Budget to have tax, savings and reform packages: Chalmers

Tax reform and spending cuts will be key elements of the May budget, Treasurer Jim Chalmers has revealed while pushing back against claims that government spending is adding to inflationary pressures.

As Chalmers continues to face pressure over the government’s role in last week’s increase in official interest rates and questions over a possible change to capital gains tax, the treasurer on Sunday said his fifth budget due on May 12 would focus on three key areas.

“The budget will be about. We’re working up a productivity package,” he told ABC’s Insiders program.

“There will be a savings package that we’re working on. [And] we’ll consider, whether more steps can be taken on tax reform.

“But overall, it will all be about, lifting the speed limit on the economy, making sure we can grow quicker with lower inflation, attracting investment, dealing with intergenerational issues, and also continuing to get the budget in better shape.”

The opposition and some economists have said the Reserve Bank’s job to control inflation was being hindered by government spending. On Friday, RBA governor Michele Bullock admitted public and private spending was adding to aggregate demand that was growing too fast.

Opposition small business spokesman Tim Wilson said the government was using public spending to hide softness across the economy.

He said it was clear government expenditure was adding to inflation.

“Clearly Jim Chalmers doesn’t understand the contribution of public spending on inflation, and therefore interest rates, he should probably sit down with a textbook,” he told Sky News on Sunday.

This masthead revealed last week that the government is considering a change to the 50 per cent concession on the capital gains tax for assets held for at last a year as part of a broader tax package.

Chalmers refused to be drawn on whether the government would move on the capital gains tax concession which many economists have argued added to house price pressures when it was introduced by the Howard government in 1999.

But he said any tax reform would take into account how the tax system may hurt younger Australians.

“When we consider next steps in tax reform, obviously issues around intergenerational equity are front and centre,” he said.