Budget 2025-26: Key measures for Australian businesses and international investment

Key highlights

Elections ahead: Australia’s 2025-2026 Federal Budget, released on March 25, focused squarely on cost-of-living measures to support households ahead of the forthcoming elections. Businesses, trade and international investment received a modest boost, with initiatives targeted at innovation and sustainability to take the economy forward. Further measures are likely to be announced before polling day, which may provide further support for businesses.

Smooth landing: Despite turbulent global conditions, Australia’s economy appears to have managed a soft landing. The Treasury forecasts growth to pick up from 1.50% in 2024-2025 to 2.25% in 2025-2026 and 2.50% the following year.

Business support: Treasurer also set aside funds for initiatives to encourage consumers to buy Australian-made goods to support local producers and is offering support to firms to expand overseas.

Future proofing: The government has introduced additional tax incentives to support renewable energy, critical materials and advanced manufacturing companies in Australia. The Budget builds on the existing AUD22.7bn (USD14.3bn) Future Made in Australia agenda to position the nation to be a beneficiary of the global transformation to cleaner and cheaper energy.

Promoting competition: The government intends to strengthen the competition watchdog and promote a level playing field for all businesses. This includes restrictions on non-compete clauses for most workers and faster approvals for most mergers and acquisitions, while scrutinising deals that could pose a risk to competition and the economy.

Investing in Australia:The government is setting up what it is calling a “front door” for investors that have what it considers big, transformational proposals. The aim is to make it simpler to invest in Australia – and attract more international and domestic capital. A pilot phase will kick off in September.

What should businesses keep an eye on?

• While most of the handouts in the Budget are reserved for the voting public, a freeze on draught beer tax provides some good news for businesses in the hospitality sector, with indexation on excise and excise equivalent customs duty rates paused for two years.
• The government will provide an additional AUD7.1m over two years to the Australian Competition and Consumer Commission to bolster enforcement action and ensure transparency in corporate behaviour.
• About AUD3.4m has been earmarked over a three-year period to provide business coaching and mentoring programmes for First Nations businesswomen and entrepreneurs.
• The government has reworked the AUD20,000 instant asset write-off scheme, which allowed businesses to instantly depreciate assets worth up to that threshold. The cap will be lowered back to its original AUD1,000 limit from July 1.

What’s new in the energy sector?

• The energy transition and infrastructure sector received some special attention in the Budget. The government is unlocking AUD8bn of additional investment in renewable energy and low-emission technology and has put in place tax incentives of about AUD13.7bn for hydrogen and critical-minerals production.
• Additionally, the Budget has allocated AUD1.5bn to support priority areas, including a AUD750m allocation for green metals, AUD500m for clean-energy technology manufacturing, and AUD250m for low-carbon liquid fuels.
• For decarbonisation of heavy industries, the government’s AUD2bn Green Aluminium Production Credit will support local aluminium smelters to transition to renewable energy, while a novel AUD1bn Green Iron Investment Fund will provide capital to accelerate the development of this new industry.

Business and investment: what’s next?

• Business investment has seen solid growth for two years and is expected to remain at recent decade highs. Non-mining investment is set to be the main growth contributor over the coming years, supported by investment in renewable energy infrastructure, warehouses and data centres.
• The government’s new “front door” is aimed at making it simpler to invest in Australia – for both domestic and global investors. It will act as a single entry point for those investors with transformational proposals, helping the government identify and facilitate priority projects.
• The Budget has allotted AUD20m over four years to support closer economic ties with India. Of that, about AUD16m will go towards setting up an Australia-India Trade and Investment Accelerator Fund, while the remainder will help extend the Maitri Grants Program to support exchange and collaboration between Australia’s and India’s cultural, educational, research and business communities.
• With its new Budget, the government scrapped about 500 tariffs in a bid to lower costs for businesses and improve productivity. The move comes amid a shifting trade environment, with the US applying a range of tariffs to the import of goods such as steel and aluminium. While the tariffs applied to Australian goods so far are expected to have a minimal impact to Australia’s economy, the bigger risk is the impact on growth in Australia's major trading partners, particularly China.
• The Treasury forecasts exports to grow by 2.50% in both 2025-26 and 2026-27, while growth in import volumes is expected to moderate to 2.50% this financial year.
• With elections looming and other uncertainties on the horizon, including news on further US trade tariffs expected in early April, this year’s Budget is unlikely to be the last word on fiscal policy. Businesses and investors will need to watch closely for further updates.

The economist’s view

Paul Bloxham, Chief Economist Australia, New Zealand, and Global Commodities at HSBC

“As Australians will know, this Budget’s coming just before a Federal Election, and the measures taken to boost spending come as little surprise in that context. We’ve seen a bump to healthcare and infrastructure spending, tax cuts and the extension of energy subsidies will help households and small businesses in particular.

However, these spending measures also contribute to a budget bottom line that, after two years of surpluses, has moved into deficit. Indeed, the primary challenge in this budget, which is largely unaddressed by policy measures, is that the budget remains in structural deficit, despite an assumed strong pick-up in productivity growth.

Net national debt is low, at 19.9% of GDP, but is projected to climb. More policy measures ought to be focused on supporting a pick-up in productivity, as this is the best way to help to narrow the deficits and minimise the expected rise in government debt.”