It became evident over the last few months that the cost of living was going to be the big ticket item of this year’s federal budget. Australians are continuing to feel the pressure whether that be at the bowser, the supermarket or when they look at energy bills.
So in the absence of real wage growth what measures are the government looking to put into place?
• A halving petrol and diesel excise for six months
• $420 cost of living tax offset for low-and middle-income earners, and a $250 cost of living payment for pensioners, welfare recipients, veterans and concession card holders. This is expected to flow to more than 10 million Australians.
• Individuals already receiving the low and middle income tax offset will receive up to $1500 and couples up to $3000 from July 1.
• A one-off $250 payment for 6 million Australians including pensioners, carers, veterans, job seekers, eligible self-funded retirees and concession cardholders.
The Treasurer summed up the spending by touting that “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.”
While cash-handouts are now something to be expected in a pre-election budget, the halving of the fuel excise will have a real immediate impact for Australians. We can expect to save around 22c a litre every time we fill up the car. This is about $30 a week for families with two cars, working out to be around $700 over the next six months. The cut is expected to flow over the next two weeks and the ACCC is on hand to monitor as concerns have been voiced that retailers will not pass this on these saviours.
While these measures will provide relief for households in the short term, they are not measures of fiscal reform and won’t solve long term structural issues in the Australian economy. Further to this, many of the pressures Australian’s are feeling are due to volatile commodity prices and compromised supply chains, and these are largely out the Government’s control, while it is the RBA that calls the shots on monetary policy so the government may struggle to curb inflation in the short term and an argument could be made that cash hand out could add fuel to the fire. So while these measures are likely to be well received by voters heading into an election, the government will be hoping that with a falling unemployment rate and rising inflation that real wage growth will resume before the end of the year.
Brett Arnol is Founder and Joint Head of Viridian Private Wealth at Viridian Advisory.
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