Government Spending 2025 & Its Impact on Small Business: What You Need to Know
- Future Accounting
- Aug 12
- 3 min read
Updated: Aug 15
What government spending 2025 means for your business strategy
Government spending in Australia has reached a post-war high, now making up 39% of GDP. According to the Centre for Independent Studies, more than half of voters rely on governments for most of their income, whether through public-sector wages, welfare benefits, or subsidies.
This unprecedented growth in spending has big implications for small and family businesses. From future tax reforms to higher borrowing costs, the government spending and small business impact story is one every business owner needs to understand.
Why government spending is at a post-war high
The surge in spending has been driven by major outlays in areas such as disability support, aged care, and childcare.
National Disability Insurance Scheme (NDIS): At $52 billion annually, this is the single largest contributor to the spending increase.
Childcare subsidies: These have more than doubled, climbing from $6 billion in 2018 to $14 billion annually, with plans for even broader access.
Off-budget investments: A further $104 billion over five years is earmarked for student loan relief and green energy funds.
While these investments support essential services, they also carry long-term financial consequences that businesses cannot ignore.
How rising public debt impacts small and family businesses
The federal government’s growing commitments are creating budget deficits, pushing debt levels higher and increasing interest payments by around 10% each year for the next decade.
For small and family businesses, the government spending 2025 is clear:
Future tax changes are likely. Treasury has already warned that tax reform is needed to fund these commitments.
Borrowing may get costlier. Higher public debt means the government competes with businesses for capital, adding upward pressure on interest rates.
The link between government spending and interest rates
This surge in government spending also influences the Reserve Bank of Australia (RBA).
Spending fuels demand: Even when private sector growth slows, higher government outlays in areas like health and childcare keep economic activity elevated, which can sustain inflation.
Higher rates for longer: To offset these demand pressures, the RBA may keep interest rates higher for longer, which affects loan repayments and financing decisions for small businesses.
If you’re a business owner with existing debt or plans to expand, now is the time to review your loan strategy.
What tax changes could mean for your business
With the government spending & small business impact conversation heating up, tax reform is firmly on the agenda.
Small and family businesses could see changes to:
Capital gains tax (CGT) concessions
Business and payroll taxes
Other small business tax benefits
Treasurer Jim Chalmers will host an Economic Reform Roundtable in August to explore how to boost productivity and stabilise the budget - and that means the rules of the game for small business could change.
Practical steps to strengthen your business now
While you can’t control government policy, you can control how you prepare. Here’s where to start:
Plan for tax reform: Speak with your accountant to assess how potential CGT or business tax changes may affect your plans.
Review your debt: Consider refinancing or restructuring loans to reduce the impact of prolonged higher interest rates.
Boost productivity: Invest in technology, training, and efficiency improvements to stay competitive.
Stay informed: Monitor updates from the Economic Reform Roundtable and other government announcements that may impact your industry.
Take action today
The bottom line? Government spending is reshaping the business landscape. From tax reforms to interest rate pressures, the changes ahead will have a real impact on small and family businesses.
Don’t wait until these changes are upon you. Book a consultation with the team at Future Accounting today to understand how to protect your business, optimise your tax position, and plan for a stronger future.
Disclaimer
This article does not constitute financial advice and is for general information only. It does not take into account any individual’s personal objectives, situation or needs, and is not intended as professional advice. Any similarity to an individual’s personal circumstances and the examples provided in this article is purely coincidental. Any person acting upon such information without receiving specific advice, does so entirely at their own risk.
Authorisation under an Australian Financial Services Licence (AFSL) is not required in the provision of this article and the author plus Future Accounting Group Pty Ltd is not acting in its capacity as an Australian Financial Services Licence holder
Liability limited by a scheme approved under professional standards legislation.
