Treasurer Jim Chalmers is vowing to deliver a federal budget that will bring spending under control, deliver tax reform aimed at younger Australians and businesses, while removing red tape from building new homes and factories.
In his key pre-budget speech, to be delivered in Melbourne to the Australian Business Economists organisation on Thursday, Chalmers will argue his May 12 fiscal blueprint will be built upon three “ambitious reform packages”.
Those packages, covering tax reform, budget repair and boosting productivity, will form part of a supply-side strategy that suggests Chalmers and the government are prepared to use some of the political capital provided by their overwhelming 2025 election victory.
“If the main constraint we are collectively facing is capacity, these packages will help expand it. More savings to make even more room for the private sector to grow, while building fiscal buffers,” he will say.
“Productivity-enhancing reforms to boost supply, generate higher living standards and unlock more investment in the process, to help the economy grow without adding to price pressures.
“And tax reform to drive more productive investment, while supporting budget sustainability and equity, and helping to rebalance the system.”
Government sources have already revealed that tax reform, including changes to capital gains tax, negative gearing and electric vehicle subsidies, are being considered. The expenditure review committee has been holding regular meetings to consider possible reforms.
Chalmers will say that any tax changes will depend on how far the government can improve the budget, international developments and yet-to-be-held cabinet discussions.
He will reveal he is considering tax changes that encourage businesses to lift investment, which would help boost economy-wide productivity, as well as reforms that make the tax system “simpler and more sustainable”.
But in a sign changes to tax concessions that favour older Australians will be targeted, Chalmers will say that the current tax system is outdated and “weighing on the opportunities faced by younger Australians and future generations”.
A “substantial” savings package will be pulled together, with Chalmers to promise the government is prepared to make difficult decisions including in areas where structural spending pressures are growing fastest. This points to further action by the government on the National Disability Insurance Scheme.
In a bid to lift productivity, Chalmers will argue the budget will contain measures aimed at making it easier to build faster, attracting investment and cutting compliance costs.
The budget is being finalised during uncertainty created by the war in Iran and a lift in inflation, which this week resulted in the Reserve Bank increasing official interest rates for a second successive month.
Chalmers will argue that despite the uncertainty, the government had to deliver a reform-minded budget.
“All this economic uncertainty and volatility is a reason for more reform, not less. It’s a reason to go further, not slower,” he will say.
“A supply-side strategy to lift the speed limit of the economy and make it more resilient. To create room in the budget. To expand capacity. And to make our tax system stronger, fairer and more sustainable.”
Shadow treasurer Tim Wilson said while the Coalition was prepared for a conversation around economic reform, the government had already shown it was not prepared to take action against corruption, such as that connected to the CFMEU.
“We know that $15 billion has gone out from public money to organised crime through the CFMEU-Labor cartel,” he told Sky News.
“We know the National Disability Insurance Agency says about 10 per cent of their $50 billion program, or $5 billion, is going towards fraud and corruption.
“And the answer from the government is to turn around and say, let’s increase taxes on Australians, let’s not stop fraud and corruption.”
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Shane Wright is a senior economics correspondent for The Age and The Sydney Morning Herald.Connect via X or email.