The 2024/25 Federal Budget: Relief Measures, Economic Outlook & Key Initiatives

As the federal election draws near, the recent unveiling of the 2024/25 budget by the Labour government turns the focus to providing relief to Australians with measures aimed at easing cost of living pressures. However, the effectiveness of these measures hinges on their ability to influence key economic indicators, notably the Consumer Price Index (CPI).

A successful alignment with CPI targets could pave the way for significant shifts in monetary policy, with potential implications for interest rates and broader economic stability. Should the Budget manage to bring the CPI back on target by the end of 2024, the Reserve Bank of Australia (RBA) may be inclined to reduce interest rates. However, the RBA anticipates that inflation may not return to the target range of 2-3% until late 2025 or mid-2026.

Below, we provide an overview of the key initiatives outlined in the budget, shedding light on their potential impact on the economy and the lives of everyday Australians.

Stage Three personal Tax Cuts

The Government has confirmed the revised stage three personal tax cuts that were announced prior to the Federal Budget being handed down and which have already been enacted into law.

Medicare low-income threshold	Threshold as at 30 June 2023	Threshold from 1 July 2023
Singles	$24,276	$26,000
Families	$40,939	$43,846
Single - seniors and pensioners	$38,365	$41,089
Family - seniors and pensioners	$53,406	$57,198
Family - for each dependent child or student	$3,760	$4,027

Medicare levy low-income thresholds increase The Medicare levy low-income thresholds will be increased for singles,
families, and seniors and pensioners from 1 July 2023.

2024 Income Year		From the 2025 Income Year
Tax Rate	Thresholds	Tax Rate	Thresholds
0%	$0 - $18,200	0%	$0 - $18,200
19%	$18,201 - $45,000	16%	$18,201 - $45,000
32.5%	$45,001 - $120,000	30%	$45,001 - $135,000
37%	$120,001 - $180,000	37%	$135,001 - $190,000
45%	$180,001 +	45%	$190,001 +

Energy Bill Relief Households will receive a credit of $300 on their energy bills credited as automatic quarterly instalments across 2024-25. Energy relief will also be provided to eligible small businesses in the form of a $325 rebate.

Capping indexation of HELP debts

As previously announced, the Government will cap the HELP indexation rate to be the lower of either the CPI or the Wage Price Index (WPI) with effect from 1 June 2023. The change will apply to all HELP, VET Student Loans, Australian Apprenticeship Support Loans and other student support loan accounts that existed on 1 June 2023.

By changing the calculation of HELP indexation from 1 June 2023, the indexation rate is reduced from:

• 7.1% to 3.2% in 2023, and
  
• 4.7% to around 4% in 2024.
  

Superannuation on paid parental leave

Eligible parents will receive an additional payment based on the superannuation guarantee (i.e. 12%of their PPL payments), as a contribution to their superannuation fund.

This payment is in addition to the changes that saw families provided with an extra two weeks of leave (22 weeks total), which will increase to 24 weeks from July 2025 and 26 weeks from July 2026

Increasing commonwealth rent assistance

The Commonwealth rent assistance maximum rates will increase by 10% from 20 September 2024.

Improving aged care support

The Government will provide funding of $2.2 billion over the next five years to deliver key aged care reforms and to continue to implement recommendations from the Royal Commission into Aged Care Quality and Safety.

Pharmaceutical Benefits Scheme co-payments

The Government will ensure that the cost of medicines remains low by freezing indexation:

• PBS general co-payments to not be indexed between 1 January 2025 and 31 December 2025 (inclusive), with indexation resuming on 1 January 2026
  
• PBS concessional co-payments to not be indexed between 1 January 2025 and 31 December 2029 (inclusive), with indexation resuming on 1 January 2030

$20k Small business instant asset write-off extended

Small businesses, with an aggregated turnover of less than $10 million, will be able to immediately deduct the full cost of eligible depreciating assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2025.

The increased small business instant asset write-off announced in the 2023-24 Federal Budget is not yet law. Senate amendments proposed increasing the threshold from $20,000 to $30,000 and expanding the measure to apply to medium entities.

The Future Made in Australia initiative

The Government has announced a bold initiative to make Australia a “renewable energy superpower.”

The $22.7 billon series of initiatives is designed to foster and encourage significant private sector investment into priority industries necessary to harnessing the economic and industrial benefits of the move to net zero and securing Australia’s place in a changing global economic and strategic landscape.

As part of the Future Made in Australia initiative,  the Government will provide an estimated $19.7 billion over ten years from 2024–25 to accelerate investment in Future Made in Australia priority industries including renewable hydrogen, green metals, low carbon liquid fuels, refining and processing of critical minerals and manufacturing of clean energy technologies including in solar and battery supply chains.

Women’s budget statement

This year, the Government launched Australia’s first national strategy with an explicit focus on achieving gender equality. Working for Women: A Strategy for Gender Equality (Working for Women) is the Government’s ten-year commitment to ‘shift the dial’ on gender equality.

The 2024–25 Women’s Budget Statement focuses on five priorities, which mirror the priority areas of Working for Women:

1. Gender-based violence
   
2. Unpaid and paid care
   
3. Economic equality and security
   
4. Health
   
5. Leadership, representation and decision making

The economy

Key statistics

• GDP – Real GDP growth of 1.75% in 2023–24. Growth is expected to remain subdued at 2% in 2024-25 and 2.25% in 2025-26.
  
• Inflation – The Government expects inflation to be within target by the end of 2024. The RBA’s most recent view is that inflation is not expected to return to the target range of 2-3% until the second half of 2025.
  
• Unemployment– The unemployment rate remaining near its 50 year low at 3.8%
  
• Wages – Nominal wages over 2023–24 have grown at their fastest rate in nearly 15 years. It is expected to soften to 3.25% in 2024-5 and 2025-6.
  
• Business investment – Growth of 8.3% last year.

The first four years of this decade have tested the economy and the resilience of all Australians: floods and bushfires, a once-in-a-century global pandemic, followed by the most significant international energy crisis in 50 years. The combined impact of these events resulted in economic consequences on supply chains, energy prices, inflation and interest rates. These events may seem like distant memories but they continue to impact the economy.

Australia is continuing to face ongoing global uncertainty stemming from persistent inflation in North America; growth slowing in China and other major economies; the United Kingdom and Japan both finishing the year in recession; and tensions rising in the Middle East and Eastern Europe.