Federal budget 2023: $4 billion to cover wage increases for vital services in budget

The budget is expected to include a measure providing extra funds to support the indexation of wages for workers on programs including Commonwealth Home Support, Veteran Home Services, community legal centres, First Nations healthcare, social housing and homelessness services, programs to reduce violence against women and chronic disease support.

The budget measure will remove the five-year averaging of the wage component of indexation.

"Some of Australia's most vulnerable families rely on these services, and this additional funding will ensure they can continue delivering for Australians when they need them the most," the government said.

Finance Minister Katy Gallagher said the change would ensure funding for vital government and community organisations "better reflects the true cost of delivering services".

"The Albanese government is improving the way government programs are indexed, allowing organisations to keep their doors open, addressing rapid cost pressures for the service providers who support the most vulnerable people in the community," the minister said.

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The change comes of top of $560 million provided in the October budget to address immediate cost pressures for community sector organisations.

"Labor has listened to calls from the community sector, including from ACOSS [Australian Council of Social Services], the ASU [Australian Services Union] and other organisations who have said that this change will ensure funding more accurately reflects labour and cost pressures," the government said.

Senator Gallagher said the measure would also support wages growth and remedy the failure of the previous government to properly address wage pressures in the sector.