The Economy in 2026 - What it might look like

Clarke McEwan Accountants

The economy in 2026 - 6 possible transformations for Australia

By imagining for a few minutes that the year is 2026, we can get a better idea of how the Australian economy might evolve. Here six economists speculate on how the economy might change in the decade after 2016.

INTHEBLACK asked six leading economists to exercise their imaginations and invent a story of what Australia's economic evolution might look like by 2026. They invented economic environments with elements that we can already see, but with huge changes to jobs, businesses, cities and international relations.

Here, then, are six thought-provoking visions of possible economic changes ahead, each addressing a different element of the economy.

Automation, looking back from 2026 - Shane Oliver

In the past decade hundreds of thousands of jobs have disappeared in transport, professional services, manufacturing, government and other sectors as machines have taken over repetitive tasks.

In the past, such transformations occurred over decades, giving displaced businesses and workers time to adjust, and the technologies that have driven the process have given rise to new industries.

Shane Oliver

Shane Oliver

However, AMP Capital Investors chief economist Shane Oliver says the decade to 2026 has been different. The rapid speed of change has been traumatic for many - old jobs have been destroyed at a much faster pace than new ones have been created.

This has caused a growing gulf between those in well-paid jobs, immune to automation, and the rest.

With less disposable income around, economic growth has slowed and social tensions are increasing. There are growing demands for the government to use the tax and welfare systems to even the spread of income, and people are loudly advocating a shift to a four-day week to share jobs.

All is not gloom, however. Cafes, tourism operators, gyms, gene therapy clinics and other personal service providers are prospering, and new jobs and businesses are appearing all the time. Despite this, the period of dislocation has been painful for many.

The workplace, looking back from 2026 - Deborah Cobb-Clark

The plunge in office rents and property prices that began in 2021 shows little sign of letting up as the days of the corporate head office appear increasingly numbered.

Deborah Cobb-Clark

Deborah Cobb-Clark

While a core of employees continue to work in the same physical space, for years now a growing proportion has been taking advantage of advances in communications technology to work from remote locations - homes, shared office spaces and even cafes with dedicated work areas.

University of Sydney professor of economics Deborah Cobb-Clark, who anticipated this development a decade ago in 2016, says this, combined with the increasing automation of many jobs, is transforming the way we live and work.

People have more leisure time as their workload shrinks and an increasing number are freed from having to undertake the daily commute.

The new model of work is changing the structure and purpose of cities. Increasingly, the CBD as a work destination is a relic of the past and the "peak hour" pressure on transport networks is receding. People still flock to cities, but mostly for their amenity and social life rather than work.

Population ageing, looking back from 2026 - Stephen Koukoulas

Having already helped to usher in land taxes in the states, the Federal Government is now facing an even tougher political fight over plans to increase the retirement age to 70 years, introduce death duties and establish a HECS-style scheme for the aged pension.

Stephen Koukoulas

Stephen Koukoulas

Stephen Koukoulas of Market Economics says there is little choice. "It is a matter of dollars and cents," he says. "Community expectations are that the provision of services be held to a high level, and that is very expensive."

The nation's swelling ranks of retirees are driving ever-increasing demands for health care, community services and income support. The burden of this cost is falling on a shrinking share of working-age Australians.

The situation has called for radical solutions, and the government is now contemplating measures that 10 years ago would have been considered unthinkable - including a progressive scale of death duties and a "reverse-HECS" for pensions, under which a means-tested proportion of the welfare payments claimed by recipients are reimbursed to the government from their estate when they die.

"People want a decent level of government-provided services," Koukoulas says, "but without some serious action, there is a real risk of it becoming unaffordable."

Productivity, looking back from 2026 - Mardi Dungey

Australia's biggest economic achievement of the past decade has been to solve the conundrum of chronically low productivity.

Mardi Dungey

Mardi Dungey

By breaking down rigidities in the way work is conceived and structured, University of Tasmania professor of economics and finance Mardi Dungey says the nation has tapped into a rich pool of labour and expertise among those who in the past have been systematically excluded from the workforce, such as those with disabilities and chronic medical conditions.

