BUDGET HIT ON TAX BREAKS; FUEL PRICE JOLT

Property investment targeted in sweeping tax reforms

Treasurer Jim Chalmers has used his first Budget since the Labor Government’s 2025 re-election to make sweeping tax reforms, in the backdrop of a global oil price shock that has lifted inflation and cut expectations on economic growth. The Government has targeted tax reforms in a bid to lift housing supply, restricting negative gearing to investment on new houses, while dumping the 50 per cent discount on capital gains in favour of inflation-adjusted indexation and a new minimum 30 per cent tax rate. In addition, Dr Chalmers has also introduced a new minimum 30 per cent tax rate on discretionary trusts, to apply from 2028. The other tax changes are due to apply from July 2027, with offset tax relief flagged for wage and salary-earners.

Global oil price shock lifts inflation, cuts growth

After producing surpluses in his first two budgets, the Federal Treasurer has set course for budget deficits over the next four years, starting with a deficit of $31.5 billion forecast for 2026-27. Dr Chalmers has cited the oil price jolt to revise the government’s inflation forecast to five per cent for 2025-26, but falling to 2.5 per cent next year. Economic growth is forecast to fall from 2.25 per cent this year to 1.75 per cent in the next, in real GDP terms. Meanwhile, Budget papers predict that net debt will rise from $616.6 billion in 2026-27 to $767.8 billion in 2029-30. While the Federal Government focuses on the ‘underlying cash balance’ for its main deficit or surplus figure, the headline cash balance includes so-called off-budget items, taking into account net cash flows from investments in financial assets, such as student loans, the NBN and Snowy Hydro. In 2026-27, the headline cash balance is forecast to be $64 billion, up from $47.9 billion in the current year.

Victoria on track to $200 billion net debt

Victoria has produced an election-year budget, forecasting an operating surplus of $1 billion for 2026-27 but net public debt of almost $200 billion within three years. Budget papers presented by Treasurer Jaclyn Symes said that net debt would rise from $175.6 billion in 2026-27 to $199.3 billion in 2029-30, and relative to the state’s economy, peak at almost 25 per cent of gross state product (GSP) in the coming year. While an operating surplus is forecast for 2026-27, Victoria is on track next year to record a $7.7 billion cash deficit, on broader budget measures that include net cash flows from investments in non-financial assets.

WA posts surpluses amid mining strength

Meanwhile, on the other side of the nation, Western Australia is forecast to post a $2.4 billion operating surplus and a narrow cash surplus in 2026-27, aided by the nation’s strongest population growth and mining royalties. WA Treasurer Rita Saffioti handed down a State Budget that revealed total public sector net debt of $40.2 billion in 2026-27, or 8.2 per cent of GSP, as well as forecasting a government cash surplus of $323 million for the coming year. WA’s budget includes major transport-related cost-of-living measures. Mining royalties are forecast to fall slightly, to $9.4 billion in 2026-27.

Flooding, fuel costs hit NT budget

Northern Territory will slip back into deficit in 2026-27 as it recovers from rising fuel costs resulting from the Middle East conflict and the impact of major flooding earlier this year at Katherine and Alice Springs. Presenting the budget for the coming year, Treasurer Bill Yan forecast the NT would register a budget deficit of $42 million in 2026-27, before returning to surplus in the following years. Commonwealth revenue will account for around $7.7 billion in 2026-27, or 72 per cent of the Territory’s revenue in the non-financial public sector.

Gas exporters face set-aside gas laws for domestic usage

Gas exporters will be required to allocate an equivalent 20 per cent of their gas exports to the Australian market, under a gas reservation scheme announced by the Federal Government. Energy Minister Chris Bowen said the 20 per cent domestic reservation would put strong downward pressure on domestic gas prices and help to ensure domestic energy security. Mr Bowen, Resources Minister Madeleine King, and Industry Minister Tim Ayres said the reservation would respect export contracts entered into before the government first flagged the scheme, on December 22, 2025. Legislation will be introduced to enact the proposed domestic gas reservation, which would apply from July 1, 2027.

One Nation easily wins key NSW Riverina seat

One Nation has seized victory in the Farrer by-election, relegating the Liberal and National parties to third and fourth places respectively in the formerly safe Coalition seat in south-west New South Wales. Australian Electoral Commission counting has One Nation’s David Farley well ahead of his main rival, Albury-based Independent Michelle Milthorpe. The Federal seat, which follows the Murray River from Albury to the South Australian border and includes Griffith and Deniliquin, was held by the former Federal Liberal Leader, Sussan Ley, for almost 25 years.