Federal Budget 2026-27: Business Resilience and Risk Considerations 

• Fuel security and sovereign capability take centre stage: More than $10 billion committed to fuel resilience, critical minerals, domestic manufacturing and supply chain continuity as Australia responds to heightened geopolitical and energy security risks.  
• Loss carry-back reforms strengthen business resilience: The reintroduction of loss carry-back provisions - alongside the permanent $20,000 instant asset write-off - is designed to improve cash flow, support investment and help businesses absorb economic shocks.  
• Productivity and digital transformation drive the reform agenda: Targeted investment in AI adoption, Digital ID, deregulation and workforce capability signals a shift toward a more technology-enabled, outcomes-focused operating environment for Australian organisations.
• Enhanced Defence capability, preparedness and resilience. Additional funding of $6.8 billion over four years from 2026–27 (and $35.6 billion over ten years from 2026–27) to increase Australia’s self‑reliance over the longer term, grow Australia’s sovereign defence industrial base, and improve national civil preparedness and national resilience.

The 2026-27 Federal Budget centres on two priorities: responding to the global oil supply shock triggered by the Middle East conflict and strengthening Australia’s long-term economic resilience. Framed as a “national resilience” budget, it combines near-term crisis measures with structural reform across supply chains, productivity, tax, skills and national security.

Against a backdrop of geopolitical instability, inflationary pressure and persistent supply chain disruption, the Treasurer outlined a strategy focused on sovereign capability - spanning fuel reserves, critical minerals, defence, infrastructure and workforce capability - alongside a major productivity and deregulation agenda. 

The centrepiece of the Budget is a fuel resilience package, with more than $10 billion committed to strengthening fuel security and critical supply chains. Measures include:

• A $7.5 billion Fuel and Fertiliser Security Facility to expand diesel and jet fuel reserve capacity
• $3.2 billion to establish a national fuel reserve
• Expanded Minimum Stockholding Obligations, lifting diesel and jet fuel reserves to 50 days

Additional initiatives include support for cleaner fuels, domestic gas reservation, freight resilience programs and investment in critical minerals processing and domestic manufacturing.

Together, these measures reinforce the importance of fuel and freight as critical enablers of economic activity. The government’s response - combining procurement measures, reserve building, domestic gas reservation and freight modal shift initiatives - reflects the cascading risks supply chain disruption can create across agriculture, logistics and manufacturing.

For organisations, the reforms also signal a broader shift in the operating environment, including streamlined ACCC coordination powers during exceptional circumstances and greater flexibility in road transport fuel contract adjustments.

This creates an opportunity for organisations to:

• Improve supply chain visibility and continuity planning
• Diversify suppliers and strengthen operational redundancy
• Accelerate energy diversification and fuel risk strategies.

Importantly, the government is positioning these resilience measures as compatible with decarbonisation objectives, balancing near-term energy security with longer-term transition goals.

Rather than introducing major new climate policy, the Budget focuses on implementing and operationalising existing commitments.

Key measures include:

• Increased ASIC funding to supervise sustainability reporting
• Continued rollout of the $5 billion Net Zero Fund
• $1 billion investment in the Boyne Island Aluminium Smelter to support lower-emissions metals production
• Continued investment in hydrogen and low-carbon liquid fuels industries – such as the $2bn Round 2 of the Hydrogen Headstart Program.

While short-term energy security measures may create tension with emissions objectives, the Budget confirms net zero transition infrastructure remains a medium-term strategic priority.

For organisations, this reinforces the need to:

• Embed climate risk into enterprise risk frameworks
• Improve reporting, governance and disclosure capability

Align operational and investment strategies with decarbonisation pathways

The Budget’s productivity agenda is closely linked to digital transformation and AI adoption, with targeted investment in AI capability, innovation and practical implementation. It also includes the establishment of a National Resilience and Science Council to coordinate investment in strategic capability and innovation.

In addition, the government is committing $654.3 million to expand Digital ID and implement a “tell us once” approach to government services, aimed at reducing duplicated reporting and administrative burden for businesses and individuals.

