The Australian government delivered its Budget last night describing it as “responsible” and being all about “resilience and reform”.

Fuel security

$14.8 billion will be invested to immediately secure more fuel, strengthen Australia’s supply chains and build long-term resilience to future fuel shocks.

“The package focuses on how to help Australians now, and how to set Australia up better for the future so we are prepared for future shocks,” reads a statement from the government.

“The conflict in the Middle East is weighing heavily on our economy and compounding the cost of living for families and businesses.

“We’ve acted to shield Australians from the worst of its impacts, by delivering relief for motorists and acting on fuel supply, affordability and security in this Budget.”

Cost-of-living relief

The government says cost-of-living relief in the Budget will “take pressure off Australians”, including a new permanent $250 tax offset for workers.

“Together with our existing tax relief, this new round of tax cuts means the average Australian worker could receive a combined benefit of up to $2816 from 2027-28,” reads a statement.

“We’re helping Australian workers earn more and keep more of what they earn and providing responsible cost-of-living relief where we can.

“This Budget delivers more tax cuts for workers, helps with fuel costs, helps more Australians achieve home ownership, provides more funding for public hospitals, delivers cheaper medicines and supports higher wages.”

‘Practical measures’ for retailers

The Australian Retail Council (ARC) has welcomed “practical measures” for retailers in the 2026 federal Budget, including the permanent instant asset write-off, red tape reduction commitments and action to address unfair competition from ultra-cheap offshore platforms. It, however, warns that a challenging outlook remains for retailers.

ARC Chief Economist and Chief Policy Officer Glenn Fahey says Australia faces a challenging economic and fiscal environment.

“It’s clear Australia’s budget and debt position will remain under pressure for some time, which makes the task of bringing inflation under control more challenging and creates ongoing pressure for businesses and households,” he says.

“Retailers continue to face intense pressure from a weak consumer outlook, rising operating costs and persistent uncertainty, most recently from the supply chain impacts of the Middle East conflict. Consumer confidence has slipped to record lows, below even the weakest readings seen during the recession of the early 1990s.”

The ARC notes that Australia also continues to grapple with low productivity growth, which is one of the most significant long-term challenges facing the economy, despite the government’s efforts introduced in the Budget.

Mr Fahey says measures that ease the payroll tax administrative burden are welcome, and notes that the government has committed to further red tape reduction measures, including harmonising state retail tenancy frameworks, waste and recycling and expanding heavy vehicle reforms. 

“It’s clear there are steps in the right direction but there’s a long way to go to meaningfully improve competitiveness, reduce business costs and lift productivity,” he says.

“It’s critical the government elaborates on its plan for incentivising states and territories to seize the moment for national harmonisation.”

ARC has consistently called for action to address the unfair advantage enjoyed by ultra-cheap offshore platforms. 

“The Budget’s introduction of new product safety obligations for digital platforms selling into Australia is a good place to start and a recognition this government is taking the issue seriously,” says Mr Fahey.

Mr Fahey says measures that improve cash flow and support investment is welcomed by retailers.

“The temporary tax loss carry-back provisions will provide practical support for businesses navigating difficult trading conditions, while a permanent instant asset write-off gives retailers greater confidence to invest in equipment, technology and operational improvements that can lift productivity,” he says.

“Measures that strengthen business resilience are constructive, particularly at a time when many retailers are absorbing higher costs across freight, logistics, energy, wages, insurance and compliance.”

‘Encouraging signs’

The Australian Food and Grocery Council (AFGC) welcomes the Federal Budget’s “encouraging signs” for long-term productivity growth, investment and workforce capability. It, however, warns escalating instability in the Middle East could still place renewed pressure on costs across the supply chain and for Australian consumers.

AFGC CEO Colm Maguire says measures aimed at incentivising business investment and strengthening skills development are welcome steps toward improving the competitiveness and resilience of Australia’s manufacturing sector.

