26th April 2026

Estimated reading time: 4 minutes

With the Federal Budget approaching, attention is once again turning to cost‑of‑living relief, tax changes and government spending.

While the headlines often focus on the short‑term winners and losers, the more important question is whether the Budget sets Australia up for stronger and more sustainable long‑term growth. 

In a recent “Oliver’s Insights” piece, Dr Shane Oliver, Head of Investment Strategy and Chief Economist at AMP, outlined five areas that matter most if the Budget is to genuinely improve Australia’s economic outlook.

Below, we step through those five themes and what they mean in practice.

1. Cost‑of‑living relief, but only if it is targeted and temporary

Given ongoing pressure from energy prices and higher interest rates, some form of cost‑of‑living support now appears unavoidable. The critical issue is the design of that support.

As Shane Oliver notes, broad and permanent handouts risk adding to inflation rather than easing it, particularly at a time when inflation is still above the Reserve Bank’s target range.

More effective measures would be:

• Targeted, focusing on households and businesses most affected
• Temporary, designed to unwind as conditions improve
• Measured, so they avoid stimulating demand unnecessarily

Poorly targeted relief may feel helpful in the short term, but it can prolong inflation and keep interest rates higher for longer.

2. Greater discipline around government spending

Government spending increased sharply during the pandemic, which was the right response at the time. However, spending is still high when compared to the size of the economy.

As Shane points out, when government spending stays elevated for too long, it can start to create problems, including:

• Pushing private businesses aside, as government competes for workers, materials and capital
• Stretching the economy’s ability to cope, meaning there aren’t enough workers, housing or infrastructure to meet demand
• Adding to inflation, because too much money is chasing too few goods and services

A credible Budget should outline a clear plan to gradually return spending to more normal levels. This doesn’t mean harsh cuts, but it does mean being more careful particularly at a time when the economy is already running close to full capacity.

3. Tax reform rather than simply higher taxes

There has been renewed debate around tax changes, including capital gains tax, negative gearing, trusts and industry‑specific levies. While some ideas may improve fairness or sustainability, raising taxes in isolation risks slowing investment and growth. 

Australia’s tax system already relies heavily on personal income tax, with bracket creep steadily increasing the burden on workers over time.

Worthwhile reform would focus on: 

• Improving efficiency across the tax system
• Reducing distortions that discourage work and investment
• Broadening the base rather than continually raising rates
• Ensuring the system remains fair across generations 

As Oliver argues, structural reform matters far more than short‑term revenue grabs.

4. A renewed focus on productivity growth

Australia’s productivity growth has been weak for over a decade, a trend that directly limits wage growth and living standards.

Without productivity improvements:

• Inflation becomes harder to contain
• Real wage growth stalls
• Economic growth becomes more fragile

A Budget that genuinely lifts Australia’s long‑term prospects should prioritise policies that: 

• Reduce unnecessary regulation
• Encourage business investment
• Improve economic flexibility
• Support innovation and capital formation

Productivity reform rarely makes headlines, but it has the greatest long‑term payoff.

5. Clearer transparency around debt and spending commitments

Finally, Shane Oliver highlights the importance of being clear and upfront about government debt — including spending that sits outside the official Budget numbers.

No matter how it is labelled, government debt ultimately has to be paid for by taxpayers. That’s why it’s important that spending decisions are transparent and well thought‑through.

Clearer rules around government spending, better disclosure of the true cost of programs, and independent checks on whether projects are good value for money would all help ensure public funds are being used wisely. Ultimately it would give Australians more confidence in how tax dollars are spent.

What this means for investors

Budgets rarely change investment outcomes overnight, but the policy direction set over time matters enormously.

As Shane Oliver’s analysis makes clear, disciplined spending, sensible tax reform and productivity‑focused policy:

• Reduce long‑term inflation risk
• Support more stable economic growth
• Create a healthier environment for investors

Once the Budget is released, we’ll focus on what truly matters – cutting through the headlines to assess the implications for your investments, cash flow and long‑term strategy.

If you’d like to discuss how the Budget outcomes affect your personal situation, please feel free to get in touch.

Remember any advice in this blog is general in nature. Always seek out professional financial advice before acting on anything personally. 

— Kristy