The Australian government has terminated its nationwide electricity rebate program following a sharp deterioration in fiscal conditions, with the budget deficit projected to exceed 5.2% of GDP in the 2025-26 fiscal year. The move affects approximately 11 million households and signals a shift in economic policy under tightening fiscal constraints.
- Electricity rebate program discontinued in December 2025
- 11 million households affected by the cancellation
- Budget deficit projected at 5.2% of GDP for 2025-26
- AUD 8.4 billion in savings expected over two years
- Aussie dollar fell 1.2% post-announcement
- 10-year government bond yield rose 18 basis points
Australia has officially discontinued its electricity rebate scheme, a key social support measure introduced during the pandemic, as the nation’s fiscal position weakens. The program, which provided up to AUD 1,000 in annual energy bill relief to eligible low- and middle-income households, was suspended in December 2025 after the Treasury reported a worsening budget outlook. The decision follows a 4.3% increase in government spending over the past fiscal year, driven by rising interest payments and expanded welfare outlays. The cancellation impacts an estimated 11 million households, with the government citing a projected budget deficit of 5.2% of GDP for 2025-26—up from 3.8% in the previous year. This marks the highest deficit since 2010 and reflects a significant erosion in revenue growth, which has slowed to 1.6% amid stagnant economic expansion and lower-than-expected tax receipts from corporate and capital gains. The government estimates that scrapping the rebate will save AUD 8.4 billion over the next two fiscal years. The abrupt policy reversal has triggered concern among consumer advocacy groups and opposition parties, who argue that it disproportionately affects vulnerable households in regional and rural areas where energy costs are highest. Power retailers report a 7% increase in customer complaints since the announcement, with some households facing energy bills rising by up to 22% in the first quarter of 2026. The government maintains that structural reforms and deficit reduction are necessary to restore market confidence and avoid a credit downgrade. Financial markets reacted swiftly, with the Australian dollar dropping 1.2% against the US dollar and the 10-year government bond yield rising by 18 basis points. Credit rating agencies have indicated a potential review of Australia’s sovereign rating, with one major agency noting the fiscal deterioration as a key risk factor.