Chalmers delivers Labor’s ambitious spending plan amid global economic pressure

Melbourne, May 13: Treasurer Jim Chalmers has handed down the 2026 Federal Budget, describing it as “the most important and ambitious budget in decades” as Australia navigates global economic uncertainty, rising living costs and geopolitical instability.

Speaking in Parliament on Tuesday night, Chalmers said the budget represented “five budgets in one”, with a strong focus on cost-of-living relief, tax reform, housing, productivity and budget sustainability.

The centrepiece of the budget is a package aimed at easing pressure on households, including tax relief for workers and a $250 cost-of-living offset. The government also announced major measures to strengthen fuel security and economic resilience amid global energy disruptions.

Framed partly by instability linked to conflict in the Middle East, the budget allocates $7.5 billion to secure foreign fuel supply chains and a further $3.2 billion to increase Australia’s fuel reserves. An additional $1 billion in interest-free loans will be provided to manufacturers and logistics firms facing rising operational costs.

Chalmers said the government had not delayed long-term reforms despite global shocks.

“One of the things we’re proudest of in this budget is that we haven’t used developments in the Middle East as a reason to delay necessary long-term reforms,” he said.

A major and controversial shift in housing and tax policy has drawn significant attention. Despite previously ruling out changes to negative gearing and capital gains tax before the last election, the government has now moved to restrict these concessions as part of a broader housing strategy.

From 1 July 2027, the 50 per cent capital gains tax (CGT) discount will be replaced with a system linked to inflation, alongside a minimum 30 per cent tax rate on gains. Negative gearing will be restricted to new-build properties only.

The government argues the changes are designed to improve housing affordability and reduce pressure on first-home buyers. Chalmers said rising house prices have far outpaced wages, making home ownership increasingly difficult for younger Australians.

“Since 1999, house prices have risen over 400 per cent, more than twice as fast as incomes,” he said.

He acknowledged the policy shift carried political risk but defended it as necessary.

“I acknowledge this is a controversial change… but when government comes to a different view for the right reasons, it has a duty to explain why,” he said.

The budget also includes a broad productivity agenda aimed at reducing regulatory burden across multiple sectors. Measures include streamlined housing approvals, simplified payroll systems, reduced tariffs, and expanded support for startups and venture capital.

A $20,000 instant asset write-off for small businesses has been introduced, along with a permanent two-year loss carry-back scheme for companies with turnover up to $1 billion from 1 July.

The government estimates these reforms will reduce compliance costs by $10.2 billion annually and increase GDP by around $13 billion.

Chalmers also highlighted significant savings measures, stating the budget delivers $63.8 billion in net savings and reprioritisation. He said reforms to the National Disability Insurance Scheme (NDIS) would save $37.8 billion over the forward estimates while ensuring the scheme’s long-term sustainability.

Despite long-standing concerns about inflation, Chalmers insisted spending discipline was improving the budget position, which is now $44.9 billion better than the mid-year update.

National security spending also features prominently, with an additional $53 billion allocated over the next decade to strengthen Australia’s defence capabilities. A further $600 million will fund a new Counter-Terrorism Online Centre, along with programs supporting affected communities and combating extremism.

Opposition economic spokesperson Tim Wilson criticised the budget, calling it “a budget of broken promises, higher taxes, lower living standards and fewer homes”.

He argued the plan would weaken economic opportunity and increase debt, accusing Labor of prioritising short-term spending over long-term growth.

Opposition Treasury spokesperson Angus Taylor is expected to deliver the formal budget reply on Thursday, setting up a major political showdown over the government’s economic direction.