The government has handed down its 2024 Federal Budget and there has been a great deal of discussion about the potential impact on inflation. As with all Budget commentary, you can find analysis that aligns to your political persuasion!
With this likely to be the last Budget prior to next election, it was always going to be prepared with that in mind. This is evident in the continued strong emphasis on providing cost of living relief with the main policy being a non-means tested energy relief payment to all households of $300. The payment is structured in such a way to impact the energy costs used when the official inflation figures are calculated. So rather than paying individuals to help them pay their higher energy bills, the bills are kept lower via the energy relief rebate. This artificially lowers the energy cost input, with the goal being to then be able to demonstrate a lowering of inflation. It will be curious to see how this is addressed next Budget, noting that if the practice is not continued then there will be material upwards pressure on inflation from the rise in reported energy costs.
A key announcement that is relevant for our retired and semi-retired clients is the continued freezing of the deeming rates which apply to all Centrelink and Department of Veterans Affairs income support recipients, as well as concession card holders such as the Commonwealth Seniors Health Card. These rates are frozen for a further year until just after the next election.
The Budget was very quiet on the superannuation front with only two measures addressed. Firstly, the Government has committed to paying superannuation on Paid Parental Leave from 1 July 2025 which is a positive policy to support new parents who have left the workforce for a period of time. Secondly, the Government has provided additional funding to support enforcement activity to address unpaid superannuation.
Management of the country’s finances during a cost-of-living crisis accompanied by persistent higher inflation rates is a difficult task. This is made more challenging by the political backdrop with an election approaching. Choices have been made and only time will tell whether the outcome is favourable for the majority of Australians, both now and into the future.
Our view has always been that inflation must be tamed. It has insidious and disastrous effects on all levels of society, so it is probably now in the hands of the Reserve Bank to make difficult decisions regarding the direction of interest rates.
As in previous years we have provided a briefing from Colonial First State which is an excellent summary of the major announcements. It can be read by clicking this link.