Jim Chalmers flags tax reform, spending cuts amid inflation concerns
Finance Minister Jim Chalmers has announced that tax reform and spending cuts will be key elements of the May budget, as he disputes claims that government spending is increasing inflationary pressures.
As Chalmers continues to face pressure over questions about the government’s role in last week’s rise in official interest rates and a possible change to capital gains tax, the treasurer said on Sunday his fifth budget, due on May 12, would focus on three key areas.
“The budget will be around. We’re working on a productivity suite,” he told ABC’s Insiders programme.
“There will be a savings package we are working on. [And] We will evaluate whether further steps can be taken regarding tax reform.
“But overall it will be about removing the speed limit on the economy, ensuring we can grow faster with lower inflation, attracting investment, dealing with intergenerational issues and also continuing to get the budget into better shape.”
The opposition and some economists said the Central Bank’s task of controlling inflation was being hindered by government spending. On Friday, RBA governor Michele Bullock admitted that public and private spending was driving aggregate demand, which was growing too fast.
Opposition small business spokesman Tim Wilson said the government was using public spending to disguise softness in the economy.
He said it was clear that government spending was contributing to inflation.
“Clearly Jim Chalmers doesn’t understand the contribution of public spending to inflation and therefore interest rates, he should probably go to a textbook,” he told Sky News on Sunday.
This imprint revealed last week that the government was considering replacing the 50 per cent concession on capital gains tax for assets held over the past year as part of a wider tax package.
Chalmers declined to be asked whether the government would introduce the capital gains tax concession, which many economists argue added pressure on house prices when it was introduced by the Howard government in 1999.
But he said any tax reform would take into account how the tax system could harm young Australians.
“As we consider the next steps in tax reform, it is clear that issues around generational equity are front and center,” he said.
Shane Wright is senior economic correspondent for The Age and The Sydney Morning Herald.Connect with: X or email.
