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- [00:01]
A
Australia's long standing housing shortage is making homes unaffordable. This challenge hits young workers and families hard and we're addressing it from every responsible angle.
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B
It was a budget framed around fairness for workers and for young people locked out of the housing market. The Treasurer, Jim Chalmers 5th Budget restricts negative gearing, though not for anyone who was already doing it, while also promising to increase housing supply and delivering a $250 tax cut for workers.
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Speaker, this is the most important and ambitious budget in decades. Important because the world is throwing a lot at us and this budget is about helping Australia deal with those challenges.
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Chalmers wants this budget to be seen as ambitious, but is it? I'm Ruby Jones and you're listening to 7am today press gallery journalist Karen Middleton on what the Treasurer is promising and whether it delivers. It's Wednesday, May 13, So Karen, hello and welcome back to the show.
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C
Thanks, Ruby.
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B
It's 8:30 at night on budget night, which is late, so let's get into it. I thought we could begin with the part of the budget that everyone has been talking about in the days and weeks leading up to tonight. Housing. We know that now that negative gearing will be restricted to new homes as of tonight and capital gains tax concessions are also going to be wound back. So tell me how all of this works.
- [01:38]
C
That's right. So as of budget night tonight, anyone buying a property will only be able to negatively gear it if it's a newly built property, not an established one. Anyone who's already got an established property will be able to continue to negatively gear it in terms of capital gains tax. The 50% capital gains tax discount that exists now is going to be replaced by a return to what was the old system? An inflation based cost assessment system. They'll also have a minimum 30% tax applied. Now people buying new properties will be able to choose which version of the system they access to minimise their tax again to try and boost the sale of new properties. But those with established properties are going to lose that 50% discount.
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A
Now this will help rebalance the system which is more generous to assets than it is to labour, and help rebalance a system where house prices have decoupled from incomes. Since 1999, house prices have risen over 400% more than twice as fast as average incomes. Our tax changes will help about 75,000 Australians achieve the dream of home ownership.
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B
OK, so these changes to negative gearing, as you say, they come into effect now. So if you're buying a house as of tonight, no negative gearing unless it's a brand new property. What that means, though, is that anyone who has already been negative gearing for the past few decades or years, they can just continue to do that for however long their loan goes for. So the intergenerational inequity that exists right now that the government says that it is trying to address, how much does that really change?
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C
Well, that's the question the Government's going to have to answer, and I reckon they'll get that question quite a lot in the next few days, because there'll be people who argue that it's still inequitable. If the people already in the market who've had the advantage and been able to access the housing market and buy investment properties can continue to negatively gear them. Whereas the people who had aspired to do that one day will only be able to do that on new properties now, they will still be able to do that on new properties. But there will be this debate, I think, about whether it goes far enough to addressing the intergenerational inequity issue. The Government argues there was no perfect way to do this and that they had to have a transition arrangement because they couldn't sort of wholeus bolus change the tax system for everyone already in the market. But it's going to raise those kinds of questions and maybe criticisms.
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B
Ok. And this is, of course, something that Anthony Albanese said that he wouldn't do. He went to the last election saying that there would be no changes to negative gearing, because you've got a chance to rule it out now. And I think it's important you rule it out if you don't plan on doing it.
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C
Well, I have no plans to do it. It's not our policy.
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B
His Treasurer has now explicitly done the opposite and a lot is being made of that broken promise. So why is the Albanese government doing this now?
