The Federal Budget handed down this week was described by Treasurer Jim Chalmers as “ambitious in the face of adversity”.
But the government is facing adversity on more fronts than just from the war in the Middle East and closure of the Strait of Hormuz.
So what are the key areas of contention?
The government has broken election commitments with the proposed changes to both the capital gains tax discount and negative gearing and it needs support in the Senate to pass the budget.
However Opposition leader Angus Taylor has vowed to fight Labor’s plans and he’s described the budget as an “assault on aspiration”.
The Greens also sound unimpressed, with leader Senator Larissa Waters saying Labor had backed corporate profits and the wealthiest 1% over the people.
She said the government should have taxed gas exports and its planned changes to negative gearing and CGT weren’t significant reform but “a damp squib”.
Similarly, CommBank economists said scrapping negative gearing and replacing the 50% CGT discount with indexation was “no silver bullet”.
“It is still supply, relative to population growth, that will determine house prices and housing affordability over time,” they said.
The economists said the budget achieved in some areas but struggled to shift the dial in others, pointing out the complete package would deliver long-term budget improvements but there were significant risks, such as the projected NDIS savings which were “highly ambitious and, in our view, are very unlikely to be delivered in full”.
Mining groups have broadly welcomed the budget, although the Association of Mining and Exploration Companies noted CGT changes could impact the way investors allocated their finance in the exploration sector.
AMEC expected investors of exploration projects to be shielded from these changes, under the ‘early stage and start-up businesses’ exemption and said the industry body would seek further clarity during consultation.
AMEC, along with the Chamber of Minerals and Energy WA and Minerals Council of Australia, welcomed the proposed fuel security package and plans to streamline approvals processes.
The CME said speeding up and simplifying approvals was the most important plank of the Federal Government’s productivity agenda.
“We’re at a make-or-break stage with the National Environmental Standards that underpin the EPBC reforms currently being negotiated,” CEO Aaron Morey said.
“If we don’t get those right, the opportunity for a bilateral agreement disintegrates.”
And he said as global energy markets tightened, maintaining operations across the resources sector must be treated as a national priority.
The fuel resilience package centres on a A$10 billion investment in immediate fuel supplies and a permanent Australian Fuel Security Reserve.
The oil price has risen from less than US$60 a barrel at the start of this year to more than $120 in recent weeks amid supply concerns and disruptions.
The budget has assumed oil stays around $100 a barrel until the end of next month then “glides” to $80 by the end of June 2027.
Treasury also presented a more severe scenario where the oil price peaks at $200 and takes three years to fall back down.
“We would still avoid a recession, but unemployment would spike to pre‑pandemic levels and inflation would peak above 7 per cent,” Dr Chalmers said.
More potential adversity in a period of increasing global instability.
