The government’s pre-election budget has come under sharp criticism from business leaders who fear that it does not undertake major policy reform and leaves the economy facing the prospect of deficits which will last for decades.
Among some of the significant announcements within the budget were minor tax relief reducing the first tax threshold from 1 July 2026, providing $268 a year to the average worker from 2026 rising to $536 mid-2027.
To support supply chain resilience, the government announced $17.1 billion over 10 years to improve freight efficiency through road and rail projects, including the Bruce Highway in QLD and Western Sydney region.
A measure that may leave marginally more spending power in the hands of some consumers came by way of the $648m in Medicare exemptions for a million low-income earners.
However, the Australian Retailers Association (ARA) and National Retail Association (NRA) said that the slow-down in spending coupled with rising business costs “leaves retail businesses extremely vulnerable.”
They added that the absence of support for business and productivity growth “is a significant missed opportunity in this Budget.”
It’s a sentiment that’s echoed by top retail bosses. “While the federal budget tries to address some of the most critical issues facing households, such as rising costs of living, it does this through symptomatic relief rather than addressing the root cause of the problems and driving sustainable outcomes,” said Wesfarmers chief executive Rob Scott, according to The Australian.
“Change and reform are hard, but the need for change is becoming more urgent if we are to address declining productivity and living standards.”
“We need to reduce the costs of government and reduce red tape to support business investment and job creation. This will help make Australia more productive and competitive so we can invest in the future needs of our society. In the absence of meaningful reform, Australian taxpayers will face even greater demands from governments on their after-tax earnings.”
The Business Council Of Australia chief executive Bran Black called on all sides of politics to undertake substantial economic reform to drive private sector growth.
“Spending has increased too quickly, and it has been baked into permanent programs, while our luck of banking the receipts from record high commodity prices is coming to an end,” said Brack.
“At $27.6 billion, the predicted budget deficit for the year ended June 2025 represents a $43 billion deterioration from the budget of just a year ago. The BCA has called for a tax-to-GDP cap of 23.9% and a 2% annual cap on spending measures to ensure public spending is sustainable, does not contribute to inflation and does not exacerbate cost-of-living pressures.
“Although these weren’t taken up in the Budget, it is clear fiscal rules are needed for budget repair given the decade of deficits ahead of us, to ensure future generations are not burdened with higher taxes and lower living standards.”
The growth of retail, a sector that employs one in ten Australians and contributes around 18% to GDP, is crucial, with Diane Smith-Gander, who chairs buy now, pay later group Zip Co, also expressing concern over the budget.
“This is a budget that fails to address the long-term challenges facing Australia,” Smith-¬Gander told The Australian. “We all know that structural deficits don’t come free. This is going to have to be paid for…We were able to push down our interest bill for a while, but now it’s growing again, and it’s growing greater than the economy is growing. Opening the door in that way is really not sustainable and I think it’s very bad economic management.”
