Budget 2022-23

Articles 31/03/2022
Budget 2022-23

The Australian economy is recovering strongly. Employment levels are at record highs. The outlook has strengthened and output is now expected to have already exceeded its pre-pandemic level. Budget forecasts a (relatively) more rosy outlook predicting ‘a sustained period of strong economic growth, low unemployment, and rising wages growth.’

These improved economic parameters has allowed the Government to smooth and reduce the net debt position by about $100 billion (compared to estimates in December 2021) to 33.1% of GDP by 2025-26 at the same time as providing key budget initiatives of providing direct financial support to offset rising living costs with more spending on infrastructure, defence, cybersecurity, Age Care and towards greater home affordability.

We are experiencing the first sustained period of unemployment below 5% since before the GFC and only the second time since the early 1970s. At the same time, inflation is expected to overshoot the central bank’s target in the near-term and climb to about 4.25% in 2021-22, squeezing real wage growth, before forecasts see it back within the RBA’s target range by 2023-24. Real GDP is forecast to grow by 1.25% in 2020-21, by 4.25% in 2021-22 and 2.5% in 2022-23.

To offset some increased cost of living pressures the government announced a temporary (6 months) 50% reduction in the fuel excise tax (22.1c/L), a $420 increase to the non-refundable, low and middle income tax offset (the 2021-22 year is the last year for this measure) and a $250 cost of living payment in April 2022 for eligible pensioners and welfare recipients (including those who hold a Commonwealth Seniors Health Card). The Paid Parental leave scheme was also tweaked to provide greater flexibility and broaden the base of eligibility.

Superannuation was left relatively untouched, other than the extension for a further 12 months of the 50% reduction in minimum pension payment drawdowns. The superannuation guarantee will increase to the legislated 10.5% from 1 July 2022.

Small business received some support. Modernisation to the PAYG instalment system means potential cash flow support by ensuring instalments reflect current period performance, as well as some additional deductions for training courses provided to employees and for assets supporting 'digital adoption'.

An additional $17.9 billion over ten years is being committed to road, rail and community infrastructure projects across Australia. An expansion of cyber and intelligence capabilities will be funded at a cost of $9.9 billion over 10 years. Extensive additional commitments have been made to defence capability, totalling $270 billion to 2029-30, to be met from existing provisions in the defence budget.

In response to the Royal Commission into Aged Care Quality and Safety, an additional $18.3 billion over five years was committed to Age Care. Funding was provided for:

  • 80,000 additional Home Care Packages over the next two years, enabling older Australians to remain at home for longer;
  • 200 more minutes of care time per day for older Australians; and
  • 33,800 new training places for aged care workers.

They also announced a new funding model and an increase in the Government’s Basic Daily Fee supplement by $10 per resident per day.

Additional support was provided to schemes to improve home affordability for first home buyers.

Should you have any questions please contact your Redwood team of advisers to discuss in further detail.

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