The Federal government has revealed its forecast for household disposable incomes, projecting an increase of 3.5% for the next financial year. This positive outlook is ascribed to wages rising at a rate faster than inflation.

Canberra

The Australian government has revealed its forecast for household disposable incomes, projecting an increase of 3.5% for the next financial year. This positive outlook is ascribed to wages rising at a rate faster than inflation, offering a glimmer of hope for improving living standards. Central to this development is the impact of the Stage 3 tax cuts, scheduled to start on July 1, which are expected to contribute 1% to the income boost by providing an average tax reduction of around $1,900.

Despite the optimistic financial forecasts, there remains a concern about inflation, which, although lower than in recent years, is decreasing more slowly than anticipated. This situation has led to acute periods where real disposable incomes faced significant declines. However, with inflation expected to continue its descent and the commencement of the tax cuts, there's an anticipation of a robust growth in real incomes towards the second half of 2024.

The government is taking this opportunity to reinforce its message of wanting Australians to "earn more and for people to keep more of what they earn," a sentiment echoed by the Prime Minister during his recent state visits. Nevertheless, critiques of the government’s approach suggest a discrepancy between promises and tangible outcomes. The budget also hints at additional measures aimed at alleviating the cost of living, with a focus on aiding lower income households through initiatives such as potentially increasing Commonwealth Rent Assistance.

This announcement aligns closely with recent Reserve Bank observations, confirming that while disposable incomes have struggled in the past, there's substantial potential for improvement looking forward. This paints a cautiously optimistic picture for Australian households, many of whom are in dire need of relief from the prevailing economic pressure.



Government predicts household incomes to improve

Posturing and posing in the nation's capital. As the Prime Minister visits his third state in as many days to promote the upcoming budget, he came with good news. Living standards increasing. Ahead of Tuesday the government has released the forecast for household disposable incomes and it predicts they'll grow by 3.5% next financial year. Real wages growing faster than inflation. It is being put down to wages going up and inflation lower than recent years. But 1% of the increase is being attributed to the Stage 3 tax cuts coming into effect on July 1st. The average reduction is about $1,900 to make taxpayers better off than last year. And the government isn't missing an opportunity to roll out the message it's been repeating for months. We want to see people earn more and for people to keep more of what they earn. It would be a good thing if it happens, but of course this is a treasurer who is better at delivering spin than substance. But this forecast in the budget is matched by what's come from the Reserve Bank this week. Real disposable incomes have declined sharply over the past 18 months, but further declines in inflation and the implementation of the Stage 3 tax cuts are expected to result in real incomes growing strongly in the second half of 2024. And that is going to flow through to households and I think they'll feel a little bit more comfortable about the cost of living situation. Inflation does remain high though, and is falling more slowly than expected. So there's a glimmer of hope for households, but some will still be desperate for more cost of living help, which has been promised in the budget. Really we want to see it targeted at lower income households doing it tough. So for example, increases to Commonwealth rent assistance would be a perfect way to go about doing that. Ashley Raper, for TN News First.

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