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In an ambitious move to lower inflation, the federal government is on a path to spend billions on energy rebates and rental assistance for those with low incomes, as part of Treasurer Jim Chalmers' cost-of-living budget.

The proposed AU$300 energy rebate for every Australian household will cost the government about AU$3.5bn over three years.

While Chalmers on Tuesday announced a cut in income taxes worth an average AU$1,888 a year for each taxpayer, the government will invest more money on renewables, critical minerals and defense, Reuters reported.

"The number one priority of this government and this budget is helping Australians with the cost of living," Chalmers said in his budget speech. "Annual inflation has more than halved from its peak in 2022...but we know people are still under the pump. That's why we designed our cost of living policies to ease these pressures."

The Anthony Albanese's Labor government has been under severe criticism over the high consumer prices ahead of a federal election, which is due early next year.

The Treasury now expects the inflation to ease and meet the central bank's 2-3% target band by the end of this year. That would be a welcome surprise for the Reserve Bank of Australia, which has been forecasting inflation to pick up to 3.8% by the year end from the current 3.6%, raising the risk of another interest rate hike.

The government also expects to back the $9.3bn surplus by cracking down on tax cheats, The Guardian reported. However, the government's decision not to increase spending or offer an immediate solution to address the housing crisis will see renters and aspiring homeowners continue to suffer.

The government will increase Commonwealth Rent Assistance by 10% for low-income households on welfare, benefiting nearly one million renters. This follows a 15% rise last year. While the AU$1.9 billion plan does offer relief to some, it excludes non-welfare renters, as the country continues to go through a rent crisis.

Subsidies for medicines

The cost of medications listed under Pharmaceutical Benefits Scheme (PBS) will be frozen for two years at AU$31.60. This is available for all those who use a Medicare card. For pensioners and concession card holders, prices will be frozen for five years.

The government is expected to spend AU$469.1m on these subsidies, and an additional AU$3.4bn to cover new medicines under PBS, including medications for cardiac disease and breast cancer treatment reducing the cost from about AU$100,000 to AU$31.60. The government also plans to spend AU$1.4bn on Medical Research Future Fund, over the next 13 years, The Guardian reported.

Health initiatives for women

A AU$56m fund will be used to launch several women's health initiatives. It will include spending AU$12.5m over four years for the National Aboriginal Community Controlled Health organization to provide free period products, AU$7m over four years to support women and families who have suffered miscarriage, and AU$5.2m over three years to train health workers to insert and remove long-acting reversible contraceptives and to train GPs in providing better treatment for menopause.

Starting from July 2025, the government will spend AU$1.1bn over four years to pay superannuation on government-funded paid parental leave, which is expected to reduce the gap in retirement income between men and women which is 25% now.

Cut in student debt

Pending a Parliament approval, the student debt will be reduced through changes in HECS and HELP programs.

Earlier this month, the government had announced to cut AU$3 billion in student debt. The proposed plan will backdate the debt relief to all HELP, VET Student Loan, Australian Apprenticeship Support Loan and other student loans that existed on June 1, last year.

Nearly 3 million have student loans at an average debt of AU$26,500. The government measure will ease about AU$1,200 from their HECS and HELP debt this year.