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Good evening CVELU, Well here it is: “The most important and ambitious Budget in decades.” The Treasurer said so himself.
Central to Jim Chalmers’ first claim is that the world is facing its greatest oil shock in half a century. In case you missed the point, the Budget even provides a handy graph comparing the Iran war to previous conflicts going back to the Yom Kippur War of the 1970s.
Chalmers was at pains to disavow any responsibility for the inflation crisis almost as soon as he got to his feet.
“War in the Middle East has been pushing up prices, pushing down growth, and punishing Australians,” he said.
And just to lay it on like bitumen: “We didn’t decide when this war began and have no control over when it will properly end.”
Chalmers even pulled out some Treasury modelling that looked like it came from the Book of Revelations, so that no matter how bad things might get he can always argue that they could have been much worse.
But as the old political mantra goes, never let a crisis go to waste.
And so the government has used the cover of this supposedly once-in-a-generation moment to do something the left has been barking about for just as long: Ditch negative gearing and capital gains tax discounts for investment properties.
 What this has to do with the war in Iran is anyone’s guess — and, to be fair, the Treasurer isn’t really pretending it does.
Hence the “important and ambitious” yin and yang theme of this Budget: “Resilience and Reform”.
In other words: “We’re responding to this crisis that is totally not our fault while at the same time proceeding with something completely unrelated that we’ve been wanting to do for years even though we said before the election we weren’t going to do it.”
The upshot is that negative gearing will from next year not apply to existing properties, only new builds, while investors will have to pay the full CGT rate on real gains (ie. after inflation has been taken into account).
Incredibly, the government appears to quietly concede that this measure will reduce housing supply that will have to be offset by other measures, saying in the Budget Overview: “The small impact on housing supply from these tax measures will be more than offset by measures that increase housing supply. Overall, this Budget will support more housing supply.”
Meanwhile the government is hoping that its centrepiece $250 Working Australians Tax Offset — which doesn’t kick in until July 1 next year — will be shiny enough to distract from the world of economic pain most Australians are about to enter.
The question is whether this and the raft of other relief spending by the government will ease that pain or prolong it.
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Joe Hildebrand
