FEDERAL BUDGET 2023-24 – STRONGER FOUNDATIONS FOR A BETTER FUTURE

Stronger foundations for a better future.

This evening, the Albanese Government delivered Labor’s second Federal Budget since assuming office, with the promise to build a stronger economy and a fairer society.

This Budget is built on five pillars: cost-of-living relief, historical investment in Medicare and the care economy, breaking down barriers of disadvantage, laying the foundation for growth and strengthening the Budget bottom line.

The Treasurer, the Hon Dr Jim Chalmers MP’s 2023 Federal Budget Speech stressed that the Albanese Government’s ‘responsible economic management’ has led to a stronger fiscal foundation.

Treasurer Chalmers cited $17.8 billion in savings and redirected spending, the first Federal Budget surplus forecasted in 15 years, and lower deficits across the forward years compared to recent Budgets, leading to a $125.9 billion improvement over 5 years.

Nexus APAC has identified critical budget items outlined in the Federal Budget Papers. This briefing divides its analysis by key portfolio areas, including Health and Aged Care, Defence, Industry, Energy, Climate Change, Social Services, Indigenous Australians, and Treasury.

Health and Aged Care

The Government has announced it will spend $101.0 billion on health and $36.0 billion on aged care in 2023-24. As anticipated, key items in the Budget include strengthening Medicare, lowering out-of-pocket health costs, and investing in the care economy:

• $5.7 billion over 5 years as an initial investment to strengthen Medicare in response to the Strengthening Medicare Taskforce Report. This includes $3.5 billion to triple bulk billing incentives for GP consultations.
• $1.7 billion over 4 years from 2023–24 from health and aged care programs which will be reinvested in new or expanded health and aged care services.
• $449.4 million over 5 years from 2022–23and the delivery of efficiencies of $74.1 million over 4 years from 2023–24 for new and amended listings on the National Immunisation Program (NIP).
• $2.2 billion over 5 years for new and amended listings on the Pharmaceutical Benefits Scheme (PBS), the Repatriation Pharmaceutical Benefits Scheme, the Life-Saving Drugs Program, the National Epidermolysis Bullosa Dressing Scheme and the Stoma Appliance Scheme.
• $511.1 million over 4 years from 2023–24 for a new national lung cancer screening program, nicotine vaping product regulation and reform, and cessation support activities for tobacco and vaping use.
• $556.2 million over 5 years from 2022–23 to strengthen Australia’s mental health and suicide prevention system.
• $827.2 million over 5 years from 2022–23 to continue and improve the delivery of aged care services and respond to the Final Report of the Royal Commission into Aged Care Quality and Safety.
• Additional funding of $338.7 million over 4 years from 2023–24 to improve the in-home aged care system.
• $591.3 million over two years from 2022–23 to continue the Government’s response to COVID-19 in aged care.
• $515 million over 5 years from 2022–23 (and $956.9 million over 10 years from 2022–23) to fund the outcome of the Fair Work Commission’s decision on the Aged Care Work Value Case.
• $219.4 million over 4 years from 2023–24 to progress work on longer-term adult public dental reform.
• An additional $358.5 million over 5 years from 2022–23 to deliver Medicare Urgent Care Clinics by the end of 2023.
• $757.4 million over 2 years from 2022–23 to ensure access to a range of vaccine administration channels, including community pharmacies, Primary Health Networks and the Vaccine Administration Partnership Program as part of its ongoing COVID-19 response.
• There will be $1.2 billion over 5 years from 2022–23 in efficiencies achieved by allowing 2 months’ worth of certain PBS medicines to be dispensed by pharmacies from 1 September 2023.

Defence

Overall annual defence spending will exceed $50 billion for the first time in 2023-24, however, the budget confirms that defence spending will stick closely to the 2% of gross domestic product benchmark. In line with the Defence Strategic Review (DSR), the Defence budget features significant reshuffling:

