Federal Budget 2026-27

Federal Budget 2026-27

WALGA's analysis and commentary

Treasurer Jim Chalmers delivered the 2026–27 Federal Budget against a backdrop of significant economic disruption, marked by rising global inflation, fuel supply constraints and ongoing uncertainty.

The Government framed the Budget as one focused on reform, with an emphasis on boosting productivity, strengthening intergenerational equity and progressing fiscal repair.

Along with higher taxation receipts, the focus on fiscal discipline and reform has meant the federal financial position has improved by $2.8 billion compared to the Mid-Year Economic and Fiscal Outlook (MYEFO), with a Budget deficit of $31.5 billion expected in 2026–27. The Budget is projected to return to balance in 2034–35 and a surplus by 2036-37. 

Gross debt still remains high and is projected to be more than $1 trillion in 2026-27, adding pressure on subsequent Budgets to manage rising interest payments. However as a share of GDP, gross debt is heading in the right direction and is expected to peak 1.2 percentage points lower than MYEFO projections. 

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The Budget was built around a five-point economic plan, which included:

  1. Responding to the oil shock – the Budget contained a $14.8 billion package to boost fuel supply, reinforce supply chains and support households and businesses. 
  2. Taking pressure off Australians – an additional tax cut was announced for Australian workers, which will provide an annual offset of up to $250 for income earned from 2027-28 onwards. Other cost of living initiatives included halving the fuel excise, new and amended listings to the pharmaceutical benefits scheme and support for dental services. 
  3. Making the economy more productive – boosting productivity was a central plank of the Budget, with key initiatives announced related to tax reform, reducing red tape, building a skilled workforce, investing in clean energy, and unlocking opportunities from AI. 
  4. Delivering tax reform – the Budget contains a substantial package of tax reform. As well as the tax offset for workers, this includes reforms to negative gearing and capital gains tax, and reforms to business taxes to support investment and innovation. 
  5. Finding savings - the Government has found $63.8 billion of savings and reprioritisations since the MYEFO.

Overview

Outside of the economic plan, the Budget contained a range of announcements related to strengthening care through health, aged care and mental health. 

Housing was also a priority area. For Local Governments, a key announcement was the $2 billion investment in the Housing Support Program – Local Infrastructure Fund. This will provide funding via states and territories to support Local Governments and state utility providers to expedite the delivery of housing enabling infrastructure. This funding is, however, contingent on the states committing to reforms to improve productivity in the housing sector, including faster and simpler approvals, releasing more land and delivering a national construction code.

Importantly for Local Governments, the Budget also 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. 

Other important announcements for Local Governments included:

  • $17 million in 2026–27 to continue delivery of the Government’s circular economy policy, program and legislative functions.
  • $14.4 million will be provided to WA over the next three years to fund active transport infrastructure including bicycle and walking infrastructure.
  • $24.7 million over three years from 2025–26 to deliver a national pilot for recycling solar panels and establish up to 100 pilot collection sites nationwide to reduce waste and reuse valuable minerals to support the energy transition.
  • $11.2 million in 2026–27 to maintain critical preparedness against High Pathogenicity Avian Influenza (HPAI H5) incursions.
  • Additional funding of $500,000 over 2026-27 and 2027-28 for the Regional Roads Australia Mobile Program – Pilot Program. 

While these announcements are welcome, other key initiatives identified in WALGA’s 2026-27 Federal Budget Submission were not funded. WALGA will continue to seek ongoing investment in critical areas such as community infrastructure, coastal management, emergency management, regional health, the regional road safety program (local roads) and telecommunications. 

Local Government Priorities

In 2026-27, Financial Assistance Grants to Local Government totalled $3.6 billion. Of this, $2.9 billion (80%) will be brought forward from 2026-27 and paid in 2025-26 in recognition of the workforce, supply chain and cashflow pressures that Local Governments face.

The magnitude of these grants is estimated to be 0.49% of Commonwealth Tax Revenue, which is a decrease from 0.51% in the 2025-26 Budget.

