Chalmers ends energy rebates as budget bites

3 months ago 17

The Albanese government’s $300 power bill subsidy will be scrapped at the end of the year, Treasurer Jim Chalmers has announced, in a press conference foreshadowing tough calls to come in his budget update later this month.

“This marks a shift in the way that we are delivering cost-of-living relief,” Chalmers said in a press conference in Canberra. “This is a shift from temporary measures, first decided when inflation was almost 8 per cent, a shift towards ongoing cost-of-living help.”

“This wasn’t an easy decision, but it’s the right decision. This was a difficult call that we made as a cabinet, but it’s the right call.

“It recognises the pressures on the budget, recognises that there is more than one way to provide this cost-of-living relief that people still need in their household budgets.”

The subsidy, which offered a $75 reduction to quarterly electricity bills and went to all households and many small businesses, was extended for six months in this year’s budget. Along with substantially larger state government subsidies, it helped push down electricity prices.

Without those subsidies, electricity prices would have climbed by 22.2 per cent since mid-2023. Instead, they have risen by 8.2 per cent.

Extending the subsidy into 2026 would cost the government an estimated $2 billion.

Chalmers said the next stage of Labor’s tax cuts would provide more effective cost-of-living relief than the energy subsidies.

“We’re providing help with electricity bills via the tax system and by providing other cost-of-living help, and as I’ve said a couple of times now, that cost-of-living help is changing over time, but our commitment to providing meaningful and responsible assistance is constant,” he said. “We’ll be providing cost-of-living help in other ways.”

Chalmers refused to answer questions on further cuts.

“I am not prepared to go into the detail of those. I’ve already announced a difficult decision that we’ve taken today as a cabinet. There’ll be other difficult decisions in the mid-year budget update as well,” he said.

On Monday morning, Deloitte Access Economics warned that the federal budget will never get back into the black, amid calls for the Albanese government to take on radical reforms, including a $54 billion overhaul of personal income taxes and a cut to generous tax incentives for property investors.

Chalmers signalled there had been cost increases for the government that would be accounted for in the mid-year update that will be released next week.

He said extra costs covering natural disasters and a lift in expenditure delivering assistance to war veterans were two examples of unexpected costs.

But the Treasurer signalled next year’s May budget would do much of the government’s heavy lifting on spending and policies aimed at lifting productivity and reducing pressure on inflation.

“A big focus there will be to balance these two challenges – our focus on inflation in the near term, productivity over the medium and longer term as well,” he said.

“We have made considerable meaningful progress on productivity and on reform since the roundtable in August, but there’s more work to do.”

Chalmers revealed he was meeting both representatives of the Business Council of Australia and the head of the Productivity Commission, Danielle Wood, with productivity issues on the agenda.

The commission is due to deliver five separate reports into new policies before Christmas, including a world-first cash flow tax on businesses. The idea has been largely rejected by the corporate sector, which claims it would actually lift the tax burden on most firms.

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