The federal government has announced that its electricity bill subsidy for households will not be extended into next year and will end as originally planned at the end of this month. Treasurer Jim Chalmers stated that the $75 quarterly discount for all households will cease, describing the decision as a “hard” one made by the cabinet in light of “budgetary pressures.” Chalmers emphasized that the subsidy was never intended to be a permanent budget measure and that the government would shift to “long-term support,” such as tax cuts, to help households cope with living costs.
The subsidy, which began in mid-2023, was applied directly to electricity bills and complemented by state and territory government assistance. Some small businesses were also eligible. Initially funded for one year, the program was twice extended due to persistently high cost-of-living pressures. Although there had been speculation about a further extension, Chalmers said moving toward long-term measures was the more appropriate approach.
The announcement comes as the Reserve Bank of Australia (RBA) holds its final monetary policy meeting of the year, with markets widely expecting interest rates to remain unchanged. Core inflation recently fell to 3.3%, still above the central bank’s preferred 2–3% range. Chalmers noted that government tax cuts could reduce the average taxpayer’s weekly burden by around AUD 50, but cautioned that inflation, global economic conditions, and other spending pressures require careful budget management.
Rising energy costs were a significant contributor to high inflation in 2022 and 2023. The first round of electricity bill relief was introduced just ahead of a sharp price spike in July 2023. Statistics show that without the subsidy, prices would have risen 19.2%, whereas with the subsidy, the increase was limited to 6%. The program effectively dampened headline inflation, but with both federal and state subsidies ending, households will continue to face elevated electricity bills.
Commentary:
Over the past two years, the subsidy provided direct relief during periods of high living costs, helping ease household burdens and stabilize inflation in the short term. However, its temporary nature highlights that one-off subsidies cannot resolve underlying structural economic pressures.
Shifting to long-term measures such as tax cuts may boost disposable income, but it cannot immediately offset the impact of high electricity and energy costs on low- and middle-income households. For many families, electricity expenses still account for a significant portion of their daily budgets, and the removal of the subsidy may exacerbate financial stress. The government must ensure that follow-up measures effectively address the real cost-of-living needs of citizens while closely monitoring energy prices and inflation trends. Otherwise, household anxiety over rising living costs is likely to persist.