The Federal Budget March 2022: What you need to know
MyState Limited Managing Director and CEO – Brett Morgan
“At a macro level, the Budget did show how the economy has rebounded better than expected, and the budget bottom line recovered as a result. However, it was a typical election budget with the promise of $17.9 billion of infrastructure programs – much of it in key regional areas. At an individual level several things like the six-month cut in fuel excise, which could save a typical two car family $700 in that period. Further, a one-off $420 lift in tax refunds and $250 one-off welfare payments will assist with immediate cost-of-living pressures being felt by many people.”
“The expansion of the Home Guarantee Scheme to 50,000 places a year for 3 years should encourage construction in regional areas. The extension of the Family Home Guarantee scheme to help single parents either buy their first house or re-enter the property market means eligible people only need a 2 per cent deposit to buy a home – and don’t need to pay lenders mortgage insurance. However, there are challenges as interest rates are likely to rise in the next few months just as these tax one-off’s and other previous initiatives such as the low- to middle-income tax offset, which has given people an additional tax refund to help them through the pandemic, wear off. And due to inflationary pressures real wages are not forecast to grow until late this year at the earliest.”
This year’s federal budget confirmed a $78 billion deficit for the 2021/2022 financial year.
This is a material reduction to the December 2021 mid-year review, which forecast an almost $1 trillion deficit by 2026. This year’s budget precludes an expected fall in the unemployment rate to 3.75 per cent, which puts pressure on wages.
This budget includes $639.90 million in new infrastructure projects across Tasmania to improve the road and rail network across the state.
| Project name | Contribution ($m) | Location |
|---|---|---|
| Tasmanian Roads Package - Northern Roads Package - Stage 2 | 336.0 | North East Tasmania |
| Great Eastern Drive Tourism Support - additional packages | 100.0 | East Coast Tasmania |
| Tasmanian Freight Rail Revitalisation Program - Tranche 4 | 96.0 | Various across Tasmania |
| Tasmanian Roads Package - Tasman Highway Sideling Upgrade - Stage 2 | 56.0 | North East Tasmania |
| Bell Bay Line - Reconnection to the Bell Bay Wharf | 24.0 | North East Tasmania |
| Melba Line Bulk Minerals Rail Hub | 14.4 | North West Tasmania |
| Hobart - Northern Transit Corridor Solution | 13.5 | Hobart to Glenorchy, southern Tasmania |
Source: Media release, Prime Minister of Australia, 28/03/22, accessed 29/03/22, https://www.pm.gov.au/media/17-9-billion-boost-infrastructure-across-australia
New incentives to support cost of living
The federal government was keen to ease the inflation burden for the community in this year’s budget, given the Consumer Price Index (CPI) was up 3.5 per cent for the year to 31 December 2021.
CPI is calculated by the Australian Bureau of Statistics (ABS) and measures how the cost of metro household expenses changes over time.
So from 1 July this year, low and middle income earners will receive a one-off cash payment. The part for the federal government in this initiative is addressing the rising cost of living without overstimulating demand that would further lift prices.
A temporary halving of the 44c/L fuel excise will also help the household hip pocket.
Investing in our future
The Coalition government announced a range of new spending programs to drive the national economy. On the back of an already substantial commitment to building our roads, rails, ports, energy infrastructure and telecommunications, this year’s budget includes $17.9 billion in new infrastructure spending. The federal government has also apportioned substantial funds for rural and regional Australia, including $480 million for the NBN outside cities.
Support for new home buyers and others
This year’s federal budget funds an increase to 50,000 places in the Home Guarantee Scheme.
This program allows first home buyers to purchase a new or existing home with a five per cent deposit. It saves successful applicants from having to pay lenders’ mortgage insurance. Of the 50,000 places, 35,000 will go towards the First Home Guarantee, while 10,000 places (the new Regional Home Guarantee) are for people buying their first abode in rural and regional areas. The remaining 5,000 places (the Family Home Guarantee) are for single parents looking to get back into the property market, which they can do under this scheme with a deposit of just two per cent.
Measures for older Australians extended
The Coalition has outlined a number of schemes to help the cash flow of older Australians. The super drawdown rate for self-funded retirees was halved in the 2020/2021 budget. For the earnings on their super balance to be tax-free, eligible superannuants aged between 65 and 74 must withdraw 2.5 per cent of their account balance every year.
Additionally, the pension was indexed up earlier this month to $987.60 for singles and $1488.80 a couple a fortnight.
