Jim Chalmers says he sees the war in the Middle East and the economic shocks as “a reason to go further on reform”, declaring the May budget will be “ambitious”, focused on savings, and that there are a “whole bunch of options” on tax reform on the table.
The Treasurer said his department forecasted year-on-year inflation could hit almost 5 per cent at the next quarter because of the oil price spike and the cascading impacts across the economy.
But Australia will not go into a recession or soon see quarters of negative growth due to the war, Dr Chalmers said.
“This will be a difficult budget,” he told Sky News.
“It will be an ambitious budget too, because this is an ambitious government.”
The Treasurer said that he saw “all of this uncertainty and all of this volatility not as a reason to go slower, but as a reason to go further on reform”.
“I’ll be working up a number of reform packages for this budget, and they’ll be focused on savings, they’ll be focused on productivity, I’ll give the colleagues a whole bunch of options when it comes to tax reform, and we’ll work through those issues in the usual considered and methodical way, recognising that we’re in the midst of another period of very substantial international economic uncertainty, and that will weigh heavily not just on our economy, not just on our budget, but also on the deliberations that we undertake in the next couple of months,” he told Sky News.
Dr Chalmers did not rule out changing the capital gains tax discount on investment properties.
“We haven’t taken any decisions on it,” he said, when asked about the prospect he could choose to reduce the 50 per cent rate down to 30 or 33 per cent, as had been speculated.
“But as I said a moment ago, we’re working up a number of tax reform options for the colleagues.”
He said there was “willingness” to consider further reforms.
“If there are additional steps we can take in tax reform beyond those income tax cuts, beyond the changes to the super tax concessions and the other tax reforms that we’ve already made, there is a willingness on my part to consider some of those options,” he said.
He similarly did not deny there would be changes to negative gearing or family trusts settings at the next budget.
Dr Chalmers was asked whether it was “fair” to voters for the government to make such sweeping changes without having flagged those changes at the previous election, less than a year ago.
He said Labor’s policy platform at the last election made up the “foundation of our reform efforts, not necessarily a destination”.
“We take seriously our responsibilities to deliver what we committed to, strengthening Medicare, urgent care clinics,” he said.
“The tax cuts are an important part of that as well.
“And we consider delivery of what we took to the election to be a foundation of our reform efforts, not necessarily a destination.
“There is always more to do when you’re a government like ours, an ambitious government, a reforming government.”
This comes as inflation forecasts rise and a handful of banks are now expecting the Reserve Bank to raise the target cash rate in coming days. Year-on-year inflation is currently at 3.8 per cent.
Dr Chalmers said his department expected inflation to hit almost 5 per cent at the next quarter.
“If we were putting pencils down on those forecasts today, we’d have inflation peaking somewhere between the mid to high 4s,” he said.
But it depended on how long the war would be, he said.
“We’ve run a number of scenarios as well, just like the private banks do.
“We’ve got a couple of months to finalise the Treasury forecasts for the budget in May, and so obviously we are working through scenarios and contingencies like this pretty much every day as we try and land these forecasts for the budget.”
But he said changes to the petrol excise was “not something that we have been considering” ahead of the budget.
“It’s not something that’s on the list of things that we are working up for the budget.”
