Budget 2024/25 – Highlights & Observations

Setting the Scene 

A first-term government’s budget serves multiple purposes. It sets the tone, earns voter trust, fulfills election promises. But it also has to show the government is listening to people and showcases its economic management skills. 

Jim Chalmers’ 2024-25 budget had to navigate contradictions: easing living costs without fueling inflation, boosting housing affordability without stimulating demand, and advancing energy transition while supporting blue-collar workers. 

And, do all of these things without increasing debt or inflation to prevent interest rate hikes. While a surplus isn’t a top voter priority, a deficit could undermine voter confidence. 

The progressive media outlets quoted young people’s disappointment in a lack of help for renters and first homebuyers, but praised university placement payments and reduced student debt. The conservative outlets criticised the budget as irresponsible and high-spending, foreseeing inflation and higher interest rates. 

The major budget announcement of $300 household relief faced scrutiny for potential inflationary impact and lack of means-testing. 

But while polling on voter reaction is underway, true sentiments will develop over time based on how people feel – are they better off or not?  

It is likely that this will be the last before the next election. 

The true value of that $300, and the rest of this budget, won’t be truly captured and understood until election day. 

What we like 
  • Housing commitments

The McKell Institute has been advocating for further Commonwealth support for social housing investment over the past 12 months. We welcomed the Commonwealth’s pledge to fund more and to help the states and territories clear infrastructure bottlenecks to expedite delivery. Homelessness funding will double to $400 million every year, which the states and territories have been told to match. More housing support will continue to be needed in future budgets. 

  • Stage 3 Tax Changes

Earlier this year, Treasurer Jim Chalmers’ addressed McKell to outline the rationale for a change to the stage 3 tax cuts. These changes were confirmed on budget night and will begin from 1 July. 

  • Reduction in Nuisance Tariffs 

Our budget submission argued for a reduction in nuisance tariffs, which are outdated or unnecessary tariffs on imports. The McKell Institute’s pre-budget submission made the case for these changes, which will lower costs for business. 

  • Increased award wages for aged care, child care, early educators 

The care sector, largely staffed by women, has struggled with wages failing to keep pace with cost of living pressures. Their unions have responded with strong campaigns for wage rises that have paid off. These hard-earned rises are an important step in attracting and retaining workers in these essential industries.   

  • Competition reform, with a new focus on reforming non-compete clauses 

The budget allocated $13.9m to pursue competition reforms, including a new focus in the Competition Review on non-compete clauses. McKell’s pre-budget submission argued for non-compete clauses to be reformed, to deliver a fairer deal for workers. 

  • Energy subsidy

The government’s marquee initiative in the budget is a $300 energy subsidy for every household. The subsidy will reduce headline inflation directly, and is not targeted or means tested. 

  • Super on Paid Parental Leave 

McKell Institute Guaranteeing Women’s Super detailed a plan to include superannuation on paid parental leave to minimise the gender gap in retirement balances. This change is long overdue, we welcome the Government funding this proposal and helping to bridge the superannuation gender gap.  

  • Future Made in Australia plans 

The government’s Future Made in Australia strategy is a necessary response to the changing economy, increased fragility in global supply chains, and the capital-drawing effect of the Biden Administration’s Inflation Reduction Act. Some economists have criticized the strategy as ‘picking winners and losers’, but it is clear these forces of change necessitated a greater government involvement in industry policy. 

Australia’s economy has undergone significant deindustrialisation over recent decades, making it highly reliant on extractive industries and poorly equipped to value-add to our substantial store of critical minerals. This policy is designed to ensure Australia harnesses the significant opportunities to develop industries based on critical resources and capabilities needed in a decarbonising world. 

These initiatives will come under considerable scrutiny, however, if successful, they will serve a dual purpose of assisting with the net zero transformation and the provision of sought-after and highly-skilled jobs.

  • Changes to HECS

The government has committed to adjusting HECS repayments. Instead of climbing with CPI, HECS debts will rise at either the WPI or CPI, whichever is lower. This ensures debts won’t climb faster than wages. McKell’s pre-budget submission recommended making HECS repayments fairer. 

What we think needs more work
  • Commonwealth rent assistance

The government increased CRA by 10 per cent, after having done so by 15 per cent the the previous budget. CRA is a direct way to help those being impacted most severely by rental increases. The increase in CRA is welcome, but pressure will remain on the government to help renters more as housing shortages, and heightened rents, remain in place. 

  • Further support for those not in work

Australia remains among the least generous when it comes to unemployment benefits. While the headline rate of JobSeeker is often complemented by other supports, like the CRA, there is no denying the dismal state of unemployment support. The budget didn’t address this fundamental problem, while at the same time forecasting a considerable increase in the unemployment rate to 4.5 per cent in coming years. 

  • Placement payments

About 73,000 students will get $319.50 per week for job placements, helping teaching, nursing, midwifery, and social work students avoid “placement poverty” and making these courses more appealing. 

However, there’s a desperate need for more qualified allied health workers. Long waitlists make early intervention impossible and are increasing NDIS costs. Paid placements would allow more workers to qualify sooner. For instance, occupational therapy students study for four years, a year longer than most students benefiting from this payment. 

Besides regular placements in the first three years, OT students need 12-16 weeks of practical training in their final year. This can be tough for students living away from home, mature-aged, or parents.

  • Limited increases in social payments

Australia’s Jobseeker payment is still only $374 a week, less than half the minimum wage ($882) and drives people out of work into poverty. Getting a job is near impossible for someone who cannot afford a haircut and would have to choose between a meal and a train ticket to a job interview. As Ross Gittens points out, this is $170 a week less than the aged pension, because of a Howard-era decision to index unemployment benefits to the consumer price index, while indexing the pension to wage growth. 

While there was a modest rise in rent assistance, the $70 figure in media releases is actually backdated to May 2022. In reality, a 10 per cent rent assistance increase sits at a maximum of about $19 per fortnight for singles and couples.

  • Tax relief for multiple job holders 

People with multiple jobs are often young, female, living in regional areas, and work in lower-paying industries. Many of them fall into the lowest tax bracket, and their second job may be temporary or seasonal, like holiday or harvesting work. People working second jobs shold have the option for a ‘pre-emptive’ return on extra tax withheld, above what’s expected for their tax bracket, in the middle of the financial year. McKell explained this challenge in its pre-budget submission.

  • Support for apprentices

The boost in funding more workers through free TAFE and VET programs is welcome, given the workforce pressures that are driving up construction costs and impacting housing delivery. 

However, this does not address the rising number of apprentices and trainees who drop-out before completion, which costs more long-term. 

  • Return of student unionism

Compulsory student unionism was banned by the Howard Government in the mid-2000s, but is set to return. 

While this was a recommendation made as part of the Australian Universities Accord, released earlier this year, the government’s plan was revealed in the budget papers, rather than through a pre-budget announcement or even a media release. The National Union of Students welcomed the move, but described the budget as a mixed bag for students, without a rise in Youth Allowance and other student support payments. 


Ed Cavanough & Rebecca Thistleton


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