Budget week dust-up: Chalmers readies Tuesday plan as NDIS savings and tax shifts draw scrutiny

Treasurer Jim Chalmers will deliver the budget on Tuesday, with the government battling to shape the narrative as political and economic squalls converge. A Middle East war, a fuel crisis, another interest rate rise, demands for more cost‑of‑living relief alongside warnings about high spending, and accusations of prime ministerial lying have combined to test the government’s control over its fifth budget.

Some of the headline measures have already been flagged, including reform of the National Disability Insurance Scheme and a fuel security plan. The NDIS overhaul is billed as the major saving in the budget, worth $22 billion. That figure relies on trimming the scheme’s annual spending growth from about 10 per cent to an average 2 per cent across the next four years — a sharp slowdown given the program’s history.

Several details are still to be settled and consultations are yet to occur, raising the risk that early savings may fall short and leave a gap in the government’s savings package.

Reserve Bank Governor Michele Bullock underscored the fiscal stakes after this week’s rate rise, saying, “when governments are spending a lot of money and we’re running up against capacity constraints, then they do need to think about whether or not there’s ways they can help the inflation problem by looking for ways to constrain demand.” Chalmers, who maintains the budget will save more than it spends, played down the remark as an answer to a hypothetical about whether governments have relied too heavily on central banks to curb inflation.

Bullock also acknowledged the treasurer’s efforts to temper demand, while being mindful of how her comments on spending would reverberate. On tax, the government went to the 2025 election promising income tax cuts and some changes to superannuation tax treatment, but not much else.

After the post‑election economic roundtable, it became clear Chalmers would push to include significant tax changes in this budget. The question was whether Prime Minister Anthony Albanese would agree. From what is known so far, the answer appears to be yes, with anticipated reworking of capital gains tax and negative gearing, and possibly tighter rules on trusts.

That stance carries political costs: before the election Albanese promised not to tinker with negative gearing or CGT, and he responded testily when pressed this week about potentially breaking his word.

With Labor holding a large majority and the opposition in disarray, the government is likely to judge it can proceed if it can frame a budget with more winners than losers and make a case for intergenerational equity — a point that is already contested. To assist that pitch, the budget will promise a modest one‑off payment for taxpayers in work.

While the initial spin will dominate Tuesday night, the more consequential task is whether the budget settings are calibrated for volatile times — a judgment that will come only in hindsight.