Sydney, March 18 - Australia’s Treasurer will press for deeper tax reforms in the government’s forthcoming May budget as part of a broader agenda to shore up the economy against potential inflationary shocks and a possible economic hit from escalating conflict in the Middle East.
Delivering a pre-budget speech on Thursday, the Treasurer said the budget preparations would concentrate on three distinct packages: increasing savings to build fiscal buffers, measures to raise productivity, and tax reform. Excerpts of the speech that were made available indicate the government is positioning those three strands as the central pillars of its fiscal response.
A recent Treasury analysis cited in the speech highlights the economic stakes. Under a more prolonged scenario, the analysis found that a U.S.-Israeli war on Iran could add 1.25 percentage points to inflation and reduce economic output by 0.6% in 2027. The Treasurer referenced that assessment when framing the need for precautionary fiscal measures.
"The conflict in the Middle East is a stark reminder of how quickly the global economic outlook can change," the Treasurer said. "All this economic uncertainty and volatility is a reason for more reform, not less. It’s a reason to go further, not slower."
The Treasurer did not specify the precise tax measures that will appear in the May budget. Local reporting has linked potential changes to the capital gains tax discount, which currently provides substantial concessions for property investors, but no formal announcements were made in the pre-budget remarks.
The speech also referenced recent monetary policy developments, noting that the central bank had raised interest rates on Tuesday in response to the risk that inflation could remain elevated for longer. That tightening in policy was presented as part of the broader context driving the government's emphasis on fiscal resilience and reform.
By centring the upcoming budget on savings, productivity and tax reform, the Treasurer is signalling a multi-pronged approach aimed at strengthening fiscal buffers, supporting medium-term growth and addressing potential distributional and efficiency issues within the tax system. Details on the scope and timing of any tax measures will be set out in the full May budget.
Summary: The Treasurer announced a three-part focus for the May budget - fiscal savings, productivity measures and tax reform - motivated in part by a Treasury scenario that forecasts higher inflation and a modest GDP hit in 2027 if Middle Eastern hostilities intensify. The central bank's recent rate increase was cited as additional context for the need to act.