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Economy

Uncapped subsidies drive $48b budget revision as OECD urges tighter targeting

Written by Jon CuthbertPublished Jan. 22 2026Last Updated Jan. 22 2026

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Treasury has revised future spending pressures up by $47.8 billion, driven by faster growth in major social programs.

The OECD has warned that universal subsidies risk worsening long-term budget sustainability, and are often used by higher-income households.

Spending now sits near 26.9 per cent of GDP, with deficits forecast to persist for years.

“Every government is entitled to their spending priorities, but with that comes a responsibility to pay for it,” said Coalition treasury spokesman Ted O’Brien.

Recent blowouts include higher-than-expected costs in the NDIS, childcare subsidies, school funding and energy-related programs, alongside policy choices that expanded eligibility.

Treasury data also points to pressure from non-means-tested measures such as home battery subsidies and the EV fringe benefits tax exemption.

“If we are serious about budget sustainability and meeting community need for social supports, we must collect substantially more revenue,” said acting ACOSS chief executive Jacqui Phillips.

With the government facing a decade of projected deficits and a federal election approaching, economists say pressure is building for more targeted policy design.

The debate now centres on whether future budgets prioritise fiscal restraint, higher taxes, or structural reform.