Federal Budget 2025-26

Federal Budget 2025-26

Updated 25 March 2025

Treasurer Hon Jim Chalmers has handed down the 2025-26 Federal Budget.

The 2025-26 Budget paints a picture of an economy that is achieving a soft landing – where inflation returns to the target band without stalling the economy. Economic growth is forecast to increase 1.5% in 2024-25, rising to 2.25% in 2025-26 and 2.5% in 2026-27. The public sector has been driving economic growth over the last two years with high levels of government expenditure and investment. This is forecast to drop over the next two years as the private sector recovers off the back of increased household consumption, dwelling investment and business investment.

Inflation has fallen faster than previously forecast, reflected by the Reserve Bank of Australia’s recent interest rate cut. Headline inflation, which sits at 2.4% for the 12 months to December 2024, is forecast to remain within the RBA’s target band of 2-3% throughout the forward estimates even after a spike as the electricity credits come to an end.

The labour market is expected to remain strong with the unemployment rate peaking at 4.25% through the forward estimates. Employment growth is expected to ease from its recent high levels as wages growth tracks above inflation leading to an improvement in living standards and an easing of cost-of-living pressures.

Significant risks to this forecast persist. Global trade tensions, protectionism and increasing tariffs are creating uncertainty for businesses and households, potentially impacting global growth. As a relatively open economy, Australia, particularly Western Australia’s export sector, may be significantly affected by a slowing global economy.

WALGA Perth

At a glance

Treasurer Chalmers reported a $27.6 billion deficit for the 2024–25 financial year, which is forecast to increase to $42.1 billion by 2025–26, with ongoing deficits expected in future years. Gross debt is projected to surpass $1 trillion during 2025–26, adding pressure on subsequent Budgets to manage rising interest payments.

WALGA's analysis and commentary

Overview

With Prime Minister Albanese expected to call the election in coming days, the Government has taken a cautious approach to the 2025-26 Budget. There is a clear focus on responsible fiscal management and investment in voter priorities such as addressing the cost of living, improving healthcare, boosting education and access to housing. 

Treasurer Chalmers reported a $27.6 billion deficit for the 2024–25 financial year, which is forecast to increase to $42.1 billion by 2025-26, with ongoing deficits expected in future years. Gross debt is projected to surpass $1 trillion during 2025–26, adding pressure on subsequent Budgets to manage rising interest payments.

Although the Government was unable to sustain the surpluses achieved in the previous two years, the overall financial position is stronger than projected in the Pre-Election Financial Outlook. This improvement is due to $94.1 billion in savings and reallocated spending, including reforms to the National Disability Insurance Scheme (NDIS), adjustments to the infrastructure investment program, and improved tax enforcement measures. 

Importantly for Local Governments, the Budget retained its commitment to a number of key funding programs for the sector including Financial Assistance Grants, Roads to Recovery and the Black Spot Program. However, it missed the opportunity to invest in other key initiatives identified in WALGA’s 2025 Federal Election Priorities, with no new spending provided for the sector. The priorities present a plan to build community resilience through strategic investments and policy reforms in critical areas such as community infrastructure, coastal management, emergency management, regional health, road safety and telecommunications. 

The absence of new funding for Local Governments is not surprising given that this was a pre-election Budget. WALGA will be looking to the Government to commit to these important initiatives in the lead up to the election. 

Addressing the high cost of living was instead a central focus of the Budget. Measures include a new round of personal income tax cuts effective from 1 July 2026 for all taxpayers, alongside a $1.8 billion investment to extend energy bill relief for households and small businesses through to the end of the financial year. Additional initiatives include increases to minimum wages and award wages, reduced costs for medicines under the Pharmaceutical Benefits Scheme, and enhanced funding for the ACCC to better safeguard consumers.

Healthcare was also a priority, with the Government committing $7.9 billion to strengthen Medicare by improving bulk billing rates, $1.8 billion for public hospital funding, an additional 50 Medicare Urgent Care Clinics, and $662.6 million to expand and train the health workforce. Women’s healthcare also received targeted support, aiming to improve affordability and choice. 

The Budget also includes a $33 billion plan to make buying and renting more affordable and to accelerate the construction of new homes. This includes $4.5 billion for States, Territories and Local Government to address local infrastructure backlogs and meet housing targets.

