Federal Budget 2024: How this year's budget tackles the rising cost of living

Federal treasurer Jim Chalmers promised Tuesday’s budget would be aimed at helping Australians facing cost-of-living pressures without adding to inflation.

“The number one priority of this government and this budget is helping Australians with the cost of living,” he said in his budget speech to parliament on Tuesday.

From July 1, a typical Australian earning an average income will get a tax cut worth thousands of dollars, with the exact amount depending on how much they earn.

They’ll also benefit from a $300 energy bill rebate for every household.

There’s also targeted cost-of-living relief for renters, with an increase to rent assistance for Australians struggling with rising rents.

With inflation still high and housing affordability at its worst level in three decades, cost-of-living relief will be welcomed by homeowners, buyers, and renters alike.

Federal treasurer Jim Chalmers said people were still “under the pump” despite inflation coming down. Picture: Getty.

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Homebuyers are expected to particularly benefit from the revamped tax cuts in this year’s budget, with borrowing capacities for typical income earners expected to rise by tens of thousands of dollars.

Dr Chalmers said despite inflation coming down, people were still “under the pump”, and the budget was designed to bring inflation back to target sooner than previously expected.

“Treasury is now forecasting inflation could return to target earlier, perhaps even by the end of this year,” he said.

PropTrack senior economist Paul Ryan said the government was constrained by high inflation, which affected how much money they could directly give to households.

“There’s no outcome tonight that is going to alleviate all of people’s cost of living concerns,” he said.

“What they’re trying to do is set the country up for the most prosperous outcome moving forward.”

“Whether they’ve done enough will depend on peoples’ circumstances.”

Here are the measures in 2023-24 budget that address the rising cost of living, and how much you could stand to save.

Tax cuts for all taxpayers

Every taxpayer will get a tax cut from July 1 this year under the updated stage three tax cuts, saving typical taxpayers thousands of dollars per year.

“Our new tax cuts for middle Australia are the biggest part of the cost-of-living relief in this budget,” Dr Chalmers said.

Anyone who earns an income will get a tax cut, regardless of their income. The income threshold for higher rates of tax will be increased to $135,000, while the tax rates for incomes below $135,000 will be reduced.

Every taxpayer will get a tax cut, with a typical income earner paying thousands less in tax each year. Picture: Getty

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Based on treasury estimates, a person on the average wage of about $73,000 will get a tax cut of $1504. 

Those earning $45,000 get a $804 annual tax cut, while people earning $100,000 save $2179 and people earning $150,000 save $3729 per year.

Mr Ryan said the tax cuts and energy rebate in this year's budget would have a substantial impact for a typical family.

“The tax cuts are of a sufficient size that they will make quite a significant impact to household cashflow,” he said.

According to a NAB survey, 29% of people plan on using the extra money from tax cuts to offset the cost of living, while 22% intend to pay down debt. More than a third (36%) of people will add it to their savings, while 12% will invest their savings and 8% will splurge it on non-essentials.

Energy bill relief for households and businesses

Every household will receive a $300 energy rebate in the 2024-25 financial year.

The $300 credit will be automatically applied to electricity bills in quarterly instalments.

More than 10 million households will receive the rebate.

“Just as every Australian taxpayer will get a tax cut, every Australian household will get energy price relief,” Dr Chalmers said.

All households will receive a $300 rebate on their energy bills next financial year, automatically applied in quarterly instalments. Picture: Getty

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One million small businesses will get a slightly higher rebate of $325 off their electricity bills.

Electricity prices jumped about 20% this financial year, and while the pricing for 2023-24 isn’t yet finalised, the Australian Energy Regulator estimates most residential customers will have price reductions of up to about 7%, while some will have modest increases of less than 3%. 

The rebates are expected to cost the government $3.5 billion.

Increase to rent assistance

Renters struggling with soaring prices are set to receive relief through increased rental assistance payments.

The maximum rate of Commonwealth Rental Assistance will increase by 10% from 20 September 2024, following on from the 15% increase to rent assistance in last year’s budget.

This takes maximum rates of rent assistance 40% higher than May 2022, and will cost the government $1.9 billion over the five years from the 2023-24 financial year.

The maximum rate of Commonwealth Rent Assistance will be increased by 10%, helping renters struggling with record-high rental costs. Picture: NCA NewsWire/ Flavio Brancaleone

Rent assistance is an income supplement that helps people on income support payments cover the cost of rental housing.

Rental prices have soared over the past few years, increasing by 42.9% in the four years since the pandemic onset, according to PropTrack data.

Rents are up 9.1% compared to a year ago, and rental affordability has hit its worst level in at least 17 years, according to the PropTrack Rental Affordability Index.

The rental market has tightened significantly over the past few years, with the rental vacancy rate sitting at just 1.2% in April amid an extreme shortage of available rental properties, which has driven up prices.

Mr Ryan said the increase to assistance would make a big difference to people in need.

"It’s reasonably well targeted, and those people that get it really need it," he said. "These people are generally paying a large portion of their income on rent."

Student debt relief

More than three million Australians will see their student debt reduce, with retroactive changes to the rate of indexation applied to student loans such as the Higher Education Loan Program (HELP).

The indexation rate on student debt balances will be capped at the lower of the Consumer Price Index (CPI) or the Wage Price Index (WPI), meaning balances won’t grow faster than wages.

This will reverse last year’s surge in student debt balances off the back of surging inflation.

Dr Chalmers said spikes in inflation have exposed a “flaw in the system” and put young people under unfair pressure.

Relief from student debt is in sight for millions of Australian students. Picture: Getty

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“We are fixing that and changing it so it won’t happen again,” he said.

Debt relief will be backdated to all HELP, VET Student Loan, Australian Apprenticeship Support Loan and other student support loan accounts that existed on 1 June 2023.

Mortgage Choice broker James Algar said the reduction to student debt wouldn’t meaningfully increase borrowing capacities for homebuyers with student debt, but could allow people to pay off their loans sooner, which would have a bigger impact.

“In the majority of cases, most people’s borrowing power dramatically improves if they’re able to clear their student debt in full prior to applying for a mortgage,” he said.

Age pension and welfare adjustments

Pensioners and welfare recipients will benefit from an extension of the freeze on deeming rates, in place since 2022.

Deeming rates are used to estimate how much income people earn from financial assets, such as savings accounts, which influences means tests for the age pension, Jobseeker and parenting payments.

Deeming rates will be frozen until 30 June 2025, which is expected to benefit about 876,000 income support recipients, including 450,000 age pensioners.