• $3.4 billion over 10 years to establish an Advanced Strategic Capabilities Accelerator within the Department of Defence.
• $254.1 million over 4 years to replace the Department of Veterans’ Affairs legacy ICT
• $189.6 million over 2 years to deliver additional assistance to Ukraine following the invasion by Russia, including Bushmaster Protected Mobility Vehicles, unmanned aerial vehicles, and infantry training to the Ukrainian armed forces.
• $37.4 million for current ADF deployments in Ukraine, Vanuatu and the Solomon Islands, and ‘additional surveillance’ projects.
• $4.5 billion over 10 years for the initial steps in Australia’s acquisition of nuclear-powered submarines, which includes:
  • $4.2 billion over 10 years to support the establishment and ongoing operation of a new Australian Submarine Agency.
• $4.1 billion for Long-Range Missile Systems and a sovereign manufacturing capability to produce them in Australia.
• Up to $368 billion on nuclear submarine acquisition under AUKUS over several decades.
• $397.4 million over 2 years to support the retention of Defence personnel and achievement of Defence’s workforce growth targets.
• $468.8 million over 4 years to modernise the Australian Secret Intelligence Service, Australia’s foreign intelligence agency.
• $80.0 million over 4 years to increase cooperation with partners ‘to support a peaceful, open, stable and prosperous region.’

Industry, Science and Resources

The Government is investing in Industry, Science and Resources through the following measures:

• $392.4 million over 4 years from 2023–24 to establish the Industry Growth Program to support Australian SMEs and startups to commercialise their ideas and grow their operations.
  • Support will be targeted towards businesses operating in the priority areas of the National Reconstruction Fund (NRF).
• $116.0 million over 5 years from 2022–23 to support the development of critical technologies in Australia.
• $61.4 million over 4 years from 2023–24 to establish the NRF Corporation.
  • The NRF will earn estimated receipts of $188.7 million over the forward estimates from the $15.0 billion of investments in loans, equity investments and guarantees, with the returns to be reinvested to ensure the NRFC’s sustainability.
• $80.5 million over 4 years from 2023–24 to support the Australian critical minerals sector to build diverse and competitive supply chains, attract international investment and transition to net zero.

Infrastructure, Transport, Regional Development, Communications and the Arts

The following budget measures are included for Infrastructure, Transport, Regional Development, Communications and the Arts:

• $3.4 billion over 10 years from 2023–24 to support venue infrastructure for the 2032 Brisbane Olympic and Paralympic Games.
• $7.7 billion over 5 years from 2023–24 to support Australia’s national broadcasters, including $6.0 billion for the Australian Broadcasting Corporation (ABC) and $1.8 billion for the Special Broadcasting Service (SBS).
• The Government will increase the Heavy Vehicle Road User Charge rate from 27.2 cents per litre of diesel by 6 per cent per year over 3 years from 2023–24 to 32.4 cents per litre in 2025–26. This will decrease expenditure on the fuel tax credit by $1.1 billion over 4 years from 2023–24.

Climate Change, Energy, the Environment and Water

In line with the Government’s commitment to reduce cost of living pressures, protect the natural environment and reduce Australia’s energy emissions, the following measures are included:

• $1.5 billion over 5 years from 2022–23 to reduce the impact of rising energy prices on Australian households and businesses by providing targeted energy bill relief and progressing gas market reforms.
• $21.8 million over 3 years from 2023–24 to maintain and enhance the capability of Australia’s National Greenhouse Accounts to deliver high-quality emissions data and track progress against Australia’s emissions reduction targets.
• $148.6 million over 4 years from 2023–24 towards the sustainability of the Murray-Darling Basin.
• $38.2 million over 4 years from 2023–24 to establish a Guarantee of Origin Certificate scheme to track and verify emissions associated with hydrogen and other low emissions products, and provide an enduring mechanism to certify renewable electricity.
• $1.3 billion in funding to establish the Household Energy Upgrades Fund to support home upgrades that improve energy performance and save energy.
• $2.0 billion to accelerate development of Australia’s hydrogen industry.
• $18.1 million over two years from 2023–24 to implement priority reforms to the operation of the Australian Carbon Credit Unit (ACCU) scheme as part of the Government’s initial response to the Independent Review of Australian Carbon Credit Units.
• $28.0 million over two years from 2023–24 to develop Australia’s first National Climate Risk Assessment and a National Adaptation Plan to understand the risks to Australia from climate change.
• $741.3 million over 5 years from 2023–24 from the Natural Heritage Trust special account to support local and long-term environmental and agricultural outcomes.
• $214.1 million over 4 years from 2023–24 to deliver the Nature Positive Plan.
• $1.3 billion over 5 years from 2022–23 to support the decarbonisation of existing industries, develop new clean energy industries and support sovereign manufacturing capacity essential to the energy transition.
• $355.1 million over 4 years from 2023–24 to protect Commonwealth National Parks and marine reserves and deliver critical infrastructure.