Notably, the emphasis is on pragmatic, phased implementation rather than large-scale technology overhauls - likely reflecting lessons from previous public sector transformation programs.

As organisations accelerate digital transformation, a widening divide is emerging between early adopters, those still adapting and businesses continuing to build digital capability. While this presents operational and workforce challenges, it also creates opportunities to improve adaptability, workforce alignment and productivity.

Organisations investing in:

• Upskilling, reskilling and work redesign programs
• Clear communication around AI and digital tools
• Strong change management and governance controls,

are likely to be better positioned to maintain engagement, reduce operational risk and strengthen productivity outcomes.

Despite a substantial deregulation agenda, the Budget does not signal a reduction in governance expectations.

The government projects its reform package will deliver $10.2 billion per year in regulatory burden reduction and contribute an estimated $13 billion annually in long-run GDP uplift. Measures include abolishing a further 497 nuisance tariffs from July 2026 and reducing financial sector compliance costs by an estimated $780 million annually through 14 legislative and regulatory reforms.

At the same time, reforms across financial services and corporate regulation continue to reinforce expectations around:

• Stronger governance frameworks
• Increased accountability obligations
• Greater focus on operational resilience

The growing use of AI-enabled approvals and oversight processes signals a shift away from volume-based compliance toward more outcomes-focused regulation. Regulators such as APRA (through CPS 230 Operational Risk Management), and ASIC (through market integrity rules and operational resilience guidance) continue to prioritise governance effectiveness, accountability and operational resilience.

For organisations, this creates an opportunity to streamline compliance processes, strengthen decision-making capability and build greater trust with regulators, investors and customers.

The Budget positions workforce participation as a key resilience lever, with significant investment in skills, migration reform and care infrastructure.

Measures include:

• $85.2 million to accelerate skills assessments for migrant trades workers
• Reforms to attract younger and higher-skilled migrants
• A National Credit Recognition Framework to support faster qualification pathways.

Increased investment in aged care, childcare and the NDIS is also expected to support higher workforce participation among people with caregiving responsibilities.

As workforce participation increases, demand for flexible and adaptive work arrangements is also likely to grow. Organisations that proactively embed flexible work models, adaptable role design and wellbeing support are likely to strengthen engagement, retention and workforce performance.

In this context, workforce flexibility becomes a core resilience capability rather than simply a workforce policy.

One of the most significant Budget measures is the reintroduction of loss carry-back provisions, allowing eligible companies to claim refunds against tax paid in the previous two years. Expected to benefit up to 85,000 companies, the measure is designed to improve cash flow and strengthen financial resilience during periods of disruption or investment.

Combined with the permanent extension of the $20,000 instant asset write-off, the reforms provide organisations with greater flexibility to invest, absorb shocks and maintain operational continuity.

The Budget also proposes significant reforms to capital gains tax concessions, discretionary trusts and investment property settings, alongside changes to the R&D Tax Incentive, including a higher offset for experimental core R&D activities and an increase in the expenditure cap to $200 million.

Taken together, the package represents a significant shift in Australia’s investment and risk-taking environment. Organisations would be well advised to review entity structures, investment pipelines and R&D strategies ahead of the proposed 2027-28 implementation dates.

The 2026-27 Budget signals a more dynamic operating environment, where resilience will increasingly be shaped by the interaction of economic, technological and regulatory forces.

Key considerations for organisations include:

• Strengthening supply chain continuity and diversification strategies
• Investing in improved monitoring and response to geopolitical risk
• Enhancing governance and operational resilience frameworks
• Investing in digital capability and workforce readiness
• Embedding flexible workforce models and wellbeing support
• Reviewing tax structures, investment strategies and R&D programs in response to proposed reforms.

Ultimately, the 2026-27 Budget positions resilience not simply as a defensive capability, but as a strategic advantage in an increasingly uncertain operating environment.

^{Prepared by Mercer (Australia) Pty Ltd ABN 32 005 315 917 (Mercer Australia). References to ‘Mercer’ shall be construed to include Mercer Australia and/or its associated companies.}

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