Jim Chalmers vows change on May 12
Finance Minister Jim Chalmers has promised to deliver a federal budget that will rein in spending, deliver tax reform for young Australians and businesses and cut red tape on new home and factory construction.
In his major pre-budget speech to the Australian Business Economists organization in Melbourne on Thursday, Chalmers will argue that the May 12 financial plan will be built on three “ambitious reform packages”.
These packages, which include tax reform, budget repair and productivity boosts, will form part of a supply-side strategy that suggests Chalmers and the government are ready to use some of the political capital provided by their landslide election victory in 2025.
“If the main constraint we collectively face is capacity, these packages will help expand capacity. More savings to create more room for the private sector to grow, while creating fiscal buffers,” he will say.
“Productivity-boosting reforms to increase supply, create higher living standards and pave the way for more investment in the process to help the economy grow without increasing price pressures.
“And tax reform to encourage more productive investment while supporting budget sustainability and equity and helping to rebalance the system.”
Government sources have already revealed tax reform is being considered, including changes to capital gains tax, negative gearing and electric vehicle subsidies. The spending review committee holds regular meetings to consider possible reforms.
Chalmers will say any tax changes will depend on how much the government can improve the budget, international developments and cabinet talks yet to take place.
He will announce that he is considering reforms that will make the tax system “simpler and more sustainable”, as well as tax changes that will encourage businesses to increase investment and help increase efficiency across the economy.
However, Chalmers, who points out that changes in tax cuts that will favor older Australians will be targeted, will say that the current tax system is outdated and “overweights the opportunities facing young Australians and future generations”.
A “significant” savings package will be put together, with Chalmers promising the government is ready to take tough decisions, including in areas where structural spending pressures are rising fastest. This signals further government action on the National Disability Insurance Scheme.
To boost efficiency, Chalmers will argue the budget will include measures aimed at making it easier to build faster, attracting investment and reducing compliance costs.
The budget is being finalized amid uncertainty created by the war in Iran and a rise in inflation that resulted this week in the Central Bank raising official interest rates for the second consecutive month.
Chalmers will argue that despite the uncertainty, the government should present a reform-oriented budget.
“All this economic uncertainty and volatility is a reason to reform more, not less. It is a reason to go further, not slower,” he will say.
“It’s a supply-side strategy to lift the speed limit on the economy and make it more resilient. Making room in the budget. Expanding capacity. And making our tax system stronger, fairer and more sustainable.”
Shadow treasurer Tim Wilson said the government had already shown it was not prepared to take action against corruption such as those linked to the CFMEU as the Coalition prepared for a talk on economic reform.
“We know that $15 billion of public money was diverted to organized crime through the CFMEU-Labour cartel,” he told Sky News.
“We know that the National Disability Insurance Corporation says about 10 percent, or $5 billion, of its $50 billion program goes to fraud and corruption.
“The government’s response has been to turn around and say: let’s raise taxes on Australians, let’s not stop fraud and corruption.”
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Shane Wright is senior economic correspondent for The Age and The Sydney Morning Herald.Connect with: X or email.
