CORE INFLATION ON THE RISE; NEW TAX CURB

Energy rebates drive down headline inflation

Headline annual inflation remained steady at 2.1 per cent in October, assisted by lower electricity and automotive fuel prices, according to the Australian Bureau of Statistics. The monthly Consumer Price Index indicator shows that electricity prices have fallen by 35.6 per cent over 12 months, driven by government energy rebates, while automotive fuel prices have fallen by 11.5 per cent. But underlying annual inflation – which excludes the effects of volatile price rises and falls, such as the effects of electricity rebates – increased to 3.5 per cent, up from 3.2 per cent in September. Reserve Bank of Australia Governor Michele Bullock last week emphasised that the central bank was focused on the level of underlying inflation, which remained above the 2-3 per cent target range for inflation.

New tax clamps on multinationals

Legislation to strengthen global tax transparency and introduce minimum tax levels for multinational companies passed Federal Parliament in the final sitting week of the year. Treasurer Jim Chalmers said the new laws would hold large multinationals to account on their tax affairs. Multinationals subject to a new public country-by-country reporting regime would need to publish certain tax information for Australia, specified countries, and the remainder of their global operations – including the amount of tax paid. Earlier in the week, Parliament passed legislation to set a 15 per cent global minimum tax and domestic minimum tax for multinational enterprise groups with an annual global revenue of at least 750 million Euros (around A$1.2 billion) effective from January 1, 2024. Dr Chalmers said the legislation would allow Australia to apply a top-up tax on a multinational operating in Australia, if the multinational group paid less than a 15 per cent tax rate wherever it operated globally.

Exports dominate Australian energy end use

Australia’s net energy use increased by two per cent in 2022-23, with rising household and industrial end use offsetting a slight fall in energy exports. Figures supplied by the Australian Bureau of Statistics, however, show that energy exports dominated end use, accounting for 17,434 Petajoules (PJ), or almost 75 per cent of net energy use. Industry energy end use rose by four per cent and household energy end use by three per cent. Domestic production accounted for around 90 per cent of Australia’s energy supply. Black coal accounted for 10,793 PJ, or one-half of domestic energy production from natural sources; 88 per cent of black coal was exported and 79 per cent of natural gas was exported as liquefied natural gas. Renewable energy production increased by 12 per cent to 325 PJ in 2022-23, with the solar energy component up by 21 per cent, and wind energy up by nine per cent.

Nation’s Treasurers agree to extend GST funding guarantee

Federal, State and Territory Treasurers have agreed on a series of reforms, including an extension of guaranteed funding through the Goods and Services Tax (GST) revenue. Treasurer Jim Chalmers said the Council on Federal Financial Relations had extended the GST no-worse-off guarantee from 2027-28 through 2029-30 to provide certainty of funding of essential services. In addition, the Treasurers agreed to a 10-year reform of National Competition Policy, as well as agreeing to explore legislative options for a nationally consistent beneficial ownership of trusts regime. Dr Chalmers said respective Treasuries would also develop options to address the declining diversity in economics student cohorts, in a bid to enhance the quality of economic debate and national policymaking.

Student debt relief package now law

Federal Education Minister Jason Clare says three million Australians will have $3 billion wiped from their student debt under legislation that passed Parliament in the final sitting week. Mr Clare said the Universities Accord Bill 2024 capped the Higher Education Loan Program indexation rate to the lower of either the Consumer Price Index or the Wage Price Index (WPI). The legislation backdates last year’s 7.1 per cent indexation rate to 3.2 per cent, based on the lower WPI and credits provided via the Australian Taxation Office (ATO). The indexation rate for 2024 will be reduced from 4.7 per cent to four per cent. Mr Clare said the ATO would automatically apply these changes to everyone with a student loan.

Convention to guide Federal decision on ADF military deployments

Deployments of the Australian Defence Force (ADF) to major military operations in overseas conflicts will be required to abide by a new convention formalised by the Federal Government. Defence Minister Richard Marles said a Memorandum on Government Conventions reaffirmed that the decision to deploy ADF personnel into armed conflict was the prerogative of the Executive Government. He said the memorandum also provided for the Prime Minister and the Leader of the Government in the Senate to give a statement to both Houses of Parliament at the earliest opportunity, followed by parliamentary debate. The Government’s response followed an inquiry into international armed conflict decision-making by the Joint Standing Committee on Foreign Affairs, Defence and Trade.