Ambition in the face of adversity
Thanks Tom, we acknowledge the Ngunnawal people, their elders, customs and continuous culture.
And I thank you, the press gallery, the Press Club and its board and sponsors for the opportunity to flesh out some of the major themes of our fifth Budget here in the Great Hall.
I also want to thank the Prime Minister, Finance Minister and other colleagues for making time, and all of you here for coming, and everyone who worked on and informed the decisions and documents we released last night, including all the staff and officials.
I also wanted to single out in particular:
Laura who is here again, and the kids, my mum and John, the essential elements of the Chalmy Army. It’s really hard being any Treasurer’s family, not just the long absences especially at Budget time, but all the other ups and downs as well.
I appreciate them and my other family too, my office, led so ably here by Claudia Crawford and Glen Granger, and back home by Brenton Hill who finishes up his long stint next month.
Our team is full of the most dedicated, intelligent, well‑motivated people, making huge sacrifices for our country because we love it, we believe in it, and we want to make it better.
Same goes for the Treasury officials, from Jenny Wilkinson right through the department, her deputies Damien, Diane, Ange, Kat, James and Ben, plus people like Pip, Jason, the whole tax team, and everyone right throughout the organisation.
Working with them on this one and over the past 4 years has been such a cherished experience, and I want them all to know how much they are appreciated.
Please put your hands together for them.
This was an especially difficult budget to put together, by far the hardest of the 5, the most responsible, but also the most ambitious, in fact the most ambitious of the 21 that I’ve worked on or responded to, in and around this portfolio.
That’s really what I want to get into with you today – how we balanced today’s global pressures with intergenerational obligations and opportunities.
How we maintained direction amidst all this disruption.
The ambitious reforms at the core of this Budget are not there despite all this global uncertainty but because of it, they’re made more urgent by the combination of big cyclical and structural shifts in our economies and societies.
We have made some hard decisions and come to a different view on contentious policies, for the right reasons.
I’d rather defend a shift in policy than leave a broken status quo in place to do more damage, and marginalise more people, over time.
It would have been easier to see what’s happening around the world as an excuse to leave some of the most difficult challenges in our economy for someone else to fix later.
We made a different more difficult choice in this Budget: to accelerate reform not just absorb the shock.
Now, there’s a lot in what we released last night, too much to go through it all again, and I’ll have the opportunity in coming weeks to get into the packages in more detail.
What I want to do instead today is to talk about what the war in the Middle East meant for our deliberations over the summer and into the autumn.
How we are seeing the conditions, global and domestic, how those forecasts changed between the last week of February and the first week of May.
What we delivered, not just despite the challenging circumstances but also because of them.
How we calibrated then recalibrated the major pieces of the Budget for those conditions.
Then in a bit more detail flesh out the intergenerational motivations underpinning our decisions, especially when it comes to the intersection of housing and tax reform.
And then put the breadth and depth of the Budget’s ambition into its proper context.
Budget deliberations
But first I think the best way to give you a sense of our deliberations is to explain how our thinking and planning evolved since December’s mid‑year update.
Budgets are typically sketched out in summer and locked down in autumn.
Of all the budgets I’ve worked on they’ve usually been almost entirely consistent with the planning over the holidays, except for 2008 in the earliest days of the GFC.
When I think back to the notes I was scribbling over December and January on planes and in the backyard, one eye on the kids in the pool –
The formal and informal conversations with colleagues, all of the consultation I did in and around and after the reform roundtable –
I’m very proud to say a very big part of all that work featured in the policies we announced last night.
Nobody here would be surprised they weren’t identical to what we would have done in February, it would be pretty strange if they were.
What might surprise you is how much we retained.
Obviously, the emphasis on fuel security became a much bigger part of the story, of course it did.
The way we thought about cost‑of‑living help changed when the fuel tax cut became necessary, and we had to find almost $3 billion to fund it.
Some good ideas were delayed for more work, and for understandable reasons.
The core remained intact and for good reasons as well.
