Budget 2025: What HR needs to know

Treasurer Jim Chalmers has handed down the fourth budget of the Albanese government. Here’s what HR teams and professionals need to know ahead of an imminent federal election.

Earlier tonight (Tuesday, 25 March), Treasurer Jim Chalmers handed down the pre-election budget that, according to conventional political wisdom, Labor had not intended to deliver. However, the arrival of Cyclone Alfred scuppered the prospect of an April election.

In his speech to Parliament, Chalmers said that the world has changed as a consequence of a global pandemic, global inflation, and the threat of a global trade war. The global economy, he reflected, is volatile and unpredictable.

“Australia is neither uniquely impacted nor immune from these pressures, but we are among the best placed to navigate them. We’re emerging from this spike in global inflation in better shape than almost any other advanced economy,” Chalmers said.

“Growth is forecast to pick up from 1½ per cent this year to 2½ per cent in 2026–27. The private sector is resuming its rightful place as the main driver of this growth, with Treasury upgrading forecasts for growth in private demand to more than double next year, compared to this one. Unemployment is now projected to peak lower, at 4¼ per cent. Employment and real wage growth this year will be stronger, and participation will stay near its record high for longer.”

Treasury now expects, Chalmers continued, that inflation will be sustainably back in the band six months earlier than anticipated.

“All of this means the soft landing we have been planning and preparing for is looking more and more likely. Because of our collective efforts, the worst is behind us, and the economy is now heading in the right direction,” he said.

Non-compete clauses

The federal budget release kicked off with a bang for the Australian workplace, with the Albanese government announcing the banning of non-compete clauses, which it claims “have no justification and drag down wages.”

Non-compete clauses operate to prevent workers from seeking or accepting new employment within an industry following the termination of their employment.

According to the government, more than 3 million Australian workers are currently covered by non-compete clauses, including childcare workers, construction workers, and hairdressers.

“Research suggests the reforms could lift the wages of affected workers by up to 4 per cent, or about $2,500 per year for a worker on median wages,” said Chalmers.

The ban will apply to workers who earn less than the high-income threshold ($175,000).

Just a week prior to the federal budget release, Australian Council of Trade Unions (ACTU) president Michele O’Neil mentioned the need to remove non-compete clauses during a debate with Australian Chamber of Commerce and Industry (ACCI) chief executive Andrew McKellar.

Now, O’Neil has lauded the actions of the government, stating: “Real wages are going up under the Albanese government, and this budget shows there is even stronger real wages growth on the way.”

“Three million workers are now looking forward to more freedom and higher wages because of the ban on non-compete clauses in employment contracts. Non-compete clauses have stopped workers changing jobs even if that job will pay them more or give them better conditions, driving down wages and stifling competition.”

Innes Willox, chief executive of the Australian Industry Group, argued that the budget “does not shift the economic dial”, hitting out at the move to ban non-compete clauses.

“The proposal to abolish non-compete clauses for many workers is also deeply concerning. It will undoubtedly lead to the difficult renegotiation of employment contracts and litigation where employers will seek to protect their intellectual property and customer base built up over years of risk and effort, which will now be threatened. This proposal is a disincentive to hire, train and upskill workers,” said Willox.

Wages

By limiting non-compete clauses, the government believes a boost in wages and mobility will follow – especially for the one in five workers who are subjected to such clauses.

For the aged-care workforce, the government plans to invest $2.6 billion for further pay rises for aged-care nurses – bringing the total wage increases in the sector to $17.7 million.

According to the budget, the early childhood and care workforce is in line for a “historic” $3.6 billion wage increase, “delivering a 10 per cent increase relative to modern award rates from December 2024 and will provide a further 5 per cent from December 2025”.

Students will also receive some relief, with the government increasing the amount that people can earn before they are required to begin paying their student loans back. The bracket has risen from 54,435 in 2024–25 to $67,000 in 2025–26.

In line with the banning of the non-compete clauses, the government will “close loopholes” that allow for “businesses to fix wages by making anti‑competitive arrangements that cap workers’ pay and conditions, without the knowledge and agreement of affected workers”.

Tax relief

The Treasurer unveiled $17 billion in tax cuts – which the Treasurer called the biggest part of the responsible cost‑of‑living package in this budget.

Every Australian taxpayer will get a tax cut next year and the year after, Chalmers detailed, to top up the stage 3 tax cuts that began last July.

“This will take the first tax rate down to its lowest level in more than half a century,” he told the House of Representatives.

“These additional tax cuts are modest, but will make a difference.

“The average earner will have an extra $536 in their pocket each year when they’re fully implemented. Combined with our first round of tax cuts, this rises to $2,190. And the average total tax cut will be $2,548, or about $50 a week.”