By relaxing time constraints and instead conceiving jobs in terms of outcomes, the nation has opened up a swathe of opportunities for those who might take longer to complete a task, but can deliver results at least the equal of able-bodied workers.

Innovations like e-lancing and a more sophisticated approach to measuring production, particularly in the services, have helped drive the transformation.

Deflation, looking back from 2026 - Nicholas Gruen

Almost 20 years on from the global financial crisis, the Australian economy, like that of much of the developed world, continues to struggle to get out of second gear.

While Australia's record of 35 years of unbroken growth is remarkable, Lateral Economics principal Nicholas Gruen says there is little to celebrate from the last 10 years. The dark cloud of economic stagnation that settled over Europe in the wake of the GFC has spread Down Under.

Nicholas Gruen

Nicholas Gruen

The tough medicine policies forced on Europe's debtor nations (Italy, Spain, Greece) by Germany stoked deflationary forces that quelled growth there, and a similar dynamic has gripped Australia. Central banks around the world, including in Australia, have struggled in vain to lift the inflation rate.

Most workers have not had a real pay rise in years, and housing costs are claiming an increasing share of income, leaving fewer dollars left over for shopping and personal services. In turn, soft turnover has given firms little reason to hire more staff or make substantial investments.

In the past decade, annual growth has averaged 2.5 to 3 per cent, rather than 3 to 3.75 per cent. The result, says Gruen, has been to make the country 5 per cent poorer than it would otherwise have been.

Instead of acting to break out of this rut, successive governments have been complacent. "Now our unemployment rate is higher than the United Kingdom and the US, and there is no sense of urgency, or that something is seriously wrong," says Gruen. "It is a story of the great Australian complacency."

China's hard landing, looking back from 2026 - Saul Eslake

In the decade since 2016 the country has endured slowing population growth, a continued decline in the terms of trade and productivity, and an end to booming house prices. Yet the biggest shock has come from the liquidity crisis that crippled China's financial system.

Saul Eslake

Saul Eslake

The warning signs were already appearing in the middle of the last decade, says independent economist Saul Eslake, when the country's banking system developed some of the worrying characteristics of the American banking system before the global financial crisis hit.

"The GFC was not primarily caused by a huge increase in bad mortgage loans, but by a wholesale run on funds tied up in securities," Eslake said at the time.

"China's banking system has taken on some of that character. China's banking system has become much more dependent on the types of funding [securities] that brought down the Western banking system [in the GFC]," he adds.

The Asian country's massive foreign exchange reserves, worth around US$3 trillion, were of little help in what became a solvency crisis. For Australia, whose trade dependency on one nation was greater than at any time since the 1950s, the economic consequences have been severe.

