The Albanese government's first federal budget will include a significant rewriting of official budget guidelines and will also see forecasts for unemployment revised as a "consequence" of a deteriorating global outlook, the treasurer has flagged.
Speaking with 7.30 at the conclusion of the last parliamentary sitting before the budget in October, Treasurer Jim Chalmers said the new budget rules would be "realistic" and "achievable".
The budget rules, or fiscal strategy, sets out guiding principles and targets, including reducing debt, "controlling" growth in spending, keeping a lid on tax and making "productivity-enhancing" investments.
Governments are required by law to outline their official fiscal strategy in each budget cycle.
One of the most rigid elements of the strategy inherited from the Coalition — a strict cap on total tax receipts of 23.9 per cent of gross domestic product — is likely to be maintained, despite Dr Chalmers repeatedly calling the number arbitrary.
"There's no reason to change that tax cap that our predecessors had," Dr Chalmers said.
"We don't currently expect to hit it, on the numbers currently before me."
But the treasurer said he still thought the number had been "more or less plucked out of the air by our predecessors", noting that he had the "courage" to criticise the cap even during the election campaign.
Tax receipts have been inching close to the cap in recent years.
The final budget outcome for the last financial year, released this week, showed actual tax receipts were 23.4 per cent of GDP in 2021-22. It was forecast to hit 23.8 per cent in the current financial year in the Morrison government's final Budget.
'Consequences' for unemployment to show up in budget papers
The recent run of historically low and falling unemployment numbers may soon come to an end, with the treasurer warning the updated budget forecasts will show "consequences for unemployment" from what he described as "difficult" circumstances in the global economy.
The OECD this week slashed its forecasts for growth in the global economy from 2.8 to 2.2 per cent in 2023.
For Australia, the downgrade was from 2.5 to 2.0 per cent.
"That will have an impact on our own growth prospects in the domestic economy. And that has consequences for unemployment as well. And I think you'll see that in the forecasts in the budget, which are being finalised as we speak."
Tax cuts to go ahead as planned
The "Stage 3" income tax cuts legislated by the previous Morrison government will go ahead as planned and without modification, the treasurer confirmed.
The cuts will kick in from July 2024 and will abolish an entire bracket from Australia's tax system so everyone earning from $45,000 to $200,000 will pay only 30 cents of every dollar they earn.
The biggest winners from the cuts will be high-income earners.
The International Monetary Fund took the rare step of openly and sharply criticising Britain's new economic policy this week, which is based on large tax cuts. The IMF called the cuts "untargeted" and suggested they were leading to a contradiction between fiscal policy and monetary policy in the UK.
In Australia, Labor has repeatedly said it would keep the legislated cuts to encourage certainty.
Dr Chalmers said there was a "cautionary tale" from the UK about not aligning fiscal and monetary policy, but was not for turning on the tax cuts.
Pressed on whether the government could consider changing them somewhat or targeting them differently — rather than keeping them exactly the same or abandoning them altogether — the treasurer again said the policy would not change.
"My position on the tax cuts hasn't changed," Dr Chalmers said.
"Our policy is as it has been."
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