Economic snapshot
Where the 2025/26 Budget was deliberately light on reform measures and dominated by cost-of-living relief and personal income tax cuts, the 2026/27 Budget is anchored by a structural tax reform package, with key revenue raising measures (CGT and negative gearing reforms and taxing discretionary trusts) estimated to raise more than $8 billion across the forward estimates and into the medium term.
This Budget is framed around achieving ‘a more resilient nation’ — it is the Government’s response to ongoing geopolitical uncertainty that is expected to curtail global growth and spike inflation, to fuel supply disruptions, and the need for structural tax reform to address intergenerational fairness and boost productive investment.
The Government notes that the Australian economy is not immune from global uncertainty and volatility but maintains that the country is well placed to confront it, with faster growth than any major advanced economy, low unemployment and solid wages growth. Treasury now expects global growth to slow from 3.5% last year to just 3% this year and forecasts inflation in Australia to peak around 5% in the middle of the year.
The Budget deficit for 2026/27 is $31.5 billion, an improvement of $2.8 billion compared with the Mid-Year Economic and Fiscal Outlook and projected to return to balance in 2034/35. The Government is investing heavily in social security and welfare, defence, education, health, and fuel security. Simultaneously, the Government has delivered a temporary 60.9% reduction in fuel excise and excise equivalent customs duty — the deepest cut in Australian history — costing $3.8 billion and equating to a 32 cent per litre reduction for petrol and diesel.
The result is a Budget that simultaneously aims to deliver cost-of-living relief, while undertaking one of the most significant structural reforms of Australia’s income tax base since the Ralph Review and the introduction of the 50% CGT discount in 1999. New revenue raised from the tax reform packages is said to be returned to workers and businesses.
