The recent Federal Budget made few changes that will affect savers, investors or retirees that weren’t already known. The tax cuts commencing in July were legislated several years ago and have recently been modified to appeal more to the masses.

Stages 1 and 2 tax cuts for low and middle earners have already been fully implemented. The Stage 3 cuts for high earners have now been reduced to give extra cuts to lower earners.

The limits on superannuation contributions will index up. From July working people under age 75 will be able to make tax deductible super contributions of up to $30,000 annually, including employer Super Guarantee amounts. The limit on non-deductible contributions will be $120,000.

One significant new announcement in the Budget was the decision to continue the freeze on the deeming rates used in the Age Pension Income Test at the current very low levels. The majority of retirees outside Canberra have their pensions limited by the Assets Test so won’t be affected.

A plan to change the Aged Care rules to require those who are better off to pay more wasn’t finalised for this Budget but may be from January or July 2025. 

The Budget demonstrated that Dr Jim Chalmers has a Doctorate in Politics, not in Economics. It was designed with politics the priority, not economics. It includes lots of spending designed to appeal to voters, and many future deficits despite higher tax and mining royalty collections.

The electricity bill subsidy is designed for political appeal, as is the increase in the Centrelink Rent Allowance and the deeming rate decision. The energy subsidy will temporarily reduce the CPI, making inflation appear lower than it is, but that is unlikely to trick the RBA into cutting interest rates.

The Australian economy is not in recession and does not need stimulus, but these decisions will give people more cash to spend, so will be inflationary. So will the subsidies for energy transition projects and the attempt to restart manufacturing in our high labour cost economy.

The Budget did nothing to boost productivity, output per worker, which is where real (above inflation) income increases come from. It did nothing to speed up new home building, such as quicker approvals, training more tradespeople, or reducing building labour costs. 

There was very little attempt to slow the growth of the NDIS. At around $42 billion it now costs Australian taxpayers more than Medicare, and is growing much faster. There was nothing new in the Budget to help solve the terrible problems in remote aboriginal communities. It should have done more.