Treasurer Hints At More Tax Reform in the May Federal Budget

‘How much we can do in May depends on fiscal considerations, international developments and cabinet deliberations,’ said Treasurer Jim Chalmers.

Treasurer Jim Chalmers speaks at Parliament House in Canberra, Australia, on Feb. 9, 2026. Hilary Wardhaugh/Getty Images

Australians can expect more tax reform in the upcoming federal budget.

This is the comment of Treasurer Jim Chalmers at an event held by the Australian Business Economists on March 19.

“We are working on more tax reform in the budget–how much we can do in May depends on fiscal considerations, international developments and cabinet deliberations,” he said.

Chalmers noted that the reform would be guided by “clear principles.”

“Firstly, we recognise an outdated tax system is weighing on the opportunities faced by younger Australians and future generations. So any changes would have a substantial focus on our intergenerational responsibilities,” he said.

“Second, we are focused on better incentivising productive business investment, if we can afford to. And third, making the system simpler and more sustainable.”

While Jim Chalmers did not specify which tax changes he had in mind, options flagged in recent months include reducing capital gains tax discounts or capping negative gearing at two properties per investor.

Both measures are seen as potential ways to boost government revenue and ease housing pressures by curbing investor demand.

Weaker GDP Forecasts

Chalmers also revealed concerning news about Australia’s economic growth, saying the forecast had been downgraded by between 0.25 and 0.5 percentage points.

“GDP is now likely to be a quarter to half a percentage point weaker in the middle years of the forward estimates,” he said. 

“A small change in a forecast, but it tells a bigger story. Not primarily a demand story, but a supply one. A story which brings together the combined challenges of inflation in the near term, productivity in the medium term, and global uncertainty all around us.”

The productivity outlook is also bleak, with the treasurer admitting it will take longer than expected for productivity to return to the previous trend.

“While Treasury will retain its long-term productivity assumption in this Budget, it will make some near-term adjustments,” Chalmers said. 

“Previously, it expected productivity to return to trend within two years. Now it expects that convergence to take closer to five, in line with other key long-run assumptions.”

Middle East Conflict’s Impact on Budget

Chalmers said the Middle East conflict would have a “defining influence” on the May budget.

He noted the oil price had risen 80 percent since January, with disruptions in the Hormuz Strait driving up fuel and fertiliser prices.

“This is adding upward pressure to global inflation, interest rate expectations and bond yields, while international equity markets and sentiment more broadly have fallen,” Chalmers said.

The Treasury has modelled the economic impact of the Iran conflict under multiple scenarios.

In a short-term scenario, oil stays at US$100 per barrel (A$141) for the first half of 2026 before returning to pre-war levels by year’s end.

In a more prolonged scenario, prices could hit US$120 per barrel in the first half of 2026 and take three years to normalise.

In both cases, Australia will see slower GDP growth and higher inflation.

“Treasury’s latest advice is the war could cut GDP growth by up to 0.2 percentage points across our major trading partners,” Chalmers said.

“In a more drastic scenario, GDP would be 0.6 percent lower in 2027 and still below pre-war levels in 2029.”

An Economic Admission of Failure: Opposition

Meanwhile, Opposition Leader Angus Taylor said Chalmers had admitted what Australians already knew.

“Living standards are going backwards and he has no plan to fix it,” he told The Epoch Times.

“What we heard wasn’t an economic vision, it was an economic admission of failure." 

Taylor’s comment was echoed by Opposition Deputy Leader Jane Hume, who stated that the Labor government was no longer even pretending it had a plan to lift productivity.

“Nine months on from a much-hyped productivity roundtable, all Australians have been given is lower expectations and no meaningful reform,” she said.