Overview
- Treasury has downgraded expected economic growth by 0.25–0.5 percentage points and now assumes productivity will take about five years to return to 1.2%, with less spare capacity across the economy.
- New scenarios tie the Middle East conflict to higher inflation, with forecasts ranging from the high 4% range at US$100 oil to about 5.5% if prices reach US$120, heightening pressure on policy settings.
- The May 12 budget will group three reforms — tax changes, spending restraint for budget repair, and measures to boost investment — as a supply‑side plan to lift productive capacity.
- Chalmers says the tax package will be guided by intergenerational equity and incentives for productive investment, with overall affordability a constraint.
- Possible measures under consideration include paring back the capital gains tax discount, restricting negative gearing, adjusting trust rules and EV concessions, with final decisions pending fiscal room, cabinet deliberations and global conditions.