In an unexpected move, the federal budget unveiled by Treasurer Jim Chalmers details a $17 billion tax cut plan that will benefit every taxpayer in Australia, although its implementation won’t begin until 2026. This strategy seeks to alleviate the burden of rising living costs while managing a substantial budget deficit, which stands at $27.6 billion—a figure exceeding initial forecasts and marking the nation’s first deficit since 2022.
The budget projections indicate ongoing deficits for the foreseeable future, including estimates of $42.1 billion in 2025-26 and $35.7 billion in 2026-27. While the 2024 figure is slightly improved from prior assessments, future years are expected to worsen as tax cuts take effect.
Key features of the tax plan involve reducing the rate for individuals earning between $18,201 and $45,000 from 16% to 15% in 2026-27, and again to 14% the following year. Taxpayers can anticipate a cut of $268 in 2026-27 and $536 in 2027-28. The Treasurer highlighted that these tax adjustments would be the lowest rates seen in over fifty years.
In addition to the broad tax cuts, there is a $648 million initiative to lift the Medicare levy’s low-income thresholds, with further investments aimed at supporting low- and middle-income earners.
Treasury forecasts a modest recovery in real wages, predicting a growth of 0.5% by year-end, coupled with GDP growth anticipated at 2.25% in 2025-26. Inflation is projected to stay within the Reserve Bank’s target range for the next three years, while a small increase in unemployment is expected.
The budget also outlines significant investments in the aged care and childcare sectors, including $2.6 billion for increased pay for aged care nurses and a 10% pay rise for childcare workers, alongside an additional 5% increase later this year. Further support for families includes $150 rebates for energy bills and reductions in prescription medication costs.
The government’s approach also addresses the need for expanded Medicare services, with a commitment of $8.5 billion to broaden bulk billing access, aiming for nine out of ten GP visits to be free by 2030.
Chalmers acknowledged the pressing global economic uncertainties, notably mentioning the ramifications stemming from ongoing international trade tensions. Despite the challenges, the budget aims to stimulate local consumption, with investments focused on promoting Australian-made products and enhancing productivity in crucial industries.
As Australia navigates these complex economic conditions, the budget reflects a commitment to supportive measures while prudently managing the nation’s financial health.