📈2025-26 Federal Budget: Winners and Losers - April 2025 📈

On the 25th of March, the Labor Government delivered its proposed 2025-26 budget which is to be implemented if they are re-elected in the federal election in May. The budget primarily focused on relieving the cost of living and housing crises, providing tax cuts and lowering medical costs.

It forecasted a deficit of $42 billion, with $785.7 billion of government spending. Following a larger deficit than 2024-25, the Labor government additionally forecasts further deficits for the next 5 years, opposing a historic aim of fiscal consolidation.

A major policy from the 2025-26 budget is the proposed cuts to household income tax. The rate of tax paid on earnings between $18,201 and $45,000 will be reduced from 16 per cent to 15 per cent from 1 July 2026. The following July, the rate is proposed to be cut further to 14 per cent. However, for any income brackets above $45,000, the rate of taxation is unchanged as they have been subject to prior reforms. This is likely to increase consumer spending for lower income households which will drive economic growth. With annual GDP growth currently at 1.3%, well below the long-term average of 3-4%, tax cuts could stimulate household spending and contribute to economic stability.

Furthermore, the government proposed an expansion of the existing Help to Buy Scheme, costing $6.3 billion. The scheme provides 40,000 eligible buyers with up to a 40% shared equity contribution towards their home, requiring a deposit as low as 2%. In return, the government retains a share of the property’s ownership, which households can later buy out. While this measure may improve homeownership accessibility, it could also drive demand-pull inflation in the housing market, potentially contributing to further price increases. Additionally, the government has committed to increasing the Medicare income levy threshold by 4.7%, which will cost them $648 million over the next 4 years. Further, it has proposed a $150 energy rebate for all households that will cost the government $1.7 billion.

These policies indicate increasing significance of issues such as the cost of living and housing crises, in the face of an election in May. However, while such reforms may assist consumers and businesses in the short term, continuous expansionary policies may cause high inflation and increased government debt in the long run.

__ 

Want more? We offer both physical teaching at our Parramatta and Burwood campus, as well as online with CREST+. Visit www.cresteconomics.com and enquire now for a free TRIAL lesson. 

#economics #news #update #hsc #prelim #exams #tutoring #education #coaching #crest

Image source: AAP/Lukas Coch