Social Services

Both the Prime Minister and the Treasurer have stated that cost-of-living relief and addressing entrenched disadvantages are key focuses for this Federal Budget. Social services measures include:

• $4.9 billion over 5 years to increase the rate of JobSeeker, Austudy, and Youth Allowance by $40 per fortnight.
• $10 billion for the Housing Australia Future Fund, which will commit to building 30,000 new rental properties over 5 years.
• $1.9 billion over 5 years from 2022-23 to extend eligibility for Parenting Payment (Single) to support single principal carers with a youngest child under 14 years of age.
• $67.5 million in 2023-24 to boost homelessness funding to states and territories.
• $134.5 million in 2023–24 to sustain the myGov platform for an additional year.
• $231.8 million in 2023–24 to enable Services Australia to respond to natural disaster events.
• $199.8 million over 6 years from 2023–24 to address entrenched community disadvantage, including through place-based approaches, engaging with philanthropy, and promoting social impact investment.
• $7.3 million over 3 years from 2023–24 for a package of initiatives to further reduce the number of people under the age of 65 living in residential aged care.
• $326.7 million over 4 years from 2023–24 to deliver women’s safety initiatives under the National Plan to End Violence Against Women and Children 2022–32.
• $155.9 million over 5 years from 2022–23 to support the Better, Safer Future for Central Australia Plan.

National Disability Insurance Scheme (NDIS)

The NDIS is one of the fastest-growing areas of spending in the Budget. Spending on the NDIS, and other measures, focus on supporting Australians living with a disability, including:

• $13.0 million in 2023–24 to the Department of Social Services to ensure it has resources to continue to provide policy advice and oversight of the National Disability Insurance Scheme and the National Disability Insurance Agency.
• $732.9 million over 4 years from 2023–24 to support NDIS participant outcomes and the effective and sustainable operation of the Scheme.
• $142.6 million over 2 years from 2023–24 to support the National Disability Insurance Scheme Quality and Safeguards Commission in carrying out its role of safeguarding NDIS participants.
• $10.2 million over 4 years from 2023–24 to establish a Central Coordination of Disability Policy function in the Department of Social Services, to drive whole-of-government action on disability policy and improve accountability against Australia’s Disability Strategy 2021–2031.
• $31.4 million over 4 years from 2023–24 to meet the remaining costs of establishing the National Disability Data Asset (NDDA) and its underlying infrastructure – the Australian National Data Integration Infrastructure.
• $1.0 million in 2023–24 under the National Disability Advocacy Program to extend individual advocacy support for First Nations people with disability.

Indigenous Australians

• $364.6 million over 3 years from 2022–23 to deliver the referendum to recognise Aboriginal and Torres Strait Islander peoples in the Constitution through a Voice to Parliament.
  • This includes $336.6 million over two years from 2023–24 for the Australian Electoral Commission to deliver the referendum, including $10.6 million to produce information pamphlets for the ‘yes’ and ‘no’ cases.
• $194 million over 5 years from 2022–23 to support the Dedicated Aboriginal and Torres Strait Islander Action Plan under the National Plan to End Violence Against Women and Children 2022 – 2032.
• $363.1 million over 4 years from 2023–24 to support the Government’s commitment to close the gap in Aboriginal and Torres Strait Islander peoples’ health and well-being outcomes and aged care.
  • This includes $238.5 million over 4 years from 2023–24 to improve First Nations cancer outcomes through building capacity and growing the healthcare workforce.
• $492.7 million over 5 years from 2022–23 for a range of measures to support critical investment in infrastructure, employment, justice, education and housing initiatives for First Nations peoples.
  • This includes $150 million over 4 years from 2022–23 to improve water security for regional and remote First Nations communities by investing in First Nations water infrastructure projects through the National Water Grid Fund.

Treasury

The government will implement key aspects of Pillar Two of the OECD/G20 Two-Pillar Solution to address the tax challenges arising from digitalisation of the economy through a:

• 15% global minimum tax for large multinational enterprises with the Income Inclusion Rule applying to income years starting on or after 1 January 2024 and the Undertaxed Profits Rule applying to income years starting on or after 1 January 2025.
• 15% domestic minimum tax applying to income years starting on or after 1 January 2024.

If you have any queries or would like a briefing, please contact the Nexus team.