Battery rebate blowout lands Labor's green subsidies in Chalmers's budget crosshairs

The cheaper home batteries program has become the prime target as Treasurer Jim Chalmers faces mounting pressure to fight inflation by cutting spending in the mid-year budget update. The scheme has handed households and businesses a taxpayer-backed 30% rebate since July last year, and Treasury's original forecast of a million new batteries by 2030 at a cost of $2.3bn has been blown apart.

A month into the program, the projected bill was already surging towards $14bn. Officials have since tweaked the design — the original version made bigger, pricier batteries more attractive to buy — and now put the cost at $7.2bn. The 2022 electric vehicle subsidy, which exempts workers from fringe benefits tax on employer-leased EVs, has also proven more popular and expensive than predicted.

Stephen Bartos, an economics professor at the University of Canberra and a former deputy secretary at the Department of Finance, argues green subsidies "shouldn't be their first port of call" for closing the deficit. He calls them "small beer" beside health, defence and the NDIS, which was expected to cost nearly $54bn in 2025–26, while the parliamentary budget office has estimated Aukus nuclear-powered submarines at up to $368bn. "Nobody is mentioning nuclear-powered submarines," Bartos said, pointing also to the roughly $11bn-a-year fuel tax credit scheme that mainly benefits major mining companies and is rising fast.

The political heat is on too. Opposition leader Angus Taylor used a Monday speech to again promise to "abolish Labor's ideological climate bureaucracy" as part of $31bn in promised savings over four years. The Coalition loudly opposed the Albanese government's recent attempt to income-test private healthcare rebates for over-65s.

Alison Reeve, who directs the energy and climate change program at the Grattan Institute, says the "middle-class welfare" charge doesn't hold up — the batteries are landing in outer suburbs like western Sydney and in regional areas. She warns that slashing support would hit the small businesses, suppliers and tradies servicing the young industry, and points to Western Australia, where the state subsidy required linking to a network-run virtual power plant. "We also need a clear path out of the subsidy so it doesn't grow uncontrollably," she said.