We didn’t finally decide on negative gearing, capital gains and trusts over the summer –
Though we did agree that to deliver intergenerational fairness and rebalance the system there needed to be tax reform, even if we hadn’t concluded what every element of the final package would look like.
Every Budget is calibrated for the conditions and in this case those conditions changed very substantially, and quite late in the piece.
The war began on the last day of summer, and we started recalibrating a bit on the first day of autumn.
Changing global conditions
What we’ve seen since has been serious and still risks becoming even more severe:
Since that final day in February, oil prices are up more than 45 per cent, the spot brent price hit an all‑time high, and we’ve seen around the same fall in supply from this shock alone as the past 4 oil shocks combined.
The war fundamentally reshaped the Budget forecasts.
Treasury is now assuming the oil price will stay at around $100 a barrel until the end of June and then gradually come back to $80.
This means inflation will be higher, household spending will be lower and growth will be slower than we thought at the start of the year.
Before the conflict, Treasury was actually going to upgrade household consumption next year by 0.25 of a percentage point to 2.5 per cent.
It ended up downgrading it by 0.5 a percentage point instead, largely due to its higher outlook for inflation.
Meanwhile, what was going to be GDP growth with a 2 in front of it is now GDP in the high 1s – although with the private sector still the main driver.
Treasury expects unemployment to stay historically low but it will be a bit higher for longer than they previously anticipated, hovering near 4.5 per cent until the middle of 2028.
Treasury also considered a much darker scenario where the oil price jumps to $200 and takes 3 years to fall back down.
Even under a scenario of that severity we would still avoid a recession, but unemployment would reach pre‑pandemic levels and inflation would peak above 7 per cent.
We take some comfort from the direction of travel in our economy before the war began.
By December last year, momentum was clearly picking up.
GDP growth in Australia in 2025 was strong, broad‑based and led by the private sector.
We finished the year with faster growth than any major advanced economy.
Private demand grew faster and contributed about 3 times more to economic growth than public demand that year.
Consumption was growing around 2.5 per cent because real income growth had also recovered after a challenging period.
Real incomes were growing at more than twice the average of major advanced economies.
Business investment grew strongly in the second half of 2025, which helped to drive CapEx forecasts for the financial year to almost $200 billion.
For the first time in a decade, dwelling investment grew for 8 consecutive quarters.
Our economy was performing strongly when we looked around the world.
We still had serious challenges in front of us – inflation was much lower than its peak in 2022 but still too high.
And although productivity growth had improved it had been too weak for too long – so we needed to lift the speed limit of our economy.
But we had a lot going for us too, before the war in the Middle East put that progress at risk.
The oil shock that has come with that conflict is part of a bigger pattern of rolling, accelerating turbulence in the global economy, a half century bookended by oil shocks where one big global disruption gives rise to the next.
We used to think of economic shocks as punctuating long periods of calm but now we have long periods of turbulence punctuated by short, sharp bursts of calm.
In the last 2 decades alone, a subprime mortgage crisis. A pandemic. Global inflation spikes triggered by war. Trade tensions. Now a huge energy shock that is pushing up prices, pushing down growth and punishing Australians.
All happening against the backdrop of the energy transformation, technological revolution, demographic and industrial change, and big shifts in geopolitics.
These big shocks and big shifts aren’t rare anymore – they’re almost routine – but their impacts are still profound.
It’s no longer possible to separate cyclical and structural change, or to deal with one then the other.
Or to wait for calm in the world to embark on big policy changes.
If you wait for perfect stability to reform, you’ll be waiting forever.
This global turbulence is no excuse to roll up into a little ball and hope it passes quickly, if anything it’s a reason to do more on resilience and more on reform, more urgently.
That’s the attitude we’ve adopted here.
Five budgets in one
The lead‑up to every budget involves hundreds of hours spent on thousands of individual decisions.
Because there are always pressures on essential spending.
Always more good ideas and worthy projects than funding available.
Always colleagues defending every dollar in their portfolio, or knocking down your door to secure an important new program or local commitment.
And the closer you get to the final document, the tougher all those choices become.
But the most important decision you make comes much earlier.
