Australia\u2019s economy is being held hostage to \u201cdecisions taken in Washington and Tehran\u201d, Jim Chalmers has lamented as he warned there was still a risk of severe economic consequences from the war in the Middle East.<\/p>\n
The Treasurer flagged billions of dollars in cuts to the NDIS as the main saving in next month\u2019s make-or-break budget as he sketched out his thinking after returning from talks with international counterparts in Washington.<\/p>\n
He\u2019s expecting higher inflation, slower growth and higher unemployment in the months ahead.<\/p>\n
And he talked down predictions from some, including prominent economist Chris Richardson, that the Government could reap some $30 billion in windfall revenue.<\/p>\n
But the uncertainty around the forecasts is so severe that Treasury is looking at including discussion of a doomsday scenario in the budget papers.<\/p>\n
\u201cWe have learned not to get too carried away with each piece of news from Middle East, whether it\u2019s good or bad; we work through a whole range of contingencies in a considered and methodical way,\u201d Dr Chalmers said on Monday morning.<\/p>\n
\u201cIf you think about the last few days, it\u2019s been a pretty wild ride when it comes to developments in the war in the Middle East\u2026 It does feel like two steps forward and one step back when it comes to these developments.<\/p>\n
\u201cAnd if there\u2019s one prevailing vibe that comes from the international colleagues, it\u2019s really, I think, a sense of frustration about how long this war in the Middle East has been playing out, and what that means for the global economy and for everyone\u2019s domestic economies as well.\u201d<\/p>\n
HSBC\u2019s Australia chief economist Paul Bloxham warned there were tricky choices ahead of policymakers.<\/p>\n
\u201cAs we see it, Australia is also less well placed to deal with this \u2018stagflationary\u2019 (or negative supply) shock than many other countries, because even before the global energy shock has arrived, inflation is already too high,\u201d he wrote in a note to clients.<\/p>\n
\u201cAustralia faces a stagflationary shock, and we expect that outright stagflation is a rising risk. The aim for policymakers ought to be to keep it brief.\u201d<\/p>\n
A separate budget note from e61 chief executive Michael Brennan said Australia\u2019s fiscal position was \u201cincreasingly uncomfortable\u201d and there was \u201ca clear sense that our future options are rapidly narrowing\u201d.<\/p>\n
\u201cThe Federal Government faces twin dilemmas: high inflation, but an increasingly shaky outlook for growth; and near-term revenue gains, but intensifying public pressure for cost-of-living relief,\u201d the non-partisan economic think tank concluded.<\/p>\n
Opposition Leader Angus Taylor said the solution had to be cutting government spending.<\/p>\n
\u201c(Stagflation) has been made inevitable by almost four years now of failed policies,\u201d he said.<\/p>\n
\u201cWe need to see a budget that turns that around, a budget that restores Australians\u2019 standard of living, that protects our way of life, and is honest and transparent.\u201d<\/p>\n
The big pieces of the budgetary puzzle are starting to fall into place, including the $53 billion boost to defence that Richard Marles announced last week, and a major cut to the NDIS.<\/p>\n
Dr Chalmers will be in Perth on Tuesday for meetings with business and State government representatives.<\/p>\n
He\u2019ll be talking about the $1000 instant tax deduction \u2013 promised in the election but now with legislation unveiled \u2013 that will benefit nearly 750,000 West Australians, saying the government values the State\u2019s workers and businesses.<\/p>\n
\u201cWestern Australia makes a big contribution and that\u2019s why it\u2019s a big focus of our budget and our economic plan\u2026 We\u2019re backing them with tax cuts, tax incentives and the $1000 instant tax deduction,\u201d he told The West.<\/p>\n
Dr Chalmers and Health Minister Mark Butler will detail the NDIS plan to State and Territory counterparts on Tuesday afternoon before Mr Butler unveils it publicly at the National Press Club on Wednesday.<\/p>\n
The disability insurance scheme has blown out massively from Labor\u2019s original vision, to the point where Dr Chalmers said that it was \u201cgrowing too fast for Australians to afford\u201d.<\/p>\n
The Government has more than halved the growth rate from the 22 per cent it was at in 2022, but wants to claw it back further to 5-6 per cent.<\/p>\n
