Fresh from handing down Australia’s most ambitious federal budget in recent memory, Treasurer Jim Chalmers has opened up about how escalating conflict in Iran upended months of policy planning, forced major adjustments to long-planned tax changes, and forced the government to accelerate reform efforts amid global economic uncertainty. In his traditional post-budget address to Canberra’s National Press Club this week, Chalmers revealed that while the Albanese government had reached a broad agreement to pursue sweeping tax reform over the 2023-2024 summer, final decisions on contentious changes to capital gains tax (CGT), negative gearing and trust taxation were only locked in after the outbreak of hostilities in Iran.
The Iran conflict has fundamentally altered the federal government’s medium-term budget forecasts, Chalmers explained. Treasury now operates under the assumption that global Brent crude prices will hold around $US100 a barrel through the end of June 2025 before easing back to $US80 a barrel. This baseline projection means Australia will face stickier inflation, weakened household consumption, and slower overall economic growth than officials predicted just six months ago.
Far from pausing ambitious policy changes to wait out global volatility, however, Chalmers said the upheaval reinforced the government’s commitment to pushing ahead with structural reform. “If you wait for perfect stability to reform, you’ll be waiting forever,” he told attendees. “This global turbulence is no excuse to roll up into a little ball and hope that it passes quickly. If anything, it’s a reason to do more on resilience and more on reform, more urgently. And that’s the attitude that we adopted here in the budget.” While Chalmers acknowledged that a number of progressive policy proposals had been delayed by the unpredictable external environment, he confirmed that the core of the government’s reform agenda remained fully intact, centered on advancing intergenerational fairness through a rebalanced tax system.
Turning to the domestic political context of the budget, Chalmers positioned the Australian Labor Party as the last bulwark of sensible centrist politics in the country, amid a global rise in far-right populism. He pointed to recent gains by right-wing populist forces, from Nigel Farage’s Reform UK in the United Kingdom to One Nation’s historic by-election win in the regional New South Wales seat of Farrer at the weekend – which ended 77 years of continuous Liberal Party control of the electorate. “We are the last ones standing in the sensible centre of Australian politics but we aren’t standing still,” Chalmers argued. “Standing still would make us the reluctant defenders of a status quo that doesn’t work. We stand for real change that makes a real difference.” One Nation leader Pauline Hanson has longstanding close political ties to Farage, making the string of recent far-right gains a point of explicit focus for the government’s political framing.
The centerpiece of the government’s tax reform package is a set of sweeping changes to Australia’s housing investment tax concessions that break a key 2022 federal election promise made by Prime Minister Anthony Albanese. Ahead of last year’s election campaign, Albanese explicitly pledged that a Labor government would not alter existing CGT or negative gearing settings. The new budget reverses that commitment: it will scrap the 50 per cent CGT discount introduced by the Howard-era Coalition government in 1999, replacing it with an indexation-based system, while limiting negative gearing tax deductions exclusively to newly constructed residential properties.
Chalmers acknowledged the shift in the government’s position, admitting that it was “not unfair for people to point out that the position we put last night in the budget is different to the position that we held and expressed 12 months ago.” He added that the government always expected the decision to spark political controversy, but framed the changes as a necessary correction to longstanding market distortions. The 1999 CGT discount, he argued, had skewed investment incentives across the Australian housing market, driving up prices for aspiring home owners and favoring wealthy property investors over first-time buyers. The government has designed the reforms to minimize near-term market disruption, Chalmers said, taking into account the millions of Australian investors who made long-term financial decisions under the previous concession regime. This broken campaign promise marks the second major reversal for the Albanese government, after its 2024 decision to roll back the former Coalition government’s stage 3 income tax cuts.
On defence policy, Chalmers defended the growing cost of the trilateral AUKUS nuclear submarine pact with the United States and the United Kingdom, as new budget figures revealed rising near-term spending on the program. The upcoming 2025-2026 financial year will see $512.5 million allocated to the Australian Submarine Agency, a 33 per cent increase from the previous year’s allocation, while the total projected cost of the nuclear submarine program has risen by an extra $431 million. Over the full 10-year implementation timeline, the total cost of Australia’s undersea warfare program is now projected to reach as high as $130 billion.
Pressed on whether the ballooning cost of AUKUS would force cuts to other critical defence and social programs, Chalmers acknowledged that large-scale defence capability projects always carry inherent risk of cost blowouts, but argued that the investment was non-negotiable amid growing regional security tensions. “Declaring the world a “dangerous place”, he said “I recognise that national security and economic security are effectively the same thing now, and nothing comes cheap in defence if you’re serious about making Australians safer. And I know that there’s been a range of views about that, but from my point of view, big investments in national security make a lot of sense.” The AUKUS pact, which aims to deliver Australia a fleet of eight nuclear-powered submarines – three built in the U.S. to the Virginia-class design, and five jointly designed Australian-built AUKUS-class boats – is the centerpiece of Australia’s 21st century defence strategy, designed to deter Chinese military aggression in the Indo-Pacific.