Federal Treasurer Jim Chalmers last night (Tuesday) delivered his fifth federal budget, stating that its central objective is to address “intergenerational inequality.” The government aims to gradually improve the nation’s fiscal position over coming years through spending cuts and tax reforms, though several measures have triggered strong criticism from the business and property sectors.
The budget forecasts a deficit of A$31.5 billion for the next financial year, A$2.8 billion lower than previously projected. However, the federal government does not expect to return to surplus until the 2034–35 financial year. Australia’s public debt is also forecast to rise to A$982 billion by the end of the current financial year. Chalmers said the government plans to save A$63.8 billion through spending restraint, with the largest component coming from reforms to the National Disability Insurance Scheme (NDIS), expected to save A$37.8 billion over four years.
The budget also outlines five major economic strategies, including strengthening economic resilience, easing cost-of-living pressures, boosting productivity, reforming the tax system, and reducing inflationary pressures through spending restraint.
Housing and tax reform emerged as one of the budget’s key focuses. The government announced that from July next year, negative gearing tax concessions for residential property will apply only to newly built homes. At the same time, the current 50% capital gains tax discount will be abolished and replaced with a system based on inflation-adjusted gains. In addition, the minimum effective capital gains tax rate will rise to 30%, with trusts to be subject to the same arrangement from the following year.
The government estimates the measures could reduce projected housing price growth by around 2% over coming years and create approximately 75,000 additional home ownership opportunities over the next decade. However, Opposition treasury spokesperson Angus Taylor said the Coalition does not support the reforms, arguing they would weaken investment incentives and potentially reduce housing supply by 35,000 homes over the next decade, further driving up rents.
The government also introduced tax relief measures, including a A$250 “working tax offset” for more than 13 million taxpayers. By 2028, the average worker is expected to receive more than A$2,800 in tax cuts.
Beyond fiscal and tax reforms, the government confirmed an additional A$53 billion in defense spending over the next decade, alongside A$10 billion to strengthen fuel security. It also unveiled a new productivity plan aimed at attracting investment and boosting wages.