Budget 2025 reactions: Tax cuts applauded, vision questioned
"Repair, relief and reform" was the message from Treasurer Jim Chalmers as he handed down his fourth Federal Budget, revealing a $42.1 billion deficit forecast for 2025-26 and a package of measures designed to ease cost-of-living pressures, strengthen Medicare, and reinvigorate the housing market.
In a packed cabinet meeting on Tuesday night, Chalmers declared the Budget 2025 has five key priorities:
- Helping with the cost of living
- Strengthening Medicare
- Building more homes
- Investing in every stage of education
- Making Australia's economy stronger, more productive and more resilient.
Prime Minister Anthony Albanese summarised the focus in a social media post:
"Free GP appointments. Free TAFE. Even cheaper medicines. Cutting 20% off student debt. $150 off power bills. And getting more Australians into their own home. Cost of living help remains our number one focus."
Tax cuts: A pre-election sweetener
A standout measure is the $17.1 billion income tax relief package, kicking in from July 2025. Every worker will receive at least $5 more in their weekly pay, with those earning $18,201-$45,000 seeing their tax rate drop:
- From 16% to 15% in 2026-27
- Then to 14% in 2027-28
By 2027, the average taxpayer will save up to $536 per year.
The government also raised the Medicare levy low-income thresholds, potentially saving eligible individuals up to $122 annually. This will continue to exempt over one million low-income households, pensioners, and seniors from paying the full levy.
The tax relief was met with applause from Labor benches, but not everyone is convinced. The Australian Chamber of Commerce and Industry (ACCI) criticised the budget for lacking "strategy and vision".
"The government is treading water," said ACCI CEO Andrew McKellar. "There appears to be no coherent strategy to take the pressure off small business, just an almost random list of largely unrelated announcements."
He warned the return to structural deficits, projected to hit 27% of GDP, would limit Australia's ability to respond to future economic shocks.
But economist Chris Richardson, a former Treasury official, struck a more optimistic tone - particularly around the ban on non-compete clauses, which prevents employers from blocking workers from moving to competitors.
"This budget is a bouquet," Richardson wrote on LinkedIn. "Banning non-compete clauses is a beautiful thing. Sorry businesses - that may be bad for you, but the ability to compete for clients and staff is great for Australian workers and families."
He added that international evidence suggests the eventual benefit of the non-compete ban could rival the tax cuts themselves in terms of long-term gains for Australians.
The Australian Council of Trade Unions (ACTU) agreed, saying the change could increase wages by up to 4%, or around $2,500 per year for affected workers.
"Non-compete clauses have stopped workers changing jobs even if that job will pay them more or offer better conditions," said ACTU President Michele O'Neil. "Tax cuts, combined with wages continuing to rise, means this budget delivers higher incomes for workers and their families."
$150 energy bill relief welcomed
With more than 70% of Australians naming cost-of-living as a priority issue and power costs soaring by 9% in recent months, the Clean Energy Council has welcomed the additional $150 energy bill rebate for all Australian families and small businesses the Federal Budget.
Clean Energy Council CEO, Kane Thornton, says while this short-term relief will be welcomed by Australians, a national home battery rebate program would assist in overcoming the upfront costs of a home battery, helping to lower power prices for all Australians.
"Four million Australians have rooftop solar, but only around 180,000 are doubling their savings with access to a home battery," says Thornton. "That means that 95.5% of solar households, already saving $1500 on average on their power bills thanks to their panels, could be saving even more through home energy storage."
Housing reform: Modest or ambitious?
Housing remains a top-tier issue in Budget 2025, but some critics say the measures don't go far enough.
Key housing announcements:
- Two-year pause on foreign investors buying existing homes (from April 1 2025).
- Expansion of the Help-to-Buy shared equity scheme for first home buyers.
- Reaffirmation of the 1.2 million new homes target under the Housing Accord.
But experts remain skeptical.
"There is strong demand for housing across Australia, but supply remains a critical issue," says PEXA chief economist Julie Toth. "The government's 1.2 million homes target is ambitious - what we need is tangible measures that will help accelerate construction."
Master Builders Australia CEO Denita Wawn welcomed modest moves on construction and labour shortages, but says the budget fell short for builders.
"The very businesses who are expected to solve the housing crisis have been left disappointed," Wawn said.
"We're not going to meet the Housing Accord target without bold reform to reverse construction cost, time and productivity trends."
Over the past decade, construction costs have risen nearly 60%, residential build times are up 48% for homes and 60% for apartments, while productivity has fallen 18%.
A return to economic growth?
Economist Stephen Koukoulas, managing director of Market Economics, praised the budget as "a good economic strategy" that delivers surprise tax cuts while keeping deficits in check.
"Within the constraint of piddling budget deficits of between 1 and 1.5% of GDP over the next four years, the Treasurer has delivered modest income tax cuts, targeted at low-income earners, and a range of helpful cost-of-living initiatives," he says.
With Treasury forecasting a return to trend economic growth, inflation within target, unemployment at 4.25% and moderate wages growth, Koukoulas added: "These are the facts that you dream about when studying economics, when you work in policy, and when you are a decent human being."
What do you think of the 2025 Budget? Comment below.
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