2025-26 Federal Budget Overview

Treasurer Jim Chalmers handed down his fourth federal budget last night, revealing a $42.1 billion budget deficit for 2025-26, following a forecast deficit of $27.6 billion for the 2024-25 financial year.

While this budget was not expected to be delivered, it served as a launchpad for the Government’s federal election campaign (which is likely to be formally called as early as this Friday) and saw the surprise announcement of further income tax cuts as part of the Government’s focus on easing cost of living pressures.

From an economic outlook perspective, there was positivity from the Treasurer; inflation is down, incomes are rising, employment is up, and interest rates are down. Growth is projected to increase to 2.5% (up from 1.5%), driven by private sector growth. Unemployment is expected to peak at 4.25%, which is lower than previously anticipated. Inflation is set to sustainably return to the RBA’s target band around the middle of this year, with wages forecast to grow by 0.5%.

This, however, is set against a backdrop of a decade of structural deficits which will see Australia’s net debt climb towards $1 trillion by the mid-2030’s.

Of course, this all sits in the midst of extreme international uncertainty. The budget acknowledges the unstable global economic conditions, including the looming US trade wars, China's economic slowdown, and conflicts in Europe and the Middle East. These factors contribute to a volatile economic environment, impacting global trade and investment.

Key Focus Areas

Cost of Living: The budget places a strong emphasis on addressing cost-of-living pressures through various measures, including tax cuts, increased bulk billing, and student debt adjustments.

Tax Cuts: The surprise announcement means every Australian will receive a tax cut from July 1, 2026, with the lowest tax rate reducing to 14% by 2027. This is part of a $17 billion tax relief package aimed at easing cost-of-living pressures. Additionally, $1.8 billion has been allocated for energy bill relief for households and small businesses, providing $150 per household.

Housing: A $33 billion plan was included that is said will build 1.2 million new homes by the end of the decade. This includes $54 million to accelerate the uptake of modern housing construction methods, doubling incentive payments to apprentices in the housing construction sector, and expanding the help-to-buy scheme with increased eligibility.

Infrastructure: The budget includes a $120 billion infrastructure investment across the country. For Victoria this includes $2 billion for transforming Sunshine Station a $1 billion road blitz.

Defence: An extra $50.3 billion will be allocated for defence by the mid-2030s, with defence spending expected to grow beyond 2.3% of GDP by the early 2030s.

Healthcare: The budget includes an $8.5 billion investment into Medicare to lift bulk billing rates and build the health workforce. The goal is for 9 out of 10 GP visits to be bulk billed by the end of the decade, along with the establishment of 50 new Medicare Urgent Care Clinics. Every state and territory will receive funding, including $1.8 billion for public hospitals and $793 million for women’s health.

Aged Care: $2.6 billion has been allocated to fund pay rises for aged care nurses starting from July 1, 2025.

Education: The budget includes $5 billion to expand childcare access and lift wages for early educators. Public school investment will be increased to achieve the recommended levels under Gonski Review, and free TAFE will be extended for 100,000 places through to 2027.

Other Measures: The budget also includes a 20% cut to all student loan debts, a reduction in the maximum price of PBS scripts from $31.60 to $25, and a $1.8 billion investment to list more medicines on the PBS. Non-compete clauses will be abolished for most workers, and a national licensing scheme will be introduced to allow electricians to work across borders.

What’s in it for Geelong?

From a Geelong perspective, while many of these measures will impact individuals and business in the Geelong region on a general basis, there are few standout announcements with direct impact for our city.

• One of the 50 new Medicare Urgent Care Clinics is slated to be built in Torquay, welcome news to Surf Coast residents and something that will ease pressure on the emergency department at University Hospital Geelong.

  
  

• The infrastructure spending for Victoria includes upgrades to Sunshine station, which will provide improved public transport access for Geelong residents to Melbourne Airport, however the Road Blitz funding is ear-marked for suburban Melbourne. Last week’s announcement that the Federal Government will allocate a further $68m towards the completion of stage 2 of the Barwon Heads Rd after to restore the project to its initial scale is a positive.

  
  

• Increased defence spending over the coming decade does provide an opportunity for Geelong, with the growing defence sector in our region. As defence spending increases, so too can the economic impact in Geelong.

  
  

• Further detail is needed, but investment in increasing housing supply would also be welcomed given the forecast growth in population and needed housing within Geelong.

The budget set the tone for the election - let’s see what specific announcements for Geelong come during the campaign.