Millions of workers will receive modest top-up tax cuts of around $10 a week as part of a pre-election Budget aimed at tackling crippling cost-of-living pressures.
In a strong pitch to win over millions of undecided voters, Treasurer Jim Chalmers’ fourth Budget also locks in additional spending on childcare, education, apprentices and Medicare – setting up an election battle with the Coalition over economic management and spending priorities.
The Coalition ruled out supporting the $17 billion tax cut package, with the Shadow Treasurer Angus Taylor claiming they were “an election bribe”. Business groups also roundly criticised the Budget claiming it failed to deliver meaningful reform to secure Australia’s economic future.
But having ruled out support for the Government’s tax cut, Opposition leader Peter Dutton is now under intense pressure to outline an alternative cost-of-living package in his Budget reply on Thursday night.
Just days before Prime Minister Anthony Albanese announces the May election, Dr Chalmers told a packed parliamentary chamber that Australia’s economy had “turned the corner” after several years of high inflation and weak growth.
The Budget confirms Australia’s economy will deliver higher wage growth on the back of strong employment figures. GDP growth is forecast to rise to 2.5 percent in 2026/27 – making Australia one of the world’s standout economies. Inflation is now forecast to fall to 2.5 percent by June, a small improvement on last year’s MYEFO numbers.
“Because of our collective efforts, the worst is behind us and the economy is now heading in the right direction,” Dr Chalmers said.
But the Budget also confirms the Commonwealth finances will be in the red for the next decade – and Commonwealth gross debt will hit the $1 trillion mark for the first time.
Last year’s surplus has been largely forgotten with the Budget now forecast to be $27.6 billion in deficit this year, rising to $42 billion in 2025/26. The Treasurer will be banking on the additional tax cuts and cost-of-living support outweighing the $179.5 billion in forecast deficits over the next five years in voters’ minds when they head to the polls in May.
With the latest SEC Newgate Mood of the Nation survey revealing cost-of-living easily tops voter concerns, the Budget’s focus was firmly on assisting household budgets.
Most of the Budget’s initiatives had already been announced, including a record $8.5 billion investment in Medicare and $150 energy rebates for both families and business owners.
Lower medicine costs and further student relief – through the HECS scheme – are also designed to win back voter support for Labor as opinion polls show the election contest is neck and neck.
Dr Chalmers admitted that cost-of-living pressures were “front of mind for most Australians, and it’s fonrt and centre in this Budget”.
In one of the few productivity enhancing reforms in the Budget, the Government will ban non‑compete clauses for low‑ and middle‑income workers. This will enable Australians to move more quickly to high paying, more productive jobs – or to start their own business.
But Ai Group CEO Innes Willox said the plan to ban non-compete clauses “is a disincentive to hire, train and upskill workers” and will lead to the “difficult renegotiation of employment contracts”.
Shadow Treasurer Angus Taylor led the Coalition’s attack against the Budget, claiming it had been designed for the “next five weeks, not the next five years”.
“At a time when living standards have suffered the biggest collapse on record … Labor’s budget has failed to deal with the economic and security challenges our nation faces,” Mr Taylor said.
Opposition leader Peter Dutton will outline his alternative vision on Thursday night through his Budget reply. Having ruled out support for the Government’s tax cuts, the Opposition leader will be under intense pressure to announce alternative cost-of-living relief. It is also clear he will challenge the Government’s spending record with Mr Taylor claiming the Budget “confirms there are deficits as far as the eye can see”.
The response from key business groups was also lukewarm. Business Council of Australia CEO Bran Black said the Budget “should have done much more to drive private sector growth”.
For further insights and what this means for you and your organisation. Reach out to SEC Newgate’s Canberra team.
Sara Hourigan, Partner, SEC Newgate Communications – [email protected]
Steve Lewis, Senior Adviser, SEC Newgate Communications – [email protected]
Kieran Phillips, Associate Partner, SEC Newgate Communications – [email protected]
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