Chalmers vows to avoid inflationary ‘big cash splash’, flags fight over property tax breaks

Treasurer Jim Chalmers has promised next week’s Federal Budget will avoid a “big cash splash” that could stoke inflation, while signaling Labor is prepared for a political fight over tax breaks for property investors. “The Budget can’t afford a big cash splash — there are good economic and fiscal reasons why that’s not a good idea in the near term,” Dr Chalmers told reporters in Canberra on Friday.

He said cost‑of‑living relief would feature, highlighting a fuel tax cut he said would cost “almost $3 billion.” Finance Minister Katy Gallagher said on Friday the Budget would include $64 billion in “savings and re‑prioritisations” across government programs.

The figure does not include tax increases, and neither she nor Dr Chalmers detailed the net savings once spending shifts are accounted for. Dr Chalmers described it as an “historically large gross savings figure” and said it was “exceedingly rare” for a government to deliver two Budget updates in a row with a net save.

The temporary three‑month halving of fuel excise introduced during the Middle East oil crisis — at a cost of $2.55 billion — is scheduled to expire at the end of June. The measure has been cutting 26.3 cents a litre from pump prices.

While this policy was copied from the Coalition, Labor now faces a fresh political contest over its plan to dilute the 50 per cent capital gains tax concession and restrict negative gearing for investor landlords making rental losses. Prime Minister Anthony Albanese, while in Opposition, had pledged to leave property investor tax breaks untouched after Labor lost two elections over similar policies.

But ahead of Tuesday night’s Budget, Dr Chalmers said the government had changed its mind and wanted to focus on helping more young owner‑occupiers into the market, noting it had already fast‑tracked the 5 per cent mortgage deposit scheme for first‑home buyers.

“When governments come to a different view on any issue, then the responsibility of the government is to explain why,” he said, adding the government would “front up and explain” any changes on “those important matters.” With One Nation now outpolling the Coalition in multiple opinion polls, Dr Chalmers also pointed to a sharp slowdown in net overseas migration after a record surge during Labor’s first term.

Net overseas migration was 548,800 in the year to September 2023, but he said the pace had slowed to 311,000 — about 45 per cent below the peak. When the Coalition lost office in May 2022, net overseas migration had rebounded to 109,600 in the year to March 2022 after Australia was largely closed to immigration during the pandemic in 2020 and 2021.

Even so, the current pace above 300,000, based on the latest quarterly Australian Bureau of Statistics data, remains higher than Treasury’s forecast of 260,000 for 2025‑26. The Budget, due Tuesday night, will set the tone for cost‑of‑living relief and housing policy while testing Labor’s appetite for a confrontation over property tax settings.

The government says it will explain any changes it pursues and argues its approach balances relief with fiscal restraint.