25 March | 2025-26 Federal Budget Summary
BUDGET OVERVIEW
With an election just around the corner, the Albanese Government’s 2025 Federal Budget is more than just a set of financial forecasts—it’s a final pitch to voters before Australians head to the polls.
This Budget was not expected to happen, with conventional political wisdom suggesting the election would be called before the government was forced to hand down a deficit. That changed with Tropical Cyclone Alfred.
Instead of campaigning, Treasurer Jim Chalmers tonight delivered a Budget framed around the mantra of “repair, relief, and reform.” Key measures include energy relief, healthcare boosts, tax cuts, and support for local industries, all aimed at easing cost-of-living pressures. At the same time, the government is laying the groundwork for longer-term reforms, from disaster recovery funding and increased competition to investment in healthcare and education.
Chalmers emphasised tax relief in his speech, announcing that every Australian taxpayer will receive a tax cut “next year and the year after, to top up the tax cuts which began last July.” These changes will bring the lowest tax rate to its lowest level in more than half a century.
The Budget marks the end of the government’s brief surplus era. While the Albanese Government has delivered two consecutive surpluses, the 2024–25 Budget reveals a deficit of $27.6 billion—almost half the amount forecast in the 2022 Pre-election Economic and Fiscal Outlook (PEFO). A deficit of $42.1 billion is projected for 2025–26, an improvement of $4.8 billion since MYEFO.
The economy is expected to grow by 1.5% in 2024–25, 2.25% in 2025–26, and 2.5% in 2026–27. Inflation is now forecast to be 2.5% through the year to the June quarter of 2025, 0.25 percentage points lower than the 2024–25 Mid-Year Economic and Fiscal Outlook projection.
The 2025-26 Budget has made key commitments in:
Easing cost-of-living pressures
Strengthening Medicare
Boosting housing supply
Investing in education at all levels
Building a stronger, more productive, and more resilient economy
KEY MEASURES
We have summarised and grouped the key budget announcements by portfolio below:
TAX REFORM
Reduce the first marginal tax rate from 16% to 14% over two years.
The cuts will decrease tax receipts by $17.1 billion over five years from 2024–25.
Freeze the draught beer excise indexation for two years, effective from August, resulting in a projected $200 million in forgone tax revenue.
ENERGY, CLIMATE CHANGE & ENVIRONMENT
$1.8 billion allocated to energy bill relief in the form of $150 rebates for households and approximately one million small businesses.
$212 million over four years from 2025–26 for environmental protection.
$2 billion expansion of the Clean Energy Finance Corporation to unlock $8 million of additional investment in renewable energy and low emissions technologies.
EDUCATION
$3.6 billion allocated to wage increases for early childhood education and care workers.
20% reduction in HECS-HELP debt to alleviate cost-of-living pressures on students.
Legislation enacted to establish the Fee-Free TAFE scheme as a permanent element of the national vocational education and training system.
$1 billion investment to establish a Building Early Education Fund to increase the supply of early childhood education and care centres.
HEALTH & AGED CARE
Increase the Medicare levy low-income thresholds by 4.7 percent, effective from 1 July 2024.
$7.9 billion allocated to strengthen Medicare by increasing bulk-billing incentives.
$2.6 billion allocated to wage increases for aged care workers.
$1.7 billion capital injection into state-run public hospitals.
$1.8 billion for new and amended listings on the Pharmaceutical Benefits Scheme (PBS), Repatriation Pharmaceutical Benefits Scheme, Stoma Appliance Scheme, and Take Home Naloxone Program.
$793 million boost to women’s health, focusing on reproductive health and menopause.
INDUSTRY & LOCAL MANUFACTURING
Enactment of National Competition Policy measures abolishing non-compete clauses.
$3.2 billion over 19 years from 2024–25 to invest in Australia’s metals industry, including $2 billion for the Green Aluminium Production Credit to accelerate the transition of aluminium smelters to renewable energy.
HOUSING
Expansion of the Help to Buy scheme with an $800 million equity injection into a government-operated fund to increase income caps for homebuyers and price caps on properties.
$16 billion increase in the Housing Australia liability cap.
$120 million allocated from the National Productivity Fund to remove state-imposed barriers to modular and prefabricated construction.
Prohibition on foreign purchasers acquiring existing dwellings for two years, effective from 1 April 2025.
DEFENCE
$61.7 million in 2025–26 to continue to provide regulatory, safety, and policy advice in support of Australia’s acquisition of nuclear-powered submarine capability.
The government will boost defence spending by $10 billion over four years. Funding for defence is about 2 per cent of gross domestic product, but this will grow to 2.3 per cent by the early 2030s.
INFRASTRUCTURE & TRANSPORT
$15.6 billion over ten years from 2024–25 for the new Infrastructure Investment Program, including $7.2 billion for safety upgrades on the Bruce Highway in Queensland.
$1.5 billion over eight years from 2024–25 for existing Infrastructure Investment Program projects or corridors, including $1.1 billion for the Western Freeway in Victoria.
For full details on the 2025-26 Federal Budget please click here.
