Labor’s federal budget has been labelled a “white flag” for economic growth, with Nationals leader Matt Canavan warning the government has “given up” on Australia’s prosperity.

Coverage of Tuesday’s federal budget has been dominated by the Albanese government’s decision to abandon its election promise not to change negative gearing or the capital gains tax concession.

However, speaking to Sky News Australia, Senator Canavan argued the problem with the budget was not just Labor’s “breach of trust”.

“It’s the white flag… that this government has (raised),” the Nationals leader said.

“The surrender… to the need to lift economic growth, to lift our economic prospects, to restore living standards to Australians.

“The government’s given up on that. They have no plan. There’s zero plan here to try and make us more prosperous and better off.

“I don’t think we should do that. We have so many resources in this country, if we put our minds to it, if we put some elbow grease into it, we can be wealthier, we can be better off. Bu we’ve got to make tough decisions to do that, and so this government’s just totally left the field.”

During his budget speech, Treasurer Jim Chalmers warned inflation was projected to peak at around five per cent in mid-2026, with economic growth to be just 1.75 per cent in 2026-27.

This was attributed to global pressures such as the oil supply shock brought on by the war in Iran and the closure of the Strait of Hormuz.

However, Senator Canavan said Australia’s inflation rate was already higher than comparable countries prior to the Iran war and the economic figures showed Australia’s living standards would continue to fall under the current government.

“Inflation is going to be running at higher than real wage growth. It’s just over two per cent in this budget, inflation at five per cent,” he said.

“That means the price of things are going up by more than what your wages go up by, and that means your standard of living falls.

“(It means) it continues to fall, because it’s fallen for the first four years of this government, and the Labor Party is projecting it to fall further.”

The Nationals leader said the government’s tax changes showed Labor had lost touch with what the public is concerned about.

“I spent the last couple of months talking to people in southern New South Wales, through the Farrer by-election,” he said.

“Not once did people raise with me the taxation of trusts, capital gains tax. I can’t even remember negative gearing. Sometimes that comes up, but I can’t remember it.

“But people, time and time again, said to me that they were struggling to pay their bills. Small businesses were just hanging on. People couldn’t get into hospitals. Waiting times were blowing out.

“Those are the things people raised with me and those are the concerns of the average Australian people that the government has just ignored last night – they have no plan to deal with those things.

“I think a lot of Australians are shaking their head, thinking what’s going on with this government? Why are they making all these arcane changes to tax law I’ve never heard of that they didn’t promise before the last election when all I want is a government that helps allow me to pay my bills, to stay in a home and save up for a home.”