The federal budget explained:
what it means for your money

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Anthony Moir
Anthony Moir, Treasurer
Reviewed: 14 May 2026
Read time: 3 min

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  What is the federal budget? |   Effects of the budget in everyday life |   Where it comes from |   Where it goes |   Should I pay attention?  |   Budget key terms 

What is the federal budget?

Put simply, the federal budget is the government’s yearly plan for how it collects money and what it plans to spend it on. Much of this money comes from taxes on income, business profits and everyday spending. It is used to fund services managed by the federal government, such as defence, welfare, foreign policy and Medicare.

But this spending plan must be approved by the Australian Parliament. The budget includes a core appropriation bill to allow the spending of public money and other legislation for specific spending measures. When the budget is approved by a vote of Parliament, the government can collect and spend your money.

Budget day is the day the government announces this plan for the coming financial year. On budget night, the Treasurer makes a ‘budget speech’ to parliament that outlines the government’s financial plan.

What areas of everyday life does the budget affect?

The budget has an impact on everyday life in more ways than people may realise.

It shapes how much tax you pay, what you get back in services, and how expensive key parts of life become. This includes healthcare costs like Medicare and medicines, education funding, childcare subsidies, aged care, and social security payments like JobSeeker or the pension. It also influences infrastructure spending such as roads, public transport and housing and can affect interest rates indirectly by influencing inflation and economic growth. Even things like fuel prices, energy bills and rent can be touched by budget decisions through subsidies, taxes or incentives.

The government gets money from:

  • Taxes on people’s income (wages)
  • Taxes on the profits businesses make
  • Taxes on the sale of items or services, otherwise known as the GST or Goods and Services Tax
  • Charges like the Medicare Levy
  • Profits from government-owned companies
  • Proceeds from the sale of government assets
  • Excise and duties such as fuel and alcohol taxes

Where does the money go?

There are 5 main areas where most of the money goes:

  • Social security payments to Australians in need
  • Medicare and aged care
  • Payments to states, territories and local governments
  • Education (schools and universities)
  • Defence spending and foreign aid

Some costs are shared between the state and federal governments, like hospital funding. 

What is worth paying attention to in the federal budget?

For households, the most immediate impact is usually in the ‘hip pocket’: tax cuts or increases, changes to benefits, and cost-of-living measures. Governments can use the budget to ease pressure through one-off payments, such as energy rebates. Longer-term spending, such as funding for housing supply or healthcare won’t necessarily show up as cash in your account straight away, but can shape affordability and quality of life over time.

The budget also makes a series of forecasts for the coming years on key indicators of the country’s financial health and priorities, such as inflation, wages, and whether the budget will be in deficit or surplus. 

The 2026 federal budget explained, without the jargon.

A clear look at what’s changing and what it could mean for you
Find out more

Speaking budget: What do these key budget terms mean?

Icon illustrating government debt, representing the amount of money the government has borrowed to fund policies and initiatives.

Debt

The amount of money that the government owes at a particular time. Just like borrowing for a car or a home, governments can borrow money to pay for policies or initiatives they couldn’t otherwise afford.
Icon representing a budget deficit, where government spending exceeds revenue and borrowing is used to cover the shortfall.

Deficit

A deficit happens when the amount of money coming in (revenue) is less than the amount of money going out (spending or expenditure) as planned in the budget. The government has to borrow to make up the difference.
Checklist icon representing government expenditure, showing the total amount the government spends in the budget.

Expenditure or spending

All the money the government spends.
Document icon representing forward estimates, showing government projections for revenue, spending and budget balance over the next four years.

Forward estimates

The government’s projections for revenue, spending and the budget balance over the next four years. These are forecasts, not guarantees.
Rising chart icon representing inflation, showing increasing prices for everyday goods and services measured by the consumer price index.

Inflation

This is the increase in prices that people pay for goods and services, from the cost of groceries to the amount your plumber charges. The main indicator of inflation is called the consumer price index or CPI, which is simply the increase in prices for items that households typically spend money on.
House and person icon representing budget lock‑up, where journalists receive embargoed federal budget information before official release.

Lock-up

Journalists covering the budget are ‘locked-up’ in media rooms inside Canberra’s Parliament House on the morning of budget day and given embargoed copies of the budget on the strict condition none of the content is published until the Treasurer starts his budget speech in parliament that evening.
Envelope with dollar icon representing government revenue, showing income from taxes and other non‑tax sources

Revenue

The government’s income from taxes and ’non-tax’ sources such as earnings from government investments. Revenue can rise and fall with the state of the economy.
Hand and dollar icon representing a budget surplus, where government revenue exceeds spending and extra funds can be saved or used to repay debt.

Surplus

When revenue is higher than spending or an amount of extra money, once expenditures and budget allocations are taken away from government income. A surplus can be saved, spent or used to pay back debt or for new government initiatives.
Document and stamp icon representing tax, showing government charges on wages, goods and services to fund public spending.

Tax

What the government charges on wages or goods and services,to raise money for public spending.
Person icon representing the Treasurer, the government minister responsible for the federal budget, economic policy and spending priorities.

Treasurer

The government minister who is responsible for the budget, as well as the government’s financial planning, setting economic policies and spending priorities.

What does the budget mean for my household?

Budget decisions can affect everyday costs like repayments, bills and groceries – but the impact looks different for everyone.

Use our budget planner* to get a clearer picture of where your money goes and how changes to the cost of living could affect you.

Try our budget planner

Sources:

Budget - Parliamentary Education Office

Infosheet 10 - The budget and financial legislation – Parliament of Australia

Online budget glossary | pbo

Anthony Moir - Pepper Money Treasurer

Contributor | Anthony Moir, Treasurer

Anthony joined Pepper Money in February 2021 as Treasurer. With over 25 years of experience in treasury and debt capital markets, he has worked with a diverse range of bank and non-bank lenders. Read more.

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