Of the remaining $724 million that will be paid in 2026-27, WA is set to receive $89.5 million. The Federal Government has indicated that it 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 seek further information from Treasury on the scale and timing of Financial Assistance Grants payments to assist Local Governments to set their budgets.

The 2026-27 Federal Budget contains ongoing funding commitments to important programs for the Local Government sector.  

Roads to Recovery Program  

The Budget confirms continuing delivery of the Australian Government’s commitment announced in late 2023 to double Roads to Recovery funding to Local Governments by 2027-28.  WA’s share of total Roads to Recovery funding over the five year period is 11.%.   

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

$m 2025-26 2026-27 2027-28 2028-29 2029-30
WA allocation 125.5 126.3 163 161.2 146.2
Total 734.0 843.0 1175.9 1162.0 999.0
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  slightly increased from $150 million in 2025-26 to $157.4 million per annum in this Budget and each of the forward estimate years.   
  
The indicative allocation for WA increases from $16.8 million in 2025-26 to $17.7 million in 2026-27, representing 11.25% of the national allocation between 2025-26 and 2029-30. 

$m 2025-26 2026-27 2027-28 2028-29 2029-30
WA allocation 16.8 17.7 17.7 17.7 17.7
Total 150.0 157.4 157.4 157.4 157.4
Safer Local Roads and Infrastructure Program 

The Australian Government continues to support the Program, which is open to both State and Local Governments, and focusses on improving road safety outcomes and addressing emerging road safety priorities. 

 WA’s share of the total program is $139.9 million between 2025-26 and 2029-30, representing  11.% of the overall funding.  

$m 2025-26 2026-27 2027-28 2028-29 2029-30
WA allocation 35.3 33.4 24.5 22.1 24.7
Total 201.5 330.0 230.0 230.0 230.0
New Large Scale Transport Infrastructure Investments  

The Budget commits $552 million for the Anketell Road Upgrades (Stage 1A and 1B) to support the development of a future road freight corridor to Kwinana, unlocking significant investment in road freight. This follows investment of $330 million in the Kwinana Freeway upgrade project announced last year.   

Developing Northern Australia  

Western Australia is allocated $29.8 million under the Northern Australia Roads Program in 2026-27, followed by $14.3 million in 2027-28 and $10.8 million in 2028-29 to support infrastructure projects that improve regional connectivity and freight movement across Northern Australia. 

WA is allocated a total of $56.4 million over the forward estimates, representing 21.9% of the total program. 

Local Roads and Community Infrastructure Program  

As anticipated, funding has essentially ceased for this program, with only minimal amounts allocated for unfinished projects.  

The 2026-27 Federal Budget aims to address the housing market's challenges and provide relief for homeowners and renters.

The headline announcement was changes to negative gearing and capital gains tax (CGT) arrangements aimed at improving the fairness of the tax system and supporting home ownership. Specifically:

  • Capital Gains - From 1 July 2027, the 50% CGT discount will be replaced by a system that indexes the cost base and applies a minimum 30% tax on net capital gains for assets held over 12 months. This will apply broadly to assets held by individuals, trusts and partnerships, but only to gains made after that date, with existing gains still eligible for current rules. Pre‑1985 assets will remain exempt for gains before July 2027. Investors in new housing can choose between the old discount or the new system, and income support recipients will be exempt from the minimum tax.
  • Negative Gearing - From 1 July 2027, negative gearing for residential property will be limited to new builds. Losses from existing properties will no longer be offset against other income and can only be used against rental income or future capital gains from property. Any unused losses can be carried forward. New-build investments are exempt, so tax benefits are targeted at increasing housing supply.

Outside of changes to the tax system, new funding has also been allocated for a range of initiatives aimed at addressing housing shortages.

Importantly for Local Governments, $2 billion has been provided over four years from 2026–27 for the Housing Support Program – Local Infrastructure Fund. This will provide funding through the states and territories to support Local Governments and state utility providers to expedite the delivery of housing enabling infrastructure.

