NICK BRUINING: Families hoping for major cost-of-living changes in Federal Budget face major headache

Australian families were hoping the Government was going to come out all guns blazing and take aim at cost-of-living pressures.

What eventuated was more like being hit by a soggy piece of lettuce that’s been left out of the fridge all night.

The changes are modest and might be easily missed, and there’s quite a bit missing, particularly for seniors.

As usual, much of Treasurer Jim Chalmers’ Budget speech covered programs and expenditure already announced.

Tax rates

While Jim’s touting the fact that the surprise tax cuts will bring extra money into all households, a 1 per cent reduction in the lowest marginal tax rate from 16 per cent to 15 per cent translates to just $5.15 per week.

The cuts are undoubtedly meant to stem the chorus of complaints about bracket creep. Bracket creep is where you end up paying more in tax because you’ve been lucky enough to get a pay rise.

For example, someone now earning $100,000 who perhaps last year earned $90,000 per year, is paying an extra $62 per week in tax.

Perhaps someone should tell Jim Chalmers that five bucks per week is bugger all.

The other problem is that this tax reduction is over a year away, kicking off in July 2026 with a similar reduction in 2027.

Mortgage arrears data and a sharp increase in people seeking help from financial counsellors tells us that the problems are here and now – and severe.

Debts

Younger voters with a student debt will be happy with the changes to HECS/HELP announced last November.

Reduced debts, payments and a higher kick-in threshold should help when they’re fronting up to their local bank manager, hoping to buy their first home.

Less debt on the ledger means they’ll be in a slightly stronger position to borrow money.

The yet-to-be seen Help-To-Buy scheme announced previously, gets an increase to the available house price limits depending on where you live. The Perth house price cap has been reset to $850,000 and regional WA, $600,0000.

The deal here is that the Government becomes a co-owner, stumping up either 30 per cent for established homes or 40 per cent for new builds. Over time and while paying off the mortgage, you can buy out the Government’s share if you choose to.

Applications for the scheme are supposed to open later in the year but are reportedly still subject to legislative changes.

Of greater significance might be the pressure on interest rates.

While most of us understandably glaze over when treasurers start muttering “billions here and billions there”, don’t underestimate the impact of the “D” word - deficit.

It’s a complex set of cogs and levers, but moving into a hefty deficit combined with the uncertainty of a world dealing with Trumponomics, could put Australia’s prized AAA credit rating under threat.

While worrying about Australia’s credit rating might seem way above your pay-grade, the fact is that a downgrade in our international credit rating would translate to increasing borrowing costs across the board.

Including mortgages.

Super

Superannuation has been left alone for now, although the Government has made it quite clear that the new 15 per cent tax on super balances above $3 million is still alive, even though it was knocked back by the Senate crossbenchers last year.

Controversially, the $3m is not indexed and, more significantly, the tax is payable by the individual, simply because of an increased account balance.

Traditionally, we only pay tax when the money’s in our hand through the sale of an asset or receipt of income. This new tax applies simply because your super fund did well.

Make no mistake, the $4 trillion superannuation honey-pot, expected to hit $5t in a couple of years, is just too tempting for any government to leave alone.

No matter who gets the keys to the Lodge in the next few weeks, increasing the tax on superannuation is sure to become a major issue in the years ahead.

Seniors

Particularly noticeable was the complete absence of anything to do specifically with seniors and retirees. Budget papers traditionally have a section dedicated to that important cohort of eligible voters.

Bill Shorten discovered the power of the silver-haired devils when he tried to mess with franking credit refunds a while ago.

Retirees on a part-pension because of Centrelink’s means testing system should take special note that this Budget made no mention of any changes to the “deeming rate freeze”.

Almost the last remaining COVID-19 concession, this sees people on a Centrelink income payment like an age pension or Jobseeker having the deemed income on financial investments, earning at the most, 2.25 per cent per annum.

While your $500,000 parked in a bank account paying 5 per cent translates to income of $25,000 per annum in your hand, Centrelink’s current deeming rate system means that at most, only $12,500 of income is being counted.

The actual income generated by financial investments is ignored.

This freeze is scheduled to end on July 1, conveniently after the election.

A return to more “normal” deeming rates will affect tens of thousands of income-tested Centrelink customers and not in a good way. A higher deemed income will translate to a lower payment from Centrelink.

Health

The other big drain on the weekly budget for many, surrounds health costs.

A $90 co-payment to see your local GP each time brings back fond and distant memories. A time when you could stump-up to your local surgery and walk-out an hour later, having simply waved the ubiquitous green Medicare card at the receptionist.

Jim’s hoping those times will return with a particularly optimistic ambition of having nine out of 10 visits to your GP bulk-billed by the end of the decade.

Employment

If you’re thinking of changing jobs, there’s good news.

It’s finally come to the attention of the Government that a shopping-trolley collector who changes shopping centres, shouldn’t be restricted from collecting trollies at the new gig for a year, under “non-compete” clauses.

These are clauses in your employment contract that can result in you being sued if you leave that job to start another, similar role.

The Government tells us that three million workers are affected by these clauses and that works out to be more than 20 per cent of the Australian workforce. It seems like an overdue reform.

In terms of excitement and innovation, this pre-election Budget offers neither.

We’ll quickly move on now to watch the live-feed from the gates of Kirribilli House, starting Sunday morning.

Hopefully, the big, white, armour-plated BMW 7, bearing the C1 number plates will drive through the gate and we can get the election party started sooner rather than later.

But one thing’s almost certain.

If “The Don” delivers half of what he’s promising in the way of tariffs and realignments, we could be looking at a December mini-Budget or an interesting Budget next May.

That, by the way, is three years away from the next election.