What the 2026 Federal Budget Means for Businesses and Industries

This year’s Budget was built around three pillars: a productivity and investment package, tax reform for workers and businesses, and a $63.8 billion savings agenda. For sectors such as construction, manufacturing, and IT & Telecoms, the announcements land directly on the challenges HR leaders have already flagged in ELMO’s 2026 HR Industry Benchmark Report (HRIB). Here’s what you need to know for each sector.

5 takeaways for businesses and HR professionals

1. The cost of doing business is going down but execution still matters

The $10.2 billion per year compliance reduction and permanent instant asset write-off are genuine wins. The challenge now is ensuring HR and finance teams have the systems to capture those savings, rather than absorbing them in manual processes.

2. Skills and workforce reform are finally on the agenda

Faster trades qualifications recognition and migration points test reform could ease some pressure in construction and manufacturing, though healthcare workers move through separate assessment pathways not covered by this specific investment.

3. AI investment is real, but the capability gap is key

For HR leaders, the grants themselves may feel at arm’s length. But it shows the government is actively accelerating the pace at which AI tools will reach Australian workplaces. However, investment in AI without capability building won’t close that gap. 

4. Healthcare and construction are about to get busier

Record hospital and housing investment will drive demand for more workers in already stretched industries. Workforce planning in these industries need to start planning ahead, to avoid bottleneck when pressure peaks.

5. Tax reform creates complexity before it creates clarity

The negative gearing, CGT and trust changes will generate short-term uncertainty for businesses and their advisors, particularly in financial services and construction, even where the long-term intent is positive.

Construction

The budget’s focus for construction centres on housing supply, infrastructure investment and trades workforce development.

Key announcements:

• $47 billion in housing investment

The government’s biggest-ever housing commitment, including a 5% deposit scheme for first home buyers.

• $2 billion for enabling infrastructure

Funding for roads, power and drainage to support new housing developments.

• Free access to Australian standards

Fees of up to $1,600 for accessing mandatory Australian standards used in construction will be scrapped.

• Simplified building regulations

Streamlining approvals so projects can move from investment decision to construction faster.

• Faster trades qualifications recognition

Skilled migrants in trades roles will have their overseas qualifications recognised more quickly, helping ease labour supply constraints.

The $47 billion housing push is going to intensify the demand for construction labour. The HRIB Report for construction shows HR leaders are already under significant pressure. 32% cite upskilling and reskilling as their biggest challenge, while 21% cite ongoing labour shortages across projects. 

With a predicted salary increase of 4.4% and a cost per hire of $16,589 in 2026, every hire and every skills gap matters.

See how construction HR leaders can respond >

Potential upsides: Record housing investment will drive sustained demand for construction labour. Free access to Australian standards reduces cost burden for smaller firms. Faster skills recognition could bring more qualified overseas tradies into the workforce sooner.

Potential downsides: The negative gearing and CGT changes have drawn criticism. Some may also argue that the Budget doesn’t go far enough to address workforce shortages, which is one of the biggest constraints to delivering homes.

Manufacturing

For manufacturing, the budget targets productivity, supply chain resilience and the ongoing transition to cleaner energy.

Key announcements:

• Future Made in Australia (ongoing)

The existing $22.7 billion fund continues, with a focus on cleaner energy and strengthened sovereign manufacturing capability.

• Removal of roughly 600 tariffs

Reducing trade barriers and lowering input costs for manufacturers reliant on imported components.

• National Competition Policy reforms (Single National Market)

Working to make Australia function as one economy rather than eight, reducing friction for manufacturers operating across state borders.

• Permanent $20,000 instant asset write-off

Certainty for manufacturers investing in new equipment and machinery.

• Two-year loss carry-back

Allows manufacturers to offset current losses against previous profits, providing a buffer during downturns.

• AI commercialisation grants

Government support for businesses bringing AI-powered innovations to market, relevant to manufacturers looking to automate and modernise operations.

Similar to the construction industry, manufacturing HR leaders are navigating a mix of pressures. Our HRIB for manufacturing reveals 23% are contending with reduced budgets and 23% cite AI adoption as a top concern. Cyber and data security is also their biggest hurdle. 

With a 4% predicted salary rise and cost per hire of $17,329, manufacturers who invest in smarter workforce systems will be best placed to keep up as the sector modernises. 

See how manufacturing HR leaders can respond > 

Potential upsides: AI grants and the clean energy transition create new capability demand and investment incentives. The permanent asset write-off provides certainty for manufacturers upgrading equipment. Tariff removal reduces input costs for supply chains.

Potential downsides: The AI commercialisation focus could widen the capability gap between large manufacturers with resources to adopt new technologies and smaller operators who are still building the basics. Budget pressure (cited by 23% of HR manufacturing leaders) won’t be eased overnight by these measures.

Healthcare

Healthcare is one of the biggest winners in the 2026 budget, with record investment across hospitals, primary care, aged care and medicines.

Key announcements:

• $25 billion for public hospitals

A new five-year funding deal with the states, representing a record investment in public hospital infrastructure and services. Health now accounts for more than 16% of total budget expenses.

• $1.8 billion for Medicare Urgent Care Clinics 

Permanent funding for all 137 clinics around Australia. By July, four in five Australians will live within a 20-minute drive of a clinic.

