Treasurer Jim Chalmers announced yesterday that the federal government’s subsidy for electricity bills, which provided a discount of $75 per quarter for all households, will not be extended into next year and will instead end in December as originally planned. Speaking at a press conference at Parliament House in Canberra, Mr Chalmers described the Cabinet’s decision not to extend the program into a fourth round as “hard” but necessary, recognizing the “pressure on the budget”.

The electricity bill rebates were introduced in mid-2023 and were initially funded for just one year, though the program was twice extended due to acute cost-of-living pressures. The government stressed that the rebates were always intended to be a temporary measure and not a “permanent feature of the budget”. The three completed rounds of the energy bill rebates have cost the Commonwealth almost $7 billion, with states and territories contributing another $1.5 billion or so.

Shift to Permanent Relief

The ending of the temporary rebates marks a significant shift in how the government delivers cost-of-living relief, moving away from measures first decided when inflation was nearly 8 per cent, toward ongoing, permanent assistance.

Mr Chalmers highlighted that cost-of-living relief will now be provided in other ways, including through the tax system, Medicare bulk billing incentives, and cheaper medicines. This transition is illustrated by the upcoming second and third rounds of tax cuts, which the government has engineered to provide “permanent help with the cost of living delivered through the tax system”.

By one measure, the combined three rounds of tax cuts are expected to provide Australians with about $50 a week in permanent ongoing help, which people can use to pay electricity bills or meet other cost-of-living pressures.

Budget Context and Energy Future

The difficult decision to discontinue the rebates was made as the Treasury finalizes the Mid-Year Economic and Fiscal Outlook (MYEFO), which is due next week. Mr Chalmers stated that the mid-year budget update will be “sensible, responsible and restrained” and will contain savings and difficult decisions to manage substantial pressures on the budget. Notably, current inflation forecasts already account for the energy bill rebates finishing this month.

Regarding future energy prices, the government plans to put downward pressure on costs over time by introducing more cleaner and cheaper energy. The policy is to replace the least reliable, aging parts of the energy fleet with the “cleanest, cheapest, most reliable renewable energy”, firmed by gas and hydro and backed up by batteries.

The government maintains that its commitment to providing meaningful and responsible assistance is constant, even though the nature of that cost-of-living help is evolving.