Treasurer Jim Chalmers has declared “no other budget in the 2000s has set out this much responsible budget repair and this much economic reform.”
Despite his claims, Tuesday night’s budget remains highly contentious – especially Labor abandoning its election commitments not to change capital gains tax discount and negative gearing.
The treasurer joined us on the podcast to explain and defend his fifth budget.
Expanding on his budget night statement about wanting to “rebalance a system which is more generous to assets than it is to labour”, Chalmers said he had deliberately created “new architecture” to give more options for providing future tax cuts.
The intention there is to give future governments the option to provide tax relief the usual way […] cutting rates and thresholds. Or cutting taxes specifically for workers via this new architecture, the [$250] Working Australians Tax Offset.
[…] I think I’ve demonstrated an enthusiasm to return bracket creep and cut income taxes where we can afford to do that. And this will provide another way in the future that governments can do that if they wish.
[…] Well, certainly we are in the cart for more tax relief when the budget can carry that, when the budget can afford that. We’ve made that really clear. Even in some of the budget documents we made it clear that one of the benefits of getting the medium-term fiscal position in much better condition is that it will provide room down the track for more tax relief.
‘Downward pressure on rents’
Asked about budget forecasts that the new housing tax changes will lead to a small rise in rent and a projected reduction in the number of new houses, Chalmers said the whole budget told a different story.
Some of those model outcomes that you’re referring to refer very specifically to and narrowly to the tax changes, and not the housing package in its entirety. And so once you look at the all of the housing policies in the budget that we released, we expect there to be about 30,000 additional homes. And when you’re building 30,000 additional homes, you will put downward pressure on rents.
In addition to that, there’s a lot of national competition policy and other policy that we’re doing with the states, which is about speeding up approvals and having more land release. So that could mean tens of thousands more homes as well. So all told, the budget in its entirety has a positive impact on housing supply.
Read more: Politics with Michelle Grattan: Tim Wilson on the budget’s hidden hits on young Australians
Ongoing shocks from the Middle East
On the war in the Middle East, Chalmers said it still keeps him up at night.
I still lose a lot of sleep over developments in the Middle East is the truth of it. And that’s because, you know, we have no say in when the war will end or how long the consequences will linger for.
[…] I am extremely worried about it. The consequences in our economy from the war in the Middle East are already serious, and they still risk becoming severe.
Read more: At a glance: budget 2026
‘Paying a price’ for broken election promises
Chalmers acknowledged the government will pay a political price for breaking its pre-election pledges not to change negative gearing and capital gains tax. But he said he stands by the housing tax choices the government has just made.
The comments and commitments that we made at the election genuinely reflected the policy that we had, the overwhelming focus on [housing] supply. Now, the big choice that we have to make in the budget […] is the choice between doing something easier, which would have been to leave it untouched – but something which became increasingly clear to us wasn’t the right way to go. Because the longer we left it, the more people would be locked out of the market.
We didn’t want to leave to some future generation to fix this problem, which is intensifying. And so we took a decision which is hard in political terms. We will pay a price for it in political terms, I think. But what matters more than that is to get the substance of it right.
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