CEDA CEO Melinda Cilento says the real test of next week’s budget is whether the government can make disciplined, coherent policy choices in a volatile environment. Here is the four-point framework CEDA will use to assess it on budget night.
Prime Minister Anthony Albanese has described this year’s Federal Budget as his government’s most ambitious yet. With the budget landing next week, the Committee for Economic Development of Australia, one of Australia’s most respected independent economic think tanks, has set out exactly what it will be watching for on budget night, and what it believes a genuinely good budget needs to deliver.
CEDA CEO Melinda Cilento frames the challenge clearly. “While ambition for our future is important, in a more volatile environment marked by geopolitical tensions, fiscal pressures and weak productivity growth, the real test will be whether the Government can make disciplined, coherent policy choices and implement them effectively,” she says.
CEDA has identified four interconnected themes that will shape its assessment. Each one has direct implications for Australian small business owners navigating a difficult economic environment heading into the second half of 2026.
Fiscal discipline
Australia’s fiscal position is more stretched than the headline numbers suggest. According to CEDA’s analysis, drawing on Parliamentary Budget Office data, the federal government’s net operating balance has been positive in just five of the past twenty years. Net debt currently stands at $36,000 per person. And interest payments on accumulated debt are on track to eclipse all other payment categories over the coming decade.
CEDA is calling for the government to introduce savings and tax packages that collectively shore up the budget bottom line, and to be guided over the longer term by a spending target range of between 24 and 26% of GDP. The think tank is also calling for broader means testing of government support, arguing that recent years have seen a rise in untargeted financial support, from universal electricity rebates to fuel excise cuts and student debt relief, that heightens inflation risk and adds strain to the budget.
On tax, CEDA points to a structural imbalance that should concern anyone who runs a business or employs people. Of the 40% increase in federal tax receipts since the onset of the pandemic to 2024-25, 87% has come from increases in income taxes, with GST contributing just 11%. CEDA argues that allowing bracket creep to finance increased spending is not sustainable and erodes the incentive to work and invest at a time when both are needed. A good tax package on budget night, in CEDA’s view, would shift the tax mix toward a more efficient and equitable footing.
Productivity
CEDA describes productivity as the most attractive lever the government can pull to put the country’s finances on a sustainable path. The numbers behind that assessment are significant. Returning productivity growth to its historic average would, according to Productivity Commission chair Danielle Wood, see Australians $14,000 better off per person by 2035. For small business owners whose margins are being squeezed from multiple directions, that kind of structural improvement in the broader economy translates directly into stronger customer spending and a more supportive operating environment.
CEDA is calling for a more seamless national economy where regulation is streamlined and duplication reduced, a stronger government role in supporting AI adoption across the economy and within government processes, and better utilisation of migrant workers’ skills, which CEDA research estimates could unlock $4 billion in annual benefits. Business investment and productivity growth are both at multi-decade lows, CEDA notes, and the budget cannot afford to defer action on either.
Economic security
The Middle East conflict has brought calls for expanded domestic fuel storage, fertiliser stockpiles, and a broader push to bring more manufacturing back to Australia. CEDA’s position on these measures is careful rather than dismissive. The think tank acknowledges that new measures to strengthen economic security are likely warranted given the scale of recent shocks, but argues the government should be explicit about the costs, risks, and trade-offs of any proposed response, not just the benefits.
Decisions to expand stockpiles of critical imports, for example, may over time reduce the incentive for businesses to manage risks themselves and will come at the expense of spending in other areas. For SME owners who have been watching the government’s fuel and fertiliser supply announcements closely over recent weeks, CEDA’s caution is a useful counterpoint: speed of response matters, but so does the long-term design of the policy.
Policy coherence
CEDA’s fourth theme is the one that often gets the least attention in budget coverage but may matter the most. A budget where individual policies work against each other, or where short-term relief measures undermine longer-term goals, is less valuable than one where the settings are aligned.
CEDA offers two pointed examples. The government continues to subsidise fossil fuel consumption through its $10 billion per year fuel excise credit scheme while simultaneously spending billions on programs to reduce emissions. And cost of living support that is not well targeted and time-bound can run counter to the shared goal of reducing inflation. Untargeted fiscal support following the pandemic was one driver of the global inflation spike, and CEDA says it will be watching closely on budget night to see whether the government has absorbed that lesson.
For small business owners, policy coherence is not an abstract concept. It shows up in whether the tax system sends clear signals about where to invest, whether compliance obligations pull in the same direction as productivity goals, and whether relief measures actually reach the businesses that need them without generating new distortions in the process.
CEDA’s overall assessment is that the current crisis, far from making reform harder to justify, makes it more necessary. “The extraordinary challenges presented by the unfolding crisis in the Middle East underscore the role that a strong, resilient economy can play in supporting Australians through times of hardship,” the think tank writes in its pre-budget analysis. “Unfortunately, the current crisis is unlikely to be the last.”
The budget lands next week. CEDA’s four themes offer a useful framework for any business owner trying to cut through the noise and assess whether what the government delivers will actually make a difference.
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