It’s about the character of the Budget.
Does it aim high or muddle through?
Does it deal with the big changes going on around the world, or hang back and hide from them?
Does it take responsibility for making things better and fairer for the next generation – or leave the heavy lifting to them?
Long before we settled on details of the reforms I announced last night, we were resolved on the purpose and the urgency underpinning them.
This approach led us to 5 main objectives:
Getting through the global oil shock and building resilience.
Taking the immediate pressure off people where we can.
Making the economy more productive and competitive to lift living standards over time.
Reforming the tax system for workers, first home buyers, businesses and future generations.
And making the budget stronger, more sustainable and helping to take the pressure off inflation by saving more than we spend.
That left us with a fuel security package, more cost‑of‑living help, a productivity plan, a tax reform package, and substantial savings.
You’re familiar with the constituent policy parts of all this and with the essential elements of the story.
So let me just sum up some of the biggest bits in brief.
Our new Working Australians Tax Offset plus our other 3 income tax cuts and instant deduction will benefit the average worker by up to $2,816 in 2028.
The productivity package will save business $10.2 billion in compliance costs every single year and our competition policy reforms alone could boost GDP by $13 billion.
Last night’s budget was $44.9 billion better off compared to our mid‑year update and more than a quarter of a trillion dollars better than what we inherited.
Gross debt is $173 billion lower next year and lower in every single year compared to when we came to office, and will peak 9 percentage points of GDP lower too.
That means we will avoid more than $70 billion in interest payments.
Average real spending growth is at its lowest level in almost 3 and a half decades over the 8 years to mid‑2030.
We have found an unprecedented $63.8 billion in savings.
For the first time on record, we’ve returned every single dollar of revenue upgrades to the bottom line in back‑to‑back budget updates.
Treasury is projecting that the budget will return to balance in the medium‑term, driven mostly by our structural savings.
One of the parts of the fiscal story we’re most proud of is that net save figure.
We’ve been able to deliver an ambitious, reforming Budget at the same time as a $26.1 billion net save.
Even when you strip out our responsible provisions from previous updates it’s still an $8.2 billion save.
This is the second update in a row the net policy line in the reconciliation table has been positive, and that’s only happened 6 times in the past 3 decades.
Intergenerational fairness
Of all the fine balances we struck last night, perhaps the most essential was between responding to the demands of the here‑and‑now while taking seriously our intergenerational obligations.
This matters right across the board but it’s absolutely essential to understanding the intersection between the tax reform and housing packages.
Consider this.
In the decade to 1999 average house prices and full‑time incomes grew at around the same rate.
In the decades since, that link has been broken.
House prices have risen by more than 400 per cent since 1999 – more than twice as fast as average full‑time earnings.
Since the Howard government introduced the 50 per cent Capital Gains Tax discount at the turn of the century there has been a big decoupling between housing and incomes.
Supply has not kept pace with rising demand, but tax settings have also played a role.
This collapse in housing affordability in Australia has disproportionately affected younger Australians.
Over those 2 decades, home ownership for people between 25 and 34 years old has plummeted 7 percentage points.
And our long‑standing productivity challenge means the generation born in the 1990s is the first in decades not earning significantly higher incomes than those that came before them.
This is even more striking when you consider we’re likely to have just 2 and a half working age Australians for every older one by the 2060s.
Any objective observer would hear these facts and conclude the status quo where our housing and tax systems meet is unfair and unacceptable.
As a society, we’re expecting too much of these young working people.
It’s not just that they are struggling to get into the housing market.
Or that they are victims of poor productivity growth for far too long.
But they will also inevitably wear a bigger burden over time as our population gets older and demand for government services rises.
These are the challenges our 2 packages on tax and housing directly address.
They are about making the system fairer for workers, first home buyers and future generations.
That was a major part of the motivation behind our $47 billion housing plan.
It was also a big part of the motivation for our first 3 rounds of tax cuts, our changes to make super fairer and more sustainable, and our reforms to make sure companies are paying their fair share.
This is just some of the substantial progress we have made on housing and tax.
