Sweeteners or a Bitter Pill? 12 Key Takeaways from the 2025 Budget

While full of sweeteners, the budget also had some bitter realities.

Australian Treasurer Jim Chalmers delivers his fourth federal budget at the Parliament House in Canberra, Australia on March 25, 2025. David Gray/AFP via Getty Images

News Analysis

If you’re diabetic, this budget might be just too sweet to digest.

In an election-focused budget, Treasurer Jim Chalmers unveiled new tax cuts, the previously announced electricity rebate and student debt reduction, as well as much more.

The biggest surprise was the $17 billion in income tax cuts aimed at lower income earners.

“It’s a plan to help with the cost of living—with two new tax cuts, higher wages, more bulk billing, cheaper medicine, and less student debt. It’s a plan to build Australia’s future with more homes, new investments in skills and education, competition reforms, and a future made in Australia,” said Chalmers.

While full of sweeteners, the budget also had some bitter realities.

Overall, Australia is still contending with yearly deficits until 2035-36, and net debt is projected to climb to 23.1 percent of GDP by 2028-29.

Below is a breakdown of some key things to know about the budget.

Treasurer Points to Global Challenges

Chalmers attributed much of the challenge to global factors, stating, “The 2020s have already seen a global pandemic, global inflation, and now the threat of a global trade war.”

He added that tariffs and international tensions, along weather incidents like Ex-Tropical Cyclone Alfred, could affect quarterly growth. With flooding in North and Far North Queensland, he warned, “storm clouds are gathering in the global economy.”

He also noted rising trade disruptions, slowing growth in China (a major export destination for Australia), ongoing war in Europe, and unrest in the Middle East.

He predicted global growth will slow to 3.25 percent over the next three years, the lowest since the 1990s.

“Australia is neither uniquely impacted nor immune from these pressures, but we are among the best placed to navigate them.”

Australian Treasurer Jim Chalmers delivers his fourth federal budget at the Parliament House in Canberra, Australia on March 25, 2025. David Gray/AFP via Getty Images

Surprise Tax Cuts

Chalmers announced a surprise tax cut, promising to reduce the 16 percent tax rate (for those earning $18,201 to $45,000) to 15 percent next year, followed by a further drop to 14 percent by mid-2027.

Treasury claims these cuts, while modest, will have a significant impact on everyday Australians.

Workers earning an average of $79,000 annually will pay $268 less in tax in the first year and $536 less the following.

Australians earning the national average income will get over $1,600 in tax relief from 2026 onwards.

But the biggest beneficiaries?

“Families of middle Australia,” with Chalmers estimating that a typical household will receive over $15,000 in combined benefits over the next four years.

$150 Energy Relief

Energy costs being a big election issue, Chalmers reiterated the Labor government’s $150 energy relief measure, which has been extended until Dec. 31, 2025.

This includes two $75 rebates on quarterly energy bills for households and around 1 million small businesses.

This extension will cost taxpayers an additional $1.8 billion, with another $5 billion allocated over the next two years.

Further, the government has announced extending the Australian Competition and Consumer Commission (ACCC) inquiry into energy retailers for another year to improve consumer deals and protections.

A general view of power lines in the south eastern suburbs in Melbourne, Australia on March 25, 2025. Asanka Ratnayake/Getty Images

Competition Reform for Fairer Markets

Another key announcement was Labor’s plan to introduce competition reform to tackle monopolies and improve market fairness.

The government aims to lower barriers for new businesses, ensuring consumers have better access to cheaper goods and services.

“"We’re reforming non-compete clauses to lift wages by up to $2,500 a year for workers covered by them.”

Medicare and Bulk-Billing Boosts

The budget also announced a series of healthcare measures.

The Medicare levy low-income threshold will rise, meaning more Australians, including seniors and pensioners, will be exempt from paying the levy.

Chalmers explained that for example, singles earning up to $27,222 will no longer have to pay.

In this photo illustration, Australian $50, $20, $10 and $5 banknotes and dollar coins are shown arranged for a photograph in Newcastle, Australia on March 25, 2025. Roni Bintang/Getty Images

At the same time, $8.5 billion will be allocated to increase bulk-billing rates, aiming for nine out of ten GP visits to be fully bulk-billed by 2030.

Additionally, the government plans to reduce the cost of medicines under the Pharmaceutical Benefits Scheme (PBS), lowering the maximum cost per script from $31.60 to $25. This is expected to cost the budget $690 million.

