The Budget and beyond: 10 takeaways for investors

The Betashares quarterly economics webinar brought together Chief Economist David Bassanese and Senior Investment Strategist Cameron Gleeson to survey a macro landscape that has grown considerably more complex since the start of the year. To watch the full webinar, click here.

A Federal Budget loaded with tax reform, an AI-driven earnings surge and a local economy caught between stubborn inflation and weakening growth. Here are the top 10 takeaways.

From 1 July 2027, the 50% capital gains tax (CGT) discount that has applied since 1999 will be replaced with two new elements: cost-base indexation, which adjusts the purchase price of an asset for inflation, and a minimum 30% tax rate on capital gains. It will apply to assets held for more than 12 months by individuals, trusts and partnerships. This is broadly a return to the pre-1999 regime, with the addition of the 30% tax floor.

Cameron Gleeson explained how the changes will tend to lower the tax obligations on income-oriented and lower capital growth strategies, and discussed the comparative advantages of superannuation and low-turnover index ETFs. For more details watch the webinar on replay or read our in-depth article here.

While the CGT changes apply broadly across asset classes, the negative gearing restrictions are narrowly targeted: from 1 July 2027, negative gearing on residential property will be available only on new builds and on properties owned at 7:30pm on 12 May 2026.

Negative gearing on shares, ETFs, commercial property and other asset classes is unaffected. That said, the after-tax benefit of any geared investment may be diminished to the extent that higher CGT rates may now apply when the asset is eventually sold.

From 1 July 2028, trustees of discretionary trusts will pay a minimum 30 per cent tax on the trust’s taxable income, with a non-refundable credit flowing to non-corporate beneficiaries.

Such beneficiaries on marginal rates above 30 per cent are largely unaffected; the measure bites on streaming to low-rate beneficiaries such as non-working spouses or adult family members on low incomes. The appeal of “bucket companies” may also be reduced, as corporate beneficiaries may not receive the benefits of tax credits for the trustee tax and therefore pay company tax on top, materially lifting the combined effective rate.

The Budget provided little near-term added fiscal restraint, leaving pressure on the RBA to raises rate further if need be.

Although underlying budget deficit forecasts over the next few years have been lowered from those of the Mid-Year Review, this largely reflected higher expected commodity prices and inflation lifting tax receipts, not new policy restraint. Policy settings were mildly stimulatory in the near term, with fuel excise relief and healthcare spending more than offsetting any tightening. Major savings such as NDIS reform do not bite until closer to 2030. And the headline deficit, which captures off-balance-sheet spending on clean energy, infrastructure and student debt relief, sits at $64 billion for FY27, almost double the $31 billion underlying figure. As Bassanese noted, the RBA would have preferred something more restrictive.

The US Supreme Court struck down the Liberation Day tariffs, ruling that a balance-of-payments crisis does not meet the threshold for tariff powers under national emergency provisions. Some US$166 billion in duties may need to be refunded. Trump has since imposed a blanket 10 per cent global tariff under alternative legal grounds, though those measures also face judicial challenge. Markets have largely looked through the tariff noise, with attention fixed on the Middle East.

Iran’s effective blockade of the Strait of Hormuz has removed roughly 20 per cent of global oil supply, from the market. Crude is trading around US$105 a barrel. Strategic reserve drawdowns and cargo already at sea have provided a buffer but, as Bassanese warned, the clock is ticking. If the strait is not reopened within a month or two, prices could spike to US$150 to US$200. The longer the conflict persists, the more acute the supply squeeze becomes.

Rising pump prices are eroding Trump’s approval ratings, and the probability of Democrats reclaiming the Senate in November’s midterm elections has climbed since hostilities began. The base case remains that a deal is struck before conditions deteriorate materially.

AI-related capital expenditure is now contributing around 2 percentage points to US GDP growth, providing a crucial counterweight to the consumer drag from elevated energy costs. Expected capex for the calendar year has been revised up from US$650 billion to north of US$750 billion. The spending pipeline shows no sign of slowing.

First-quarter US earnings growth landed at 27 per cent, nearly double the 13 per cent consensus from just six weeks prior. The outperformance is concentrated in what Gleeson termed the AI-commodities barbell: information technology and communication services at one end, energy and materials at the other. The sectors in between have been considerably more subdued.

Until late February, the 2025 rotation from US to ex-US global equities continued. Since the late-March lows that accompanied the Iran conflict and Strait of Hormuz disruption, US equities have rebounded sharply on the ceasefire and continued AI earnings momentum. Emerging markets have also recovered, led by the Asian semiconductor and memory chip complex.

Whether the broader rotation has paused or reversed is the more contested question – global markets continue to trade at meaningful valuation discounts to the US. Yet the Nasdaq 100 has strong momentum right now and does not appear to be in bubble territory on prevailing multiples, which admittedly are dependent on lofty earnings growth expectations.

The RBA has now raised rates three times in 2026. Underlying inflation, while marginally better than feared in the March quarter, remains well above the 2 to 3 per cent target band. Earnings downgrades are weighing on the local market, and Australian equities continue to lag global peers. The conspicuous exception is resources, which are rallying hard on the back of commodity demand tailwinds from both the energy crisis and the global AI infrastructure buildout.

Disclaimer

^{This article is based on the Betashares Q2 2026 Economics Webinar. Betashares is not a tax adviser. This information should not be construed or relied on as tax advice and investors should obtain professional, independent tax advice before making an investment decision.The information contained in this article is general information only and does not take into account any person’s financial objectives, situation or needs. Investors should consider the appropriateness of the information taking into account such factors and seek financial advice. This article is provided for information purposes only and is not a recommendation to make any investment or adopt any investment strategy. Future results are impossible to predict. Actual events or results may differ materially, positively or negatively, from those reflected or contemplated in any opinions, projections, assumptions or other forward-looking statements. Opinions and other forward-looking statements are subject to change without notice. To the extent permitted by law Betashares accepts no liability for any errors or omissions or loss from reliance on the information herein.}