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C
Well, it's fascinating, Ruby, because you're right. They said at the election, emphatically, in fact, the Prime Minister was quite forceful with journalists who were asking him about this, that they were not going to make these changes and they've changed. And they say that things have changed since the election and I think circumstances have changed. But there's going to be a question about whether people accept the reasoning and the argument in favour of breaking the promise. You've got these kind of competing constituencies, you've got the people who say, we want the government to do something. It's got a huge majority, it needs to do something to fix a broken tax system, and those are people who don't want to wait till the next election to have the government come up with an idea and then get it endorsed. They say that's too slow. Those people are putting pressure on the government now to do something. And then you've got the people who quite rightly say this is a broken promise. It's an egregious broken promise. They said they wouldn't do it. I believe them. And this is a breach of trust. And the government is choosing to act on the, on the first lot of people's demands and thinks that it can manage the second lot. And it's interesting because I think because of the size of their majority, that the number of seats they won at the election, a lot of people are telling, you know, focus groups, social researchers, pollsters, that they sort of were surprised by the size of the majority the government got and that it now has the opportunity to do something like a once in a generation thing because of that majority and it should act fast. So in some ways, the old rules or the, the standard rules of don't break a promise get flexibly interpreted even by voters. I think when they decide that there's something that warrants doing something about it right now, and that is what the government is looking to and pointing to in its decision to break the promise and make these changes, I think people
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A
will be most focused on the positive change that we're making in the tax system and in the housing market. It has obviously involved a level of political risk because we've come to a different view and I've said in recent days, and I really mean it. One of the reasons I'm here, taking these characteristically difficult questions from you, Sarah, is because I do understand when you come to a different view, you have to front up and explain why. And that's why I'm doing it.
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B
So is the risk here then, Karen, that no one is happy with this policy, that property investors and the housing lobby don't want the bubble to end, but for young people who are trying to get into the market, that this policy doesn't actually make a meaningful difference to them. So all this political capital is being spent on something that actually doesn't deliver.
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C
That is the risk. You know, it's the old saying about you can't please all the people all the time, but you try to please some of the people some of the time, and the risk is that you upset all of the people all at once. And that's what the government will be hoping that it isn't doing. I guess it depends on how effective its explanation is and how people receive that, whether they decide that this is an important move to fix the system, whether they accept that there has to be a transition which entrenches some of that unfairness for a while, or whether they think it doesn't go far enough and, you know, punish the government accordingly.
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B
Still to come, tax cuts for working Australians. Karen, a central concern of this budget has been how the government can weigh cost of living relief measures against the inflation risk. So given that, can we talk a little about what is in the budget that might help reduce costs for people?
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C
Yeah. So there's been some speculation in the last week or so that there might be some kind of extra tax measure. And we have in fact seen that in the budget tonight. It's called a working Australians tax offset of $250.
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A
This offset is targeted to workers and it represents the most meaningful permanent increase to the effective tax free threshold since labor increased it more than a decade ago.
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C
It doesn't come in until the second half of 2027 and it won't be claimable until the end of that tax year. So really we're talking about an extra measure that people would get in their pockets after probably the next election. So it's a while away. But the other measure that the government's introduced is this $1,000 instant tax deduction and that's aimed at people who are claiming lots of work related expenses in their tax return. It's allowing them to claim up to $1,000 without having to provide receipts. And now, yes, that's going to be pretty welcome to a lot of people for whom doing the tax is a huge headache. If you want to claim more than $1,000, you are going to have to provide receipts. But up to $1,000, you'll be able to claim that instantly. It'll be a faster way to do your tax. So that's going to appeal to a lot of people. I think Treasury's saying that something like 6 million people, working people, are going to benefit from that proposal. That makes tax time a little bit easier. One of the key things the government is emphasising is that all the money that it's saving from the tax measures that it's making is going towards funding other tax measures like the tax cuts that it announced a couple of years ago. So it's talking about a broadly revenue neutral budget and it's trumpeting the fact that it's re employing that money to the benefit of the electorate.
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B
And this budget also cuts the permanent migration intake, which is interesting. So is that an economic decision or a political one?
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C
Well, that's a very interesting question. On face value, it looks to me like a political decision. The government's setting the 2026, 27 permanent migration program planning level at 185,000 places. And most of those, over 70% are going to go to skilled migrants. They're also going to prioritise applications from people who are already onshore. And those that are offered to offshore applicants are going to be targeting high skilled migrants with high levels of education. But there is also an admission in the budget papers that the government's forecast net overseas migration levels have blown out. So they had forecast in the mid year budget update that the 2025, 26 level of net overseas migration would be 260,000. In fact, they're now saying it's going to be 295,000. So that's a blowout of 35,000. They say that's because not as many people are leaving the country as there had been before. But on the whole, there's a new emphasis or an even greater emphasis on skilled migrants, on highly educated migrants and on people already here in Australia. So they're kind of pulling the drawbridge up a little bit on new migrants. And you've got to assume that that's at least in part a response to the sort of political climate we're seeing that delivered Pauline Hanson and her One Nation Party a seat in the electorate of Farah on the weekend. And that is, you know, becoming a big issue around Australia with the connection between the number of migrants since the COVID lockdowns and border closures and the economic pressures people are facing. Whether or not, you know, those connections are fair, that's certainly something that people are feeling. And the government is making a point of emphasising a tightening of the migration system in this budget. And it seems to be looking to those sort of sentiments.
