Treasurer Jim Chalmers has promised his fifth Federal Budget will focus on 'saving more than we spend' as Australia faces worsening economic conditions.

It comes after Reserve Bank governor Michele Bullock urged the government to rein in spending while hiking interest rates again to 4.35 per cent, delivering another blow to Australians with a mortgage.

Chalmers said: 'In the upcoming Budget, we'll continue that record of responsible economic management by saving more than we spend and banking all upward revisions to revenue.

'This Budget will be focused on fuel security, addressing inflation, boosting productivity and resilience, and managing global economic uncertainty, and today's decision highlights why this is so important.'

So, what can Australians expect to see in the Budget on Tuesday, May 12?

Here's what has already been announced - and what the government has teased.

Relief at the petrol pump

A cut to the fuel excise has already been accounted for in the Budget, which cuts 26 cents off a litre of petrol or diesel. 

The measure, announced on March 30, halved the tax for three months up to June 30 and aimed to reduce the cost of a 65L tank of fuel by nearly $19.

A decision has not been made on whether it will be extended.

However, Prime Minister Anthony Albanese did confirm on Wednesday that a fuel security and resilience package would be announced in the Budget.

'The package will provide more than $10billion to secure Australia's near-term fuel and fertiliser security, establish a permanent government-owned Australian fuel security reserve of around a billion litres, and lift the Minimum Stockholding Obligation by around 10 days for every type of fuel,' he said.

'This will support an overall expansion of Australia's onshore fuel reserves to ensure at least 50 days of fuel supply and storage of diesel and aviation fuel.'

Cutting down the NDIS

The government has already flagged large cuts to the National Disability Insurance Scheme (NDIS), with savings of $15billion to be rolled out over the next four years. 

At its current trajectory, the scheme is set to cost about $49 billion this financial year and is now more expensive than Medicare. 

It is also not far off matching spending on defence, with costs on track to reach $62 billion by 2028–29. 

But, in April, Chalmers said it would be the 'single biggest source of savings in the budget', with the federal government aiming to reduce the scheme's annual growth from 10 per cent to between 5 and 6 per cent.

Health Minister Mark Butler confirmed that changes to eligibility rules would seek to lower the number of Australians on the NDIS to 600,000 by 2030. 

Given there are approximately 760,000 people using the scheme, it would mean booting 160,000 off it.

The scheme's budget is also expected to be brought down from $70billion to $55billion.

If you're a worker and pay tax...

Just hours before the RBA announced a cash rate hike of 0.25 points to 4.35 per cent, hitting millions of mortgage holders, rumours swirled of a possible, one-off tax break for Australian workers.

The Australian reported that the Albanese government was considering an offering such a measure in the upcoming Budget.

Speculation suggests workers who pay tax could see an income offset between $200 and $300. 

If it is announced, it would apply to the next financial year - and only for income earned during work, not from investments.

...plus, more tax cuts

Outside the one-off income offset, it is fair to assume the Budget will account for two announcements the government made earlier this year to Australians' taxes.

A consultation finished on May 1 for proposed draft legislation that would see 6.2 million workers claim a $1000 tax deduction without the need for receipts for the 2026-27 financial year.

The bill would amend tax law to introduce a standard deduction of up to $1000 for Australian tax residents who earn income from work, starting July 1.

An Australian who earns less than $18,200 does not pay income tax and so, would not benefit from the change.

But, at the top tax rate of 45 cents for each $1 over $190,000, a $1000 deduction could reduce tax by up to $450 - or $470 including the Medicare levy.

The proposed bill would also keep the current arrangements for those who have more than $1,000 in work-related expenses, or earn only business or investment income.

Chalmers may also note the flow-on effect of two modest tax cuts that were announced in March.

From July 1 this year, the Labor government will reduce the 16 per cent tax rate to 15 per cent for income between $18,201 and $45,000.

From July 1, 2027, this tax rate will be reduced further to 14 per cent.

Goodbye to the EV tax break

Earlier this week, the Treasurer and Energy Minister Chris Bowen announced that the fringe benefits tax exemption for electric vehicles (EVs) will be wound back.

The incentive, which allows employers to avoid paying fringe benefits tax on EVs under $91,387 purchased through a novated lease, will be transitioned to a 25 per cent discount.

The cost of the tax break to the federal budget has blown out in recent years from an initial $90million to $1.35billion in 2025-26 and had been expected to rise to $3billion by 2028-29.

But a phased tightening of the incentive will save taxpayers $1.7billion over four years from the 2026-27 budget.

From April 2027, the full tax discount will only apply to EVs costing $75,000 or less, while vehicles above $75,000 but below the luxury tax threshold will only receive a 25 per cent discount.

All EVs below the luxury tax threshold, which is $91,387 but rises each year with inflation, will only receive the 25 per cent discount from the same date.

'Intergenerational fairness'

The budget is widely tipped to make changes to negative gearing, capital gains tax discounts and how trust funds are taxed - though the government has avoided specifics. 

A key message from both Albanese and Chalmers about the Budget has been that it will be about 'intergenerational fairness'.

'This budget is not about and never will be about setting some Australians against other Australians,' Chalmers said on Monday. 

'It's about recognising some of these legitimate intergenerational concerns, which, in my experience ... are often shared by older Australians.'

Of the rumoured policy changes, the legal service Corrs Chambers Westgarth has highlighted the debate over CGT as the most significant.

'It was reported that the Treasury initially modelled a reduction of the discount from 50 to 33 per cent for investment properties,' the service wrote in a preview of the budget.

'However, the conversation has now shifted to a wholesale replacement of the CGT discount in favour of a return to the pre-1999 inflation indexation model.

'Under the former indexation model, cost base was indexed to CPI so that in effect, only gains in real terms are taxed at a taxpayer's marginal rate. 

'Given the recent uptick in inflation, this may not be all that punitive of an outcome, especially for taxpayers planning a long-term hold.'

It has also been speculated that Chalmers could announce a minimum tax rate, ranging between 25 and 30 per cent, on trust distributions, which would align them with the rate that applies to companies.

Over 65s' health insurance

Perhaps in honour of 'intergenerational fairness', it was announced in April that people over the age of 65 will no longer pay discounted rebates for private health insurance. 

Older Australians will have to pay more than $200 a year extra for their cover.

'I understand this won't be a welcome decision for many, but it's the right thing to do,' Health Minister Mark Butler said during the announcement.

The decision was made because some older Australians receive eight per cent more in rebates than younger people on the same income. 

Billions for defence 

An extra $53 billion will be spent on defence over the next decade in order to lift military spending to three per cent of Australia's GDP. 

It appears to be a move to appease US President Donald Trump and his administration, which has slammed Australia for not boosting its spending previously.

It was top Pentagon official Elbridge Colby who cited the figure of three per cent. 

The spending will be focused on infrastructure such as drones and long-range missiles. 

There will also be investment in the longer term to build more self-reliance.