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How the 2024 Federal Budget will impact the investment environment

Published 15/05/2024, 03:40 pm
© Reuters.  How the 2024 Federal Budget will impact the investment environment
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The Australian Shareholders Association released a statement about the Federal Budget, stating the 2024 Budget should alert shareholders and investors to changes in taxation policies, investment incentives and economic forecasts, which could impact the stock market and individual portfolios.

The Federal Budget presented a surplus in 2023-24 and aims to lower inflation below 3% by year-end to ease interest rates and cost-of-living pressures for pensioners, families and students.

However, the budget has downgraded Australia's gross domestic product (GDP) growth forecast from 2.25% to 2%.

The following is a breakdown of the ASA's statement.

Short-term cost-of-living relief

Tax cuts

The government plans to provide economic relief through stage 3 tax cuts, set to commence on July 1, 2024. From 2024-25, the average tax cut will be A$1,888.

Energy relief

A one-time A$300 energy rebate will be provided to every household. Additionally, A$27.7 million will be invested to integrate consumer energy, including batteries and solar, into the grid.

Medicines

The prices of medicines covered under the Pharmaceutical Benefits Scheme co-payments will be frozen until 2026 for the general population and until 2030 for pensioners and concession cardholders.

Pensioners will benefit by around A$3,300 after the government extends a freeze on increases to the deeming rate for another twelve months.

Sector impact

Renewable energy and infrastructure

The 'Future Made in Australia' policy aims to bolster national and economic security by promoting self-reliance in critical industries such as manufacturing and renewable energy.

A$22.7 billion will be allocated over 10 years for new tax incentives for critical minerals and green hydrogen initiatives.

The government has pledged A$1.5 billion to support clean energy technologies, including A$1 billion for the Solar Sunshot initiative and A$523.2 million for the Battery Breakthrough Initiative. Additionally, A$466 million will advance Australia's quantum computing capabilities.

Food and grocery

A 12-month inquiry will investigate pricing and competition in the supermarket sector.

CHOICE will receive funding for three years to produce quarterly price comparison reports for consumers.

Housing

In response to the housing crisis, the government pledged A$12.3 billion in housing programs to address rising rents and prices. This includes A$4.3 billion for developers, tradies and social housing, and A$1 billion for state governments to build infrastructure for new homes.

More than A$90 million will boost the construction sector's skilled workforce and create 15,000 fee-free TAFE places and 5,000 pre-apprenticeships.

A five-year deal for social housing will improve house repairs and crisis support.

Aged care

Following recommendations from the Royal Commission into Aged Care Quality and Safety, the government will provide A$2.2 billion for critical aged care reforms, including an A$531.4 million investment in Home Care packages to reduce wait times. Aged care workers will also receive increased award wages.

Other key announcements

Parental leave

From July 1, 2025, superannuation will be paid to parents taking up to 20 weeks of publicly funded paid parental leave. This aims to close the retirement savings gap between women and men and encourages women to return to the workforce. A$1.1 billion has been allocated for this initiative.

Domestic violence support

Declaring domestic violence a national emergency, the government will provide emergency payments of up to A$5,000 to victims as part of a A$925 million assistance package.

Student support

Students will see a reduction in their Higher Education Contribution Scheme (HECS) debt. Those studying teaching, medicine, and social work will receive a A$320 weekly payment during compulsory work placements to counter placement poverty.

Read more on Proactive Investors AU

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