Economic Yarn up: How the Budget stacks up for First Nations

Our Principal Economist, Dr Siddharth Shirodkar, examines the intricacies of what’s happening on the global and domestic marketplace. Read the whole update or jump down to the section of your interest.

A great deal has happened in the last two months since the Federal Budget 2025-26 was released, including the National election and another cash rate cut. But there are valuable insights still contained within the budget document, so we thought it was timely to revisit some of the key points, and what it means for First Nations communities.

Global impacts & domestic status

To start with, geostrategic and geoeconomic uncertainties in Europe, the Middle East – and now South Asia – have been having shocks on people, communities, and markets. And along with protectionist trade policies in the US coupled with weak growth in China, these international factors continue to weigh on global economic prospects.

While some of these challenges are moderating – including India and Pakistan stepping back from the brink and de-escalation of trade tensions in the US and China, other conflicts are either heating up – between Israel and Iran - or persisting in Ukraine, Palestine and Yemen. Australia’s key markets across other parts of Asia remain strong, including India and the Southeast Asian economies, presenting opportunities for partnership and mutual growth. This includes Australia’s critical relationship with Indonesia, one of the largest economies in Asia, and a key moderating influence in the region.

Domestically, Australia's economic recovery demonstrates resilience, with inflation returning to the target rate of 2-3%, continued low unemployment, and the Budget expecting household incomes to rise by more than inflation over the next few years. If so, we should generally see a modest reduction in the cost of living. But GDP growth for the March quarter was weak, only growing 0.2%.

The Reserve Bank of Australia commenced its rate cutting cycle, with two cash rate cuts already this year, and markets expect further rate cuts in 2025, particularly if economic growth remains weak. The Treasury predicts a soft landing for Australia with low but positive growth this financial year and increasing to 2½% by 2026-27.  However, systemic barriers mean that positive opportunities arising from more accommodating economic conditions do not always reach First Nations communities equally. Targeted policies to address economic development challenges are needed for communities facing marginalisation to achieve economic stability and growth.

Natural disasters, like ex-Tropical Cyclone Alfred, can increase these challenges, particularly in remote regions with significant Indigenous populations. The disruption caused by these events underscores vulnerabilities in infrastructure and economic support systems, and some First Nations are often hardest hit.

Ensuring the economic resilience of First Nations communities is a priority for IBA – it’s why we exist.

The latest Federal Budget aims to address some of the vulnerabilities through both Indigenous-specific funding and broader mainstream programs. So, what are those initiatives?

Budget initiatives – Indigenous specific & mainstream

The 2025-26 Budget includes $1.3 billion in First Nations-specific funding over six years, directed at addressing critical areas like remote community services, food security, housing, and economic participation. Key initiatives include:

• $842.6 million for essential services in remote Northern Territory communities
• $50 million to subsidise food in remote stores
• $23.9 million for strengthening the Indigenous Procurement Policy
• $3.4 million for mentoring and coaching for First Nations women in business.

Further, $70.9 million was redirected for IBA’s home ownership program, part of which will make the path easier for more single carers and single parents to get into home ownership.

How does this funding fit into the broader budget?

First Nations people have access to the same mainstream programs that all Australians enjoy such as Medicare, the NDIS, and income support. These programs represent significant spending and can provide substantial benefits if coordinated effectively and informed by First Nations perspectives.

For instance, the $3.5 million allocated to expand the Deadly Choices program empowers First Nations people to complete annual health checks through Community Controlled Health Services. This initiative connects with the broader $60 billion allocated to the Health and Aging portfolio.

However, not all that funding is equally accessible, particularly for First Nations communities in regional and remote areas.

More First Nations people in home ownership

In First Nations housing, the budget redirected $70.9 million to IBA’s home ownership program, which is another example of targeted support. Of this funding, $20 million is allocated to the Single Carers Home Finance package. This program will enable First Nations single carers and parents—many of whom are women—to access culturally secure and sustainable home ownership options.

This includes increasing the maximum cap on IBA’s Shared Equity from 35% to 50% for First Nations single carers and single parents – doubling their purchasing power.

First Nations people can also benefit from broader home ownership measures like Housing Australia’s “Help to Buy” scheme, which will be available to any eligible Australian by lowering deposits and reducing mortgage size. Expanding the program’s price and income caps are designed to make it more accessible to families, including First Nations households seeking pathways to home ownership. The program has yet to commence but watch this space.

First Nations business impacts

The Budget contained $23.9 million to strengthen the Indigenous Procurement Policy (IPP), which is designed to support more First Nations businesses to grow. To find out about the tremendous growth in the First Nations business sector, which the IPP has supported, read our Pathways Through Business report. The Budget also includes $3.4 million to increase the participation rate of First Nations women in business through place-based mentoring and coaching, to be co-designed by First Nations businesses and IBA. First Nations women in business are the fastest growing business demographic in Australia, but remain under-represented, so this measure will be of benefit.

It is important that First Nations businesses can establish linkages with key measures from agencies such as the Department of Industry, Science and Resources, including the $54 million to grow the prefabricated and modular construction sector, which could be of great benefit in a number of First Nations communities with chronic housing shortages.

This is in addition to other spending across portfolios including education, agriculture, industry and environment – equating to billions of dollars of which First Nations communities, as Australians, should be able to draw from.

Indigenous access to broader government spending

There is often a misconception that First Nations people receive billions of dollars annually in government spending. While targeted programs average $4-6 billion annually, the broader $25 billion that is ear marked for First Nations people is part of mainstream government spending on services like health, education, and social security. This expenditure is embedded within the total $600 billion Federal Budget, meaning that around 5% of total government spending is meant for First Nations people.

Given that Aboriginal and Torres Strait Islander people make up around 3.8% of the population, this proportion is broadly aligned with the First Nations share of the population.

First Nations-specific funding plays a vital role in addressing inequalities stemming from historic exclusion. Economic exclusion results in more First Nations families being exposed to poverty. The marginalisation of First Nations is therefore symptomatic, and results in significant gaps in health, employment, and housing outcomes. That is why First Nations people may be disproportionately represented in certain spending categories – not out of choice, but out of circumstance.

Many of the programs – and therefore dollars – aimed at First Nations people are delivered through non-Indigenous institutions and organisations. Ensuring that government programs are culturally appropriate and delivered directly to communities is critical to achieving meaningful outcomes for First Nations people.

Local Indigenous-run institutions and businesses are often best positioned to deliver services within their communities, as they possess the cultural knowledge and deep connections needed to gain traction in communities. Supporting these organisations not only improves outcomes for Indigenous communities but also generates significant flow-on benefits for the wider economy.

Moving forward

First Nations should not shy away from accessing what they are entitled to as Australians, whether it is access to services, or taking advantage of the opportunities in clean energy, Made in Australia, or other broader government initiatives. Building the linkages and access to massive mainstream government programs will be an important source of support for achieving Indigenous economic development and growth.

Don’t forget to check out our IBA Impact Report 2024 – Pathways to financial wellbeing, which measures the long-term financial wellbeing of community.

We’ll continue to bring you updates as markets move.

Disclaimer: The information contained in this material is general in nature and not tailored to your particular circumstances, objectives or needs. If you are eligible and decide to apply for products or services from IBA you should obtain independent financial and legal advice before signing any documentation or making any significant financial decisions and you should rely upon your own independent advice and inquiries. While IBA has no reason to believe that the information in this material is inaccurate, the truth or accuracy of that information cannot be warranted or guaranteed and may have changed since it was prepared. IBA takes no responsibility for any damage or loss suffered by you in relying on the information in this material.