The Australian government will hand down its 2026-27 federal budget on Tuesday in Canberra, with Treasurer Jim Chalmers under pressure to balance cost-of-living relief against a deteriorating external environment. Prime Minister Anthony Albanese, in remarks to caucus on Wednesday, told colleagues the document would be framed as a "national resilience" budget rather than the more expansive package previewed at the start of the year.
High oil prices linked to the war in the Middle East and a near-record cash rate of 4.35 per cent — held by the Reserve Bank earlier this week — have squeezed household budgets and reduced the headroom Treasury had counted on. The Bureau of Statistics reported headline inflation rose to 4.6 per cent in March, with petrol contributing roughly 0.8 percentage points of the increase.
The Treasurer has trailed an extension of the temporary halving of the fuel excise, currently due to expire on June 30, by at least three months. Modelling circulated within the government suggests the extension would cost around A$2.4 billion in lost revenue but is regarded as politically unavoidable.
More significantly, Mr Chalmers is understood to be weighing a reduction in the capital gains tax concession, currently set at fifty per cent for assets held longer than twelve months, to either thirty-three per cent or twenty-five per cent. The change would raise around A$15 billion over the forward estimates and is favoured by Labor's left, though the prime minister's office is wary of a backlash from investors.
Treasury's mid-year update lifted the projected underlying cash deficit for 2026-27 to A$48 billion. Most economists expect Tuesday's document to nudge that figure higher and to push the projected return to surplus into the second half of the decade.
The budget will also include a previously announced A$70 million package for productivity-linked tax incentives for small and medium-sized businesses, and an expanded Future Made in Australia line item directed at lithium refining, green hydrogen and pumped-hydro storage.