By Clarke McEwan February 11, 2026
Electric vehicles (EVs) are no longer a niche choice. By late 2025, they account for more than 8% of new car sales in Australia, driven in no small part by generous tax incentives. One of the most significant is the Federal Government’s Electric Car Discount, introduced in mid-2022. For many businesses and employees, it has materially reduced the cost of owning or leasing an EV. That said, the rules are now under review. While no immediate changes are proposed, this is an important moment to understand the benefits, assess whether they suit your circumstances, and consider timing. How the Electric Car Discount Works (in Plain English) The discount is not a cash rebate. Instead, it operates through tax concessions that can significantly reduce the real cost of an EV: 1. Fringe Benefits Tax (FBT) exemption Where an eligible EV is provided to an employee as a fringe benefit, private use is exempt from FBT. This is often the biggest saving. Without the exemption, FBT is effectively charged at up to 47%. For many employees, the exemption can reduce the annual after-tax cost of a vehicle by thousands of dollars. Important points: The exemption applies to battery electric vehicles and hydrogen fuel cell vehicles. Plug-in hybrid vehicles lost eligibility for new arrangements from 1 April 2025. The car must be first held and used after 1 July 2022 and be below the luxury car tax threshold at first purchase. 2. Higher luxury car tax (LCT) threshold Fuel-efficient vehicles, including EVs, benefit from a higher LCT threshold ($91,387 for 2025–26, compared to $76,950 for other cars). This can prevent the 33% luxury car tax applying to part of the purchase price. 3. Reduced import costs Certain EVs are also exempt from the 5% customs duty, reducing upfront acquisition costs. Commercially, these settings have made EVs very competitive. Lower running costs (electricity versus fuel, fewer servicing requirements) and solid resale values have strengthened the business case, particularly for salary packaging and small fleets. Why the Government Is Reviewing the Rules A statutory review of the Electric Car Discount has now commenced. The key reason is cost. Uptake has exceeded expectations, and the projected cost to the budget has increased significantly over the forward estimates. The review will examine: Whether the concession is still required to encourage EV adoption. Whether eligibility settings should be tightened (for example, limiting benefits to certain vehicle types or price points).How the discount interacts with other policies, such as the National Vehicle Emissions Standard commencing in 2025. Public consultation is underway, with a final report not due until mid-2027. Importantly, there is no suggestion of immediate changes, and any reforms are more likely to be prospective. Practical Takeaways for Business Owners and Employees While uncertainty always creates hesitation, the current rules are clear and legislated. From a practical perspective: Now is a good time to review fleet or salary packaging arrangements, particularly if you are considering replacing a vehicle in the next 12–24 months. Existing arrangements are expected to be grandfathered, reducing the risk of retrospective changes (although we can’t guarantee this). Ensure vehicles are clearly under the LCT threshold at first purchase and meet all eligibility criteria if you want to access the FBT exemption. Check the tax treatment of charging infrastructure provided in connection with an eligible EV, this won’t necessarily qualify for an FBT exemption. Final Thought The Electric Car Discount remains one of the most valuable concessions available for employee vehicles. While a review introduces longer-term uncertainty, the commercial reality today is that EVs can deliver genuine tax and cash-flow savings when structured correctly. If you are considering an EV—either personally or through your business—now is the right time to run the numbers. Please contact our team if you would like tailored advice on whether an electric vehicle strategy makes sense for you under the current rules.
By Clarke McEwan February 11, 2026
As a business owner or investor, time is always tight. So it’s no surprise many people now turn to AI tools like ChatGPT for quick answers on tax deductions, super contributions or structuring ideas. The responses sound confident, arrive instantly and cost nothing. What could go wrong? Plenty. The Australian tax and super system is complex, highly fact-specific and constantly changing. While AI can be a useful starting point, relying on it for decisions can expose you to audits, penalties and poor financial outcomes. We’re increasingly seeing the clean-up work when AI advice goes wrong. Where AI Can Help (and Where it Can’t) AI is quite good at explaining basic concepts in plain English. It can help you understand what “negative gearing” means, outline the difference between concessional and non-concessional super contributions, or prompt you to think about record-keeping. Used this way, it can save time and help you ask better questions. The problem starts when AI moves from explaining concepts to giving “advice”. Tax and super outcomes depend on your specific facts: your income levels, business structure, age, residency status, assets, timing and future plans. AI does not know these details unless you provide them—and you generally shouldn’t. Even then, it cannot exercise judgement or balance competing risks the way an experienced adviser can. The Accuracy Risk: Confident, but Wrong AI tools are known to “hallucinate” – that is, provide answers that sound authoritative but are incorrect or incomplete. In practice, this can mean: