2024-25 Australian federal budget: What does it mean for businesses and the future of work

The 2024-25 Australian Federal Budget, delivered by Treasurer Jim Chalmers, sets the stage for tough economic times ahead, as the nation grapples with rising unemployment and sluggish wage growth projections. 

Chalmers emphasised the government's realism about the current economic pressures while maintaining optimism for the future. The budget outlined a significant increase in spending, with an additional $11.7 billion allocated for the upcoming financial year, including $1.1 billion for undisclosed measures. Over the next four years, the budget earmarks $32.5 billion in new spending alongside $8 billion in savings.

Against a backdrop of 3.6% inflation in the year leading to March, the government's measures aim to curb inflation to below 3% by Christmas, potentially paving the way for a rate cut. 

Notably, the budget highlighted the expansion of eligibility for the higher rate of JobSeeker as a measure to address the cost of living, although its impact is expected to be limited to 4,700 individuals with restricted work capabilities.

Migration policy emerges as a focal point, particularly concerning its impact on housing supply and affordability. The budget forecasts a decline in net overseas migration from 528,000 last year to 395,000 this year, with further reductions expected in the coming years. 

Permanent migration is capped at 185,000 places, with a significant allocation to the skills stream. Additionally, the government proposes to cap international student numbers, although specific figures remain undisclosed.

The budget also adopts conservative estimates for commodity prices, anticipating a halving in the prices of thermal coal and iron ore by March next year. Despite these projections, unexpected budget windfalls are anticipated, with each $10/tonne increase in iron ore price above the forecast contributing half a billion dollars to the budget.

As businesses and the workforce navigate the implications of the budget, it becomes imperative to dissect its implications for the future of work and economic sustainability. In this analysis, we delve into the key provisions of the 2024-25 Australian Federal Budget and examine their ramifications for businesses, workforce dynamics, and the broader economic landscape.

Key Initiatives for Education and Workforce

In a significant move, the government has announced the elimination of $3 billion in HECS debts due to last year's 7.1% indexation. This measure translates to reduced student debts for over 3 million Australians, with an average credit of approximately $1,200 per student for the past two years. The debt relief extends to apprentices enrolled in the VET Student Loan program or the Australian Apprenticeship Support Loan.

Addressing placement poverty in universities, the government aims to support students undergoing practical training by offering financial assistance. Students pursuing nursing, teaching, or social work will receive a Commonwealth Prac Payment of up to $319.50 weekly, subject to means testing. 

Additionally, apprentices in the automotive, electrical, housing, and construction sectors can receive up to $10,000 in payments to learn clean energy skills, expanding eligibility based on industry feedback.

To regulate the influx of international students, universities will be mandated to curb their intake, aligning with the government's broader objective of reducing annual migration to 260,000. This decision has sparked concerns among leading education bodies.

Furthermore, $90 million will be allocated to provide 15,000 fee-free TAFE and VET places, with an additional 5,000 pre-apprenticeship positions from 2025, aimed at bolstering the housing construction sector.

Tax adjustments

An extension of the instant asset write-off scheme for small businesses was announced, granting eligible businesses with a turnover under $10 million the opportunity to claim up to $20,000 from eligible assets for another year. However, despite this measure being proposed in last year's budget, its passage through parliament remains pending, prompting urgent appeals from businesses to secure its approval before the June 30 expiration date.

Future in focus: Driving local manufacturing resurgence

Beyond the anticipated revisions to stage 3 tax cuts, the government's budget for the year places a spotlight on revitalising domestic manufacturing. Central to this endeavour is the Future Made in Australia initiative, consolidating various manufacturing and renewable energy programs under one comprehensive framework, boasting an investment exceeding $15 billion. 

This concerted effort underscores a significant commitment of taxpayer funds towards bolstering local industry and fostering innovation, particularly within the renewable energy sector.

Several initiatives have been announced or reiterated, including allocating $1 billion to the Solar SunShot program to augment Australian-made solar panels, and earmarking $2 billion for the Hydrogen Headstart scheme to propel the green hydrogen industry forward. 

Additionally, substantial investments are directed towards groundbreaking projects such as establishing the world's first fault-tolerant quantum computer in Brisbane, with matched funding from the Queensland government, and supporting Arafura's rare earths mine and refinery development in Central Australia with an infusion of $840 million. 

Other initiatives include funding Liontown Resources' lithium project in Western Australia, comprehensive mapping of critical minerals by Geoscience Australia, establishing Australia's first high-purity alumina processing facility in Gladstone, and expediting Renascor Resources' Siviour Graphite Project in South Australia with a significant injection of funds totaling $185 million. 

Furthermore, a lucrative $1 billion export deal has been secured to supply Germany with infantry fighting vehicles, manufactured at Rheinmetall's facility in Ipswich.

Revised parental leave benefits 

Beginning next July, recipients of the government-funded paid parental leave scheme will receive superannuation contributions alongside their payments, marking a significant enhancement to the existing program. 

Presently, couples welcoming a newborn or newly adopted child can avail themselves of up to 20 weeks of paid parental leave at the national minimum wage, with this duration set to incrementally increase to 26 weeks by July 2026.

Under the proposed scheme, slated for implementation pending Labour’s success in the upcoming election, superannuation contributions will amount to 12% of the paid parental leave rate, calculated based on the national minimum wage of $882.75 per week. 

While the exact financial implications remain undisclosed, a review initiated by the former government estimated an annual expenditure of approximately $200 million for incorporating superannuation into paid parental leave benefits.

With approximately 180,000 families accessing government-paid parental leave annually, this augmentation reflects a significant step towards bolstering support for new parents and fostering long-term financial security during crucial life transitions.