Federal budget 2022-23:
relief amid the pain

The first budget from a new government manages high debt, attempts to boost the economy and ease some cost pressures.

The Albanese government’s first budget, delivered last week, focused on delivering its election promises while preparing the nation for increasingly difficult economic conditions.

Of most relevance for smartMonday members were budget initiatives to help with living costs, extending downsizing provisions in superannuation, and investments to improve the economy.

Managing the nation’s high federal debt was perhaps the government’s first priority. Delivering the budget last Tuesday, Treasurer Jim Chalmers emphasised the government would restrain its spending so it’s better able to deal with Australia’s increasing social welfare costs and the interest payments on its debt.

The budget was prepared in the shadow of worsening expectations for the Australian economy: forecast higher unemployment, much higher energy costs and generally higher prices. This also means the government expects lower tax revenue in the years ahead.

• Downsizing contributions now apply to those aged 55 and older (previously it was 60 and older)

This means people aged 55 and older can contribute up to $300,000 from the proceeds of a home sale into their super. And that contribution won’t count toward usual annual contribution caps. There are a few rules to downsizing contributions such as the home being sold must be based in Australia.

• Childcare subsidies will increase up to 90% from July 2023 for families earning less than $530,000
• Paid parental leave will increase to 26 weeks by 2026
• Pensioners will have home sales’ proceeds exempt from the pension assets test for 12-24 months
• Seniors health cards will be available to single self-funded retirees earning $90,000 or less a year ($144,000 for couples)

Increased parental leave and extra subsidies for childcare were flagship proposals from the Australian Labor Party before the federal election in March. But despite the rise in inflation, particularly energy prices since then, no new initiatives were launched to broadly help the Australian public.

With the extension of paid parental leave, it was noted by The Association of Superannuation Funds of Australia that the government’s decision to extend the scheme to 26 weeks over the next four years would help address workforce participation and the gender superannuation gap (which means women are retiring, on average, with much less super than men).

• Housing Australia Future Fund will be set up to manage investments from super and institutions into affordable housing in the years ahead
• Healthcare improvements of $2.9 billion including Medicare Urgent Care Clinics
• Energy transmission fund of $20 billion to be established to drive investment in renewable energy
• Nursing home residents to have access to a registered nurse and receive a minimum amount of care

Many of the broad initiatives outlined in the budget rose during the election campaign earlier this year. The government is trying to keep its spending limited while delivering on these promises.

While those listed above (among others) will help some Australians with their living expenses, the Treasurer was clear that cost pressures will worsen before they become easier.

“The global economy teeters again, on the edge – with a war that isn’t ending, a global energy crisis that is escalating, inflationary pressures persisting, and economies slowing – some of them already in reverse,” he said when delivering the budget to Parliament.

“But while we intend to avoid the worst of the turbulence from overseas, we cannot escape it completely. Global challenges, along with high inflation and higher interest rates, will have an impact.”

The budget initiatives, some of which are outlined above, will have to pass through Parliament and be legislated before they take effect. This budget was held out of cycle in October due to the election of a new federal government that needed to outline its direction for the economy and the nation. The annual federal budget is usually held in May, which will be the case in 2023.

Byron Smith