Income taxes will be cut further over two years: From 1 July 2026, it will reduce the 16 per cent tax rate to 15 per cent (for income between $18,201 and $45,000), and then from 1 July 2027, this tax rate will be reduced further to 14 per cent.

The Albanese government will also increase the Medicare levy low‑income thresholds, Chalmers added, which he labelled extra tax relief for more than a million Australians.

Additional cost-of-living relief

Workers across the country will also receive additional support from the Albanese government in the wake of the ongoing cost-of-living crisis.

“The cost of living is front of mind for most Australians and it’s front and centre in this budget. We know the welcome improvements in the aggregate numbers don’t always immediately translate to how people are feeling and faring,” the Treasurer told the House.

“We’ve made a lot of progress together, but we know many people are still doing it tough. Our plan to rebuild living standards starts with cost‑of‑living help and wages growth.”

Those additional measures of support included:

• Another $150 in energy bill relief, extending the energy rebates until the end of 2025.
• Reduction to the maximum price of PBS medicines to $25, and investing $1.8 billion to list more life‑changing medicines on the PBS.
• Wiping 20 per cent off all student debts and lifting the repayment threshold for graduates.
• $8.5 billion to make more GP visits bulk billed for all Australians and train more doctors and nurses, as well as $657.9 million to open another 50 Medicare Urgent Care Clinics and expand existing services.
• Making 100,000 Free TAFE places available across Australia every year.
• Establishing a Three-day Guarantee so that families are eligible for at least three days of subsidised early education and care, and building more childcare centres across Australia.

Small businesses

The extension of energy bill relief for six months to the end of 2025, applying to around 1 million eligible small businesses, was the headline relief for Aussie SMEs. The government also seeks to work with states and territories on extending unfair trading practices protections, which work to safeguard small businesses from power imbalances.

Although Willox noted that the extension was welcome, it fails to include a long-term relief for small businesses.

“The time-limited extension of the energy rebate for households and small businesses is welcome. While the rebate may have provided some minor bill relief, it has not assisted with managing the long-term energy affordability and reliability issues that are afflicting households and businesses,” Willox said.

“It is notable, too, that the end of the rebate indicates that inflation will then jump back up to 3 per cent for the next financial year.”

The Australian Competition and Consumer Commission (ACCC) enforcement of the Franchising Code will be boosted by $7.1 million over two years.

It was also claimed by the government that around 1.5 million sole traders are set to benefit from the government’s tax cuts for every taxpayer.

Home ownership help

The Albanese government is also set to commit $33 billion to help build 1.2 million new homes before the end of the decade, including $54 million to accelerate the uptake of modern methods of housing construction.

“The first two rounds of the $10 billion Housing Australia Future Fund are helping build about 18,000 social and affordable homes for those who need them most, and lifting the cap on Housing Australia’s financial liabilities to $26 billion also helps here,” Chalmers said.

“We’re making sure new properties are well‑located and connected to the infrastructure they require. Our Housing Support Program is funding the crucial roads, water, and power these new homes need. Our national leadership is incentivising states and territories to reform their planning systems to accelerate new housing supply.”

Further, the Treasurer unveiled an expansion of its Help to Buy scheme, by way of updating the property price and income caps from $90,000 to $100,000 for individuals and from $120,000 to $160,000 for joint applicants and single parents, so more first home buyers are eligible for the scheme.

This, he said, will help 40,000 Australians buy their first home in the next four years.

“The changes will mean they can access a bigger range of homes and buy one that suits them. And we’re easing pressure on the housing market by banning foreign investors from buying established homes, and cracking down on foreign land banking as well,” he told the House.

In a statement, Minister for Housing Clare O’Neil said: “Help to Buy takes years off the time it takes to save for a deposit. First home buyers on average rates with a $519,000 home will save about $900 per month when buying an existing home, and $1,200 per month when buying a new home.”

Women’s health

Chalmers also noted that the government is “proud” to invest $793 million in women’s health.

This will, he suggested, create more choices, lower costs, and deliver better health care for women.

“This funding will help Australian women save on contraception, access more endometriosis and pelvic pain clinics, and receive better support through menopause,” he said.

“For our government, women’s health is not a boutique issue or a question of special interest – it is a national priority.”

The funding will come as a relief to many working women, particularly given how menopause is holding women back in the workplace. One expert said there is a menopause talent drain that employers need to address.

Cyber security

Compared to the previous budget where the government provided $187.4 million towards protecting taxpayer data against fraudulent attacks, this budget relatively skips any boost to cyber security improvements for businesses and taxpayers across the country.

This year merely featured a regurgitation of the government highlighting that they have already “committed more than $60 million to help small businesses uplift their digital and cyber security capabilities”.