“This Budget recognises lifting productivity is essential to securing Australia’s long-term economic resilience,” he says.

“Commitments to support investment, encourage innovation and build workforce capability are positive signals for manufacturers operating in an increasingly challenging global environment.

“The food and grocery manufacturing industry is Australia’s largest manufacturing sector, employing almost 300,000 people and producing essential goods for every household in the country. Policies that help businesses invest in new technology, improve efficiency and address workforce shortages are critical.”

The AFGC says continued focus on skills and training will be particularly important as manufacturers face ongoing labour shortages and increasing operational complexity.

“Building a pipeline of skilled workers will help improve productivity, strengthen sovereign manufacturing capability and support more sustainable growth across the sector,” says Mr Maguire.

However, the AFGC cautions domestic policy settings alone may not be enough to insulate Australian consumers from mounting global pressures, particularly rising geopolitical tensions in the Middle East.

“Over recent days, the AFGC has highlighted the growing risks associated with disruption to global shipping and energy markets stemming from instability in the Middle East,” says Mr Maguire.

“These developments have the potential to increase freight, fuel and input costs right across the supply chain.”

“While the Budget contains constructive measures to support economic growth and business investment, global volatility remains a significant risk factor that could place upward pressure on prices for manufacturers and ultimately consumers.”

The AFGC says maintaining a stable and competitive operating environment will be essential to helping manufacturers manage future shocks and continue delivering affordable food and grocery products to Australians.

“Industry and government must continue working together to improve productivity, strengthen supply chain resilience and ensure Australia remains an attractive destination for manufacturing investment,” says Mr Maguire.

A mixed bag for small business

The Council of Small Business Organisations Australia (COSBOA) says the federal Budget delivers some encouraging measures to support productivity and reduce regulatory burden but also raises serious concerns about the impact of proposed tax changes on many small business owners.

COSBOA CEO Skye Cappuccio says measures aimed at simplifying compliance, improving harmonisation and supporting investment were welcome at a time when small businesses remain under significant economic pressure.

“Small businesses are looking for certainty, simplicity and practical support to help them manage the cumulative pressures of fuel, energy, insurance, wages, rent, freight and compliance costs,” she says.

“There are some encouraging signs in this Budget that recognise the need to improve the operating environment for small business and reduce friction across the economy.”

COSBOA welcomes the government’s commitment to:

• Making the $20,000 Instant Asset Write-Off permanent from 1 July 2026
• Progressing the “tell us once” principle across government agencies and regulators
• Harmonising payroll tax and licensing arrangements across State and Territory borders
• Streamlining secure access to government services through Digital ID
• Reducing regulatory burden by $10.2 billion annually in compliance costs
• Initiating a Productivity Commission inquiry into regulatory barriers impacting business dynamism

The organisation also acknowledges measures designed to support small business through the tax system, including the proposed $250 tax offset for workers and sole traders, loss carry-back arrangements for companies, and support for start-up businesses in their early years.

However, COSBOA expresses serious concern regarding the complexity and potential unintended consequences of proposed tax changes, including:

• Changes to the Capital Gains Tax discount calculation
• The introduction of a minimum 30% tax on capital gains after 1 July 2027
• The application of a 30% minimum tax rate to trust distributions after 1 July 2028
• Delays to the delivery of the proposed $250 tax offset

Ms Cappuccio says COSBOA is calling on the government to undertake extensive consultation with the small business sector before implementing the proposed reforms.

“Small business needs fairness in the tax system, but it also needs stability, certainty and simplicity,” she says.

“We are urging the government to work closely with stakeholders to prevent unintended consequences and ensure these reforms are workable in practice.”

COSBOA also calls on the government to consider a specific carve-out for small business trusts and provide support to help business owners access appropriate advice and understand the implications of the proposed changes.

“Many small businesses will require professional advice to fully assess the impact of these measures, and government should assist businesses to navigate what are substantial and complex changes,” says Ms Cappuccio.