5 key questions to help you understand the 2025 Australian budget

​The 2025/26 Australian Federal Budget is set to be unveiled this week, and it's helpful to understand the important details to see how it might affect the economy and your finances.

With a federal election on the horizon and interest rates still at elevated levels, the 2025 budget carries significant political and economic weight. The government aims to balance cost-of-living relief with fiscal responsibility, while trying to appeal to voters and manage inflation pressures.

Treasurer Jim Chalmers will deliver the 2025/26 budget at approximately 7:30pm (AEDT) on Tuesday 25 March 2025, coinciding with a live speech from Parliament House in Canberra. The budget papers will be available to read on the government’s official budget website .

Here are five critical questions to consider:​

1. What is the projected budget deficit or surplus?

The upcoming budget is anticipated to reveal a deficit, with no clear timeline for returning to surplus. Treasurer Jim Chalmers has indicated that the budget will feature years of deficits, reflecting ongoing economic challenges and the need for sustained fiscal support.

2. How will government revenue be generated?

Government revenue primarily comes from:​

• Income tax: The largest portion, sourced from individual taxpayers.​
• Company tax: Taxes paid by corporations on their profits.​
• Sales taxes: Including the Goods and Services Tax (GST) applied to most goods and services.​

It’s important to note that bracket creep – where tax thresholds do not keep pace with wage growth – has increased reliance on income tax, according to economists and analysts.

3. Where will government spending be allocated?

Based on the last budget, we can assume major expenditure areas will include:​

• Social security and welfare: Approximately 37% of total spending, covering pensions, unemployment benefits, and other support programs.​
• Health: Over 15% allocated to healthcare services and infrastructure.​
• Payments to states and territories: Funding for various state-level projects and services.​
• Defence and education: Big investments in national defence and educational institutions.​
• Interest on national debt: Servicing existing debt accounts for about 3.3% of spending.

4. What steps are being considered to curb spending?

The government will reveal $2.1 billion in savings and reprioritisations in the budget. Since the 2022 election, $95 billion in savings have been achieved. However, future economic challenges may necessitate caution in spending to ensure financial discipline and economic resilience.

5. How will the budget address cost-of-living pressures?

The 2025 Federal Budget is expected to introduce several new and expanded initiatives aimed at alleviating cost-of-living pressures for Australians, including:​

• Energy bill relief: An extension of the existing scheme will provide households with an additional $150 rebate on electricity bills, automatically applied to reduce financial strain.
• Healthcare support: A significant investment of $8.5 billion is allocated to expand bulk-billed GP visits, aiming to deliver 18 million extra bulk-billed consultations annually. This measure seeks to reduce out-of-pocket healthcare expenses for Australians.
• Education assistance: The budget proposes reducing student debts by 20%, effectively decreasing the average student loan by $5,400. This initiative aims to ease financial burdens on graduates entering the workforce.
• Childcare subsidies: Families earning under $530,000 annually will benefit from subsidised childcare starting in January 2026, making early childhood education more affordable and supporting working parents.

While the aforementioned initiatives have already been announced, there is an expectation that the government may offer additional measures of support when the budget is handed down.

Stay tuned to Mozo’s live blog for more information, updates and commentary pertaining to the budget, next week’s cash rate decision and any subsequent interest rate changes.