Groceries, fuel, bills & tax: What the Budget means for your bottom line

The 2026 Federal Budget is here and it’s making headlines, but will your household’s bottom line benefit (or shrink) from the changes? 

If this year’s budget were to be described in one word, it would be ‘tax’; in two, we could add ‘uncertainty’. Federal Treasurer Jim Chalmers spoke on both themes at length on Tuesday night, spruiking multiple notable tax reforms while warning of ongoing implications from war in the Middle East. Here are some of the most impactful changes: 

• $250 tax offset for all Aussie workers each year from July 2027
• $1,000 instant tax deduction for work-related costs from next financial year 
• Tax on income of $18,201 to $45,000 will drop from 16% to 15% next financial year and to 14% the year after 
• Negative gearing to be restricted to newly-built homes 
• Capital Gains Tax (CGT) 50% discount to be replaced with inflation-adjusted indexation and a minimum 30% tax rate

These changes are "some of the boldest we’ve seen for some time" and will go a long way towards “shifting the tectonic plates that have been sitting under Australia’s property market,” Canstar Data Insights Director Sally Tindall said.

“However, it has not solved the cost-of-living challenges many Australians are facing each day.”

So, with the days of cash splashes and energy rebates gone (at least for now), what can households expect from the 2026 Federal Budget? 

Groceries: Things may get worse before they get better

While Dr Chalmers didn’t reveal a flashy plan on reducing grocery costs on Tuesday, he did detail a few key initiatives that might (might) help your dollars stretch further at the checkout–or at least, stop you from snapping under the strain. 

War in the Middle East has not just impacted the supply of oil. Food producers need fertiliser, chemicals, and plastics–all of which are also under pressure. The government has made a few key moves that could ease the strain, like:

• The $7.5 billion Fuel and Fertiliser Security Facility (getting important goods to Australia) and
• the $55 million Transport Resilience and Capacity Kickstart pilot program (transporting them around the country).

But these are unlikely to make a meaningful impact at the grocery checkout. At least, not anytime soon.

Fuel and oil are a crucial part of supply chains, both in making the products we use day to day and transporting them to us. Australian Food and Grocery Council (AFGC) CEO Colm Maguire told Canstar, “with all of the different inputs being impacted now, we won't see a remedy in the short term.”

“It's everything from the wrappings around bread to the bottles that the milk goes into that's impacted, on top of the fertilisers or fuel needed to actually get them to market … even things like nappies have a high reliance on the petrochemicals that go into making the product themselves.”

The AFGC warns that grocery suppliers and manufacturers have so far been absorbing these costs, but an “unavoidable reckoning” could soon be upon consumers. 

“There is a breaking point,” Mr Maguire said.

“Any point of the supply chain can only cop sustained pressure for a certain period of time before those cost implications flow through to the cost of goods to the consumer.” 

Inflation forecasts: How much could the cost of your shop go up?

Of course, impacts from the ongoing oil shock will likely go hand-in-hand with Australia’s already-high domestic inflation. The Federal Government tips prices will rise 5% this year.

Interestingly, it also provided alternative forecasts, assuming a more severe conflict in the Middle East pushes oil prices to as high as US$200 a barrel this year. If this happens, it could drive inflation up 7.25% in 2026.  

That could see the average four-person household–which pays $240 per week for groceries, according to Canstar research–spending nearly $900 more at the supermarket each year:

Fuel: Short term relief set to roll off  

If we’re diving into the effects war in the Middle East is having on Australians, we can’t go past fuel prices. The daily average litre of petrol was 10.6 cents higher in the week to May 6 than it was prior to the conflict escalated in late February, according to the latest ACCC data. 

The government has committed $14.8 billion to buy more fuel, strengthen supply chains, and protect against future oil shocks, and another $3.2 billion to establish the Australian Fuel Security Reserve. Even so, drivers may have a nasty surprise at the bowser on 1 July. 

That’s when the 32-cent-per-litre fuel excise reduction, applied at the start of April, will expire. Unless the government extends it at the eleventh hour, fuel prices are expected to spike overnight as the tax returns to its full rate.

Bills: Swapping rebates for resilience

The 2026 Budget signals the end of energy bill relief seen in previous years. Instead, the Treasurer put forward a major structural change aimed to keep energy costs down over the longer-term:

• Domestic Gas Reservation
• The government will make gas producers set aside 20% of their production to serve the Australian market. This should result in lower power prices over the long-term, but households probably won't see any impact on their bills until it comes into effect in 2027.
  
• PBS Additions: The Pharmaceutical Benefits Scheme (PBS) received a boost, with treatments for conditions including cystic fibrosis, kidney disease, and cancer added.
  
• Private Health Insurance Rebate slashed for seniors: Those aged over 65 will get the same Private Health Insurance (PHI) Rebate as Australians of all ages (currently 24%) from April 2027. As it stands, those aged 65 to 69 may get a 28% rebate, while those over 70 may get 32% back. 

Canstar modelling shows someone aged 70 with gold hospital cover will fork out  $410 more for their policy after the extra discount is axed. Add in the 1 April price hikes, and estimates show the average 70 year old could be paying $815 more for their health insurance.

Older Australians warned: Don't downgrade on a whim

That has led to worries that older Australians will downgrade their health insurance policy or ditch the protection entirely, precisely when they’re more likely to need it. 

“If you’ve been in the system for decades as a fit, healthy, diligent-fee-paying customer, this is not when you want to be dropping out,” Ms Tindall said. “Australians rely on private health cover the most when they’re older.

“If you’re struggling with rising private health insurance costs, before you do anything dramatic that you might regret down the track when hit with a bout of ill health, stop and compare your options.”

Switching from an average-priced gold hospital cover policy to the cheapest option in that tier could save a 70-year old around $769 on their premiums, without having to downgrade their cover, Canstar research has found.

Tax: How much will your household save?

While Ms Tindall is sure the Treasurer would have loved to “pull a rabbit out of his hat” and hand $250 cash to households, the eagle eye of the RBA, which would no doubt argue such measures would drive up inflation, likely kept any such move at bay. 

“Instead, the rabbit is now on the long train out of Canberra,” she said. “It’s coming, in the form of the Working Australians Tax Offset, but it’s not set to arrive in people’s bank accounts until the second half of 2028. 

“There is extra money coming this year, mind you, in the stage two tax cuts promised in the 2025 Federal Budget, which will start flowing through to people’s pay packets from July.”

For anyone earning over $45,000, the change will put an extra $268 back into their pocket each year.

The bottom line for your bottom line

If you were looking for a check in the mail (à la the Rudd Government in 2008) or another few hundred off your electricity bill (as recent years have brought), the 2026 Federal Budget may be a disappointment. But Dr Chalmers appears to be trading budgetary painkillers for long-term financial surgery.

For the average household, the scorecard looks like this:

• Fuel price outlook: While the government aims to shore up long-term fuel supply stability, the most immediate change is the return of the fuel excise. Expect to pay around $15 to $20 more to fill up a 60-litre tank from July.
  
• Tax cuts to come into play: Tax changes will save most working Australians, but much of the benefit won’t arrive until mid-2027. Between now and then, inflation and interest rates will continue to burden many household budgets.
  
• Grocery price pain left unnumbed: The Budget doesn’t offer much in the way of solutions to the latest supply chain pinch-point, and the hits to households may keep coming if inflation continues to bite.  

In the words of the Treasurer, it seems like the “uncertainty" isn't going anywhere—and for now, neither are the higher costs of living.