcohol taxes) and quite possibly home owners. That's because if the budget does prove to be inflationary, the next rate hike could just be up.