Australia’s bottom line will receive a major improvement, as Labor sets its sights on tackling intergenerational inequity through tax and housing reforms.
Young Australians are being promised a more level playing field in what Labor has described as one of the most important budgets in years.
Treasurer Jim Chalmers has confirmed Tuesday’s budget will not show a return to surplus in any year in the four-year outlook, but deficits will narrow compared to December’s mid-year update.
The mid-year economic and fiscal outlook projected a cumulative deficit of about $143 billion from 2025/26 to 2028/29.
Focus on tax, housing and cost of living
Prime Minister Anthony Albanese confirmed tax changes will be delivered, alongside measures to help drive housing supply.
“Tonight will be about giving young people a more level playing field,” he told Nova Adelaide radio.
“This is a big reform budget… tackling some issues that have been kicked down the road for too long.”
Economists have predicted a substantial improvement to the budget bottom line due to higher tax revenue, partly linked to the Iran war.
Chalmers said there would be a focus on cost of living, housing and inflation pressures.
“We choose the hard road of reform, not the path of least resistance… a responsible budget, a reform budget,” he said.
“The status quo in the housing market and in the tax system is not working for too many Australians.”
Spending restraint and savings measures
Labor has sought to frame the budget as one of spending restraint, following warnings from economists and Reserve Bank governor Michele Bullock that increased spending could fuel inflation and lead to further rate rises.
Some major spending measures have been announced, including in defence, hospital funding and rail infrastructure, but these are expected to be partly offset by tax increases on property investors and people with trusts.
Media reports suggest a one-off tax handout of $200 to $300 for wage and salary earners may not begin until 2027 to limit inflation in the near term.
Finance Minister Katy Gallagher said the budget would balance relief with longer-term reform.
“We are thinking about relief as part of this budget, in addition to resilience and reform,” she told ABC News Breakfast.
NDIS savings and budget improvements
The centrepiece of the savings package is a forecast $35 billion reduction in the cost of the National Disability Insurance Scheme.
Gallagher has identified $63.8 billion in gross savings, though it remains unclear how much will reduce the deficit and how much will be redirected to other spending.
Growth in government payments, adjusted for inflation, is forecast to average 1.5 per cent over the eight years to 2029/30, the lowest rolling eight-year average in almost three and a half decades.
The budget will show policy decisions improving the bottom line for a second time since Labor came to power in 2022, following a $2.2 billion improvement in December.
Debate over accounting and tax changes
However, some of that improvement has been linked to accounting treatment of policies, including the government’s home battery scheme.
The forecast cost of the scheme rose from $2.3 billion to $11.6 billion, which was counted as a parameter variation, while changes to rein in the scheme were recorded as policy decisions.
Nationals leader Matt Canavan said any changes to negative gearing or capital gains tax should be put to voters at an election.
