Australians to get Tax Cuts and Cash Handouts to Relieve Cost of Living

Treasurer Josh Frydenberg speaks to journalists at a press conference before delivering his 2022 Budget speech at Parliament House in Canberra, Australia, on March 29, 2022. (AAP Image/Mick Tsikas)

Ten million Australians will receive a one-off $420 (US$315) tax offset to assist with the ballooning cost of living, while six million welfare recipients will get a $250 cash payment in the 2022-23 federal budget.

Treasurer Josh Frydenberg unveiled the details of the anticipated “temporary, targeted, and responsible” cost of living relief package on Tuesday evening.

The tax offset will leave low and middle-income earners $3,000 (US$2,250) better off in a dual-income household or $1,500 better off for a single income household.

The fuel excise tax will also be cut in half, down 22 cents a litre for the next six months. This is expected to save a family with two cars filling up once a week around $30 a week, or $700 in total.

“Events abroad are pushing up the cost of living at home. Higher fuel, food and shipping costs are increasing inflation and stretching household budgets,” Frydenberg told parliament. “This cut in fuel excise, which takes effect from midnight tonight, will flow through to the bowser over the next two weeks.”

“The competition watchdog will monitor retailers to make sure these savings are passed on in full.”

The Australian competition watchdog warned consumers that the major influencing factor of fuel prices is the international price of petrol, which is something outside of the country’s control.

“Any change in these factors would mean that the change in petrol prices may differ at certain times from the reduction in excise of 22 cents per litre,” the watchdog said.

The government also allocated $3 billion over the next five years for cheaper medicines for 2.4 million Australians.

“This budget’s new cost of living package is responsible and targeted, delivering cheaper fuel, cheaper medicines and putting more money in the pockets of millions of Australians,” Frydenberg said.

The new tax offsets are estimated to cost $4.1 billion (US$3 billion) while the cash payment will cost about $1.5 billion.

The budget forecast sees the deficit for 2022-23 at $78 billion (US$58.4 billion), or 3.4 percent of GDP, which is about $100 billion (US$75 billion) better off compared to last year.

As a share of the economy, the net debt will peak at 33.1 percent on June 30, 2026.

“[This is] the largest and fastest improvement to the budget bottom line in over 70 years,” Frydenberg said.

As pandemic economic assistance programs end, the unwinding of government spending on emergency support has significantly lessened the burden on the country’s debt levels.

At the same time, Australia’s unemployment rate is heading towards a 50-year low. The treasurer revealed that a record 220,000 Australians were now in a trade apprenticeship, the highest level since records began in 1963.

“More people in work, fewer on welfare,” Frydenberg said. “Repairing the budget without increasing taxes.”

However, AMP Capital Chief Economist Shane Oliver noted that the reliance on a growing economy to reduce the budget deficit was “unlikely to reduce debt quickly enough and is dependent on interest rates remaining low relative to economic growth” and would be highly vulnerable if anything cut the commodity boom short.

The 2022-2023 Budget books are seen at Parliament House in Canberra, Australia, on March 29, 2022. (AAP Image/Mick Tsikas)

Along with the cost of living relief, budget spending on national security is also a major highlight as geopolitical tensions remain high, with the defence budget being boosted to over 2 percent of GDP.

The government is making major investments into building new submarine bases, surveillance systems, helicopters, tanks and has also planned to permanently increase the number of defence force personnel by 30 percent.

It also contains a $2.1 billion package to support Australian women, focused on women’s safety, economic security and leadership, and health and wellbeing.

Small businesses will also receive $1.6 billion in tax relief to support businesses going digital, training new staff and upskill existing staff.

The Australian Chamber of Commerce and Industry welcomed the significant funding for skilled workers amid the “worst labour and skills shortage in 48 years” but noted that businesses were left with a long road to recovery.

The Australian Council of Trade Unions President Michele O’Neil said the budget failed to address the falling levels of real wage growth.

The Labor opposition has called the budget a pre-election “cash splash” and “ploy” ahead of a looming federal election.

“Scott Morrison is only pretending to care about the costs of living because he has to call an election in the next fortnight, and he’s running out of time,” Shadow Treasurer Jim Chalmers said. “While inflation has risen to 4.25 percent, real wages are going backwards 1.5 percent this year—more than the 0.25 percent the last budget anticipated.”

The prime minister called the budget a “shield” against the cost of living pressures that Australians were dealing with, caused by the war in Europe.

“When people needed help [during the pandemic], we were there, and we want to make sure that people are coming through this latest shock, one of the biggest energy shocks we’ve seen in a generation, by delivering real cost of living relief right now through tax cuts, through cutting excise,” Morrison told the ABC.