The federal government released its 2026 budget last week, with longstanding issues in the food and beverage sector mostly overlooked in favour of the critical supply chain challenges arising from the Middle East conflict. Although organisations such as AUSVEG and the National Farmers’ Federation (NFF) have welcomed measures that will ease pressure on farmers and strengthen the nation’s food supply chains, there are concerns that they fall short of the specific and systemic reforms necessary to restore certainty to the Australian food industry.
The Middle East conflict has driven rapid response to critical issues in the supply chain, after Australia was hit particularly hard due to a lack of substantial domestic fuel and fertiliser production or reserves.
The impacts of global instability and supply chain disruption are hitting Australian producers hard, at a time when many growers were already looking to step away – with last July’s AUSVEG Industry Sentiment Report revealing two in five vegetable growers were actively considering leaving the industry within a year.
The Australian Food and Grocery Council (AFGC) warned earlier this month that a convergence of Middle East conflict, energy market disruption, and domestic interest rate pressure is forcing unsustainable cost increases onto the nation’s food and grocery manufacturers.
The increasing cost of living and the past three months of severe price increases are also heavily impacting the Australian population, with Foodbank’s 2025 Hunger Report finding one in three Australian households are now experiencing food insecurity, and frontline food charities overwhelmed by increased demand.
National Farmers’ Federation (NFF) Horticulture Council chair, Jolyon Burnett, said the 2026 budget reflects several long-standing advocacy priorities of the Council and the NFF, including important wins on tax settings, investment certainty, and supply chain resilience.
“(The) budget includes a number of practical measures that will help ease pressure on farm businesses and strengthen Australia’s food and fibre supply chains,” said Burnett.
“From tax reform certainty to fuel and fertiliser supply security and deferring export cost recovery, these are outcomes we have fought hard for on behalf of farmers across the country.
“The government’s commitment to reduce regulatory burden – estimated at over $10 billion annually – is a step in the right direction and reflects the reality facing growers dealing with mounting compliance costs, whether that’s being imposed by government or coming down supply chains.
“We’ll continue to work with government and regulatory agencies to ensure our markets are working in the national interest, and that there’s a government response for when those markets demonstrably fail,” he said.
Fuel and fertiliser measures
To address immediate supply chain issues, the government included a $14.8 billion fuel security and price relief package in the budget, aiming to immediately secure more fuel, strengthen Australia’s supply chains and build long-term resilience to future fuel shocks.
The major commitments include:
- Securing more fuel internationally through the $7.5 billion Fuel and Fertiliser Security Facility, in addition to the around one billion extra litres of fuel secured for the period from March to June through temporarily relaxing the Minimum Stockholding Obligation and adjusting fuel standards
- Building long term fuel resilience through the $3.2 billion Australian Fuel Security Reserve and increasing the Minimum Stockholding Obligation (MSO), to increase Australia’s reserves of diesel and jet fuel to 50 days
- Delivering the $1.1 billion Cleaner Fuels Program, to boost the production of low-emission fuels in Australia, and working with industry on a market measure to drive demand and to reduce our reliance on imported fuels
- $55 million in 2026-27 for a Transport Resilience and Capacity Kickstart pilot program to incentivise more freight to move via trains and cargo ships
- $54.7 million over five years from 2025-26 to manage Australia’s Fuel Security Framework
- Strengthening the Fuel Security Services Payment to ensure the future of Australia’s last two remaining oil refineries, and providing $10 million in 2026-27 to develop feasibility studies to expand our domestic refining capacity
- $9.2 million over two years from 2025-26 to deliver a nationally coordinated approach to managing disruptions to fuel supply chains through the Fuel Supply Taskforce
- An additional $8.2 million in 2026-27 to defer cost recovery arrangements for agricultural export services, with improvements to streamline biosecurity for fertiliser imports
DAFF budget cuts
The 2025 budget had some more specific items for the food and beverage sector, including a $3.5 million investment to begin development of a national food security strategy – expected to be released in mid-2027. The National Food Council was established in November to lead the work, under the Department of Agriculture Fisheries and Forestry (DAFF), and a food supply chain assessment was commissioned following the supply chain issues in March.
