Governance and Risk Guide to the 2025 Federal Budget
Your essential update on governance, regulation, and risk in the year’s biggest fiscal event.
In this special report, we examine tonight’s federal budget, highlighting what you need to know about the major governance and risk management announcements.
Budget 2025 overview
Set against a backdrop of global uncertainty, rising insolvencies and pressures on business, a housing crunch, and with an election on the horizon, the 2025 Federal Budget walks a fine line between providing relief and maintaining fiscal discipline.
Pre-election tax cut sweetener but no meaningful foundations laid for productivity-enhancing reforms
Modest tax cuts aimed to trickle through the pockets of Australians ahead of the election will cost the budget $17 billion. This comes at a time when continued global uncertainty and geopolitics shake the foundations of the Australian economy with greater volatility in commodity exports and revenue expected over the forward estimates.
The government has committed just $12 million over four years from 2025-26, to support small businesses, with the bulk of the spend going to the ACCC to strengthen regulatory oversight of the Franchising Code of Conduct, $3 million over four years from 2025-26 for ASIC to improve its data analytics capability to better target enforcement activities to deter illegal phoenixing activities. $5.3 million in 2025–26 will go to the OAIC to continue its regulatory oversight of the Digital ID and Identity Verification Service programs.
International uncertainty will continue to test business resilience
Commodity price volatility has increased the uncertainty around forecast estimates, including whether the government can afford their promised tax cuts. The revenue outlook continues to be exposed to underlying economic risks. The global economic outlook remains uncertain and volatile, particularly from the escalation in trade tensions. This uncertainty poses risks for exports and global commodity prices that will impact business investment.
In our Pre-Budget submission, Governance Institute called for an economic reform agenda to improve the competitiveness and productivity of Australia’s corporate and commercial sectors. The rapid development of new technologies, particularly generative AI, has emerged as a once in a generation productivity enhancing opportunity for businesses of all sizes and all industries. Businesses are in the process of transitioning to a greener and more sustainable operating environment and require greater support measures to invest.
The Australian economy is on a more optimistic footing however anaemic productivity growth expected over forward estimates
The Treasurer has delivered a more optimistic tone to budget forecasts over the forward estimates. Australia’s economy grew by 1.5 per cent in 2024, with forecasts for 2.25 per cent growth in calendar years 2025 and 2026, with an expected pick up to 2.75 per cent in 2027 but remain below historical averages of 3.3 per cent over the forward estimates. Productivity growth is expected to slow to 1.2 per cent per year over the forward estimates. The government has missed an opportunity to kickstart productivity growth through reforms to support business growth and living standards.
A resilient labour market and moderating inflation expected to drive real wages growth
The labour market is expected to remain resilient over the forward estimates, remaining at 4.25 per cent. The consumer price index (CPI) is expected to moderate to between 2.5 per cent to 3.0 per cent over the forecast period. The Treasury is also estimating the wage price index (WPI) to increase by over 3 per cent over the forecast period to 2027-28. The strength of labour market conditions and moderating inflation have continued to drive growth in real wages.
Inflation has moderated substantially across both headline and underlying measures. Inflation is now expected to be 2.5 per cent through the year to the June quarter 2025, which is 0.25 of a percentage point lower than expected at the time of MYEFO. Headline inflation is forecast to be just below 3 per cent through the year to the June quarter 2026 and then be around the middle of the target band for the remainder of the forecast period.
Budget deficits lower but here to stay
The budget will be in a deficit to the tune of around $27.6 billion in the current financial year. The government is also forecasting that the budget will remain in a deficit for the next decade.
Following a short-lived surplus of $15.8 billion for 2023-24, the deficit for 2024-25 is estimated to come in at $27.6 billion, peaking at $42.1 billion deficit in 2025-26. The Government predicts persistently high deficits to 2028-29 for a total $179.1 billion. The deficit forecast in 2025–26, is an improvement of 0.2 percentage points of GDP since MYEFO.
Gross debt is estimated to be $177 billion lower in 2024–25 than estimated in the pre-election economic and fiscal outlook (PEFO). Gross debt-to-GDP is expected to peak at 37.0 per cent at 30 June 2030 and then fall to 31.9 per cent at 30 June 2036. Gross debt is expected to increase from 33.7 per cent of GDP in 2024-25, to 36.9 per cent as soon as 2027-28. Forward estimates for interest payments on dept are expected to accumulate to $109.6 billion, with $14.9 billion interest payable in 2024-25 alone.
The Budget position is expected to improve its interest on debt by more than $60 billion over the 11 years to 2032-33. Debt is estimated to increase year on year over the forward estimates from $940 billion in 2024-25 to $1.16 trillion in 2027-28. Total savings and spending reprioritisations to $94.1 billion, and total budget improvements to $123.8 billion, since the PEFO.
Productivity, competitiveness and business resilience are essential for continued economic growth.
Company gross operating profits have continued to decline and there has been a record number of business insolvencies recorded, with the latest ASIC business insolvency data for 2025 showing the worst start of any year. The Government has made modest announcements across a range of policy portfolios to support a more resilient business environment.
Cyber security
Additionally, the Australian Criminal Intelligence Commission (ACIC) will receive $51.3 million in 2025–26 to bolster its efforts against transnational, serious, and organised crime.
The Office of the Australian Information Commissioner (OAIC) will receive $8.7 million over three years from 2024–25 for enforcement activities and $5.3 million in 2025–26 for regulatory oversight of Digital ID programs.
$3.4 million in 2025–26 will be allocated to the Commonwealth Fraud Prevention Centre. To support law enforcement and national security, $2.2 million in 2025–26 will facilitate access to data under the AUS-US Data Access Agreement.
Modern Slavery
Community-based projects to prevent modern slavery will receive $1.0 million in 2025–26, and a national database for hate crimes and incidents will be supported with $0.3 million in 2025–26.
Workplace and gender equality reporting
Support for the Workplace Gender Equality Agency and Australian Public Service Commission for reporting requirements, including workplace sexual harassment, will receive $1.4 million in 2025–26.
Consumer protection
Consumer protection has also received $6.7 million in 2025–26 allocated to extend the operation of the National Anti-Scam Centre within the Australian Competition and Consumer Commission, protecting consumers and businesses from scams.
Small businesses will receive only modest support. Strengthening regulatory oversight of the Franchising Code of Conduct, $7.1 million over two years from 2025–26 will be allocated to the Australian Competition and Consumer Commission.
The Australian Securities and Investments Commission will receive $3.0 million over four years from 2025–26 to enhance data analytics for targeting illegal activities. Treasury will develop protections against unfair trading practices with $0.8 million in 2025–26.
$0.8 million in 2025–26 will go to the Treasury to reform Australia’s financial reporting governance arrangements.