The reforms in this Budget go a lot further by starting to rebalance a tax system that favours assets over workers.
Concessions like negative gearing and the capital gains tax discount provide generous treatment for income from assets that isn’t available for labour income.
These policies do little to support new housing supply – in fact in the past 5 years more than 80 per cent of investor borrowing has been for existing housing.
And the types of property investments that we need more of – like units and apartments – have actually been worse off on average under the current 50 per cent discount than they would have been under indexation.
It’s clear these concessions have fundamentally distorted our housing market.
The current tax arrangements tip the balance against first home buyers and that’s why we are changing them.
For example, Treasury’s analysis shows about one in every 3 negatively geared investors receive a net income tax subsidy overall, even if the property turned a profit.
In other words, Australian taxpayers are effectively paying a third of these negatively geared investors to own an investment property.
We’re coming at this housing challenge from every responsible angle, maintaining a primary emphasis on supply but recognising that while the challenge starts there it doesn’t end there.
All this data makes a clear and compelling case that we need to make some changes to help level the playing field.
The reforms to negative gearing and capital gains tax in this Budget will help first home buyers and build on all our work to boost supply, reduce red tape and make it easier for young people to get a deposit.
Housing supply is still the main game, and that’s why this Budget has a big focus on more supply.
Not just in how we’ve designed these tax measures, but also the $2 billion for enabling infrastructure we’ll make available where the states and territories commit to further housing reforms like faster approvals and releasing more land.
Another way we’re taking steps to rebalance the system is by making sure the tax rates paid on income from assets held in discretionary trusts, as well as future capital gains, are more in line with those paid by the average worker.
We’re redirecting the revenue from all of these reforms over the next 4 years to provide more tax cuts for working Australians, as well as more support to businesses to drive productivity and investment.
The new Working Australians Tax Offset and $1,000 instant tax deduction are unique in our tax system because they provide the first broad‑based tax relief specifically targeted at working people.
By introducing these changes, we are setting up a new architecture that until now has been absent from the Australian system.
This will allow future tax relief and reform to build on these tax cuts and continue the work of rebalancing the tax burden so it is shared more fairly between assets and labour.
This is a downpayment to make it easier to provide more support for workers and future generations.
This is about tax relief and tax reform to make our economy work in the interests of more Australians, businesses and future generations.
These changes and this intergenerational focus aren’t about putting older and younger people at 10 paces.
We recognise and respect the really big contribution that older Australians have made and continue to make to our country and our economy.
Many Australians are finding it incredibly difficult to get into the housing market, that’s not the fault of older Australians, it’s the fault of successive governments that haven’t taken this housing challenge seriously enough.
These changes are about recognising some of these legitimate intergenerational concerns which are also often shared by older people too.
We don’t judge people who have done well, we want more people to do well.
Conclusion
This Budget is the balance point between a post‑election year of delivery and the coming year of more reform.
We’re not pretending or claiming that one night and one set of numbers means we’ve solved every problem in our economy.
No government will ever do that.
But it was a big and serious effort.
Easily the most responsible and the most ambitious budget of the 5 we’ve put together –
With the most savings, the most tax reform, meaningful ways to shift the dial on productivity, and consequential policy changes right across the portfolios.
And easily the one with the highest degree of difficulty too –
Calibrated and considered as the global economy absorbed the biggest oil shock in history.
We know our decisions will be contested and that’s OK.
The reform road has speed bumps, and twists and turns.
We’re doing what’s necessary, not what’s convenient, at a time of extraordinary, accelerating change in the world playing out in our economy and society.
And when you look around the world, from Farage to Farrer – the choice this moment presents for parties of government is clear.
We are the last ones standing in the sensible centre of Australian politics but we aren’t standing still.
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.
Reforms that empower our people to be the beneficiaries of change not its victims.
That’s why everything that the world has thrown at us over the past few months has changed the focus of our response –
But not the level of our ambition.
Not because reform is easy –
But because we owe it to the faith Australians have placed in us to make a difference, not just mark time.
Thank you and I look forward to your questions.