Why Australians’ Borrowing Power May Soon Get a Boost
To ease cost of living pressures, the Australian government announced tax cuts for 13.6 million taxpayers and rebates for households. While beneficial, these cuts may impact borrowing power and create opportunities for first home buyers.
A Boost from the Budget
Treasurer Jim Chalmers announced a $300 energy rebate and $36 weekly tax cuts from July in the 2024 Federal Budget.
“We will give every taxpayer a tax cut, provide energy relief to every household, and offer a $325 rebate to 1 million small businesses.”
This extra income could boost borrowing power, helping first home buyers enter the market sooner.
| 2024 Federal Budget | |
| Taxpayers | All taxpayers in Australia will receive a tax cut on July 1 through the already legislated stage 3 cuts. |
| Households | Every household in Australia will receive $300 off their energy bill through a rebate. |
| Small businesses | Around one million small businesses will receive $325 off their power bills. The $20,000 instant asset write-off scheme has also been extended, while 457 “nuisance tariffs” will be abolished. |
| Renters | Commonwealth Rent Assistance will increase by an additional 10 percent, following a 15 percent increase last year, benefiting nearly 1 million households. |
| People on JobSeeker with limited work capacity | JobSeeker recipients able to work up to 14 hours a week are now eligible for the higher rate, an increase of $54.90 a fortnight. The change is expected to benefit 4700 people. |
| People who use medicines listed on the PBS | The government will freeze the maximum co-payment for prescriptions on the Pharmaceutical Benefits Scheme at $31.60 for a year.
Aged care pensioners and concession card holders will have their maximum co-payment frozen at $7.70 per prescription for five years. |
| Pensioners | Along with the five-year freeze on PBS medicines for aged care pensioners, the deeming rate will also be frozen for another year. This extension until June will benefit 870,000 people, including 450,000 age pensioners, providing additional financial relief to vulnerable groups. |
| Students | A change to student debt reindexation will cut the nation’s HECS-HELP debt by $3 billion.
The Commonwealth Prac Payment will provide students up to $319.50 weekly during clinical placements, starting mid-2025. |
| Parents | The government will spend $1.1 billion on superannuation for paid parental leave for parents of babies born or adopted after July 1, 2025. |
Understanding Borrowing Power
Borrowing power is the amount a lender will lend, determined by deposit size, household expenses, and after-tax income. For example, a larger deposit can increase borrowing power, while higher expenses may limit it. Additionally, credit history impacts borrowing power, as a strong credit score can lead to better loan terms. Understanding these factors helps assess your borrowing capacity. While tax cuts can boost income and borrowing potential, you can also improve your borrowing power by:
- Cut back on spending: Trimming down non-essential spending can free up additional funds to boost your deposit which will increase borrowing capacity.
- Reduce credit card limits: Lowering your credit card limit or canceling unused cards can enhance borrowing power, as lenders consider the maximum limit, not the balance.
- Increase income: Supplementing your income through a second job or negotiating a pay rise can improve borrowing power.
Expert Advice From a Mortgage Broker
Online calculators can estimate your borrowing power, but tailored advice is invaluable. A personalized assessment considers your income and credit score, while a financial advisor navigates lending complexities, ensuring informed borrowing decisions. This approach enables informed decisions that align with your needs. Consult with a Lending Connections broker to get personalised advice based on your financial situation. Work closely with an expert, such as those at Lending Connections, and get insights into your borrowing power with a strategic plan to help you reach your home ownership goals.