It was concerning for organisations to note in the 2026 budget that $191.6 million will be cut from DAFF over five years from 2025–26 (and $30.5 million per year ongoing), including:
- $104.6 million over five years by reducing uncommitted funding from grant programs.
- $52.0 million over four years from (and $13.0 million per year ongoing) by reducing uncommitted funding for the Future Drought Fund.
- $35.0 million over two years from 2028–29 (and $17.5 million per year ongoing) by reducing funding for the agriculture stream of the Natural Heritage Trust.
The budget also committed $77.1 million over four years (and $17.5 million per year ongoing) to sustain agricultural export and trade functions, including:
- $45.1 million over four years (and $11.4 million per year ongoing) to continue Australia’s international engagement in agricultural forums and trade standard setting functions.
- $23.8 million over four years (and $6.1 million per year ongoing) to continue to support access to critical global agricultural markets.
- $8.2 million in 2026–27 to maintain export regulatory services, with revised cost recovery arrangements for these services deferred to 1 July 2027 in recognition of the disruptions being experienced by farmers and producers due to the conflict in the Middle East.
AUSVEG has continued to advocate on the necessary short, medium and longer-term government commitments and policies to protect long-term food security.
“These measures remain essential to restoring confidence at farm level, and reversing worrying declines in grower profitability, productivity, as well as vegetable consumption among Australians,” stated AUSVEG.
“While some elements of (the 2026) budget may provide some benefit to some Australian vegetable growers, these are still short of the specific and systemic reforms necessary to restore much needed certainty to an industry that is critical to Australia’s food security.”
R&D and innovation
Agriculture and food production was named a national innovation pillar in the recent review of Australia’s research and development (R&D) system, Ambitious Australia, which aims to reverse a decade-long decline in business R&D investment and reorient Australia’s innovation system around sectors where it has genuine competitive advantage.
The federal government stated its productivity package in the 2026 budget will reduce regulatory costs by $10.2 billion a year, boost long-run GDP by around $13 billion a year through work underway with states and territories, and promote $400 million in additional R&D among young firms.
“These measures, alongside governance reform and investment in national science capability, are the first steps in responding to the comprehensive review of research and development, Ambitious Australia,” stated the government release.
“We will also consult with stakeholders on key details of the government’s capital gains tax reforms, including the treatment of early-stage and start-up businesses given the unique features of the tech and start-up sector.”
Key measures include:
- Introducing two-year loss carry back for all companies up to $1 billion in turnover from 1 July 2026 to encourage investment and sensible risk taking.
- Introducing loss refundability for start-ups from 1 July 2028, to help new businesses invest and grow in their first two years.
- Expanding tax incentives for venture capital from 1 July 2027, to encourage more investment and unlock patient capital for young, growing firms.
- Better targeting the Research and Development Tax Incentive from 1 July 2028, increasing offset rates for core R&D by around 25-50 per cent, increasing the turnover threshold for the refundable tax offset, reducing the intensity measure and increasing the maximum expenditure threshold.
- Making the $20,000 instant asset write-off permanent, to support small businesses to invest and keep compliance costs low.
Science & Technology Australia (STA) CEO, Ryan Winn, said there is an overwhelming sense of uncertainty in the research and development industry as funding for non-medical research grants see a significant reduction.
“One third of the workforce has told us they are planning to leave the sector, and we have decades long under-investment in R&D that simply hasn’t kept up with the real cost of doing research,” said Winn.
“The government says it's taking a responsible approach to securing Australia's resilience and intergenerational equity – backing our R&D sector is the only way to do that.
“The government also wants a Future Made in Australia. But increasingly, our workforce doesn’t see a future here. Until the Ambitious Australia report recommendations are implemented in full with corresponding new investment, our industry will continue to lack the certainty it needs to deliver on that ambition,” he said.