Education funding was another significant focus, with $5 billion dedicated to establishing a universal early childhood education and care system that guarantees at least three days of subsidised care per week. Free TAFE programs have also been made permanent. 

The Government's ‘Future Made in Australia’ policy also received additional funding, with over $3 billion directed towards green metals production and $2 billion to expand the Clean Energy Finance Corporation.

The Budget also contained significant funding to address other challenges facing Australians, including provisions for $1.2 billion to fund response and recovery from ex-Tropical Cyclone Alfred and other disasters; $3 billion to complete the National Broadband Network; $130 million in secured loans to keep Rex Airlines operational; and $262 million to support environmental protection. 

Importantly for regional communities, the Budget also confirmed the Government’s commitment to ensure the major banks continue to operate over 800 of their branches in regional and remote Australian until at least 31 July 2027.

Read ALGA's commentary.

Local Government Priorities

  • Financial Assistance Grants

In 2025-26, $3.45 billion has been provided for Financial Assistance Grants funding, with WA to receive $423.6 million. The magnitude of these grants is estimated to be 0.51% of Commonwealth Tax Revenue, the same as last year. The Federal Government has announced they will continue to work with States in relation to the financial support of the Local Government sector, including advancing funding earlier than would usually occur.

WALGA has requested that the Australian Local Government Association request further information from Treasury on the scale and timing of Financial Assistance Grants payments to assist Local Governments to set their budgets.

  • Roads to Recovery Program

The Budget confirms continuing delivery of the commitment announced in late 2023 to double Roads to Recovery funding to Local Governments by 2027-28. WA Local Governments are allocated 14.6% of the national total funding. The program is forecast to deliver $95 million to WA Local Governments in the current financial year, and budgeted to increase 23% to $117 million in 2025-26 followed by increases of 18.7% in 2026-27 and a further 5.3% in 2027/28.

WA's allocation of the Roads to Recovery program is as follows:

2024-25         $95.0 million
2025-26         $117.0 million
2026-27         $138.9 million
2027-28         $146.2 million
2028-29         $146.2 million 

The program remains an allocation over a five-year period, allowing Local Governments some flexibility to move funding between years within the program.

  • Black Spot Program

Nationally, funding for the Black Spot Program, which funds safety improvement works in places where there have been serious crashes or where serious crashes are likely to occur, has been increased by 14% in 2025-26 to $150 million per year, in accordance with previous announcements.  

The indicative allocation for WA increases from $16.8 million in 2025-26 increasing to $18.4 million in 2027-28.

  • Safer Local Roads and Infrastructure Program

The Australian Government has combined the former Bridges Renewal Program and Heavy Vehicle Safety and Productivity Program into a broad-based program targeting improvements to the safety and productivity of the local road network. The Budget provides $38.5 million for projects in WA in 2025-26 and a further $31.0 million in 2026-27. Western Australia is expected to secure around 12.4% of the funding available. However the funding provided nationally falls from $310 million in 2025-26 to $215 million in 2027-28 suggesting a lack of commitment to ongoing funding for this program.

WA's allocation of the Safer Local Roads and Infrastructure program is as follows:

2024-25         $35.9 million
2025-26         $38.5 million
2026-27         $31.0 million
2027-28         $26.7 million
2028-29         $26.7 million 

  • New Large Scale Transport Infrastructure Investments

The Budget does not commit the Australian Government to new transport infrastructure investments in WA that have not already been announced over recent months.  The Kwinana Freeway upgrade announced earlier this year is included with a $350 million commitment.  However, this single major new project in WA will account for 2.2% of the $15.5 billion committed to new transport infrastructure nationwide.

  • Developing Northern Australia

Western Australia is allocated a further $78.1 million to improve previously prioritised State roads in Northern Australia.
 

  • Local Roads and Community Infrastructure Program

As anticipated, the very popular Local Roads and Community Infrastructure program is continuing to be wound down. Final Budget allocations to WA Local Governments are forecast to be $35.6 million in 2025-26, down from $106.2 million in the year ending June 2024.

  • Active Transport Fund

The Active Transport Fund that was announced as part of the previous Budget, providing $100 million over four years from 2025-26 to support construction and upgrade of bicycle and walking infrastructure, is retained. The Budget indicates $10.8 million will be provided to WA over five years, which suggests no further announcements from those projects identified for funding earlier in March.  

