There were four themes that jumped out. The last of which may be particularly and directly relevant to many CA ANZ members.

1. The deficits

The underlying deficit for the 2024-25 fiscal year came in at $28.3 billion. Over the total period of the forward estimates the underlying deficits total $179.5 billion.

But it’s important to focus on the “headline” deficit, not the “underlying” measure. The headline number includes so-called “off budget” spending like student debt forgiveness ($26 billion), the National Reconstruction Fund and the $13 billion of “decisions taken but not yet announced” and “other”. As the government has expanded the use of off-budget vehicles, the difference between underlying and headline has become meaningful.

The total actual “headline” deficits over the forward estimates are considerably larger, coming in at $283.4 billion.

In the long run the only way to deal with a deficit is by increasing taxes or reducing spending. This is the key figure which will drive major policy decisions for whoever is in government after the election. The magnitude of it underlines the fiscal challenge Australia faces.

Even 10 years out the budget barely comes back into balance, and that is with a large amount of bracket creep, and spending at 26.8% of GDP. In 2022-23 spending was just 24.4% of GDP.

2. Economic growth forecasts

Economists are notoriously bad at forecasting. But the economic growth forecasts in the budget are important to understand. The budget papers had this to say about growth: “Growth picked up in the Australian economy at the end of last year, supported by a recovery in private demand. The recovery is expected to continue with the economy forecast to grow by 1½% in 2024–25, 2¼% in 2025–26 and 2½% in 2026–27. The improvement in growth is expected to be broad-based and supported by a gradual recovery in growth in private final demand over the forecast period.”

This is arguably rather bullish in a world marked by global uncertainty with U.S. President Donald Trump set to announce a new wave of tariffs on April 2, on top of the existing disruptions to global supply chains that has already occurred, and the substantial uncertainty about European security arrangements.

GDP is an imperfect measure of the economy, but ultimately it’s GDP that pays for all the spending in the budget.

3. Bracket creep

The budget had one legitimate surprise in it. A tax cut for all taxpayers through a reduction in the 16% tax bracket for incomes between $18,201 and $45,000. It will be reduced to 15% from 1 July 2026, and then to 14% from 1 July 2027.

A worker on $100,000 a year will get a $268 tax cut in the 2026-27 fiscal year and $536 each year after that. So $5,000 over a decade. But the bracket creep mentioned above will cost the same taxpayer $25,000 over that decade.

4. Something to watch

One of the revenue measures in the budget involves: “strengthening the sanctions available to the Tax Practitioners Board (TPB), modernising the registration framework for tax practitioners and providing funding to the TPB to undertake additional investigation and compliance activity targeting high-risk tax practitioners. This measure is estimated to increase receipts by $47.0 million and increase payments by $27.4 million over the five years from 2024–25.”

There was little detail about exactly what this involves, but it is certainly something CA ANZ will engage with the Government on to prevent unintended consequences for our members.