The government released its 2025-26 federal budget on Tuesday night. Budget documents show more than $785 billion in spending, including tax cuts and a “record” $8 billion Medicare boost. In response to questions from Insurance Business, some industry stakeholders expressed concern at the level of spending, the lack of help for SMEs and the possible impact on brokers and other insurance professionals.
“Significant increases in insolvencies over the past few years show small businesses are hurting and the ATO’s response is putting fuel on the fire, not helping the situation,” said Jacob Solly (pictured, left).
The Sydney-based CFO of Bellrock Advisory said there were “no major surprises” in the budget - including the deficit that it contributes to deepening.
“My first reaction is that the budget offers a number of headline grabbing, cost-of-living focused handouts to the voting public, but limited stimulus for SMEs and the economy,” said Daniel Gronert (pictured, centre).
The Adelaide-based CEO of Arteva Funding said, given that an election is around the corner, the budget appears to be focused on winning votes. Gronert suggested he was disappointed that, in his view, there was no clear message and plan from the government about how it will support the private sector to stimulate the economy in the coming years.
Solly’s Bellrock colleague and CEO Marc Chiarella (pictured, right), was also worried by the cost of this budget.
“My concerns are around this government’s spending,” said Chiarella. “The forecast for FY24-25 is $26.9 billion – what will it be, given the foreshadowed spending?”
Arteva’s CEO expected the tax cuts and energy bill grants to provide limited relief for consumers. For SMEs, he said the budget does not clarify if the instant asset write-off scheme will continue.
“This may impact SME investment as we head towards June 30,” said Gronert.
He was concerned this could also impact brokers.
“For brokers facing a soft market, reduced investment by SMEs will only further negatively impact sums insured and premium growth,” said Gronert.
He also spotted other budget measures that could impact insurance professionals.
“I’m very concerned about the proposed ban on non-compete clauses for staff earning under $175k per annum,” said Gronert. “This will have a significant impact on brokers and the wider insurance sector, with SME employers afforded limited opportunity to protect their IP and customer base.”
He said the change has the potential to create significant disruption and administrative expense for SMEs.
Chiarella said his budget worries are also around Australia’s credit rating and how that could impact insurers holding bonds.
“The concern is Australia’s credit risk if this keeps up,” said the CEO. “Inflationary pressures impact insurer investment income.”
He said, given that insurer income comprises of government bonds, a decline in the country’s credit rating may lead to diminished returns.
This could impact brokers, he suggested, by ultimately raising the premiums of their customers.
“Lower rates of investment income impact insurers’ willingness to compete in a market,” said Chiarella. “Where there is less capacity deployed among insurers, premiums increase.”
For the wider economy, the increased level of debt caused by the budget, he said, may also lead to economic instability.
“Continuing to spend does not help interest rates given the pressure spending puts on inflation, and consequently monetary policy,” said Chiarella. “Despite the last 25-point rate reduction in February, families and businesses continue to struggle.”
He pointed to figures from the Australian Securities and Investments Commission (ASIC).
“ASIC reported a 36.2% increase of companies entering into administration in the nine-month period July 1, 2023 to March 31, 2024,” said Chiarella. “Small business needs additional tax cuts.”
He said these insolvencies have significant implications for insurers.
“Not just in the context of ‘claims’ but also for those who rely on insurance policies which, due to the insolvencies have little effect,” said Chiarella.
Solly was able to see some positives in the budget for insurance customers, including in the construction sector where housing shortages and increasing property development are big challenges.
“In the construction sector, labour shortages continue for our construction clients,” he said.
Solly said his firm’s childcare sector clients could also find opportunities to expand.
“The supply shortage of childcare centres and increasing demand for childcare means there is an opportunity for our childcare clients to further expand and service the community,” he said.
In anticipation of US government tariffs impacting metal supplies, Solly also welcomed the increased government support in the budget for local production.
“Especially in the renewable and green energy sector,” he said. “US imposed tariffs on metal imports will negatively impact Australian exports to the US. Australian manufacturers will need to buy locally to reduce the shortfall in revenue for the metal suppliers in Australia.”
Both Solly and Chiarella expressed disappointment that the government didn’t help more with disaster resilience.
“Returning to the impact of families, and in the context of insurance, it would be great to see the Federal Government, in its foreshadowed splurge of cash, deploy some funds to the Insurance Council of Australia’s (ICA’s) proposed Flood Defence Fund (FDA),” said Chiarella.
Solly estimated that the insurance industry is seeking two to three times more support for these resilience measures than it is currently getting from the government.
“However, this would mean a further increase in the budget deficit which could harm Australia’s credit rating,” he said.
What impact do you see this federal budget having on the industry and insurance professionals? Please give us your view below.
