AU2025 Federal Budget: Insights into the Risks, Reliefs and Election Strategies

By: Robin Zhang and Lachlan Cai

Posted: 6th April 2025

Introduction into Australia’s Federal Budget

The Australian Federal Budget 2025-26 outlines the government's priorities for spending and raising money for the next fiscal year. The budget addresses the key priorities of the year, which include reducing cost of living pressures, expanding access to healthcare, funding education and childcare, and providing assistance for housing and infrastructure. With new tax cuts and record funding in key areas like healthcare and housing, the budget aims to support everyday Australians and cater to their needs, whilst promoting long term economic growth. It reflects the Government's goals of making the economy more robust and guaranteeing that everyone has access to basic services.

Key Insights

Summary of Announcements

The Government will deliver two new tax cuts over two years, starting from 1 July 2026, the current 16% tax rate which applies to taxable income will be reduced to 15% and from July 1 2027 onwards, it’ll be reduced to a further 14%.In a historic move, the Government is making the largest investment in Medicare in over 40 years, being a $7.9 billion boost to expand bulk billing, making it easier for more people to see general practitioners for free. Going forward, the Government has committed $1.5 billion through the Housing Support Program to state, territory and local governments to fund projects such as improving planning capability, delivering infrastructure such as roads, water and power, and building more social housing. They are also offering $3 billion in incentive payments under the New Homes Bonus, up to $4.5 billion in funding is committed for states and territories to address infrastructure backlogs and deliver new housing. Finally, the Government is investing $5 billion towards building a universal early childhood education and care system through investments like $3.6 billion to lift the wages of early educators through the Worker Retention Pay. Together, these investments reflect the Government’s commitment to easing cost-of-living pressures while strengthening healthcare, housing, and early education across Australia.

Budget’s Revenue

The Australian government funds the federal budget mainly through taxation. The largest source of taxation comes from income tax paid by individuals, followed by company tax on business profits. Moreover, other key taxes include the Goods and Services Tax (GST), which is collected by the federal government and distributed to each state. In addition to taxes, the government earns non-tax revenue through fees such as passport and visa charges, profits from government-owned businesses, and returns on investments.

Key Sectors of Expenditure

Savings in Australia’s 2025-26 Federal Budget extend across multiple sectors, with major allocations directed toward Social Security, Healthcare, and Housing.

Social Security and Welfare remains the largest expenditure, comprising 37% of the budget, largely driven by the National Disability Insurance Scheme (NDIS). An additional $175.4 million AUD over four years has been allocated to enhance its integrity.

Healthcare, accounting for over 15% of the budget, sees $8.4 billion dedicated to expanding bulk billing, enabling 18 million additional GP visits. Further investments aim to lower prescription costs enabled by the Pharmaceutical Benefits Scheme (PBS).

In response to Australia’s housing crisis, government initiatives like the "Help to Buy" scheme seek to reduce deposit requirements and mortgage sizes on real-estate, making homeownership more obtainable for the typical Australian.

How would this impact our daily lives?

The 2025–26 Federal Budget introduces several key measures that will directly impact Australians' daily lives by alleviating financial pressures and improving essential services. Tax cuts will see the lowest marginal tax rate reductions increase take-home pay and boost disposable income for everyday expenses. The Energy Bill Relief Fund provides an additional $150 rebate for all households and over one million small businesses, easing the strain of rising utility costs. Healthcare support is strengthened through increased bulk billing budgets, making GP visits more affordable and accessible, increasing Australians’ general well-being. Meanwhile, the “‘Help to Buy” scheme aims to support homebuyers, making homeownership more obtainable amid Australia’s ongoing housing crisis. These measures aim to ease cost-of-living pressures, improve financial security, and enhance access to essential services for individuals and households nation-wide.

Rolling into the next Federal Election…

As the 2025 federal election nears, the 2025–26 Budget plays a crucial role in shaping voter sentiment. The government’s cost-of-living measures aim to ease financial pressures, but gaps in climate action and small business support could weaken its appeal.

However, the opposition (the Coalition Party led by Peter Dutton) counters with a more immediate relief plan, focusing on short-term financial aid, energy costs, and healthcare funding while proposing migration cuts and public sector reductions. As contrasting ideas dominate the political scene, it is critical for voters to reflect on their personal standing and the long-term sustainability of such issues.

In short…

Australia’s 2025–26 Federal Budget presents a strategic array of tax cuts, cost-of-living relief, and economic measures aimed at addressing current financial pressures while laying the foundations for future stability. The budget’s impact will be widely felt as households see tax reductions and energy rebates, businesses will navigate changes in funding and regulations, and the broader economy will adjust to shifting fiscal policies. However, challenges remain, particularly in supporting small businesses and climate initiatives. As the nation heads toward the 2025 federal election, this budget will undoubtedly influence political discourse and voter sentiment.