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The Budget in Review

The 2022/23 Federal Budget measures continue to provide support for economic growth and full employment. This year’s Budget also remains friendly for households as the Government prepares for the upcoming election, with election sweeteners such as cost of living handouts and a halving of petrol and diesel fuel excise for six months.

 

For small business, the main initiatives include rebates for increasing digital adoption and training for staff development. The Government has also allocated additional funding to support growth in apprenticeships in crucial industries and pledged further spending to enhance modern manufacturing. Infrastructure spending was a big winner with the Government committing to enhance regional connectively in key growth hubs and to further develop regional infrastructure.

 

There are measures aimed at helping to grow and upskill the workforce within the aged care sector and more broadly, but we are concerned these measures do not go far enough and do not address the fundamental problem of a workforce shortage.

 

Superannuation was largely untouched for the first time in many years, with the Government seeking to position itself pre-election as the party that won’t make any adverse changes to super.  The opportunity was not taken to do more to address the gender super gap. 

Federal Budget

Key changes:

 

  • Superannuation and retirement changes

     

    • The only significant 2022/23 Budget change to super is a 12 month extension of the COVID-19 temporary relief under which the minimum superannuation pension drawdown rates have been halved (i.e. announced to also apply for 2022/23).

    • However a reminder that a number of previously legislated changes are to take effect from 1 July 2022, including the following Superannuation Guarantee (SG) changes:

      • The SG rate will increase from 10.0% to 10.5% (with further annual increases of 0.5% to lift the SG rate to 12% from 1 July 2025)

      • The $450 minimum monthly earnings threshold to be eligible for SG contributions will cease to apply

     

  • Personal tax/cost of living measures

     

    • Increase of $420 ($840 for eligible couples) in the 2021/22 Low and Middle Income Earner Tax Offset (LMITO), with payments made in this year’s tax return.

    • Cost of Living Payment - $250 each to Income Support recipients to be made in April 2022.

    • Petrol and Diesel Fuel Excise reduction of 22.1c per litre for 6 months.

     

  • Aged care initiatives

     

    • An additional $468.3 million allocation to the sector bringing the total investment into Aged care for 2022/23 to $29.8 billion.

    • The release of 40,000 new home care packages (from the 80,000 promised in 2021/22) over the coming 12 months.

    • An additional $458.1 million over five years from 2021-22 to support older Australians in the aged care sector to manage the impact of COVID-19 pandemic.

    • $215.3 million to provide bonuses of up to $800 to aged care workers (home care and residential aged care).

    • Expanded funding of $124.9 million for the Aged Care Preparedness program that supports aged care providers to manage and prevent outbreaks of COVID-19.

    • $50.4 million over four years from 2022/23 to improve the capability and capacity of the residential aged care workforce to deliver vaccination services to residents and staff. 

     

  • Investment implications

     

    • The measures announced in the 2022 Federal Budget may be less stimulative than before, but will help the Australian economy move gradually ahead. With reduced available stimulus from fiscal and monetary policy, we expect Australian capital markets to continue to be dominated by global events in 2022.

    • The Budget is balancing short-term issues such as rising inflation and cost of living (e.g. through the temporary reduction in fuel tax) and more extended issues of geopolitics (through increased defence spending), debt reduction and longer-term megatrends such as the need for infrastructure and environmental issues.

    • From an investment perspective, Australia remains in a relatively better position compared to other developed countries, although the benefits will be very sector specific.  

     

  • Workforce initiatives

     

    • The Budget contains initiatives under four central themes: apprenticeships, jobs for regions, positioning for the future, and small business.  All of these elements are primarily targeted at funding more places for young, disadvantaged, aged care sector, seasonal and regional workers.

    • Yet the reality of this investment is that it will likely take years before we see dividends and, with the exception of seasonal workers and a net 10,000 additional skilled workers visas, it doesn’t necessarily address the critical shortages in labour supply we are seeing now. It remains to be seen whether small business will take on more staff, invest in training or utilise the difference to make up for their losses incurred during the COVID years.

    • We know that reskilling and upskilling is top of mind for organisations across Australia and we encourage small businesses to invest in themselves and their teams to ensure their employability for the future. 

     

  • Health initiatives

     

    • $2.4 billion for additional new and amended PBS listings.

    • $525.3 million to reduce out of pocket costs by lowering the Pharmaceutical Benefits Scheme (PBS) Safety Net eligibility.

    • A further contribution of $648.6 million for Mental Health and Suicide prevention.

    • Private Hospitals devices agreement expected to reduce pressure on Private Health Premium increases.

    • A continued spend on COVID-19 response and recovery, particularly in health and aged care settings and for vulnerable Australians.

 

 

Time to learn, time to prepare

To learn how Mercer can assist your organisation with the outcomes from the 2022 Federal Budget speak with a specialist Mercer consultant today.

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