Treasurer Jim Chalmers has handed down the federal budget for 2025–26, just weeks ahead of the next federal election.
This was Chalmers’ fourth budget since taking office as Treasurer in 2022 but there had been doubts whether it would go ahead due to its proximity with the federal election.
In his speech, Chalmers said: “Our economy is turning the corner. Inflation is down, incomes are rising, unemployment is low, interest rates are coming down, debt is down, and growth is picking up momentum.
“On all these fronts, our economy and our budget are in better shape than they were three years ago.”
Regarding the deficit, Chalmers said the government has engineered the largest fiscal turnaround in a single term, with this year’s budget $207 billion better than what it inherited.
“In our first two years, we posted the first back‑to‑back surpluses in nearly two decades,” Chalmers said, underscoring the government’s fiscal prowess.
“Our deficit this year has almost halved since we came to office,” he added, with the $27.6 billion deficit for 2024–25 coming in at nearly half the level predicted in the PEFO.
“Next year’s deficit is $42 billion, lower than what was forecast at the last election, and lower than at the mid‑year update.”
Inflation is expected to be 2.5 per cent through the year to the June quarter 2025.
“Inflation has moderated substantially across both headline and underlying measures. Headline inflation was 2.4 per cent over the year to the December quarter 2024, which is less than a third of the peak observed in 2022. Inflation is now expected to be 2.5 per cent by the middle of this year, a quarter of a percentage point lower than forecast at MYEFO.”
Real GDP is forecast to grow by 1.5 per cent in 2024–25, 2.25 per cent in 2025–26 and 2.5 per cent in 2026–27.
The budget also said the government will amend the tax laws to clarify arrangements for managed investment trusts, to ensure legitimate investors can continue to access concessional withholding tax rates in Australia complementing the Australian Taxation Office’s strengthened guidelines to prevent misuse. This measure will apply to fund payments from 13 March 2025.
Commenting on the speech, Financial Services Council chief executive, Blake Briggs, said: “We congratulate the Treasurer for focusing on cost-of-living challenges facing Australians, and delivering stability and certainty for the financial services industry in advance of the federal election.
“As one of the largest contributors to the domestic economy, this continued fine tuning of the financial services framework is welcome, however there remains significant opportunity for the next parliament to refocus on economic growth and regulatory simplification opportunities to grow the economy.”
FAAA general manager, policy, advocacy and standards Phil Anderson said: “There is very little news in this Federal Budget and it is light on detail. Notable omissions for our profession include any CSLR or ASIC levy relief and no action on access to the ATO Portal.
“It is disappointing that the government has not been able to move ahead on a clear pathway in improving the accessibility and affordability of financial advice, at a time when an increasing number of Australians would benefit from professional quality advice.”
Looking ahead, Chalmers said key priorities for the Labor government include tackling inflation, rebuilding living standards, and leveraging national strengths for future growth.
The budget is built around five main priorities: easing the cost of living, strengthening Medicare, increasing housing supply, investing in education at all levels, and making the economy more productive and resilient.
Earlier this month, a survey of advisers by Viridian Advisory found the cost of living, the housing shortage and aged care policies were among the top concerns of their clients, and advisers reported they had received an “uptick in client enquiries” as the date drew closer.
However, advisers’ own views were more neutral, with 82 per cent saying they were neither optimistic or pessimistic towards the potential budget policies. An overwhelming majority (96 per cent) said they anticipated making only minimal shifts to their portfolio following the budget.