This funding is contingent on states committing to reforms to improve productivity in the housing sector, including faster and simpler approvals, releasing more land ready to build homes, and delivering a genuinely national construction code.

Other programs to support increased housing supply and research include:

  • $56.4 million over four years from 2025–26 to support the oversight and delivery of key programs under the Government’s Homes for Australia plan and for a public campaign to inform taxpayers of the changes to the tax system
  • $2.1 million in 2026–27 to extend Commonwealth funding to support the Australian Housing and Urban Research Institute.
  • As part of the closing the gap initiative, $6.3 million over three years from 2026–27 for a national First Nations housing peak body to represent the Aboriginal and Torres Strait Islander housing sector and support better housing outcomes for First Nations people and communities.
  • $59.4 million over four years from 2026–27 to provide states and territories with funding for community housing providers to supplement rental income for social housing for over 4,000 eligible young people, aged 16‑24, who are in receipt of the Away from Home rate of Youth Allowance or ABSTUDY and who are at risk of, or experiencing, homelessness.

Disruptions to the global production and shipping of fuel due to the conflict in the Middle East has significantly impacted fuel prices, with the national average diesel price up 70 cents per litre at the end of April 2026. The fuel increases are expected to add to inflationary pressures across the economy and dampen consumption.

Fuel Excise and Heavy Vehicle Road User Charge

The Government implemented a temporary reduction of fuel excise 32 cents per litre for petrol and diesel (excluding GST) and removal of the road user charge for heavy vehicles on 1 April 2026. The Budget confirms that this will end as planned on 30 June 2026. The net cost to the Budget of these measures is forecast to be $2.5 billion. 

Fuel Security and Resilience

The Government will provide up to $11.9 billion over five years from 2025-26 to improve Fuel Security and Resilience through the National Fuel Security Plan.

The fuel security funding includes:

  • up to $7.5 billion in financial support for the establishment of a Fuel and Fertiliser Security Facility to increase additional supply and storage of fuel and fertiliser.
  • the establishment of a $3.2 billion Australian Fuel Security Reserve to increase long term fuel supply and storage in combination with an increase to the Minimum Stockholding Obligation (MSO), to increase Australia's fuel reserves to 50 days.
  • $1 billion in the Economic Resilience Program from 2025-26 through the National Reconstruction Fund Corporation to support freight, fuel, fertiliser and other critical supply chains affected by global market disruptions.
  • $55 million in 2026-27 to deliver the Transport Resilience and Capacity Kickstart pilot program to incentivise increased freight volumes by rail and maritime transport.
  • $54.7 million over five years to support ongoing management of Australia's fuel security framework.

Active Transport Fund  

The Active Transport Fund announced as part of the previous Budget to support the construction and upgrade of bicycle and walking infrastructure, has been retained, with $299.9 million allocated over five years from 2025-26 to 2029-30. 

WA will receive  $14.5 million over three years from 2026-27, representing 6.1% of the national allocation of $234.3 million over this period. Annual WA funding allocations are forecast to be $6.1 million in 2026-27, $4.9 million in 2027-28 and $3.5 million in 2028-29. 

While $50 million has been provided to the fund in 2029-30, this has not yet been allocated to any state.  

Regional Roads Australia Mobile Program – Pilot Program  

An additional $500,000 is provided to WA over 2026-27 and 2027-28 for the Regional Road Australia Mobile Program – Pilot Program. This program aims to improve mobile phone coverage on regional highways and major roads. This follows an initial investment of $3.5 million in 2025-26. WA’s share represents 12.9% of the total program funding.  

Pilbara Ports Common User Infrastructure  

The Australian Government continues to provide funding to support common user upgrades at the Dampier and Lumsden Point ports in the Pilbara to support the export of critical minerals and facilitate renewable energy.   

The Budget includes $133 million in 2025-26, followed by $257 million in 2026-27, with a further $20 million allocated in each of the following two years. This reflects an updated expenditure profile for the previously announced $545 million program of work.  

