Everyday Australians are holding out hope tax reforms targeting the cost of living will be part of the 2026 Federal Budget, as new findings lay bare the extent to which the average household is battling to make ends meet.
With talks the government will use next month's budget to make changes to Capital Gains Tax, Anglicare Australia found Aussies are looking for policy to go one step beyond funding tax cuts.
Executive director Kasy Chambers said Australians were looking for real solutions, including action on housing, energy costs and income.
Anglicare Australia’s Cost of Living Index revealed that even full-time workers at the minimum wage were left with little income spare once essential living costs including rent, transport and food were paid.
Furthermore, in some households there was virtually nothing left to cover energy bills or other quarterly expenses.
“We are seeing more people, more often, looking for more money and cash through our emergency relief services, we're consistently now also seeing working families,” Ms Chambers said.
Australians are looking to the budget for strong solutions to housing and energy concerns. Picture: Getty
“But especially we hear ‘rent’ and I think the reason rent comes through over and over and over is because it's the highest thing. It's the thing that has no elasticity in it, just nothing.
“There's no capacity to say to your landlord, ‘Can I do three weeks instead of four this time?’
“That really impacts on our services, because those are big amounts of money, we just can't (financially help) do that for everyone. We're just seeing that cost of living bite everywhere."
Best use for using tax reform
Four options for using revenue from tax reform were outlined in the report – building public and community housing; raising the tax-free threshold; increasing working-age payments; and wiping unpayable energy debt.
Treasurer Jim Chalmers will hand down the budget on 12 May. Photo: Getty Images
Almost 70% of respondents equally supported increasing the tax-free threshold and providing income tax cuts, while building public and community housing had the support of 63% of respondents.
Increasing Centrelink payments had 54% support, and forgiving energy debt garnered 49% support.
Ms Chambers said the findings challenged the assumption that tax cuts were the default answer.
“Tax cuts might sound good in theory. But when people are asked what actually matters, they choose the things that will make a real difference to their lives,” she said.
Concerns around fuel price and availability are a key area of concern for Australians. Picture: Eleni Tzanos.
“That means fixing the housing crisis, lifting incomes for people doing it tough, and bringing down essential costs.
“This is a rare opportunity to turn tax reform into real reform.”
The worst hit Australians
Ms Chambers said low and low middle income earners were particularly feeling the pressure, and tax cuts for everyone will not effectively target the issue.
“There's a very, very easy way to target this to the tax system, and that's to increase the tax free threshold," she said.
“It's a very easy administrative thing for the government to do, and it makes life much, much easier.
“It makes a lot more difference to those people who are on lower incomes.”
Perfect storm of pressures
REA Group senior economist Eleanor Creagh said a combination of pressures were “freezing households” at once all at once.
With both headline and core inflation above the Reserve Bank’s 2% to 3% target, Aussies are staring down the barrel of another rate cut next week, with several more this year also forecasted by leading economists.
| Date | Headline inflation | Trimmed mean |
| Feb 2026 | 3.7% | 3.3% |
| Jan 2026 | 3.8% | 3.3% |
| Dec 2026 | 3.8% | 3.3% |
| Nov 2026 | 3.4% | 3.2% |
“We've had back-to-back interest rate rises this year in February and March, which has increased mortgage servicing costs, and also is hitting borrowing capacity for those potential home buyers,” Ms Creagh said. “We've got an energy shock, with the oil price shock feeding through to everyday costs on households.
"It's all against the backdrop of what is a long standing issue in Australia, which is chronic housing under supply, which has meant that rents and home prices have risen substantially in recent years.”
The mix of all these pressures occurring at the one single point in time was unusual relative to history, Ms Creagh said.
“They always say history rhymes, it doesn't repeat,” she added. “We've got high levels of global and domestic uncertainty certainly impacting consumer sentiment.
REA Group senior economist Eleanor Creagh. Picture: John Gass
“Households are being squeezed from multiple directions, and housing, I'd say is an amplifier to that.”
While tax reforms could help at the margins, Ms Creagh said it will not fix Australia’s housing affordability challenge unless it really focused on boosting supply to sustainably improve affordability in the long run.
“Reworking tax concessions is one thing, but there's other policies, like maybe shifting away from stamp duty, incentivising new construction, aligning federal and state incentives with respect to housing supply and red tape excreta would probably do a lot more for the cost of housing than reworking tax concession,” she said.
“You've got to build your way out of a housing shortage.”
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