Australian Budget 2024 - Winners & Losers

On Tuesday, May 14th, Treasurer Dr. Jim Chalmers presented his third Federal Budget, delivering a mix of economic highs and lows for Australians. Here’s an in-depth look at the key takeaways and their implications for various groups, investors, and financial markets.

Firstly, let’s start with some of the key headlines:

  • Surplus Achieved: The Budget revealed a surprising $9.3 billion surplus, far exceeding the initial forecast of a $1.1 billion deficit. However, a $28.8 billion deficit is projected for next year, influenced by the upcoming election.
  • Economic Growth: The economy is expected to grow by 2% in 2024/25 and 2.3% in 2025/26.
  • Key Assumptions: The Government anticipates net immigration will be 395,000 this financial year, reducing to 260,000 by 2024/25. They also project iron ore prices to stabilize at US$60/tonne, down from current levels above US$100, potentially improving the deficit outlook.

Winners of the 2024 Federal Budget

  • Lower Income Renters: A 10% increase in rent assistance provides essential relief. For instance, with the average rent at $590 per fortnight and rental support at $158, this boost eases financial strain from rising rents.
  • Solar Panel Manufacturers: The government is allocating $1.5 billion in subsidies to enhance solar panel manufacturing, promoting a greener future and supporting the industry.
  • Hydrogen Production: Starting from 2027/28, a new tax incentive will offer $2 per kilogram for locally produced hydrogen, positioning Australia as a leader in renewable energy.
  • Parents: From July 2025, superannuation will be paid during paid parental leave, mainly benefiting women and addressing the superannuation gender gap.
  • Small Businesses: Small businesses will receive a $325 rebate on electricity costs and can utilise an instant asset write-off up to $20,000 for assets installed and used by June 2025, aiding in expense management and growth investment.
  • Pensioners and PBS Medicine Users: A freeze on PBS costs for a year and a five-year freeze on co-payments for pensioners and concession card holders will help manage healthcare costs.
  • Student Debt Holders: The indexation on student debt will be reduced to the lower of CPI or wage inflation, providing average savings of $1,200.
  • Tax Payers: Stage 3 tax cuts will proceed as planned, with those earning $200,000 or more receiving a $4,529 cut.
  • Savers: With inflation unlikely to decline in the short term, higher interest rates will benefit those with term deposits and cash in the bank.
  • Social Housing Recipients: A $432.1 million investment in social housing and homelessness services aims to address affordable housing needs.
  • Households: The Energy Bill Relief Fund will provide a $300 rebate, offering relief from rising energy costs.

Losers of the 2024 Federal Budget

  • First Homebuyers: The Budget does not include significant changes to housing or gearing policies, leaving first homebuyers facing ongoing market challenges.
  • Higher Income Renters: There is no increase in rental allowance for higher-income renters, providing no relief from housing market pressures.
  • Scammers: The government is investing $67.5 million to combat online fraud and scams, aiming to protect Australians from digital threats.
  • International Students: Caps on international student placements at universities will be tied to the institutions' ability to build additional housing.
  • Australian Expats: Those hoping for a weaker Australian dollar may be disappointed as the Budget suggests no immediate cash rate cuts from the RBA, potentially strengthening the Australian dollar.
  • Mortgage Holders: With no imminent rate cuts, mortgage holders will not see immediate relief in their repayments.
  • Financial Advice Tax Deductibility: No improvements were made to the tax deductibility of financial advice, disappointing many who hoped for material benefits from such changes.

Overall Market Impact of the 2024 Federal Budget

For Australian expat investors, let’s explore how this year’s Budget could impact each of the major asset classes.

  • Cash and Term Deposits: Savers can continue to benefit from higher interest rates in the short term, maintaining attractive returns on cash and term deposits.
  • Bonds: The surplus announcement might ease pressure on bond yields, but projections of higher medium-term deficits result in a relatively neutral impact on bond yield dynamics.
  • Shares: Increased spending benefits retail shares, but higher interest rates could temper these gains. Renewable energy sectors like solar and hydrogen may see benefits from the Future Made in Australia (FMIA) initiatives.
  • Property: Housing measures in the Budget are unlikely to significantly alter home prices, which remain influenced by supply shortages and high interest rates. Modest home price growth is expected for the year.

The 2024 Budget presents a mix of significant benefits and missed opportunities, with varying impacts depending on individual circumstances. Keep an eye on these changes as they shape Australia's economic landscape in the coming years.

 

To Your Financial Success!

Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Planner with Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to Australian professionals in Singapore. Jarrad Brown is an Authorised Representative of Global Financial Consultants Pte Ltd - No: 200305462G | MAS License No: FA100035-3

To learn more about how we may be able to help you, please contact us:

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General Information Only: The information on this site is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision.

*Please note that Jarrad Brown is not a tax agent or accountant and none of the content outlined here should be taken as personal advice. You should consult your tax agent and financial adviser to review your current personal finances and financial goals to consider whether this strategy is appropriate for you.

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