Editorial: Budget in free-fall needs to be unpicked and fixed

When Treasurer Jim Chalmers delivered the Budget last week he declared it “the most important and ambitious Budget in decades”.

A little more than seven days later, the Budget is in tatters and Dr Chalmers and his boss Anthony Albanese’s national sell of their blueprint is unravelling fast.

It seems just about each day a new problem has emerged.

The big picture is the damage done by the broken promises represented by the changes to the capital gains tax and negative gearing.

But within that framework there are growing question marks.

Mr Albanese’s sell hit trouble when he had to admit that future discretionary trusts set up to distribute inheritances would be taxed at a higher rate due to Budget changes, as the Government fended off claims it was bringing in a “death tax”.

His ­admis­sion that future testamentary discretionary trusts face a minimum 30 per cent tax on distributions came hours after he claimed all testamen­tary trusts would be exempt.

That backflip was followed by acknowledgement on Tuesday that the changes on trusts would not be ready to go to Parliament with the first raft of Budget legislation.

Those changes would take “longer to develop”, Mr Albanese said.

He also sought to deflect some of the pain onto the States amid small business fears they faced higher State-levied stamp duties if as a result of the changes they were forced to restructure.

“Stamp duties are imposed by the State government, not by us,” Mr Albanese said.

And he flagged the need for consultation with start-ups concerned that capital gains tax changes could undermine investment.

Mr Albanese said the Government recognised “that there’s a particular issue” with start-ups relating to capital gains tax.

And in a telling sign, despite all the spin about “intergenerational equity” before the Budget, Mr Albanese has taken to watering down perceptions that it is an “ambitious” document.

Instead, the Budget’s capital gains tax changes are now being depicted as merely returning to a 25-year-old system.

“What we are simply doing is returning the system to what was there before 1999,” Mr Albanese said.

The Government’s messaging is in retreat.

The Budget has profound ramifications for a whole range of sectors that Mr Albanese and Dr Chalmers didn’t see or didn’t want to see.

Middle Australia has found itself in the firing line. Tradies, hairdressers, small start-ups in the garage who are having a crack are wondering what their future looks like.

As each day goes by it seems further unintended consequences continue to emerge.

Meanwhile the Government’s economic management credentials continue to sink along with its credibility.

The Prime Minister and Treasurer have no idea what they have unleashed. Bits of the Budget framework are spinning off in all directions.

Either the Government or Parliament are going to have to unpick the document in the days ahead and fix it.

Responsibility for the editorial comment is taken by Editor-in-Chief Christopher Dore.