Why Australians’ Borrowing Power May Soon Get a Boost

As part of its focus on easing cost of living pressures, the Australian government has announced that all 13.6 million taxpayers in Australia will receive a tax cut on July 1 through the already legislated stage 3 tax cuts. In addition to this, households, small businesses and renters, amongst others, will benefit from a range of rebates aimed at easing cost of living pressures. While it’s good news for Australian taxpayers, tax cuts could also impact borrowing power, opening the doors for first home buyers and those looking to upgrade their home.

2-May-16-2024-12-35-19-4723-AM

A Boost from the Budget

Jim Chalmers, Treasurer, has revealed the Federal Budget 2024 includes a $300 energy rebate for every Australian household, and a revamp of stage-three income tax cuts that will deliver taxpayers an average of $36 a week from July.

“Just as every Australian taxpayer will get a tax cut, every Australian household will get energy price relief,” he told parliament, noting that 1 million small businesses will also benefit from a $325 rebate.

The additional income could translate into a boost to borrowing power, helping more first home buyers get into the market sooner, and making mortgage repayments more manageable.

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 be increased by a further 10 per cent, on top of a 15 per cent 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 maximum co-payment for prescriptions on the Pharmaceutical Benefits Scheme will be frozen for a year at $31.60. For those on the aged care pension and concession card holders, that maximum co-payment will be frozen for five years at $7.70 per prescription.
Pensioners	In addition to the five-year freeze for PBS medicines for people on the aged care pension, pensioners will benefit from the deeming rate being frozen for another year. By extending the freeze until the end of June next year, the government says 870,000 people, including 450,000 age pensioners, will be better off.
Students	A change to student debt reindexation which has been backdated to last year and will wipe about $3 billion off the nation's collective HECS-HELP debt. There's also Commonwealth Prac Payment - up to $319.50 per week for students during their clinical and professional placements in an attempt to combat "placement poverty" that will start in mid-2025.
Parents	The government is spending $1.1 billion to pay superannuation on government-funded paid parental leave for parents of babies born or adopted on or after July 1, 2025.

Understanding Borrowing Power

Borrowing power refers to the amount a lender is willing to lend based on factors such as size of deposit, household expenses, and after-tax income. While tax cuts can provide a welcome boost to income and potentially increase how much you could borrow, there are some other proactive steps you can take to improve borrowing power, including:

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 cancelling credit cards you don’t use – can improve borrowing power, because lenders assess the maximum credit limit rather than the outstanding balance.
Increase income: Finding ways to supplement your income, such as taking on a second job or negotiating a pay rise, can improve borrowing power.

Expert Advice From a Mortgage Broker

While online calculators – such as this one – can provide an estimate of your borrowing power, getting tailored advice based on your individual circumstances is invaluable. Consult with a Mortgage Express broker to get personalised advice based on your financial situation. Work closely with an expert, such as those at Mortgage Express, and get insights into your borrowing power with a strategic plan to help you reach your home ownership goals.

While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Finservice Pty Ltd (Mortgage Express) for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.

Finservice Pty Ltd (Mortgage Express) is authorised as a corporate credit representative (Corporate Credit Representative Number 397386) to engage in credit activities on behalf of BLSSA Pty Ltd (Australian Credit Licence number 391237) ACN 123 600 000 | Full member of MFAA | Member of Australian Financial Complaints Authority (AFCA) | Member of Choice Aggregation Services.