Kylie Green
The 2025 Australian Budget has sparked plenty of conversations, with the Government focused on building a more competitive, productive, and dynamic economy. Wage increases for aged care workers and energy bill rebates are great steps forward, but there's still a long way to go to fully support employees and close the productivity gap in Aussie workplaces.
Key outcomes from the 2025 Budget
Key highlights:
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Wage growth: Wages are forecasted to outpace inflation, with a 1.25% real wage growth expected by 2027.
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Tax cuts: Across-the-board tax cuts mean the average worker will be around $536 better off each year starting from mid-2026.
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Ban on non-compete clauses: Employees earning below $175,000 annually won't face non-compete clauses anymore. This change gives over three million workers, including those in childcare and construction, the freedom to pursue better-paying jobs. This change is expected to boost productivity, lift wages by up to 4%, and drive greater job mobility. However, it also brings added pressure on pay and the administrative task of updating employment contracts by 2027.
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Employment services reform: $68.6 million is allocated over five years to enhance Workforce Australia Online services, with $32.1 million for the Real Jobs, Real Wages pilot, supporting those at risk of long-term unemployment.
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Support for care workers: A further $2.6 billion in pay rises for care sector workers like aged care and education is designed to improve equality in female-dominated industries. In addition, there will be continued support for the NDIS.
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Expansion of the Australian Public Service (APS): 3,400 new APS roles are planned for the upcoming year, aiming to reduce reliance on external consultants.
The productivity challenge in 2025
The budget highlights the productivity issue in Australia, with the budget only due to come into balance by 2050. However, the budget didn’t provide major structural reforms such as changes to consumption tax, as expected in an election year. It did provide some productivity enhancements such as support for the construction industry and for some trades such as electricians.
Grant Thornton described the budget as “a street fight for growth, as businesses navigate rising input costs such as salary increases, product, and insurance costs while facing challenges to drive top line growth.”
The productivity challenge is highlighted in our latest Workplace Engagement Index, which revealed a worrying 30% drop in the number of employees who feel productive at work this year. Even more concerning, over a third of employees are experiencing burnout. While wage increases and financial support ease immediate pressures, they don't fully address the complex needs of today's workforce.
Employees want more than just a paycheque. And with a multigenerational workforce, it's clear that conflicting needs for additional employee benefits are becoming more apparent. Our research shows that reward and recognition ranked higher than competitive compensation among the top five drivers of employee productivity. It proves that there's more to motivating employees than pay alone.
Beyond paycheques: A holistic approach to employee wellbeing
Financial wellbeing is just one piece of the puzzle. In today's economic climate, where the cost of living remains a top concern, businesses need to think beyond traditional compensation. Our employee discounts program has seen a surge in employers seeking offers on everyday essentials. These programs can provide tangible financial relief, with savings that can quadruple the $532 per year tax cuts.
But awareness alone isn't enough. Turning good intentions into impactful change is where many organisations stumble. Supporting employee wellbeing means taking a holistic, tailored approach that addresses financial security, psychological safety, and creating a culture where employees feel genuinely valued.
Our latest Workplace Engagement Index also highlights the top three things employees want their employer to prioritise next year:
- Mental wellbeing
- Reward and recognition from managers
- Financial wellbeing
Despite cost of living pressures, employees are prioritising mental health, with 73% wanting their employer to focus on mental wellbeing this year vs. 59% wanting them to focus on financial wellbeing.
Building a meaningful Employee Value Proposition (EVP)
So, where should business leaders start? Here are three key areas to guide a more intentional approach to employee support:
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Financial security: Beyond pay rises, offer meaningful benefits such as employee discount programs, financial education resources, and cost-saving initiatives that boost disposable income.
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Psychological safety: Create a workplace where employees feel safe to speak up, with access to mental health resources and flexible work arrangements.
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A culture of recognition: Recognition and reward programs, professional development opportunities, and tailored wellbeing initiatives make employees feel valued and engaged.
Taking intentional steps for real change
As the 2025 Budget puts economic competitiveness and productivity in the spotlight, it's a timely reminder for business leaders to reflect on whether their employee value proposition meets the evolving needs of their teams. A one-size-fits-all approach won't cut it. By prioritising a holistic strategy that supports financial, mental, and physical wellbeing, employers can create workplaces where employees don't just survive, they truly thrive.
If you're interested in exploring new ways to boost employee engagement and retention in the year ahead, why not speak to one of our experts today to see how we can help?
