Labor will deliver a $300 energy rebate to every Australian household as the $3.5bn centrepiece of a cost-of-living budget likely to reignite political debate about whether the Albanese government is doing enough to fight inflation.
The treasurer, Jim Chalmers, has revealed the federal budget’s second surplus in a row, of $9.3bn, chased by a $28.3bn deficit in 2024-25 due to a raft of “unavoidable” investments in government services and a $7.8bn cost-of-living package.
In what could be the last budget before the next election, the Treasury is forecasting a deficit of 1% of GDP in 2024-25 during the crucial period that the Reserve Bank must weigh whether to end the contractionary cycle of 13 interest rate rises.
Chalmers told reporters in Canberra that the government could “engage meaningfully” in the fight against inflation without “smashing the economy” at a time when growth is projected to be “sluggish”. Australia’s economy is projected to grow by just 1.75% this year rising to 2% next financial year, while unemployment is projected to rise from 4% to 4.5%.
In addition to energy rebates and the revamp of stage-three income tax cuts delivering taxpayers an average of $36 a week from July, the federal government will spend $1.9bn on a 10% increase in the maximum rate of rent assistance and $3bn on a pharmacy package to include freezing Pharmaceutical Benefits Scheme medicine co-payments at $31.60 until 2026.
Despite opposition support for the budget’s cost-of-living measures, the un-means tested $300 payment was panned by welfare advocates, and independent senators Jacqui Lambie and David Pocock.
Chalmers told reporters the cost-of-living package was a mixture of “broad” and “targeted” measures. The government had made energy rebates universal because “people are under cost-of-living pressure up and down the income scale”, he said.
In his speech, Chalmers said the Treasury estimated these measures would take 0.75% off inflation this year and 0.5% next year. Earlier he told reporters the government was “not spraying big cheques to people” but rather providing credits through energy retailers of $75 a quarter on household bills.
“Just as every Australian taxpayer will get a tax cut, every Australian household will get energy price relief,” he told parliament, noting that 1 million small businesses will also benefit from a $325 rebate.
“Keeping the lights on for families and businesses – and keeping downward pressure on inflation.”
Earlier, Chalmers revealed a new national target for eight out of 10 workers to have a tertiary qualification by 2050, and a total of $1.6bn in new spending on tertiary education.
That includes $500m for priority skills and the $1.1bn cost of the Universities Accord response, with $427m for new practical placement payments, $240m to limit growth of student loans and $350m for fee-free uni preparation courses.
The government is spending $2.2bn on aged care and $2.8bn on improving Services Australia, including $1.8bn for hiring frontline staff to reduce backlogs. With the government under pressure over its management of borders, it gave a further $100m to the Department of Home Affairs, and $124m to Australian Border Force for civil maritime security.
These investments are part of what the finance minister, Katy Gallagher, characterised as “unavoidable” spending, which the government says constitute two-thirds of the $25bn of net decisions taken in this budget, with the remaining third representing the cost-of-living package.
The budget also contains a contingency reserve which grows from $14.7bn in 2025-26 to $26.5bn in 2027-28.
Chalmers told reporters in Canberra this was a “responsible” provision for “imminent policy decisions which are not ready to be costed yet”, including aged care and early childhood education pay cases and negotiations with states on schools and hospital funding.
Over 10 years the Albanese government will invest $22.7bn in its Future Made in Australia plan, which the Coalition cited before the budget as one of the areas it may seek to make savings.
The plan includes $13.7bn in production tax incentives for green hydrogen and processed critical minerals and a $1.7bn innovation fund for priority sectors including green metals and “low carbon fuels”.
Chalmers said the Future Made in Australia Act would set conditions “to ensure investors benefiting from our incentives are supporting their people and communities” – including that industries created “secure, well-paid jobs for our people”.
On Tuesday evening the shadow treasurer, Angus Taylor, told ABC TV the opposition “cannot support billions in handouts to billionaires”, rejecting the production tax credits.
He described cost-of-living measures as “a Band-Aid on a bullet wound” but accepted the Coalition would support them.
“You should be dealing with the source of the problem when inflation is raging,” Taylor said. “The government isn’t because [the budget] is designed for election and not a cost-of-living crisis.”
The government says the budget contains $6.2bn in new money for a total of $32bn over 10 years for housing, although it has come under fire from the Greens because much of this ($9.3bn) is extending the national agreement on social housing and homelessness with the states.
The Greens leader, Adam Bandt, also labelled cost-of-living relief “Band-Aid measures” and argued that three-quarters of renters will miss out because they don’t receive rent assistance. Bandt told ABC TV the minor party would support “growing the green metal sector”.
The budget includes $27.9bn of savings or revenue measures over four years, the biggest of which is $14.1bn in reduced growth in national disability insurance scheme spending. It includes $2.5bn in tax receipt measures including cracking down on the shadow economy and tax avoidance; and $600m tightening capital gains tax rules for foreign residents.