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B
And the big message of this budget, every budget has one is around fairness. Yet the biggest cut has been from disability support, 36 billion from the NDIS. And when it comes to intergenerational inequality, there are these real questions, I think, about whether or not this budget will address that in any meaningful way. So what is your assessment of that messaging and whether the budget actually backs it up?
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C
I think it's. I mean, I think it is certainly moving in that direction. And as we've been saying, there'll be debate about whether it goes far enough. Certainly there are some in the community that will point to what is still being spent on things like The Aukus submarine deal and things that weren't done, like the decision not to tax the gas industry in a more onerous manner and say, well, you know, why are you sort of doing these things and not doing those things? And there are places you could be saving money. But I think they have made some pretty hard decisions here that will probably ultimately be beneficial for the economy and fairer for the economy, but they're going to be hard to manage in the short term. It's interesting, you know, going back to the point we discussed about the feedback they're getting from Australians about the desperation and the desire for them to do something to change the system. You know, I've got a piece in the Monthly this month looking at the levels of anxiety in the community and the sorts of sentiment that is delivering support to Pauline Hanson's One Nation and talked to some pollsters and social researchers about that. And one of the messages that came through there from people, which I thought was really fascinating, was the sentiment that if you've got two houses, the tax system helps you more than if you've got two jobs. And that is the sentiment, really, that we've heard from Jim Chalmers in the delivery of his budget, the press conference that he gave explaining the budget in the lock up to journalists. He was talking very much about that.
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A
This is about better aligning the taxes paid on these types of income with the taxes paid on wages. These changes will level the playing field for workers and first home buyers and support investment in productive assets, including new housing supply. And they will fund our new round of tax relief for more than $13 million Australian workers.
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C
He was saying, we want the tax system to be fairer to people who earn their income through working and not as generous to people who earn their income from passive investments and assets. Because he says, it's out of whack, it's out of balance and it needs to be rebalanced. And that's very much the emphasis. So in that sense, it's a very labour budget. It is really trying to shift that back to be fairer to working people, but it's not going to be without some pain in the short term. And certainly there are some groups that are going to find it very difficult. I mean, there are some changes to the tax for business as well, to try and protect business from the worst of the economic crisis. And there are some pretty dire forecasts in here.
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A
In this budget, treasury also presents a more severe scenario where the oil price peaks at $200 a barrel and takes three years to fall. Back down, we'd still avoid a recession, but unemployment would spike to pre pandemic levels and inflation would peak above 7%.
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C
And so, you know, there's a lot of sort of uncertainty about all of this. And the government has taken a big risk, a big political risk in making these changes in this tough budget at this time. But they've decided they've got the political capital they need to spend it and that Australians are calling out for something to change.
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B
Well, Karen, thank you so much for your time.
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C
Thanks, Ruby.
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B
Also in the news, the government has been accused of trying to bury its response to the Peter Murphy report on gambling reform by releasing it on budget eve. Leading advocate Tim Costello says it's very disappointing, particularly since the government is only tackling four of the 31 recommendations. The official government response, released more than 1,000 days after the report, ignores calls for an online gambling regulator and comprehensive ban of online gambling advertising. And a Canberra teenager has been charged with planning a terrorist attack in the Act. The 17 year old is accused of planning an attack motivated by views aligned with nationalist and racist extremism. Counterterrorism. Police say it's alarming to see young Australians exposed to violent extremist material and propaganda. I'm Ruby Jones and we'll be back with a special budget bonus episode this afternoon where we'll break down exactly what the government's changes mean for house prices and people trying to get into the property market. Thanks for listening,
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A
Sam.