It was the budget that almost didn’t happen, but the federal government will let us in on its spending priorities for another year on Tuesday night in Canberra.
Not only will it mark the fourth budget being delivered by Treasurer Jim Chalmers, it will also be the final budget by the current federal government ahead of a rapidly-approaching election.
This year’s budget will have fewer surprises than years gone by, but there’s been a steady stream of announcements made by the government in recent months as part of its re-election pitch before voters head to the polls by May 17.
So if you’re partial to a spoiler — or simply don’t want to wait until 7:30pm AEDT tonight — here’s everything that we know about this year’s budget.
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The bottom line
- The budget will be in a deficit to the tune of around $26.9 billion. The government is also forecasting that the budget will remain in a deficit for the next decade.
- Treasurer Jim Chalmers says there are five priorities in this year’s budget: supporting the recovery from ex-Tropical Cyclone Alfred, cost-of-living support, strengthening Medicare, investing in education, and making the economy “more competitive, dynamic and productive”.
- This year’s budget forms part of the government’s pre-election pitch, meaning many of the announcements will only be delivered if Labor is re-elected by voters at the federal election, which has to be held by May 17.
Budget deficit
After delivering back-to-back budget surpluses for the first time in 10 years, the government has been preparing us for the pendulum swinging the other way — straight into a deficit.
In non-budget speak, a deficit means the government is spending more than it earns. This year, the government is going to be spending about $730 billion, and is forecasting a deficit to the tune of $26.9 billion.
But returning to a deficit isn’t surprising, as the budget has been in what’s known as a “structural deficit” for the better part of 20 years. (In fact, the past two budget surpluses have been mainly due to the economy performing above average, meaning higher tax receipts and lower welfare payments.)
Plus, the government has made no secret of this in its forecasts, outlining it in the budget last May, and again in its mid-year budget update in December.
And don’t expect the budget to return to surplus (or be “back in black”) anytime soon — the government is forecasting deficits for the next decade.
As for why the budget will be in the red? The short answer is falling commodity prices (which hurts mining exports like iron ore), weaker economic growth, and higher government spending on things like the NDIS, aged care, health and defence spending.
The budget won’t also be solely about spending either. The government has already pencilled in $2.1 billion worth of cuts to save some cash, including a $720 million saving by using fewer private consultants.
Energy bill relief
If the government is re-elected, households can expect more energy bill relief for the rest of the year.
From July 1, every household and about one million small businesses will have $150 in energy rebates automatically applied to their electricity bills every quarter.
It’s an extension of previous rebates offered by the government, and will cost the budget $1.8 billion over forward estimates.
According to the Australian Bureau of Statistics, the energy rebates have shaved 25.2 per cent off electricity prices, and have directly reduced headline inflation.
As for whether we could see further energy subsidies and other cost-of-living measures being announced on Tuesday night? Treasurer Jim Chalmers said we’ll “have to wait and see”.
Healthcare
This is a key area of focus for the government as it heads into the next election, and has made plenty of announcements in this space.
The government has already committed to spending $8.5 billion on Medicare in what it claims is the “single largest investment in Medicare since its inception more than four decades ago”.
The money will be spent over four years, and will go towards making nine out of 10 GP visits free by 2030 — equivalent to 18 million extra bulk-billed GP visits per year — and fund 400 nursing scholarships and 2,000 new GP trainees a year by 2028.
The policy itself would see Medicare payments increase for patients depending on where they lived, from $42.85 to $69.56 for a standard consult in a metropolitan area, to as much as $86.91 in a remote area.
As for the funding itself, Mr Chalmers said $5.4 billion had already been set aside for it in the mid-year budget update.
The government is also spending $644 million to fund 50 new urgent care clinics, a bulk-billed GP service, to open before the middle of 2026.
Once opened, the government says 80 per cent of Australians would live within 20 minutes of an urgent care clinic.
Cheaper medicine is also on the agenda, with $689 million to be spent over four years to reduce the cost of most medications listed on the Pharmaceutical Benefits Scheme (PBS).