Swan Active Ellenbrook  

The Australian Government has committed $25 million over three years towards construction of a facility integrating aquatic, sport, health, wellbeing and community services to meet the needs of the growing Ellenbrook community.  

The Budget provides $5 million in 2026-27 and a further $2.5 million in 2027-28, following the previously allocated $17.5 million in 2025-26.  

Perth City Deal 

The Budget contains ongoing funding for the previously announced Perth City Deal, to support a range of projects in the Perth CBD, including the Edith Cowan University Cultural and Creative Industries CBD Campus. $257 million is allocated in 2026-27, with funding then dropping to $20 million in both 2027-28 and 2028-29 as the project reaches its conclusion.

Other announcements of interest to Local Governments include:
  • Additional $17 million in 2026–27 to continue delivery of the Government’s circular economy policy, program and legislative functions.
  • Funding to implement significant reforms to the Environment Protection and Biodiversity Conservation Act 1999, including:
    • $36.9 million over two years from 2026–27 for the Department of Climate Change, Energy, the Environment and Water (DCCEEW) and the Clean Energy Regulator to continue administering the Nature Repair Market and develop additional methods to increase investment in nature and facilitate delivery of environmental offsets.
    • $13.2 million over two years from 2026–27 to establish the Restoration Contributions Holder to deliver environmental offsets on behalf of proponents.
    • On​​going funding to establish the new National Environmental Protection Agency as a statutory agency from 1 July 2026.
  • $24.7 million over three years from 2025–26 to deliver a national pilot for recycling solar panels and establish up to 100 pilot collection sites nationwide to reduce waste and reuse valuable minerals to support the energy transition.
  • Additional $110.8 million over two years from 2026–27 to continue activities to protect native species and Australia’s biodiversity. This includes:
    • ​​​$99.6 million over two years from 2026–27 to support conservation and planning activities, including actions to slow the rate of environmental and native species decline, and aid recovery of Australia’s native species and special landscapes.
    • $11.2 million in 2026–27 to maintain critical preparedness against High Pathogenicity Avian Influenza (HPAI H5) incursions.
  • Funding to accelerate and streamline approval processes including:
    • $105.9 million over four years from 2026–27 for the Department of Climate Change, Energy, the Environment and Water (DCCEEW) and the National Environmental Protection Agency (NEPA) to modernise environmental information, data and digital systems to improve user experience and enable simpler, faster environmental approvals.
    • $47.6 million over four years from 2026–27 to progress bilateral agreements with states and territories, to enable states to conduct assessments and approvals on the Commonwealth’s behalf.
    • $26.4 million over four years from 2026–27 for DCCEEW and NEPA to work with states and territories to develop new bioregional plans and strategic assessments.
    • funding to support states and territories to implement bioregional plans and strategic assessments in priority areas.
  • The Government will amend the Telecommunications Act 1997 and the National Broadband Network Companies Act 2011 to streamline approvals for telecommunications infrastructure, support the removal of redundant facilities, improve the National Broadband Network and strengthen consumer safeguards.
  • $793.7 million over five years from 2025–26 (and $176.1 million ongoing) to achieve better outcomes for First Nations people under the National Agreement on Closing the Gap.
  • $220.3 billion over five years from 2026–27 to the states and territories for public hospital services and the implementation of the 2026–2031 Addendum to the National Health Reform Agreement (NHRA).
  • Funding to improve Australia’s resilience to natural hazards and preparedness to respond to disasters, including:
    • $6 million in 2026–27 to the National Emergency Management Agency (NEMA) to continue engagement with the states and territories on a national high‑speed and high‑capacity mobile broadband emergency response capability.
    • funding to implement the new national cell broadcast messaging system to improve emergency warning communications.
    • funding to bolster the national aerial firefighting fleet and increase national surge capability during the higher–risk weather season.
  • $1.7 million in 2026–27 for additional funding to continue the Remote Air Services Subsidy Scheme to subsidise the carriage of passengers and essential goods to communities in remote and isolated areas of Australia.

Past Federal Budgets

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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