It would still be one of the fastest-growing programs in the budget.<\/p>\n
\u201cOur highest priority in the NDIS is providing a high standard of support and care, and that means we need to be able to pay for it,\u201d Dr Chalmers said.<\/p>\n
\u201cThis has been a really big part of our pre-budget deliberations. It is easily the most important part of the savings package that we will present on budget night.\u201d<\/p>\n
The Coalition has said it will work with the Government to contain NDIS growth and make sure the scheme is sustainable for the long-term \u2014 a position leader Angus Taylor reiterated on Monday.<\/p>\n
But the Greens declared it a \u201cmoral failing\u201d that the Government was looking to cut the NDIS but not hiking taxes on gas exports.<\/p>\n
\u201cI think most Australians will be revolted that this Government would rather let the gas giants get away with mega profits and make savings off the back of disabled Australians,\u201d the minor party\u2019s leader Larissa Waters said.<\/p>\n
The Greens are leading a new inquiry into gas taxes, due to report a few days before the Budget, and want to see a 25 per cent tax imposed on exports.<\/p>\n
Multiple ministers have confirmed there have been discussions internally about options for potential taxes.<\/p>\n
Former WA minister Bill Johnston has told the inquiry any move that cut Australian gas exports would be playing into the hands of Russian leader Vladimir Putin, and that it was a \u201ccolonial attitude\u201d to argue that Asian countries couldn\u2019t choose their own pathway to net zero.<\/p>\n
Resources Minister Madeleine King has also been publicly mounting arguments against such a move.<\/p>\n
Her Cabinet colleague, Industry Minister Tim Ayres, declined to give his view on Monday.<\/p>\n
\u201cThe best thing to do is for us to work on those issues carefully with the industry and make announcements when the time is right,\u201d he said.<\/p>\n
Cabinet\u2019s expenditure review committee is also considering options to reshape the capital gains tax discount and negative gearing, as part of a focus on intergenerational fairness.<\/p>\n
That includes the potential to reset the system to where it was before John Howard\u2019s changes in 1999, meaning property investors would only be able to get a tax break equal with inflation changes when they sold up.<\/p>\n
Dr Chalmers said everyone would have to wait until Budget night on May 12 to see where this landed.<\/p>\n
\u201cWe have been really upfront for some time now in saying that we do think that there is intergenerational unfairness in the tax system and in the housing market \u2014 I think the housing market is where some of those intergenerational issues are most obvious,\u201d he said.<\/p>\n
\u201cWe are working through a range of options to see if we can deal with them or address them in a responsible way.\u201d<\/p>\n
Mr Taylor said he\u2019d heard \u201cabout three thought bubbles a day on what the Government might do on housing\u201d and called for lower migration and a boost to supply to tackle the problem.<\/p>\n
The Finance Brokers Association of Australia argued the capital gains tax and negative gearing changes would discourage investors and push up rents.<\/p>\n
\u201cWhile I commend the Government for wanting to open up more housing, these changes will disadvantage the very people it seeks to help \u2014 younger Australians, as well as many other people on lower incomes,\u201d interim chief executive Peter White said.<\/p>\n","protected":false},"excerpt":{"rendered":"Australia\u2019s economy is being held hostage to \u201cdecisions taken in Washington and Tehran\u201d, Jim Chalmers has lamented as…\n","protected":false},"author":2,"featured_media":619746,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,164,2322,84],"class_list":{"0":"post-619745","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-au","9":"tag-australia","10":"tag-business","11":"tag-economy","12":"tag-federal-politics","13":"tag-politics"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/619745","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=619745"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/619745\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/619746"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=619745"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=619745"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=619745"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}