Should the government be re-elected, it says four out of five medications on the PBS will cost a maximum of $25, down from $31.60 — saving Australians a combined $200 million a year.
(Pensioners would continue to pay $7.70 for PBS medicines, with that price locked in until 2030.)
The government had made the announcement long before American drug companies urged the US government to impose reciprocal tariffs on Australian pharmaceutical imports as punishment for its “discriminatory” PBS subsidies.
There’s also $573 million set aside for women’s health, which is specifically focused on supporting reproductive health and menopause.
Education
Last November, the government confirmed it would cut HECS-HELP debts by 20 per cent to ease cost of living pressures for young Australians.
The change would mean a university graduate with an average debt of $27,600 would have approximately $5,520 removed from their loan.
The announcement followed a previous commitment by the government to reduce the amount of money graduates have to repay each year, and allow them to earn more before having to pay down their HECS-HELP debts.
All up, the two measures would cost the budget more than $500 million.
The government has also committed to providing 100,000 fee-free TAFE places every year should it be re-elected, and make the scheme permanent nationwide.
Housing
With a housing crisis gripping the country, this is a key area for the government, and has already committed to spending $9.2 billion on social and affordable housing over a decade.
The government also wants to broaden its “Help to Buy” scheme to allow homebuyers to “co-buy” their property with the government, which would reduce the size of their deposit and mortgage needed to buy a home.
Under the scheme, the government owns either a 30 per cent stake of an existing home (or 40 per cent of a new build), which the home owner can buy out over time.
But the changes put forward by the government would see it increase the income cap for homebuyers and price cap on properties.
The changes would cost an extra $800 million, with the government offering a total of $6.3 billion under the Help to Buy scheme.
(The scheme itself hasn’t even started yet, with applications expected to open later this year provided the government is re-elected.)
Childcare
Families with young children will benefit from receiving three days of subsidised childcare, after the measure passed the Senate in February.
From January next year, parents will be guaranteed a minimum of three days of subsidised childcare regardless of how much they work or study — provided they don’t earn more than $533,280.
As part of the guarantee, the government also abolished the activity test requirement introduced in 2018, which required a parent to work, study or volunteer to receive the subsidy.
The government expects around 66,700 families will benefit from the guarantee in its first full year, and a further 100,000 families will be eligible for additional hours of care.
All up, the government spends around $15 billion of taxpayer funds on childcare subsidies.
The government has committed to creating a $1 billion fund to help build more than 160 childcare centres “where they are needed the most”.
And despite shocking allegations about Australia’s childcare sector aired by Four Corners last week, don’t expect any money to be set aside for a royal commission into the industry — Anthony Albanese has rejected the idea.
Cyclone Alfred
Tuesday’s budget may not have even happened if it wasn’t for ex-Tropical Cyclone Alfred hitting south-east Queensland and northern NSW in early March — but it has made the government’s forecasts a little more challenging.
The clean-up bill alone from ex-Tropical Cyclone Alfred is projected to cost the budget a cool $1.2 billion, and wipe 0.25 percentage points off the economy’s gross domestic product in the three months to March.
But we’ll get a better idea of just how much the cyclone and the destruction it left behind will cost our economy on Tuesday night — and what measures, if any, the government will announce to support those affected communities.
Any announcement will also be on top of $11.6 billion in disaster support outlined by the government in the mid-year budget update.
Aviation
We can expect to see some cash set aside should the government decide to buy embattled airline Regional Express.
The airline entered voluntary administration last July, with the government handing over $80 million last November to ensure Rex’s regional flights would remain operational.
In January, the government became Rex’s largest creditor, buying up $50 million worth of debt — but less than a month later, it confirmed that it would purchase the airline if a new private owner for the business couldn’t be found.
If that were to happen, Rex would become the first nationally-owned airline in three decades.
It’s unclear exactly how much the government would fork out to buy Rex, but the airline owed creditors around $500 million when it collapsed last year.
(Of course, this all depends on no private company coming forward to take on the business — a second sales process is currently underway, and administrators for the airline have until the end of June to secure a sale.)
