Treasurer Jim Chalmers will deliver Labor’s fourth federal budget on Tuesday at 7:30pm, with promises of “substantial” cost-of-living relief and a pledge to maintain fiscal discipline amid ongoing global and domestic headwinds.
A budget that wasn’t supposed to happen
Originally, the government had planned to avoid handing down a budget at all. Prime Minister Anthony Albanese was widely expected to call an April 12 election, but the arrival of Tropical Cyclone Alfred earlier this month disrupted those plans. With the writs unsent, the government was forced to proceed with a full budget, now expected to serve as the launchpad for a May election.
Cost-of-living relief central to the budget
Dr Chalmers has made clear the budget’s central theme: targeted relief for Australians still struggling under the weight of high prices — but without fuelling inflation.
Key measures include:
- $150 electricity rebate for all households and 1 million small businesses in the second half of 2025.
- $25 cap on PBS prescription medicines from 1 January 2026, the lowest level in 20 years.
- Freeze on the PBS concession price at $7.70 per script until 2030.
- Continued support for bulk billing, as part of an $8.5bn investment in Medicare.
While the government has backed away from its 2022 pledge to cut power bills by $275, Chalmers defended the measures taken: “Electricity bills came off by 25% last year,” he said, citing last year’s $300 rebate and broader inflation data.
Budget numbers: modest improvements, larger risks
The budget is expected to forecast a cash deficit of $26.1bn for 2024–25, following a surprise surplus last year — Australia’s first in 15 years. Treasury has downgraded expected revenues by $11.3bn over the forward estimates, reflecting weaker commodity prices and a normalising labour market.
Wages rose 3.2% over the year to December, while inflation fell to 2.4%. Unemployment remains steady at 4.1%, and GDP grew 0.6% in the December quarter.
Despite these indicators, Chalmers warned that any revenue upgrade this year would be the “smallest of our four budgets by far.”
Natural disasters and external risks
The fallout from Cyclone Alfred will be reflected in the budget, with Treasury estimating a $1.2bn hit to GDP, including the loss of 12 million work hours and potential upward pressure on fruit and vegetable prices. Overall disaster spending is now expected to rise to $13.5bn, up from $11.6bn in December.
The budget also factors in global risks, including escalating US trade tensions. Modelling by Treasury suggests that Donald Trump’s proposed steel and aluminium tariffs would cost Australia less than 0.02% of GDP directly, but indirect effects could raise that to 0.1% — equivalent to around $3bn.
Investments in housing, healthcare and infrastructure
Housing affordability remains a focus, with:
- $850m to expand eligibility for Labor’s shared equity Help-to-Buy scheme.
- $49.3m to support modular housing initiatives.
In health, the government is:
- Expanding urgent care clinics with a $644m package.
- Investing $573m in women’s health, targeting reproductive care and menopause.
- Lifting public hospital funding by $1.7bn and providing $2.6bn for aged care worker wages.
On infrastructure, Queensland’s Bruce Highway will receive $7.2bn, while Victoria and western Sydney will benefit from multi-billion-dollar transport and rail investments. A further $1bn has been set aside for future rail corridors in western Sydney.
Defence and industry policy
- $272m for long-range missiles.
- $262m to support AUKUS-linked supply chains.
- $300m for the Whyalla steelworks, with up to $1.9bn flagged for infrastructure upgrades.
Opposition and election outlook
Shadow Treasurer Angus Taylor has criticised the government’s spending trajectory and hinted at deep cuts if the Coalition is elected, including:
- Reducing public service headcount by at least 36,000.
- Cutting permanent migration by 25%.
- Introducing spending caps tied to GDP growth.
- Potential cuts to NDIS spending growth, targeting a level as low as 3% (currently 8%).
But Taylor declined to provide detailed costings for these proposals, saying more would be revealed after the budget.
The Coalition supports the government’s $1.8bn power bill rebate extension but argues it offers short-term relief only, labelling it “a bandaid on a bullet wound.” Opposition Leader Peter Dutton is expected to deliver his budget reply speech on Thursday, with promises of new energy supply plans and further cost-of-living proposals.
Economic outlook and structural pressures
Treasury is expected to slightly downgrade growth forecasts from those issued in December, when GDP was tipped to grow 1.75% in 2024–25. Inflation is now tracking slightly below Treasury’s forecast of 2.75%.
Despite some fiscal improvements since Labor took office in 2022, the path back to a budget surplus remains uncertain. Chalmers has admitted a return to surplus “remains to be seen,” with structural pressures such as the NDIS (forecast to reach $60bn by 2030) weighing heavily on the budget outlook.
The road to the election
With most key policy measures already announced, Tuesday’s budget is expected to include “provisions” for additional spending to be revealed during the campaign. That includes potentially significant policies around childcare, where Labor has signalled aspirations for universal access, though details have been deferred.
Prime Minister Albanese is expected to call an election shortly after the budget is delivered, with May 3 or May 10 the most likely dates.
