Cost of living, energy, and home loans: recapping the new Federal Budget

After a year of economic turmoil and government shake-ups, the Australian Federal Budget has a steep hill to climb. Pressing issues like the rising cost of living and housing affordability crisis understandably took centre-stage, with major wins for energy, superannuation, and JobSeeker included. But has the budget done enough to relieve money stress for Aussies?

Here’s what you need to know about the 2023 Federal Budget.

The rising cost of living has hit Australians in a few painful areas, particularly housing, food, utilities, and child/healthcare costs. All have been tackled either directly or indirectly by the new federal budget.

So what are the highlights? Headliners include:

• Rental assistance. An added $2.7 billion will go to raising the rates received by people on Commonwealth Rent Assistance (an increase of 15% per person).
  
• Single-parent household support. $1.9 billion will go to expanding the eligibility of which households could receive single-parent payments. Previously, the rule was only single parents with children under 8 could apply. Now, the eligible child age has been lifted to 14. 
  
• JobSeeker payments. JobSeeker will receive a massive $4.7 billion overhaul. Experts have long lobbied for the government to lift dole payments to 90% of pension rates. While the new measures fall short, they will provide an additional $40 a fortnight to all Jobseeker recipients and expand the eligibility of higher rates from those over 60 to those over 55. 
  
• Childcare subsidies. $4.7 billion in childcare subsidies will go live from 1 July for families earning less than $530,000 a year. Families with combined incomes of $80,000 or less will have care costs for their first child subsidised by up to 90%, while families who earn more will have their benefits progressively scaled depending on their incomes.
  

Energy bills and homeownership costs will also see some measurable relief, but these deserve their own sections (expanded below). So with such comprehensive reforms coming, will the budget go far enough to help those who need it most?

Potentially, no. Inflation is set to last until mid-next year – if we’re lucky – so real wages won’t receive a measurable boost until then. Additionally, the federal budget makes no mention of tax cuts for low to middle-income earners, whose taxes are set to jump $1,500 from 1 July 2023.

Wealthy Australians, however, will continue to enjoy the stage three tax breaks coming into effect from 1 July 2024.

“A lot of the spending that the government is doing is the right stuff,” explains Rich Insights expert spokesperson, Chris Richardson.

“The increase in JobKeeper — and it is not enough — that’s all great, but if you really wanted to do that fairness stuff [...] I’d say you needed to take some tough decisions and we haven’t seen those tough decisions in this budget.”

Two of the Budget’s key measures fall under the banner of energy – namely, the cost of household energy bills and the sustainability of the nation’s energy sources.

With utility bills rising, contributing to cost of living pressures, the government has announced several plays to help households and small businesses tackle the financial burden of keeping the lights on. 

According to Budget documents, the Energy Price Relief Plan aims to “shield Australians from the worst impacts of price increases and provides immediate help with power bills”. The government says their Plan will reduce the expected retail gas price growth by 16% and squash expected electricity price growth by 25%.

How? Through four main initiatives: 

• Electricity bill relief for low-income earners and small businesses. Pensioners, veterans, concession card holders, and those on some government support payments could receive up to $500 of bill relief, estimated to benefit 5.5 million households. Small businesses could receive up to $650 in electricity bill support too. 
  
• Price caps on gas and coal. By capping wholesale gas prices at $12 per gigajoule and introducing a mandatory code of conduct for gas sales, it’s hoped that households and industrial gas users will be able to get fairer prices. Combined with a price cap on coal used to generate electricity, the government estimates it could result in a 0.75% reduction in inflation next fiscal year. 
  
• Household Energy Upgrade Fund. $1 billion will go towards over 110,000 low-interest loans for energy-saving home upgrades, in partnership with private lenders, and $300 million will go to the states and territories to upgrade the energy efficiency of social housing properties. 
  
• Improving access to energy-saving info. The government will invest $36.7 million to provide households with better information on energy-saving measures, improve the nationwide House Energy Rating Scheme and bring the Greenhouse and Energy Minimum Standards program up to scratch with today’s needs. 
  

Queensland Conservation Council director, Dave Copeman, says these initiatives are welcome, but that investment in renewable energy can’t be overlooked.

“The energy rebate and low-cost loans for energy efficiency in this Federal Budget are welcome steps towards easing the pressure on households struggling with rising costs of fossil-fuel generated power,” he said.  

“While this immediate relief is crucial, if we want to permanently lower power prices and keep our communities safe, we must fast-track investment in renewable energy.

“Renewable energy can tackle both the cost of living and climate crises.”