  • Regional and Urban Precincts and Partnerships Programs

Projects funded under the Regional Precincts and Partnerships Program were announced in January 2025.  The Budget confirms that $147.1 million remains to be allocated nationally, but there is no funding indicated in WA beyond the current financial year. 

Likewise, the Urban Precincts and Partnerships Program shows a further $106.3 million yet to be allocated.

  • Regional Mobile Telecommunications

The Telecommunications Regional Roads Pilot in WA has a further $4 million provided to 2027-28 to improve mobile phone coverage on regional highways and major roads. The WA Telecommunications Resilience Pilot that received a $2 million allocation in 2024-25 is not included in the Budget for 2025-26 or future years.

  • Pilbara Ports Common User Infrastructure

As previously announced $313 million is forecast to be spent in the current financial year and a further $117 million included in the budget to complete a $545 million program of work at Dampier and Lumsden Point to enable handling of critical minerals and other trades to support renewable energy projects.
 

  • Health

Healthcare was a priority in this Budget with significant commitments to improve bulk billing rates, fund public hospitals and urgent care clinics plus expand the health workforce. 

$265.4 million over four years from 2025–26, and $94.8 million per year ongoing was pledged to expand general practitioner (GP) training through the Australian General Practice Training Program and the Remote Vocational Training Scheme. The funding is to deliver 200 new general practitioner training places each year from 2026, increasing to 400 from 2028. Also included was $248.7 million over four years from 2025–26 (and $83.6 million per year ongoing) for salary incentives for junior doctors to specialise in general practice, and to provide paid parental leave and study leave for trainee GPs.

  • Other Announcements

Other announcements of interest to Local Governments include:

  • $8.9 million over three years from 2025–26 to improve and expand support services for vulnerable Australians, including Australians experiencing housing insecurity and family, domestic and sexual violence.
  • $17.1 million over four years from 2024–25 to establish the Accessible Australia initiative, to increase accessibility in community spaces across Australia through accessible infrastructure projects at national parks, beaches, and play spaces, as well as fixed and portable Changing Places facilities to enable increased participation.
  • The Government will provide $506.4 million over five years from 2024–25 (and an additional $12.3 million in 2029–30) to achieve better outcomes for First Nations people under the National Agreement on Closing the Gap. Funding includes:
    • $137.3 million over three years from 2024–25 to support the transition between the Community Development Program and the new remote employment service for a four month period to 31 October 2025  
    • $70.9 million over two years from 2025–26 to increase opportunities for First Nations people, and particularly single carer families, to buy their own home and build intergenerational wealth through a boost to Indigenous Business Australia’s Home Loan Capital Fund, and
    • $50 million over four years from 2025–26 to provide access to low cost products for remote stores, ease cost of living pressures and improve food security in remote communities.
  • The Government will provide additional funding of $46 million over four years from 2024–25 to continue digital mental health services.
  • The Government will provide $28.8 million over two years from 2024–25 to improve Australia’s resilience to natural hazards and preparedness to respond to disasters. 
    Funding includes:
    • $17.7 million in 2025–26 for the Bushfire Community Recovery and Resilience Program to support bushfire resilience activities in rural and regional Australia
    • $5.4 million in 2025–26 to support the National Emergency Management Agency’s continued engagement with the states and territories on a national high speed and high capacity mobile broadband emergency response capability
    • $3.2 million in 2025–26 to extend targeted mental health support for emergency service workers provided through Fortem Australia and the Black Dog Institute, and
    • $2.5 million over two years from 2024–25 for a one off Business Continuity Payment of $10,000 to Child Care Subsidy (CCS) approved services closed or partially closed for eight days or more due to impacts of Ex Tropical Cyclone Alfred, subject to conditions, including providers agreeing to temporarily not charge families CCS gap fees during the closure period.
  • $250m over five years for the Saving Australia Bushland program to protect more of Australia’s natural environment through better pest management and incentives for private land conservation and increased partnerships with state and Local Governments to expand protected areas.
  • $11m over 2025-26 to continue efforts to reduce the economic and environmental burden of established feral animals, pests and weeds.
Acknowledgement of Country

WALGA acknowledges the continuing connection of Aboriginal people to Country, culture and community. We embrace the vast Aboriginal cultural diversity throughout Western Australia, including Boorloo (Perth), on the land of the Whadjuk Nyoongar People, where WALGA is located and we acknowledge and pay respect to Elders past and present.

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