Claiming deductions that don’t apply to your circumstances Miscalculating capital gains tax or ignoring integrity rules Suggesting super strategies that breach contribution caps or eligibility rules Quoting legislation, cases and rulings or concessions that don’t exist or are out of date. These errors are rarely obvious to a non-expert, but they are normally obvious to the ATO, courts and experienced advisers. A recent decision handed down by the Administrative Review Tribunal highlights some of the key problems. In Smith and Commissioner of Taxation [2026] ARTA 25 the taxpayer appeared to rely on AI tools to identify cases which supported their argument, but this approach was shot down by the Tribunal. Some of the cases didn’t exist and others were simply not relevant to the matter being considered. If the person using the AI tool doesn’t verify the existence of the cases provided by the tool and read them to ensure their relevance then “the Tribunal’s resources are being wasted, as the Tribunal must look for cases that don’t exist and read cases that have no relevance at all”. ATO Scrutiny is Increasing, not Decreasing The ATO isn't anti-AI—they use it internally for fraud detection and analytics. But for you? The ATO’s misinformation guide makes it clear that AI tools can provide false, inaccurate, incomplete or outdated information. The ATO’s message is to verify everything, or face the music. Surveys reveal 64% of businesses seek AI accounting help first, only for pros to unscramble the mess—wasting time and money. ATO AI transparency statement | Australian Taxation Office Protect yourself from misinformation and disinformation | Australian Taxation Office When something is wrong, the ATO will generally amend the return, charge interest and may apply penalties—even if the mistake came from AI advice rather than intent. We are seeing this play out most clearly with work-from-home claims, property deductions and SMSF compliance. Superannuation: High Stakes, Little Margin for Error Super is an area where AI advice can be particularly dangerous. Self-managed super funds, in particular, operate under strict rules. AI often overlooks key issues such as eligibility, timing, purpose tests and investment restrictions. The result can be non-compliance, forced unwinding of transactions and penalties that run into thousands of dollars. Super mistakes can also permanently damage your retirement savings. Data Security and Privacy There is also a practical risk many people overlook: entering personal or financial information into AI platforms. Once data is entered, you lose control over how it is stored or used. This creates privacy and fraud risks that are simply not worth taking. A Smarter Approach: AI Plus Professional Advice AI is best used as a support tool, not a decision-maker. It can help you understand the landscape, but important tax and super decisions should always be reviewed in light of your full circumstances. At our firm, we encourage clients to bring questions early, test ideas and have conversations before acting. That approach almost always costs less than fixing problems after the fact. The bottom line: AI can be a helpful assistant, but it is not your accountant. When it comes to protecting your wealth and staying compliant, tailored professional advice remains essential.
By Clarke McEwan February 11, 2026
When clients sell a long-held family home, they may be able to channel part of the proceeds into superannuation by using the downsizer contribution rules. Basic Eligibility Conditions To qualify, the seller must meet a number of conditions: They must have reached the eligible age of 55 years (at the time of making the contribution). The eligible dwelling must be located in Australia and have been owned for at least 10 years. The disposal of the dwelling must be exempt from CGT under the main residence exemption to some extent (full exemption not required).ntent of your post goes here. To edit this text, click on it and delete this default text and start typing your own or paste your own from a different source. The contribution must be made within 90 days of settlement, and an election form must be lodged with the fund no later than when the contribution is received. The downsizer contribution can only be used once per individual and is limited to the lesser of the gross sale proceeds or $300,000 per person. Does the Sale Need to be Fully CGT-exempt? A common question is whether the sale must be fully exempt as the main residence. Importantly, a full exemption is not required. Even if only part of the capital gain is exempt under main residence rules, the property may still qualify — provided all other conditions are met. Is the Property Required to be the Main Residence at Sale? Equally important: the property does not need to be the seller’s principal residence at the time of sale. Living in the property for some years and renting it out later does not disqualify it, as long as the ownership and residence history supports at least a partial main residence exemption. Special Rules for Pre-CGT Properties Where a property was acquired before CGT began, the rules look at whether part of the gain would have been disregarded had CGT applied. A key requirement is that there is a dwelling that qualifies as the main residence. Disposal of vacant land will generally not satisfy the test and therefore will not meet downsizer requirements. Eligibility of a Non-Owning Spouse It is common for only one spouse to be listed on the property title. A non-owning spouse may still qualify for a downsizer contribution if all other requirements are met, apart from ownership. However, a spouse who never lived in the property and could not reasonably have treated it as their main residence is unlikely to be eligible. Preservation and Access to Funds A downsizer contribution is subject to the standard preservation rules. Once contributed, the amount cannot be accessed until: · You reach preservation age (60) and retire, or · You reach age 65, regardless of retirement status. Consider future cash-flow needs before making the contribution. Before you Contribute Although seemingly straightforward, downsizer contributions involve several nuances. Please contact us if you have any questions. Related links: Downsizer super contributions Downsizer contributions and capital gains tax
