Federal Budget 2025-26: Workforce priorities and employer considerations  

• The abolition of non-compete clauses that hinder job mobility and suppress wages for affected workers is anticipated to increase wages.
• $793 million of funding targeting specific women’s healthcare and increased funding for childcare has the potential to assist in increasing female participation in the workforce.
• $46 million committed to improving digital mental health services - supporting both individuals and workplace wellbeing initiatives.

The Budget announced several measures that are expected to have a positive impact on the workforce. It includes targeted measures to address the cost of living through tax cuts, reduced healthcare costs, and energy bill relief, while also outlining measures to improve wages in key sectors such as aged care, early education and healthcare. 

Treasury now forecasts unemployment to peak at 4.25%, lower than previous estimates. Economic growth is forecast to improve from 1.5% in FY26 to 2.5% in FY27. This will lead to average wage growth of 0.5% for the Budget period. The Treasurer was adamant this would not impact inflation, which is expected to be sustainably back within the RBA’s target range of 2-3% during the same period. 

The Budget aims to create a stronger, more productive, and resilient economy and workforce. This was addressed through measures driving competition reforms and encouraging investment in areas such as green metals, construction, defence and manufacturing. The abolition of non-compete clauses that hinder job mobility and suppress wages for affected workers is anticipated to increase income potential, as these individuals gain the freedom to pursue more productive and higher-paying employment opportunities.

A key focus of this year’s Budget is women’s health and increased access to childcare. With $793 million of funding targeting specific women’s healthcare for issues such as endometriosis and menopause, as well as the increased funding for childcare, it has the potential to assist in increasing female participation in the workforce.

While we expected to see specific measures to address the challenges of technology disruption across the workforce, detailed initiatives were not outlined. As emerging technologies such as Generative AI encroach more deeply on everyday tasks and activities, business may need to redesign work to accommodate this shift to a human-machine teaming model. The implications are significant for workers and for work itself, as Mercer’s Global Talent Trends Report indicates. It would be encouraging to see dedicated policies and initiatives emerge in this area to uplift skills and capabilities, and to strengthen safety and risk management - helping ensure Australia keeps pace with global advancements.

It was pleasing to see that the Budget has strong support for skills and education as our research shows that skills are a high priority agenda for employers and workers¹. The Budget commits to investing in skills at all levels of education and the Government has set a target of 80% of the working-age population having completed a tertiary qualification by 2050². Measures in support of this include the 3 Day Guarantee that ensures every child is eligible for at least three days each week of subsidised early education, ensuring accessibility and allowing parents to balance work and family priorities.

Investment into priority sectors for skills development includes:

• Healthcare, where more post-graduate scholarships will be granted for nurses and midwives to extend their skills and qualifications
• Fee-free TAFE scheme – to be made permanent nationwide from January 2027 with 100,000 places provided each year
• Cutting student loan debts by 20%

Overall, these measures are vital for preparing the workforce for the future, ensuring that all Australians can gain skills and an education to thrive in a rapidly changing economy.

As part of efforts to ease cost-of-living pressures, the Budget includes significant investments to expand Medicare support.

The Budget announced additional funding of $8.4 billion over five years from 2024–25 (and $2.5 billion per year ongoing) to increase access to bulk billing. This denotes the single largest reform to bulk billing since its inception. This is expected to deliver fee-free services for nine out of ten consultations. In addition, $46 million was committed to improving digital mental health services. These combined investments are expected to provide much-needed improvement to access to care and encourage more proactive health management - with additional funding for mental health services supporting both individuals and workplace wellbeing initiatives.

While these initiatives represent a strong commitment to improving health outcomes, the absence of commentary on Fringe Benefit Tax reform leaves open questions about how the Budget supports broader uptake of private health insurance, particularly as reliance on Medicare continues to grow. This should be monitored as additional reliance on Medicare has the potential to place excessive strain on the public system, necessitating alleviation through directing more Australians towards private health insurance in the future.

Further, while the Budget commits $606.3 million over four years from 2025–26 to deliver more Australian doctors and nurses, and $657.9 million over three years to expand the Medicare Urgent Care Clinics Program, there was limited detail provided on the additional resources required to support implementation. As these initiatives progress, it will be important to consider the potential impacts on system capacity and service delivery, including any flow-on effects for timely return-to-work outcomes for injured or unwell workers.

The Pharmaceutical Benefit Scheme (PBS) additionally saw a $1.8 billion investment over five years to reduce the cost of PBS prescriptions from $31.50 to $25, as well as expanding covered medications to include specialised drugs for cancer treatment, women’s health, and mental health - further supporting a reduction in the cost of living. The Treasurer estimated these reforms could reduce the cost of expensive conditions, such as lymphoma, by up to $600K.

The Budget committed $240.4 million over five years to enhancing access to women’s health support, including $26.3 million over three years being directed towards perimenopause and menopause support. This includes expanding the PBS to include drugs for alternative menopausal hormone therapy, contraceptives, and severe endometriosis. These measures may create opportunities for employers to support women accessing care that has previously been limited, particularly in light of rising disability insurance claims related to women’s health and wellbeing.

In keeping with broader digital reform efforts, $228.7 million was committed to enhancing the My Health Records system - supporting the ongoing shift toward digitally enabled healthcare. Additionally, $5.3 million was allocated to the Office of the Australian Information Commissioner  to continue its regulatory oversight of the Digital ID and Identity Verification Service programs, highlighting a continued focus on privacy and information security – important considerations for multinationals navigating complex global privacy regulations. 

Overall, the Budget provides a welcome investment in the health and wellbeing of Australians, while supporting a stronger economy and workforce. Employers should remain mindful of these changes as they may impact existing benefit structures. Maintaining a strategic focus on employee benefits will be essential as the balance between public and private continues to evolve – particularly in a competitive era where retaining talent is key. 

1 Mercer: Global Talent Trends 2024-2025

2 Australian Universities Accord

 

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