Federal Treasurer Jim Chalmers has committed to tax reform in his next budget, but added that no decision has been made on whether capital gains tax will be part of those changes.
Speaking to the ABC’s Alan Kohler in the first episode of his That’s Business podcast, Mr Chalmers said of his upcoming May 12 budget: “There will be tax reform.”
When asked if the change will include a reduction in capital gains tax, a move that has been speculated in the media, Mr. Chalmers said nothing has been decided at this stage.
He replied: “We haven’t decided on that yet.
“There are a number of strategic options that will be put to his colleagues in the coming weeks. Whether that’s one of them or not is yet to be decided.”
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The Treasurer said it was too early in the budget process for major policies to be finalized, and the economic uncertainty caused by the Iran war could mean that such decisions would be made later than usual.
“We wouldn’t have taken those decisions in normal times but, because of this uncertain situation, there is more flexibility later in the process to get some of them,” Mr Chalmers said, adding that major financial decisions would be made in April anyway.
‘A very serious threat to our economy’
The Iran war is unlikely to delay, or even change, major policy decisions, but the treasurer admitted that it makes traditional budgeting processes, such as economic and financial forecasts, very difficult and uncertain.
“What we are really dealing with here is the fifth major economic shock in less than two decades,” Mr Chalmers said.
“This has the potential to significantly disrupt the supply of electricity, for fuel, not just fertilizer, and destabilize our economy.
“So, a very serious threat to our economy.”
When asked if that threat includes the risk of recession (where inflation is too high at the same time as the economy is stagnant or in recession), Mr Chalmers acknowledged the risk of inflation but pushed back fears of a recession, saying the Australian economy has entered a crisis at a critical stage.
“We’ve had the lowest unemployment rate of any government in 50 years. That doesn’t fit that description,” he responded.
“And, when it comes to growth, we ended the year with the fastest economic growth of any major advanced economy.”
While refusing to be swayed by his views on whether the decisions of the US and Israel to launch an attack on Iran were wise, Mr. Chalmers said he was hopeful that the war would end quickly.
“It is clear that the end of the hot part of the conflict will not come soon because we have to fix these supply chains, and the longer it drags on, the more long-term damage there is to an economy like ours.“
Mr Chalmers reiterated that the government is “working with our international partners to ensure we can maintain supply”, but added that the current energy crisis has added another dimension to the economic and environmental arguments for a transition away from fossil fuels.
“Energy transition is a matter of national security,” he argued.
Mr Chalmers says the transition to clean energy will eventually be seen as a major economic and productivity transformation on the scale of the Hawke-Keating governments of the 1980s and early 90s.
“What we are equal to is building an economy driven by clean and cheap energy and making people the beneficiaries, not the victims, of technological change. That’s our mission, that’s our limit.”
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