By Clarke McEwan February 11, 2026
For many Australians, a holiday home does double duty. It’s a place to escape with family and friends, and during the rest of the year it’s listed on Airbnb or Stayz to help cover the costs. Until recently, many owners assumed they could claim most of the usual deductions for the property without much trouble, as long as appropriate apportionments were made. However, that position is now under more scrutiny than ever following the release of some new draft guidance documents by the Australian Taxation Office (ATO) - TR 2025/D1, PCG 2025/D6 and PCG 2025/D7. The ATO is looking to significantly tighten the rules around holiday homes that are used to derive some rental income. While the documents are still in draft form, they clearly signal the ATO’s compliance focus going forward. What is the ATO Concerned About? In simple terms, the ATO wants to distinguish between properties that are genuinely held to maximise rental income and those that are primarily lifestyle assets with some incidental rental use. The ATO confirms that all rental income must be declared, even if it is occasional or earned through informal arrangements. However, if the property is really a holiday home and isn’t used mainly to produce rental income during the year then the owner can’t claim any deductions for expenses such as interest, rates, land tax, repairs and maintenance. That is, the ATO might not allow any of these expenses to be claimed as a deduction, even if the property is used to generate taxable rental income for some of the year at market rates. If the property is classified as a holiday home by the ATO then owners can only claim deductions for limited direct expenses such as cleaning or advertising. The ATO is particularly focused on properties that: Are blocked out for private use during peak periods (for example, school holidays or ski season), Are advertised inconsistently or at above-market rates, Generate ongoing tax losses year after year. How Expenses Must be Claimed Even if the property isn’t classified as a holiday home, it will often still be necessary to apportion expenses if the property is only used partly for income producing purposes. PCG 2025/D6 outlines how expenses should be apportioned. The key principle is that claims must be “fair and reasonable”. Common methods include: Time-based apportionment (for example, based on days rented or genuinely available for rent), and Area-based apportionment (where only part of a property is rented). Getting this wrong, or failing to keep evidence, increases audit risk. The ATO has access to booking platform data and can easily compare listings, calendars and reported income. The Financial Impact can be Significant Consider a holiday unit that earns $30,000 a year in off-peak rent but is kept for private use during peak holiday periods. Under the new approach, the ATO may conclude the property is really a holiday home and could reduce deductible expenses from tens of thousands of dollars to only a small fraction, resulting in a materially higher tax bill. Co-ownership also needs care. Income and deductions are generally split according to ownership interests, regardless of who uses the property more. Renting to relatives at discounted rates can further limit deductions. Practical Steps you Should Take Now Although the guidance is proposed to apply from 1 July 2026 (with transitional relief for arrangements in place before 12 November 2025), now is the time to review your position: Are you holding and using the property to genuinely maximise rental income? Is the property advertised broadly and consistently, including during peak periods? Use market pricing: Set rent in line with comparable properties in the same area. Keep strong records: Retain booking calendars, advertisements, enquiries, and a diary showing private versus rental use. Review ownership and strategy: In some cases, changing how a property is operated can improve its commercial profile and tax outcome, but beware of CGT liabilities, duty and legal fees. Document existing arrangements: If you may qualify for transitional relief, evidence is critical. The Bottom Line The ATO is not banning deductions for holiday homes, but it is drawing a firmer line between genuine investment properties and lifestyle assets. With the right structure, pricing and record-keeping, many owners can still claim appropriate deductions and improve cash flow. If you own a holiday property, a proactive review could save you from an unpleasant surprise later. Please contact us if you would like us to assess your current arrangements and help you plan ahead.
By Clarke McEwan January 16, 2026