Industry and infrastructure
In mid-January the government announced $2 billion in production credits to support the creation of a “green aluminium” sector.
The pre-election policy would see aluminium producers paid a yet-to-be-determined amount for every tonne of the metal they made using renewable energy before 2036, and is similar to measures in place for critical minerals and solar panels.
That announcement came months before US President Donald Trump imposed a 25 per cent tariff on steel and aluminium imports, which comes into effect on April 1.
Speaking of steel, the government is also spending $2.4 billion on a support package for the Whyalla steelworks, which entered administration in February.
The federal government has also committed to funding 80 per cent of the Bruce Highway upgrade in Queensland, costing taxpayers $7.2 billion.
Donald Trump
We can expect to learn a lot more about how the government sees the impact of US President Donald Trump on the global economy, and how it will affect us here in Australia.
The biggest factor here is the 25 per cent tariffs imposed on Australia’s $1 billion steel and aluminium exports, which Treasury estimates will hurt the economy’s GDP by 0.02 per cent by 2030.
However, taking indirect impacts into account, that cost would increase to $3 billion, or 0.1 per cent of Australia’s total GDP.
Depending on how the trade war escalates, and how it impacts our biggest trading partner in China, we could be on the hook for even more economic pain.
Regardless, we’ll get a better idea of how the current state of play of Trump’s tariffs will affect the budget bottom line.
Defence
The government is bringing forward $1 billion in defence spending to help boost Australia’s military capability, with the budget to contain an increase of $10.6 billion for defence over the next four years.
That’s on top of a previously announced $50 billion commitment to defence spending over a decade.
In addition, our spy agencies will receive an extra $45 million in funding from the government after it released a long-awaited independent review into the nation’s intelligence capabilities.
The government has also committed to spending $272 million on Australian-made radars, $650 million to stock up on long-range missiles, and $262 million to develop the supply chains needed to support the AUKUS submarines.
Beer
Yes, really. The government is going to freeze the draught beer excise indexation for two years from August.
That’ll mean the budget misses out on about $200 million in tax revenue, but the government says it’s a win for “beer drinkers, brewers and hospitality businesses”.
The government has also announced tax relief for Australian distillers, brewers and wine producers.
Any other hints?
We can expect more measures from the government to support Australian-made products, in direct response to the tariffs introduced by the Trump administration.
The government has also already set aside $2.9 million to respond to the ACCC’s report into the supermarket sector, which was released last week.
And sorry to be the bearer of bad news, but don’t expect any major tax reform like we saw in last year’s budget with the revised Stage 3 tax cuts.
Will any of this happen before the election?
The government has already said that it wants to get the $150 energy bill relief through parliament this week while MPs are in town for the budget, and it’s likely to be passed without much issue.
As for the rest of the measures, it’s unlikely given how long it takes for legislation to be drafted and passed through both houses.
Plus, the clock is ticking on the federal election — and given it has to be held on or before by May 17, the latest possible date the election could be announced is April 14.
That’s because there must be a minimum of 33 days between the writs being issued by the governor-general to dissolve parliament after the prime minister calls the election and polling day.
Either way, once the budget is delivered on Tuesday night, all eyes will be on Anthony Albanese making a trip to the governor-general to call the election.
What about the Coalition?
So far, the Coalition has promised to match a number of the government’s spending priorities dollar-for-dollar — including the $8.5 billion for Medicare, with an additional $500 million for mental health support.
Coalition frontbenchers Angus Taylor, Jane Hume and Nationals leader David Littleproud have also supported the extension of the government’s energy bill relief, despite Opposition Leader Peter Dutton criticising the payment.
The Coalition has also outlined some of its own policies ahead of the election, including a pricey plan for nuclear power, a return to tax-free corporate lunches, a $5 billion housing infrastructure fund, and plans to cut 36,000 public service jobs.
We can expect to hear more about the Coalition’s policies, and any other measures from the government it will match, when Peter Dutton delivers his budget reply speech on Thursday.
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