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A Budget is not just a list of announcements. It’s a set of choices about what a government values and what it believes the country can sustain. Understanding the economic context helps make sense of why decisions were made the way they were.

The global context

This Budget was built against a genuinely difficult backdrop.

The conflict in the Middle East has caused:

  • The largest global oil supply disruption on record

  • Significant disruption to supply chains for fuel, fertiliser, chemicals, food and plastics

  • Higher global inflation and slower global growth

  • Global growth forecast at 3 per cent in 2026, down from 3.5 per cent in 2025

Australia is not immune. Domestic inflation is forecast at 5 per cent through the year to June 2026, driven largely by the oil price shock. Economic growth is expected to slow to 1¾ per cent in 2026–27 before recovering to 2¼ per cent in 2027–28.

Australia’s position

Despite the global headwinds, Australia is in a relatively strong position:

  • Growing faster than every other major advanced economy

  • Unemployment low at around 4¼ per cent

  • Gross debt lower than every major advanced economy

  • Wages growth solid at around 3¼ per cent

The Budget position

Underlying cash balance:

  • 2025–26: deficit of $28.3 billion (1.0% of GDP)

  • 2026–27: deficit of $31.5 billion (1.0% of GDP)

  • Projected return to balance: 2034–35

Gross debt:

  • Peaks at 35.8 per cent of GDP — 1.2 percentage points lower than forecast at the last update

  • $173 billion lower in 2026–27 than the estimate inherited from the previous government

  • Saves more than $70 billion in interest costs compared to earlier projections

Savings and reprioritisations:

  • $63.8 billion found in savings this Budget

  • Total savings since coming to government: $177.9 billion

  • Net policy decisions are positive for the second consecutive Budget update

Why this matters locally

Relief that makes inflation worse isn’t really relief — it’s a delayed bill. The test I apply to any Budget measure is whether it provides genuine support without trading off future stability.

This Budget provides cost-of-living help, backs Medicare, supports housing supply, backs small business and invests in the future — while keeping a responsible eye on what the country can sustain. That balance matters.

Read the full Budget overview at budget.gov.au