Tuesday’s federal budget will reveal a $45bn improvement in the commonwealth’s bottom line over this and the next three financial years, as Jim Chalmers promises “spending restraint” at a time of high and rising inflation.
The improvement in the forecast bottom line comes as Anthony Albanese defended expected reforms to negative gearing and capital gains tax, casting the budget’s focus on intergenerational fairness as a salve against rising populist anti-establishment politics sweeping the western world.
While the nation’s finances are expected to remain in the red, the treasurer flagged a combined $44.9bn in smaller deficits over the four-year forward estimates period, compared with the December update.
The budget will show that policy decisions taken since the midyear economic and fiscal outlook have contributed to the fiscal improvement, and that the government had not spent the windfall tax gains driven, in part, by soaring commodity prices triggered by the US-Israel war on Iran.
“We’ve delivered a big improvement in the budget bottom line since we were elected and another improvement since the last update in December,” Chalmers said.
“What’s driving this improvement in the budget are the savings we’ve found and the spending restraint we’ve shown and you’ll see that [in the budget].”
The government has already announced that changes to the NDIS will save the budget an estimated $37bn over four years.
If achieved, it will be one of the largest savings from a single policy decision this century, according to the e61 Institute.
Other pre-announced policy changes, including trimming investor tax concessions, winding back health insurance rebates for older Australians, and scaling back the electric car discount, will bring the total savings to “well over” $50bn, predicted e61 economists Lachlan Vass and Jack Buckley.
Sign up for the Breaking News Australia emailAfter last week’s interest rate rise, Michele Bullock, the Reserve Bank governor, warned extra government spending risked adding to inflationary pressures.
The government claimed real, or after inflation, growth in total government payments will average 1.5% in the eight years to 2029-30, although this included the huge drop-off in spending after the pandemic.
Real payments growth will average an estimated 5% in this and the last financial year, according to the mid-year budget update.
Albanese said Tuesday would feature “a very wide-ranging budget”, which would have a focus on housing, productivity and fuel security.
After One Nation’s historic victory at the Farrer byelection on the weekend, the prime minister on 4CA radio said “we see what happens when people don’t think they have a shot at a fair go”.
Amid accusations of breaking a promise not to touch tax rules for landlords, Albanese said “the dream of home ownership is disappearing for a generation of Australians, and we can’t afford to just sit back and watch that happen”.
“That’s the Australian principle and value that we have, and I don’t want to see that disappear.”
The shadow treasurer, Tim Wilson, accused the government of “a series of broken promises” after Albanese had flatly ruled out making changes to negative gearing during the 2025 election campaign.
Wilson said he feared young people looking to enter the housing market today would be deprived of the opportunities for wealth creation enjoyed by older generations, who received generous tax breaks on property investments and assets.
“The Australian people have woken up to the new taxes on the self-starters of this nation,” he told a news conference. “So, in the coming days, the government is going to have to be full and transparent about the deceit and betrayal they have put forward.
“The reality is that this is exactly the opposite of what the treasurer has been saying. He’s been going out and saying this is going to be a budget for young Australians. Now he’s locking in the benefits for one generation and harming young Australians.”
