Federal Budget 2025

The 2025-26 Federal Budget, held on March 26, revealed the Albanese government's first deficit since taking power in 2022.

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Forecasts for 2024-25 were revised to show a $27.6 billion deficit, and forecasts show the deficit is expected to grow to $42.1 billion in 2025-26 before a gradual decline.

Despite the deficit, the government said the bottom line was still in a better position than how it was handed over by the Coalition.

"The government's responsible economic and fiscal management has delivered a stronger Budget, with the first back-to-back surpluses in nearly two decades and smaller deficits and lower debt compared to the 2022 Pre-election Economic and Fiscal Outlook (PEFO)," Budget documents said.

"The Budget position is cumulatively $207 billion better than PEFO over the seven years to 2028-29. The deficit in 2024-25 is almost half what was forecast at PEFO."

Treasurer Jim Chalmers announced a raft of spending measures as it prepared to announce the federal election - which has now been set for May 3. These include cost-of-living relief, cutting student debt, tax cuts and more investment into infrastructure and healthcare.

In his speech to parliament Chalmers said the Australian economy was "turning a 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," Chalmers said.

"This progress has been exceptional, but not accidental. The credit belongs to Australians in every corner of our country. We've come a long way, but there's more work to do."

New tax cuts 'a complete joke'

Chalmers declared that cost-of-living pressures were "front and centre," unveiling two surprise tax cuts for all Australian taxpayers.

From 1 July 2026, the 16% tax rate, which applies to taxable income between $18,201 and $45,000 will be reduced to 15%, with a further reduction to 14% effective from 1 July 2027.