How is the Australian government improving the budget bottom line in 2026?

Treasurer Jim Chalmers has announced a $77 billion improvement in the budget's forward estimates. The government claims that the majority of this repair is driven by structural spending restraint and savings rather than increased tax revenue.

What role does the NDIS play in the government’s fiscal savings plan?

The National Disability Insurance Scheme (NDIS) is the primary target for the government’s spending restraint strategy. It is slated for $37.8 billion in long-term reductions to help stabilise the federal budget.

How will changes to the Capital Gains Tax (CGT) discount affect property investors?

The government is recalibrating the CGT discount to address what it calls a "distortion" in the housing market that has existed since 1999. For investors, this shift aims to reduce the tax advantages of holding existing assets and instead incentivise the construction of new dwellings.

What is the Albanese government's strategy for housing affordability?

The strategy focuses on increasing housing supply by encouraging the building of new houses and apartments through tax reform. By modifying the CGT discount and negative gearing arrangements, the government hopes to create more affordable options for first-home buyers.

Why is the government changing policies on negative gearing and CGT now?

Treasurer Jim Chalmers stated that the government changed its view late in the budget process after concluding that a pure focus on supply was insufficient to address intergenerational inequality.

What are the key risks for the government following these budget announcements?

The primary risk is "political risk" stemming from broken election promises regarding negative gearing and CGT. While the government argues that voters value substantive policy outcomes over rigid adherence to past pledges, there is a risk of a voter backlash.

How do these budget changes affect the taxation of income versus assets?

The Treasurer intends to narrow the gap between how people who work for a living are taxed compared to those who generate income through assets. By reducing tax concessions for property and investment, the government aims to create a "fairer" landscape.

Economy

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Chalmers prioritises budget savings over tax hikes

Written by Heidi Cuthbert Published May. 12 2026Last Updated May. 12 2026

The Albanese government has framed its latest fiscal strategy as a victory for spending restraint, with Treasurer Jim Chalmers asserting that the majority of a $77 billion improvement in the budget bottom line is driven by savings rather than tax increases.

Addressing the media, the Treasurer noted that the contribution of structural savings is triple that of recent tax reforms.

A portion of this repair is slated to come from the National Disability Insurance Scheme, which is targeted for $37.8 billion in long-term reductions.

Chalmers emphasised that "heavy lifting" is being performed by these efficiencies to ensure sustainable budget management.

Parallel to these savings, the Treasurer defended controversial shifts in housing policy, specifically targeting the capital gains tax discount.

Chalmers argued that the discount, introduced by the Howard government in 1999, created a "big distortion" in the property market. By recalibrating these tax arrangements, the government aims to incentivise the construction of new dwellings and improve affordability for first-home buyers.

Acknowledging the "political risk" associated with reversing previous election commitments on negative gearing and CGT, Chalmers maintained that the decisions were made late in the budget process to address deep-seated intergenerational inequality.

While he rebuffed suggestions that market conditions had not changed since the election, he argued that voters ultimately value "substantive change" over rigid adherence to past promises.

The Treasurer concluded that the focus must remain on boosting supply and aligning the taxation of labor with that of investment income to create a fairer economic landscape for all Australians.