Experts argue that budgets cannot tackle important structural issues such as productivity, inflation and corporate taxes.
News Analysis
The 2025 federal budget has made economists and the business community skeptical despite a move to appeal the vote public.
The pre-election budget centre and advertised tax cuts will begin mid-2027, offering an additional $538 a year to the average worker.
However, experts argue that the budget does not address important structural issues such as productivity, inflation and corporate taxes.
Graham Young, executive director of the Australian Institute of Progress, said the bounty of budget savings is that there are no more new major spending measures like the Climate Change Initiative.
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“Most of the budgetary measures are designed to convince voters that there will be no (inflation) crisis or that the government cares about them. Instead of solving the problem, the government is handing out fiscal painkillers,” Young told the Epoch Times.
According to Young, government approaches are driven primarily by ideology rather than empirical evidence, and play a role in satisfying trade unions and environmental lobby groups.
Major policy changes left hope: Economists
Gigi Foster, an economist at the University of New South Wales, said the budget has not attempted to tackle major long-term issues such as stagnation of productivity, inflation, housing stress, wealth inequality, corporate tax evasion and corruption. Some of these issues require major policy changes.
“We see a lot of cash splashing across different regions and different groups wrapped in the flag of “cost of living relief” or intended as a signal of respect or importance (e.g., targeted fees for awards for elderly care workers, or high funding in emergency care clinics, hospitals, and public schools).
She warned that many of these measures are direct inflation and that they have not thoroughly investigated whether publicly funded sectors such as healthcare and education have produced meaningful results.
Foster acknowledged some positives, including moves to address community childcare shortages, such as cutting taxes and Medicare collections, but she warned that continuing subsidies for “green” energy and shared homeownership schemes would be counterproductive.
How do you pay for everything? Slake
Independent economist Saul Eslake said the budget is noteworthy about how it “almost differences” in its near or mid-term outlook.
“The 2025-26 budget has not solved any obvious important questions even before the last election. This spoke to the average from 1975 to 2019 (and then average after (and at that point) (and at about 1.5-2 percent of all possible GDP) (Covid-of of the covid-och time).
He urged both parties to have an “adult conversation” with voters about the best and most equitable ways to raise extra income to fund government spending.
Band-Aid Solution
Young said the government is effectively involved in “Whac-a-Mole” to address the cost of living.
“When they spend their living, they give them minor tax cuts in the hope that you won’t blame them.
“When they encourage energy that is too unreliable, they first subsidize existing electricity producers like coal to fill the hole this creates, and when it doesn’t increase costs, they subsidize domestic consumers and pretend that the problem is not present.”
Business Council supports tax cuts, but the private sector needs more support
Branskrack, CEO of Australia’s Business Council (BCA), welcomed the improvements in personal income tax and economic outlook, but emphasized the need for broader economic reforms.
“The budget forecasts a slightly better day for economic growth as GDP increases by 2.25% next year, but it is welcome, but policies and reforms that will drive investment and business-driven growth will not be available now or in the coming years,” Black told the Epoch Times.
The BCA also criticized the budget for its lack of focus on private sector growth.
Recognizing improvements in productivity, workforce skills and education funding, the council has expressed concerns about a sustained deficit and increased inflation that are expected to reach 3% next year.
“All budgets are, there are significant spending with a $42.1 billion forecast shortfall, and we won’t be able to get back to balance for 10 years.
Black said spending as a share of GDP would reach 27% next year, the highest since 1985-86, excluding the pandemic period.
The housing industry welcomes support, but there is a shortage
The Housing Industry Association (HIA) also saw it as an opportunity to miss out on the budget. HIA Managing Director Jocelyn Martin said the measure failed to address structural challenges, recognizing its focus on increasing housing supply.
“Australia needs to provide 150,000 new homes each year to accommodate the growing population and facilitate the pressure to afford housing,” Martin said.
“Instead, government-induced obstacles, chronic skills shortages, excessive taxes and regulatory barriers have led to over 70,000 new housing shortages per year.”
