By Rachel Waterhouse, CEO, Australian Shareholders’ Association

The Government’s pre-election 2025–26 Federal Budget introduces several measures aimed at helping to reduce the cost of living, with tax cuts, funding for bulk billing and cheaper medicines, support for electricity bills, and plans for housing, education, and local businesses.   

Although Treasurer Jim Chalmers states that the Budget is not aimed at the election itself, it is clear that some of the announcements, such as the proposed tax cuts, are designed to create points of difference with the Coalition.   

The Economy 

Given a volatile global economy, with trade disruptions, slowing growth in China, and conflicts in Ukraine and the middle east, the Government anticipates growth in the global economy of 3¼ percent for the next three years, the slowest since the 90s, and warns of reduced growth in the two biggest economies.   

At home, it predicts growth to increase from 1½ percent in 2025-26 to 2½ percent the following year, although it warned that there could be a ¼ percentage point drop because of Ex-Tropical Cyclone Alfred and floods in North and Far North Queensland.   

Demand in the private sector is expected to double next year, while unemployment is projected to peak lower at 4¼ percent.   

Real wage growth is likely to be stronger and a drop in inflation is anticipated.   

However, the surpluses of the past couple of years have ended, with deficits predicted for this year of $42 billion.   

Taxation 

The Budget announced several measures the Government claims will reduce cost-of-living pressures, including:   

• $17 billion in new tax cuts, reducing the rate between $18,201 and $45,000 to 15 percent from 1 July, 2026, and to 14 percent from 1 July, 2027, adding to the tax cuts provided previously;  
• an increase in the Medicare levy low-income thresholds by 4.7 percent for singles, families, and seniors, from 1 July, 2024;  
• $999 million over 5 years to the ATO to crackdown on domestic and multinational tax avoidance; and  
• funding to proceed with additional taxes on earnings for superannuation balances exceeding $3 million (see the box below).   

Superannuation Tax Adjustments  

In the Budget, the Government will proceed with plans to introduce an additional tax on earnings where total superannuation balances exceed $3 million. This includes taxing unrealised gains — by calculating the change in the market value of a member’s total super balance over the financial year.   

ASA acknowledges efforts to minimise additional reporting burdens for super funds, but taxing unrealised gains is inappropriate due to the long-term, volatile nature of investment returns. Gains are often irregular, and taxing “paper profits” risks forcing investors to sell assets in poor market conditions simply to cover tax liabilities.   

This could lead to artificial downward pressure on asset prices and unintended consequences for investors whose balances fluctuate around the $3 million threshold.   

ASA continues to call on the Government to reconsider this approach and supports superannuation policies that are fair, consistent, and designed to encourage long-term wealth creation.   

Cost‑of‑living relief 

The Budget announced several measures the Government claims will reduce cost-of-living pressures, including:   

• $1.8 billion to energy bill relief until the end of 2025, cutting $150 off bills, and applying pressure through ACCC on companies to offer cheaper deals to customers;  
• empowering the ACCC by making the Food and Grocery Code mandatory, increasing penalties, and boosting competition, to target excessive surcharging, scams, and unfair trading by supermarkets;  
• cutting 20 percent off all student loan debts, raising the minimum repayment threshold, and reducing repayment rates.   

Wages 

The Budget introduces increases to support real wages and introduced reforms for certain sectors:   

• $2.6 billion to fund pay rises for aged care nurses from March this year;  
• support for an increase for the early childhood education and care workforce;  
• support for pay rises to ensure the National Minimum Wage has risen by almost $7,500 a year; and  
• reforming non‑compete clauses, to improve mobility and lift wages by up to $2,500 for workers covered by them.   

Social support 

Further funding has been allocated for the disadvantaged:   

• $1.3 billion for Closing the Gap and economic self‑determination for First Nations Australians, including investing in remote community services, business opportunities, and home ownership;  
• $424 million for Australians with a disability;  
• more funding for aged care reform;  
• more funding to support veterans; and  
• a further $1.2 billion to support recovery from ex-Tropical Cyclone Alfred, as part of $13.5 billion in natural disaster funding.   

Health care 

The Government’s Budget announcements have focused on Medicare and medicines, with additional funding for hospitals and women’s health:   

• $8.5 billion to lift bulk-billing rates and build our health workforce, suggesting that 9 out of 10 GP visits should be fully bulk-billed by the end of the decade, saving patients around $860 million per year;  
• $644 million to create add 50 Medicare Urgent Care Clinics to the 87 already open;  
• a reduction of the maximum price for PBS medicines to $25, with no change to pensioner caps;  
• $1.8 billion to list more life‑changing and life‑saving medicines on the PBS;  
• an extra $1.8 billion to the states and territories to fund public hospitals;  
• new incentives for doctors to train as GPs and new scholarships for nurses and midwives; and  
• $793 million in additional funding towards women’s health care.   

Housing 

The Budget included initiatives to assist with housing, as part of a $33 billion plan to help build 1.2 million new homes before the decade is out, including:   

• $54 million to accelerate the uptake of modern methods of housing construction, cut red tape, and reduce financial barriers to more efficient practices;  
• lifting the cap on Housing Australia’s financial liabilities to $26 billion;  
• ensuring that new properties are well‑located and connected to the infrastructure they require;  
• encouraging states and territories to reform planning systems to accelerate supply;  
• attracting more apprentices to the housing industry by doubling incentive payments to $10,000 if they train in the sector; and  
• expanding the Help to Buy scheme for first home buyers.   

Education 

Education is being supported across the board in the Budget, including:   

• from January 2026, replacing the Child Care Subsidy activity test with a new Three Day Guarantee of subsidised early childhood education and care;  
• investing $5 billion to build more childcare centres in areas of need and lift the wages of early educators;  
• putting billions more into public schools;  
• $1.6 billion to fund 100,000 Free TAFE places annually from 2027 until 2035, for vocational training.   

Productivity 

The Budget aims to support productivity growth with:   

• a $900 million fund to reward state governments for implementing reforms that promote competition;  
• a national licensing scheme to allow electricians to work seamlessly across borders; and  
• support for small businesses to protect them from unfair trading and resourcing the regulator;  
• funding the Buy Australia plan to support local producers; and  
• delivering tax relief for hospitality venues, brewers, distillers and wine producers.   

Industry support 

The Government’s initiative A Future Made in Australia will:   

• invest more than $3 billion to support the production of Australian‑made green metals, like aluminium and iron; and  
• build on the tax incentives for critical minerals and green hydrogen legislated this year;  
• $2 billion to the Clean Energy Finance Corporation to help to develop new industries in clean energy manufacturing, green metals, and low carbon liquid fuels, and to unlock private investment.   

Regions 

The Budget will provide support to the regions, by:   

• $3 billion in additional equity to complete the rollout of the National Broadband Network;  
• $17.1 billion over 10 years for road and rail projects; and  
• $262 million for preservation and conservation of natural land and ocean assets.  

Defence 

Investment in defence will include:   

• an extra $50.3 billion by the mid‑2030s, taking funding up to 2.3 percent of GDP; and  
• $45 million in the initial response to the 2024 Independent Intelligence Review.   

What does this mean for investors?  

While many Budget measures aim to ease cost-of-living pressures, they also present opportunities and risks for retail investors. Changes to superannuation taxation remain a critical area requiring close attention.  

As this is a pre-election Budget, the final direction of some proposals may depend on the outcome of the upcoming federal election. The Opposition Leader is expected to deliver his Budget reply on Thursday.

ASA will continue to advocate for policies that support independent, long-term investors.