According to the NAB Quarterly SME Business Survey for Q3 2025, the health of Aussie SMEs is on the up, with SME business conditions rising 7pts in this third quarter of the year. And there’s additional good news for manufacturing businesses – SME conditions for the manufacturing sector are up 11 points! Heading towards the end of the financial year, this improved outlook is a huge boost to confidence in the sector. However, it’s not the time to get complacent. To really set your business up for success in 2026, we’ve highlighted four strategic elements that will help you to continue this upward trajectory. 1. Get in control of your costs Explore fixed-price supplier contracts for key overheads like energy and raw materials. Fixed terms help you lock in prices and minimize any cashflow shocks if there’s further volatility in the supply chain in 2026. With costs more predictable and stable, you’ll be able to budget more effectively and keep the business in a positive cashflow position. 2. Boost your cash collection cycle Efficient collection of customer payments is a vital way to improve your cashflow position. Try enforcing stricter payment terms with your customers and using multiple payment channels, so it’s as easy as possible for customers to settle their bill. You can also use finance tools like invoice finance or early payment discounts to shorten your cash collection cycle (CCC), helping to stabilize your working capital and reduce your reliance on short-term credit and loans. 3. Invest in technology and production efficiency Automation technology offers a huge opportunity, if used wisely and strategically. Put your capital into automation technology and machinery that enhances the productivity, efficiency and cost-effectiveness of your production processes. With the benefits of automation, you can address labour cost pressures, reduce your manufacturing waste and increase your overall output capacity – a vital step if you’re going to scale up production for 2026. 4. Get flexible with your people strategy High staffing costs are eating into your margins, but there are ways to mitigate this impact. Try increasing your use of third-party contractors for specialized or growth-phase roles. This helps you access the expertise, skills and knowledge you need, but without committing to the full financial load of hiring permanent, high-paid employees. The signs of light at the end of the tunnel may be there for Australian manufacturing. But there’s real value in updating your business strategy for the coming year. Book some time with our team to talk through your 2026 goals, your current strategic worries and where we can work with you to revise and refresh your strategy.
By Clarke McEwan December 3, 2025
The Government has released draft regulations that would require certain retailers to accept cash payments, ensuring Australians can still buy essential goods like groceries and fuel – even when technology fails. The change aims to stop people from being excluded when power, internet, or card systems go down, or when they simply prefer to pay in cash. Who Will Need to Accept Cash – and Who Won’t The new rules are targeted and, importantly, practical. They’ll apply to fuel stations and grocery retailers, including both major supermarket chains and independent operators, but only for in-person transactions under $500. That means you won’t have to accept someone paying for a $700 tyre replacement or bulk farm supplies in cash – it’s about the everyday essentials. If your business (or franchise group) has an annual turnover of less than $10 million, you’ll be exempt. That’s good news for most small businesses such as family-run grocers, local cafés, and corner stores already managing tight margins and staffing challenges. The regulations are expected to take effect from 1 January 2026, with a review after three years to see how the system is working in practice. Why It’s Happening The move comes as part of a broader push to maintain access and fairness in Australia’s payment system. The Government and industry groups have recognised that while most Australians are happy to tap their card or phone, around 10–15% still prefer to use cash – particularly older Australians and those in regional or remote areas. There’s also a resilience angle: during bushfires, floods, or power outages, card networks can go offline. In those moments, cash becomes essential. What This Means for Your Business For larger retailers, this change will mean dusting off cash-handling policies and reintroducing processes that many have phased out. That may include: Re-establishing cash floats and tills Staff training to handle and verify cash More frequent bank deposits and reconciliation procedures For small businesses that fall under the $10 million exemption, the key step will be to document your turnover clearly so you can demonstrate that the exemption applies. We can help ensure your records and structures support that. There may also be commercial upside. Accepting cash could attract a segment of customers who’ve drifted away as stores went digital – especially in regional areas where cash use remains strong. A small business that promotes “cash welcome” could even gain new loyal customers who value convenience and personal service. Preparing for the Change With final regulations expected soon, it’s worth starting to plan now. Review your payment policies, assess whether you’re likely to be caught by the new rules, and budget for any setup or compliance costs. If you’re exempt, ensure your records are watertight. If not, look for ways to streamline cash handling – for example, by using digital cash counters or smart safes to reduce errors and time spent on reconciliations. Looking Ahead Cash isn’t going away just yet. This reform is about maintaining choice, resilience, and fairness in how Australians pay – and ensuring businesses are ready when customers want to use it.  If you’d like help assessing how these rules could affect your operations or what the exemption means for your business, get in touch with our team.
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