Jim Chalmers has vowed to crash through a “scare campaigns of lies” as Labor prepares to break its promises to keep investor tax breaks and the treasurer stakes his credibility on a suite of measures to drive up living standards after years of low growth and rising populism.
This masthead can reveal Labor is plotting a major housing supply package, including potential new incentives to states, to combine with tax hikes to tilt the balance in favour of first homebuyers in its “reform and resilience” budget.
Prime Minister Anthony Albanese is betting that next week’s budget will win the support of financially stressed Australians and outweigh the political baggage of ditching his repeated election pledge not to touch negative gearing.
Promising at a time of anxiety over migration to overhaul the skilled program to bring in workers “we want”, Chalmers announced measures on productivity he said would bolster GDP growth by $13 billion per year. Productivity, which has slowed since 2010 and has not improved under four years of Labor, has been blamed by the RBA as a factor in its decision to lift interest rates.
Chalmers and Finance Minister Katy Gallagher on Friday revealed $64 billion worth of savings in the budget, mostly from the NDIS and redirected defence spending, as it scrambles to reduce inflation and deficits after years of near-record spending.
The treasurer told this masthead that his reforms “give us the best chance in a generation to shift the needle” on boosting the nation’s wealth, as he braces for arguably Labor’s biggest policy fight to date on overhauling negative gearing, capital gains tax and trusts.
“We know that that will invite the usual scare campaigns of lies,” Chalmers said from his office in Parliament House, recalling the 2019 election when Bill Shorten proposed similar policies. “We’re not deterred by that.”
The government says its first budget of its second term, after it won a decisive majority, will not be a cash splash. Ministers are refusing to reveal the amount by which the budget’s deficit will be reduced.
Economist Chris Richardson said the more important test was whether the government’s spending and saving decisions took money out of the economy, after RBA boss Michele Bullock earlier this week warned against handouts.
With years to go until the next election and the opposition leaking support to One Nation, Chalmers is pitching this moment as Labor’s big chance to make tough calls. He warned that Labor could run out of time if it did not make large changes to the economy.
Labor has also started bleeding some support to the populist right. Albanese has told colleagues of the potential for both the Greens and One Nation to surge if housing remains unaffordable and pessimism about the country and the world remains entrenched.
“I’m an impatient person, and I try and do as much as we can as soon as we can, recognising that, in one way or another, the clock ticks on every government,” Chalmers said.
“The degree of difficulty is the highest as well. It’s not the same budget in every sense that we would have handed down in February, but I think the thing that might surprise people, is how much we still intend to get done despite the disruption and distraction coming from the Middle East.”
“What we’re trying to do here is accelerate reform, not just absorb the shock. It’s kind of two budgets in one in that regard.”
The 48-year-old is handing down his fifth budget amid a second inflation outbreak since Labor assumed power. The Queenslander, widely regarded as a prime ministerial aspirant, shed 17kg over summer and went for a pre-6am run in front of cameras in Canberra on Friday to signal action and ambition.
Shadow treasurer Tim Wilson said his counterpart was “cooking the budget books and his excuses to hide his inflation addiction doesn’t wash by claiming new taxes as ‘saves’“.
“The treasurer has previously boasted $114 billion in savings, and then gone on to spend another $223 billion in the next breath.”
Chalmers said he had put effort into a suite of policies to increase productivity with the aim of encouraging the economy to grow more quickly and lift workers’ incomes without adding to inflation. The Productivity Commission has called for red tape costs to be reduced by $10 billion per year; Chalmers says his measures will cut costs by $10.2 billion.
One part of the package is a change to Australia’s skilled migration program. Former treasury secretary Martin Parkinson conducted a review of the migration system for Labor in 2023, concluding that the mechanism to select skilled migrants was inadequate and that about half the skilled migrants in the country were not making use of their qualifications.
Labor is proposing changes to cut by six months the time taken for migrant tradespeople to enter the workforce, as the government strives for far more homes to be built in Australia. Also, the government will tinker with the migration points system to select more highly educated, younger people.
The points system was OK but flawed, Chalmers said.
“We think it’s a substantial lever to get who we want in the industries that we want,” he said. “It’s about making sure that our migration system works in our national interest and especially our national economic interest.”
As this masthead revealed last year, tradies including builders, plumbers and electricians, often face fees of up to $1600 to access mandatory Australian standards on everything from solar panel installation to electrical wiring.
These standards will now be free to construction, occupational health and safety and product safety firms.
Small businesses will have access to a permanent $20,000 a year instant asset write-off. The Coalition had gone to the last election promising to make this $30,000.
Also among the proposed reforms is the harmonisation of state and territory retail tenancy regulations, the standardisation of certain product standards including agricultural and veterinary chemicals and $655 million will be spent on expanding the Digital ID to reduce the need to share and store personal data by businesses.
Paul Sakkal is Chief Political Correspondent. He previously covered Victorian politics and won a Walkley award and the 2025 Press Gallery Journalist of the Year. Contact him securely on Signal @paulsakkal.14.Connect via X or email.
Shane Wright is a senior economics correspondent for The Sydney Morning Herald and The Age.Connect via X or email.