By his own assessment, Jim Chalmers’ fifth federal budget is the most important and most ambitious from an Australian government in decades.
Buffeted by the global energy shock, the treasurer describes Tuesday night’s spending package as five budgets in one.
The plan, he says, improves resilience against international shocks; helps with cost-of-living pressures; delivers badly overdue tax reform; boosts productivity and gets right the balance between savings and new spending.
But – for all its virtue – Labor’s moves to rebalance the country’s intergenerational compact might take too long for young Australians locked out of the housing market. Worse, efforts to ride the waves of disruption emanating from the war in Iran could easily come unstuck if Donald Trump makes the crisis worse, a scenario that sees unemployment rising and inflation approaching Covid-era levels – potentially taking the country back to the brink of recession.
Sign up for the Breaking News Australia emailFirst, credit where it’s due. Not since John Howard and Peter Costello introduced the GST back in 1999 has Australia’s sclerotic tax system undergone such significant changes. Reforms to negative gearing and the capital gains tax discount, which so badly hurt Labor at two elections, now look like a fait accompli for the government.
Governments of all stripes dream of improving the tax system, and most squib it as soon as the politics get sticky. Chalmers, ambitious for his own future, has been determined not to miss his reform moment more than four years into government.
Labor will also save billions by reining in generous trust rules for high-income earners, while applying the tough reform medicine needed for the national disability insurance scheme. With the scheme on track to eclipse defence and social spending, that change, as Chalmers says, is about “saving the NDIS from itself”.
It’s a shame this budget sees Labor breaking major election promises made by Anthony Albanese little more than a year ago. The government’s hollow words ruling out changes affecting property investors should be the final death knell for campaign commitments delivered before voters go to the polls.
But if housing is the underlying political problem leaving many younger people feeling forgotten by the system, changes worth just 2% from the average property price might not move the needle. Saving about $19,000, on Treasury’s own estimates, likely won’t stop an erosion in faith from those feeling mugged by the herculean task of saving for a deposit. Efforts to boost housing supply, including Labor’s challenging promise of 1.2m new homes by the end of the decade, will be even more important.
In the medium and longer term, Labor faces similar challenges to the Coalition from the raging bushfire of rightwing populism in Australia. Slow and methodical improvements on intergenerational inequity and the economic outlook of the average household might not do enough to stop an exodus in public support from the major parties.
Chalmers told parliament and the nation on Tuesday night that the government was choosing “the hard road of reform, not the path of least resistance” in its latest budget. He said responding to the pressures Australians are confronting today should go further and faster because of the unpredictable geopolitical outlook, promising to live up to responsibilities for generations to come.
Apart from when they fail badly, most federal budgets are quickly forgotten. Being remembered for the reasons the government wants will be the big challenge of Tuesday night.
Tom McIlroy is Guardian Australia’s political editor