• $5.9 billion for PBS medicines 

Expanding access to medicines on the Pharmaceutical Benefits Scheme, including treatments for cystic fibrosis (saving some patients up to $250,000 per year).

• $3.7 billion for aged care 

More beds, more home care packages and improvements to aged care quality.

• Faster overseas qualifications recognition 

Specifically prioritising healthcare roles where skills shortages are acute, including nursing, allied health and specialist roles.

The 2026 HRIB shows 25% of healthcare HR leaders name implementing legislative changes as their single biggest challenge. With only 3.9% salary growth predicted, 23% of leaders citing reduced budgets, and a cost per hire of $16,973, the sector is being asked to do more with less.

See how healthcare HR leaders can respond > 

Potential upsides: Record hospital funding will support workforce expansion across nursing, allied health and administration. Aged care investment addresses both workforce and infrastructure gaps. Faster qualifications recognition could meaningfully ease skills shortages in the near term.

Potential downsides: Funding alone won’t solve the structural skills shortage. With 24% of healthcare HR leaders already citing AI adoption as a key challenge and 25% focused on managing legislative change, new budget measures add to an already complex HR agenda.

IT & Telecoms

The budget takes a productivity-first approach to the digital economy, with AI, digital identity and regulatory simplification as the standout themes.

Key announcements:

• AI commercialisation grants

Direct government support for businesses developing and commercialising AI innovations, a clear signal that AI investment is a national productivity priority.

• Expanded Digital ID

Broader rollout of the Digital ID system to speed up government approvals and reduce administrative friction for businesses.

• “Tell us once” government approach

Australians and businesses won’t need to keep submitting the same information to different agencies — a significant time-saving for organisations dealing with compliance and government interaction.

• $10.2 billion/year in compliance cost cuts

Includes making electronic record-keeping with financial regulators easier and simplifying climate-related financial disclosures — relevant to tech companies navigating ESG reporting obligations.

• National Competition Policy reforms

Single National Market reforms that reduce friction for IT and telecoms providers operating across jurisdictions.

• Pipeline of data centre and renewable energy projects

The Treasury noted a solid pipeline of data centre investment as a positive for business investment outlook.

IT and telecoms are already at the sharp end of workforce pressure. ELMO’s HRIB Report shows 32% of HR leaders cite upskilling and reskilling as their top challenge and 31% name expanding AI use across the organisation as a major concern. 

See how IT & Telecoms HR leaders can respond > 

Potential upsides: AI commercialisation grants directly support a sector that is already at the forefront of AI adoption. Digital ID expansion and compliance simplification reduce admin burden for tech businesses. The data centre investment pipeline signals long-term demand for IT infrastructure and the workers who build and maintain it.

Potential downsides: Government AI grants will intensify competition for an already scarce pool of AI and data talent — potentially pushing salary expectations even higher. The 5% salary rise already predicted in the HRIB may be conservative if public and private sector demand continues to climb.

Financial & Insurance Services

For financial services, the budget delivers meaningful compliance relief, but also introduces the most significant property tax reform in decades, with ripple effects across the sector.

Key announcements:

• $780 million per year in financial sector compliance cost cuts 

Electronic record-keeping with financial regulators will be made easier and climate-related financial disclosures simplified, directly reducing the cost of doing business for banks, insurers and financial institutions.

• Negative gearing reform 

Investment properties bought after 7:30PM AEST on 12 May 2026 will no longer be eligible for negative gearing from 1 July 2027. This has implications for clients of financial planning and lending businesses.

• Capital gains tax reform 

The 50% CGT discount was replaced with cost-base indexation for assets held more than 12 months, from 1 July 2027. Combined, Treasury estimates the negative gearing and CGT changes will raise $3.6 billion over the forward estimates.

• Discretionary trust minimum tax

A new minimum tax on income from discretionary trusts from 1 July 2028 (with three-year rollover relief for restructuring). The measure is projected to raise approximately $4.5 billion per year once fully operational from 2029–30. 

• Expanded venture capital tax incentives

To encourage investment and innovation, particularly relevant for fintech.

• $63.8 billion in savings

The budget takes a disciplined approach to spending, which has implications for the economic outlook financial services businesses are navigating.

Financial services HR leaders face the largest AI expectations gap compared to the above sectors. With economic outlook as a top challenge alongside cyber threats, and a 4.8% salary rise predicted, there’s a pressure to attract and retain specialist talent in the field.

See how financial and insurance HR leaders can respond > 

Potential upsides: The $780 million annual compliance saving is a genuine win for financial institutions. Fintech businesses stand to benefit from expanded venture capital incentives. The trust and CGT reforms, while controversial, create significant new advisory demand for accountants, financial planners and legal teams.

Potential downsides: The negative gearing and CGT changes represent a major shift in the tax landscape that financial services businesses will need to help clients navigate. This could add workload and compliance complexity at a time when AI adoption is already lagging. The discretionary trust changes also affect business structures commonly used in the financial sector.

Federal Budget announcements have not been legislated and may change. The information in this publication is for information purposes only and does not constitute legal advice. For legal advice, please consult a qualified legal professional.