Budget: What’s in it for you as Melbourne Cup day sees another rate rise

Treasurer Jim Chalmers has taken a pasting for his Budget. Boring.  Not revolutionary. The critics have been piling it on.

But actually, we think there is a lot of opportunity.

Uncle Jim was pretty predictable. Here are the cold, hard statistics curtesy of PWC:

And here’s the detail:

power prices would rise 56 per cent over two years from July 1, 2022 and drive inflation higher and rates higher

Here are five ways to keep you safe from the worst of any recession.

• 1. Create a financial buffer.

• This is not easy, but it’s possibly the most important. Experts say that you should have enough to cover at least three, and possible six months of expenses. It is estimated that a family of four needs $6800 per month to keep them going, so this means your buffer should be between $20,400 and $40,800. For a single person the estimate is $3400 per month, so the buffer should be between $10,200 and $20,400. Westpac estimates that the average person has around $3500 in savings, so that is a significant gap in a family with one and even two people working. Everything helps in creating the buffer: paying more if you have a mortgage so you are ahead, having that garage sale and turning that junk into cash, deciding if you need that second car, Airbnb out the garage or take in a rent paying student. Create some targets and even turn it into a game, it could even be fun.

• 2. Cut back on spending.

• It’s an old one, but do you really need that second takeaway coffee, or that smashed avocado on toast. You might like a cocktail, but a beer is cheaper. One way of understanding this is to go back through your statements and try and fully understand how much you are spending and on what. Most people spend more than they think they do. So think about taking the bus, rather than an Uber. Do you need that gym membership, or can a brisk walk or kicking the ball with friends serve the same purpose. Your favourite restaurant might be great, but its pricey and there’s another one not far away which is cheaper but still serves good food. A full audit of spending will always turn up surprises, and ideas on how to save.

• 3. Consolidate your debts.

• If you have credit card debt, you are paying much more in interest than you should. If you have a mortgage it might be prudent to roll that other debt into your mortgage, as that is the cheapest money you will ever borrow. Or look at taking a new credit card with an interest free holiday period so you can reduce your outgoings in the short term.

• 4. Activate your side-hustle.

• These days, many people run a number of jobs. It’s called a “portfolio career.” The classic side-hustle is to get out there in your car and become an Uber driver, but there are other options and some of them might be fun. You might have a killer DJ set – well how about getting paid for that. You might have some hidden craft skills – put them to use and get an account on Etsy. You like dogs – there is always paid work for dog sitters and walkers. Even one shift of a side-hustle per week can make an impact on your income, and help you build up the buffer you want.

• 5. Make sure your money is working for you.

• If you are building up savings to protect you in the event of a downturn, you might not be earning much interest at the bank. The upside of the current environment is that banks are raising rates on some deposit accounts, so that might give your savings a bit of extra help. Instead of leaving all your money in a transaction account at minimal interest, check out the term deposits where you might be able to get 3.5% interest or so. Its not huge, but it can be a help.

All these ideas are part of the same plan: to increase income and reduce outgoings.

Don’t look at any of them in isolation, but as part of a “whole of life” effort to recession proof yourself so that if Jim Chalmers is wrong, and Australia does move into recession, that you and your family can make it through without too much financial pain.

Budget at a glance:

A five-point plan for targeted cost-of-living relief.  This includes cheaper child care and cheaper medicines, an expanded Paid Parental Leave scheme, more affordable housing, and getting wages moving again.

The Plan delivers cost-of-living relief and an economic dividend without putting pressure on inflation.

• $4.7 billion over 4 years to deliver cheaper child care for 1.26 million families.

• $531.6 million over 4 years to expand Paid Parental Leave to 26 weeks by 2026.

• More affordable housing, including through a new national Housing Accord which brings together governments, investors and industry to boost supply and deliver up to 20,000 new affordable homes.

• $787.1 million over 4 years to reduce the general patient co-payment for treatments on the Pharmaceutical Benefits Scheme from $42.50 to $30 per script.

• Supporting wage increases for our lowest paid workers and getting wages moving again.

• 480,000 fee-free TAFE places and a $50 million TAFE Technology Fund to modernise TAFEs.

• 20,000 additional university places for disadvantaged Australians.

• $474.5 million over 2 years to support student well-being and improve classrooms.

• Supporting women’s workforce participation and advancing gender equality.

• Boosting the Work Bonus income bank to give older Australians the option to work and keep more of their pension.

• A Powering Australia Plan to drive investment in cleaner, cheaper energy, including $20 billion of low-cost finance under Rewiring the Nation to upgrade our electricity infrastructure.

• Acting on climate change and a $1.8 billion investment in strong action to protect, restore and manage our precious natural environment.

• Up to $200 million per year on disaster prevention and resilience initiatives through the Disaster Ready Fund, as well as additional funding for flood affected communities and extra staff to quickly get Australians the support they need.

• Establishing the $15 billion National Reconstruction Fund to support a future made in Australia. • More than $120 billion of investment in transport infrastructure over the next 10 years.

• $2.4 billion in NBN Co to extend fibre access to 1.5 million more premises and $1.2 billion for the Better Connectivity for Regional and Rural Australia Plan.

• Protecting our farmers from pests and diseases such as foot-and-mouth disease.