The Mid‑Year Economic and Fiscal Outlook strengthens the budget, reduces debt and continues the Government’s responsible approach to economic and fiscal management.
The figures show a stronger budget position compared to the election and a much stronger budget compared to what we inherited from our predecessors.
This is the only mid‑year update on record that has delivered a better bottom line every year of the forward estimates, less debt in every year of the forward estimates and net policy decisions that improve the bottom line.
On this combination of measures, it is the most responsible mid‑year update on record.
It’s a sensible and responsible update that is all about delivery, responsibility and restraint.
We’re delivering on our promises, making room for unavoidable pressures, and strengthening the budget at the same time.
This stronger budget position has been achieved by identifying an additional $20 billion in savings and reprioritisations, ensuring net policy decisions are positive and returning every dollar of tax receipt upgrades to the budget.
In our first term, we delivered the largest nominal budget improvement on record, delivered back‑to‑back surpluses in our first two years and a much smaller deficit in our third year.
This MYEFO builds on that progress:
- The deficit in 2025–26 is $36.8 billion, around $5.4 billion lower than the 2025 Pre‑Election Economic and Fiscal Outlook (PEFO) and more than $6 billion lower than what we inherited.
- The budget bottom line is cumulatively $8.4 billion better than the 2025 PEFO across the forward estimates, better in each year of the forward estimates; and $233.5 billion better over the 7 years to 2028–29 than what we inherited.
- Gross debt is forecast to be $993 billion by the end of this financial year, $29 billion lower than expected at the 2025 PEFO and $176 billion lower than what we inherited.
- Gross debt is forecast to peak at 37.0 per cent of GDP, the same as the 2025 PEFO and much lower than the 44.9 per cent our predecessors left us.
- The progress we have made on the budget since we were elected means we avoid more than $60 billion of interest costs over the 11 years to 2032–33.
We’ve managed to make this progress in the face of growing, unavoidable spending pressures.
We’ve had to accommodate $35 billion in payments variations, including an extra $6.3 billion in natural disaster relief, $3 billion for the Age Pension and $2 billion in veterans’ entitlements.
Despite these pressures, we’ve delivered a stronger budget position through our responsible approach:
- For the first time in eight years, net policy decisions are positive. This means our decisions directly improve the budget position.
- We have been able to do this because we have identified a further $20 billion in savings and reprioritisations taking the total since coming to Government to $114.1 billion.
- The positive impact of our decisions means we have returned every single dollar of the revenue upgrade to the budget bottom line. This is the first time a government has done this in more than fifteen years.
- We’ve kept average real spending growth to 1.7 per cent over the seven years to 2028–29, compared to our predecessors who averaged 4.1 per cent.
- Payments as a share of GDP fall over the forward estimates from 26.9 per cent in 2025–26 to 26.5 per cent in 2028–29.
New measures we’re providing through this mid‑year budget update include:
- $10 billion to deliver up to 100,000 homes for sale only to first home buyers.
- $1.1 billion for more free mental health services and additional training places.
- $435 million to help low‑income workers through our boost to the Low Income Superannuation Tax Offset.
- An extra $233 million in funding for the CSIRO.
- $98 million to fast track the qualification of 6,000 tradies and establish a new National Training Centre in New Energy Skills.
- $1.1 billion for the Cleaner Fuels Program, among other measures supporting the Government’s Net Zero Plan.
We’re also:
- Delivering two more rounds of tax cuts for every taxpayer next year and the year after.
- Supporting more bulk billing since 1 November.
- Cutting student debt by 20 per cent for 3 million Australians across November and December.
- Making medicines even cheaper from 1 January next year.
We recognise that Australians are still under pressure and the global economic environment is complex and uncertain, but the Australian economy confronts these challenges from a position of strength.
The private sector recovery we have been planning and preparing for is gathering pace, and we see that reflected in in today’s numbers.
A key driver of this is a better outlook for non‑mining business investment, which is expected to reach its highest level on record in the years ahead.
While inflation is higher than we would like, this is partly driven by temporary factors and it has come down substantially since the Government came to office. Treasury expect both headline and inflation excluding fuel and energy rebates to be in the target band next financial year.
Under Labor, growth and the private sector recovery are picking up, business investment is strengthening, unemployment is low, participation is near record highs, real wages are growing, debt is down and the budget is stronger.
Whether it’s the big turnaround we’ve engineered in the budget, $114 billion in savings, spending restraint or the private sector recovery, we’ve made a lot of progress and that’s clear in the mid‑year update.
Labor’s economic plan is all about helping with the cost of living at the same time as we build a more productive and resilient economy and a more sustainable budget, and the mid‑year update advances this plan.