Charged with the unenviable task of improving growth without fuelling inflation amidst weak and uncertain domestic and global economic outlooks, Treasurer Jim Chalmers has delivered a relatively measured Federal Budget. 

The 2024-25 Budget, which seeks to secure Australia’s future economic prosperity by providing assistance to Australians with cost-of-living pressures as well as delivering on the Federal Government’s Future Made in Australia plan, includes the following headline measures:

• Investing in a Future Made in Australia: $22.7b of investment over the next decade to build a Future Made in Australia, which is a plan to maximise the economic and industrial benefits of the net zero transformation.
• Cost-of-living relief measures : $300 energy relief for all Australian households and $325 for eligible small businesses, the waiving of $3bn in student debt through amendments to the approach to HECS indexation, increasing the maximum Commonwealth Rent Assistance amount, and cheaper medicines.
• Building more homes for Australians, including new housing investment of $6.2bn.;
• Significant investment in Medicare.  

Few measures were announced from a tax perspective, although the potential impact of measures to broaden the Capital Gains Tax (CGT) net for foreign residents and penalise Significant Global Entity (SGE) taxpayers who mischaracterise or undervalue royalty payments, should not be underestimated.

It is pleasing to see production tax incentives for green hydrogen and the processing and refining of critical minerals, although the detail of these measures remains to be seen. The extension of the increased Instant Asset Write-Off is also welcome, subject to its potential to inadvertently stoke inflation.

Also welcome is the increased funding for the Australian Taxation Office, particularly the extension of the Tax Avoidance Taskforce and other compliance initiatives, all of which is forecast to yield an increase in receipts.

Whilst the forecast $9.3bn surplus— the first back-to-back surplus in almost two decades—is certainly welcome, the significant deficits forecast thereafter, described as being fuelled substantially by what the Treasurer called  ‘unavoidable spending’, suggest that tough decisions may need to be made by future governments.

Whether the 2024-25 Federal Budget will achieve its dual aims of alleviating cost-of-living pressures while securing Australia’s longer-term economic prosperity remains to be seen, as does its potential impact on inflation. 
 

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