So, what measures towards sustainability has the government included in the 2023-24 Federal Budget?

According to Budget documents, the government recognises energy’s role in Australia’s prosperity to date, but hopes a transition towards renewable energy “can do the same for decades to come – powering the next era of growth across our regions, for both traditional and new industries.”

Key sustainability initiatives that could have the most impact on everyday consumers include: 

• Bolstering energy regulators. The government will give the Australian Energy Regulator $46.5 million to regulate the markets and protect consumer interests during the grid upgrades.
  
• Helping small to medium businesses save energy. The government will run the Small Business Energy Incentive to help businesses save on their power bills by using energy more efficiently. 
  
• Driving change through the vehicles we use. The National Electric Vehicle Strategy will be implemented to give Australians better choice when it comes to electric vehicles and encourage the use of cleaner, cheaper-to-run vehicles. The government will also introduce a Fuel Efficiency Standard in cars, supported by $7.4 million of funding. 
  
• Supporting workers transition and adapt to new industries. Through the Net Zero Authority, the government will focus on the regions, industries, and workers that traditionally powered the economy, to help them adapt to the transition. 
  

Australian Banking Association (ABA) chief executive, Anna Bligh says, “Development of a sustainable finance taxonomy is an important step in decarbonising the economy and is an issue the ABA has been advocating on for several years.

“This Budget’s clean energy initiatives will enable everyday Australians to access lower cost funding to reduce their household emissions footprints.”

A surprisingly simple adjustment to how employers pay superannuation could add an extra $6,000 to Australians’ retirement savings, according to the government. The change? Pay the 10.5% mandatory super contribution at payday, not quarterly. 

Previously, the ‘quarterly loophole’ has underpaid Aussies billions worth of superannuation. By closing it, the new federal budget ensures workers receive super payments at a higher frequency – allowing interest to compound more over time while cracking down on businesses ducking their obligations. 

For a 25-year-old on an average salary, the government estimates this could cushion their retirement with $6,000 more. The new rule will go into effect from 1 July 2026. 

Superannuation balances over $3 million will also be taxed at a higher rate of 30%. This change will affect roughly 80,000 Australians – only a 0.5% drop in the superannuation pool. According to the Australian Taxation Office, most Australians only have between $288,000 - $358,000 saved in their super by their retirement age, depending on their gender.

Between stratospheric property prices and 3.75% of rate hikes from the Reserve Bank of Australia, financing a home loan has become unrealistic for many Australians. 

While First Home Buyer Grants have already done a lot of heavy lifting in this area, they’re not alone anymore. The federal budget will tackle both sustainability and affordability in a couple of decisive new programs, as well as expand the eligibility criteria for the first home schemes. 

Let’s break down the biggest changes: 

• Green home loans. Many lenders offer green home loans to eco-conscious borrowers who either have or will make energy-efficient improvements to their homes. Now, $1 billion in funding will go to creating 110,000 low-interest home loans for eligible Aussies through the Clean Energy Finance Corporation. The loans will encourage homeowners to add cost-saving green features like solar panels, rain-water tanks, and double-glazed windows. 
  
• Upgrades to social housing. The budget will pour $300 million into green upgrades to social housing, reducing its carbon footprint while conserving energy usage by a third. 
  
• First Home Guarantee opened up. Previously, only singles, couples, and de-facto partners were eligible to apply for national and state First Home Guarantee schemes. Now, any two people (including friends and siblings) who qualify can apply, including non-first home buyers who haven’t owned in ten years and Australian permanent residents. 
  
• Expanding rental supply and property investment. The budget shifts around some tax rates and constructive incentives in a way it claims could add 1 million more rental homes to the market from 2024. This could potentially ease rental price pressure on vulnerable Australians. 
  

So what could these changes ultimately mean for housing affordability? Expanding the supply of rental homes is both sorely needed and long overdue, while green measures could work to reduce living costs for some.

However, the main culprit behind steep mortgage rates – the RBA – is unlikely to be swayed by the new budget. So long as inflation remains a problem, the RBA will continue to tighten monetary policy and make servicing a home loan harder, and experts from think-tank Barranjoey reckon the new budget neither helps nor hurts inflation. 

“When we run it through our modelling we get an inflationary lift, but it is not material enough to really alter the economic outlook or our views for the RBA,” explains Barrenjoey chief economist Jo Masters. 

Without tackling the root causes of inflation, i.e. supply-chain issues, the central bank is left to fight inflation the only way it knows how: raising interest rates.

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