Jim Chalmers will unveil another four years of deficits but with a bottom line that’s $44.9 billion better than previously forecast when he hands down his fifth Budget.
The Treasurer’s improved set of books comes as Anthony Albanese said he would make no apologies for pulling every lever on housing as his government prepares to cut back property investor tax concessions, breaking an election promise.
Tuesday’s budget will show lower deficits every year compared to the mid-year update released in December.
That update forecast a cumulative $143.3 billion deficit between 2025-26 and 2028-29, already an improvement on what had been projected in the pre-election budget a year ago.
“What’s driving this improvement in the budget are the savings we’ve found and the spending restraint we’ve shown and you’ll see that tonight,” Dr Chalmers said.
He also intends to show net savings in the budget for the second update in a row and has pledged to return every single dollar of revenue upgrades to the bottom line.
The bulk of the $64 billion savings come from a $35 billion cut to the NDIS, while tax breaks for electric vehicles will be scaled back and the troubled inland rail project has been scrapped.
But he’s cautioned people not to expect “near-term cash splashes” as he strives to not worsen rising inflation.
The Opposition claimed the Government’s budget was in “complete disarray” the day before it was unveiled because of the broken promises on capital gains tax discounts and negative gearing.
But Mr Albanese said people should have known the Government had ambitions to do more based on speeches he and Dr Chalmers made at the National Press Club in June last year.
Both said the mandate from their election platform was the foundation for what Labor would do this term, not the limit.
Since then, the difficulty for first-home buyers had become even further entrenched, Mr Albanese said.
“Another year has passed since the election and not enough has changed,” he told Radio National on Monday.
“So many people have had another year of missing out at auctions, of renting and paying someone else’s mortgage, and too many young people are close to giving up on the opportunity of owning their own home.”
He insisted the Government was all about “making the right decisions for the right reasons for the times that you are in” as it contemplated change that he had ruled out during last year’s election campaign.
Finance Minister Katy Gallagher said that last year, the Government was focused on boosting the supply of houses.
That’s still the case, but it now knows more is needed.
“People of my generation, we found it hard to save up and buy a house, but people in generations below me are finding it impossible,” she said.
Tomorrow’s budget is widely expected to contain cuts to capital gains tax discounts and negative gearing, used in combination by people with investment properties to shrink their tax bills, and increase taxes on family trusts.
The details of the exact changes being contemplated and how they will be phased in have been kept under wraps.
But a string of ministers have insisted in recent days that “if we do change our position on any policy, we will explain why it is that that is occurring”, as Mr Albanese put it on Monday.
“We do need to do more and use every lever at our disposal,” the Prime Minister said.
It’s a big shift from a year ago.
He repeatedly ruled out changes to capital gains tax and negative gearing during last year’s election campaign.
“Yes. How hard is it? For the 50th time,” he said in Cairns on April 8 last year when asked if he ruled out any changes to the capital gains and negative gearing tax settings if re-elected.
The Opposition seized on this to accuse the Government of lying to voters.
“Isn’t it extraordinary that only a year ago, Labor was saying that, for the 50th time, no, we will not be changing these taxes in the next term of government,” deputy leader Jane Hume said.
Shadow treasurer Tim Wilson said grandfathering or “grace periods” on any cuts on the taxes – which he opposes anyway – would only serve to entrench the inequality the Government says it’s tackling.
“(Dr Chalmers) has been going out and saying this is going to be a budget for young Australians; now he’s locking in the benefits for one generation and harming young Australians,” he said.
“This government’s budget process is in complete disarray because they have broken their word and Australians have woken up to the dishonesty at the heart of this government and its budget.”
Accommodation Australia is ready to back in the changes once they see them, having told the government last year it should cut back negative gearing on properties being used for short-term rentals like Airbnbs.
The tax changes will come in addition to more measures aimed at increasing the supply of houses.
This includes $2 billion for infrastructure like sewers, electricity connections, and roads to enable new housing estates, and $500 million to speed up approvals.
Another $59.4 million will go to helping thousands of young, homeless Australians to get into community housing.
The budget will contain a significant productivity package as well as the tax changes, estimated to save businesses $10 billion in dealing with red tape and boost GDP by $13 billion a year.
It will make the $20,000 instant asset write-off for small businesses permanent, streamline interactions with government departments, and make it faster and easier to recognise trades qualifications.
Other big-ticket items in the Budget include a $10 billion fuel security package to increase storage and secure fuel shipments to Australia.