Cutting Student Debt

Targeting young voters is a 20 percent reduction in all outstanding Higher Education Loan Program (HELP) debts.

This move will affect around 3 million Australians and is expected to remove $16 billion from student loan accounts.

For example, a graduate earning $80,000 annually with $35,000 in student debt will see a reduction of $7,000 in their loan and pay $850 less in compulsory repayments. Alongside this, a shift to a “marginal repayment system” will further ease financial pressure on graduates.

Housing to Receive Boost

In a bid to ease the housing affordability crisis, budget announced expanding “Help to Buy” housing scheme.

With a new $800 million investment, this $6.3 billion program is designed to help first-time buyers enter the market with lower deposits and smaller mortgages.

The new measures will increase property value caps and income limits, making the scheme accessible to more buyers, especially those working in essential industries like teaching, healthcare, and retail.

The expanded program is expected to assist around 40,000 Australians and has the potential to unlock access to over 5 million properties across the country.

$2.6 Billion for Aged Care and Early Childhood 

An additional $2.6 billion will fund pay rises for aged care nurses from March, ensuring better pay for those who care for our elderly.

“We’ve also supported a historic wage increase for early childhood educators, raising the minimum wage by nearly $7,500 a year.”

Sweeteners Come With Highest Spending Since the Pandemic

Labor’s policies are projected to keep the budget in structural deficit until 2035-36.

The deficit—the difference between what the government receives in revenue versus its spending—currently sits on negative $27.6 billion this financial year, and will balloon to $42.1 billion next year.

Treasury estimates that in the succeeding years, that value will normalise to $35.7 billion and $37.2 billion.

Government spending as a percentage of the economy will rise from 26.2 percent to 27 percent by 2025-26, reaching its highest level since the pandemic.

Although NDIS spending growth is expected to slow, Labor’s additional spending—such as $20 billion for Medicare, energy bill relief, pharmaceuticals, and school funding—has contributed to an increase in overall government expenditure.

Overall this will continue to plunge net debt—the overall money Australia owes—further into the red, with debt expected to increase from 19.9 percent of GDP, to 21.5 percent by 2025-26 and continue to rise to 23.1 percent by 2028-29.

In money terms, that means $556 billion this financial year, and possibly $768.20 billion by 2028-29.

Chalmers Defends Budget’s Debt Figures

In a post-budget interview with ABC, Chalmers defended the debt numbers, stating, “First of all, the budget position is $207 billion stronger than when we came to office, and that shouldn’t be lightly dismissed.”

He added, “Secondly, this year’s deficit is almost half the size of what it was when we came to office.

“Thirdly, when you look at the overall positions, the bottom line in this budget is stronger than it was just a few months ago in the mid-year update. So, we are chipping away.”

Opposition Reacts: ‘A Budget for the Next Five Weeks, Not Five Years’

The opposition was quick to respond.

Shadow Treasurer Angus Taylor described the $17 billion tax cuts as a “cruel hoax” and said the government’s spending is short-term, aimed at winning votes rather than addressing long-term economic challenges.

“They’re not genuine tax cuts,” he claimed. “73 cents a day in a year’s time, when typical Australian families with a mortgage are paying an extra $50,000.

“We need a pathway back to the standard of living Australians had before Labor took power,” he told ABC news.

Economist Sceptical

Gigi Foster, a professor at UNSW, expressed concern that the budget fails to address Australia’s most pressing structural challenges, including productivity stagnation, inflation, housing stress, wealth inequality, corporate tax evasion, and corruption.

“I see a lot of cash splashes in various areas and to various groups that are wrapped in the flag of ‘cost of living relief’ or intended as a signal of esteem or importance (e.g. the targeting of aged care workers’ award rates, or the higher funding for urgent care clinics, hospitals, and public schools),” she told The Epoch Times.

She warned that many of these measures are directly inflationary and lack a thorough examination of whether public systems, such as healthcare and education, are delivering meaningful outcomes.

Conclusion: A Mixed Bag

While Chalmers is promoting optimism, reasoning that a balance is needed between government-backed short term relief against long-term structural reform, the question remains, how effective is the budget in tackling the underlying challenges facing the Australian economy?

Though tax cuts, energy rebates, and other measures will undoubtedly offer temporary relief to households, the critical issue is whether the government can sustain these interventions without exacerbating the nation’s debt.