The 2026/27 Australian budget is a modest one by the standards of some recent years, and should have little effect on views of the economy.
At the margin, there is downside risk to the government’s 1¾ per cent gross domestic product forecast for 2026/27, and upside risk to its 2½ per cent inflation forecast.
But the quarter-point gap on each versus ANZ Research’s expectations is also not all that large in the context of some of the economic challenges of recent years.
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The budget includes support for households, and the most substantial changes to housing tax policy since 1999.
Negative gearing for residential property will be limited to new-build homes from July 2027 and there will be a minimum 30 per cent tax rate on capital gains. The ban on foreign purchases of established housing is extended until Jun-2029.
Along with the accumulation of efforts in recent years to boost housing construction, housing policy is now acting from both the supply and the demand sides to try and address the housing affordability crisis.
Much of the rest of the budget delivers into existing streams of policy: finding efficiencies in the National Disability Insurance Scheme, improving Australia’s resilience to a more challenging global environment (including access to fuel and fertiliser), raising the defence budget and improving productivity. Many of these are likely to feature in future budgets as well.
Some budgets present relatively cleanly, and the detailed analysis of the evening can be close to the final word. Other budgets seem to evolve over days as the breadth of detail is digested. This budget might take some more thought.
The housing tax changes are substantial but are something we might look back on. If they pass into law and are delivered smoothly, will they, after several decades of reform-lite budgets, show that reform is possible and pave the way for more? Many would hope so.
Richard Yetsenga is Chief Economist and Head of Research at ANZ
