Australian news and politics: Chalmers says inflation figures ‘encouraging’ but still too high

Mr Chalmers said the government’s decision to cut the fuel excise had helped to take some the “sting” out of price pressures stemming from the conflict in the Middle East.

“Our automated fuel fell 7per cent in April. It was rising 32.8 per cent in March and that’s why we stepped in. Treasury analysis shows that our cut to the fuel excise reduced headline inflation by around half of a percentage point.”

Mr Chalmers said even though fuel was a big driver in today’s lower inflation figure, it wasn’t the only one, with food and rent also moderating.

Asked whether the fuel excise would be extended beyond next month, Mr Chalmers said the government was “not anticipating extending” it but it would that reviewed from week-to week.

Treasurer Jim Chalmers has described the lowest inflation reading since before the Iran war as encouraging but conceded it’s still too high.

“What we see in these numbers are some encouraging numbers but also, we understand that inflation is too high in these numbers and that’s why it’s a big focus of the Government,” he told reporters in Canberra on Wednesday.

The consumer price index in April dropped to 4.2 per cent, down from a near three-year high of 4.6 per cent in March, after the Federal Government last month cut petrol and diesel taxes to 26.3 cents a litre until the end of June.

This was the lowest headline inflation level since February’s 3.7 per cent annual increase before the US strikes on Iran led to the Strait of Hormuz blockade.

Underlying, or trimmed mean inflation, only rose moderately in April to 3.4 per cent, up from March’s annual pace of 3.3 per cent when volatile items were excluded.

Small business advocates COSBOA want the threshold for existing capital gains tax concessions lifted so it extends to businesses with a $10 million turnover, in line with the tax office definition, instead of the current $2 million.

ACCI’s Andrew McKellar said that was something that should be done anyway, but it wouldn’t fix the broader problems with the CGT proposal.

“Those things should be addressed, but by themselves they’re not enough,” he said.

He urged all business groups to stick together rather than offering piecemeal suggestions to the Government that might not fix the problems everyone faced.

“Let’s ensure that we get an outcome across the board, that we address all issues because, if we don’t, what we’re going to see is the result of these policy changes will be that there will be more tax on business investment. That means there will be less business investment,” he said.

Australia’s business chambers are formally calling on the Government to limit its capital gains tax changes to housing only, warning the broader proposal outlined in the Budget will ultimately only stifle business investment.

Pause and rethink was the directive to the Treasurer and PM from Australian Chamber of Commerce and Industry boss Andrew McKellar on Wednesday morning.

He wants to see the government “pull it back” to housing.

“What is the problem that the government is trying to address? They’ve articulated that they are concerned about housing affordability,” he told reporters in Canberra.

“That’s where their concern is. So, if they focused on that, then it’d be very different situation.”

The extent of the capital gains tax changes in the Budget surprised many who thought they would only be limited to housing.

Instead, the 50 per cent discount on capital gains will be replaced with a new inflation-based discount and a minimum 30 per cent rate on the taxable portion across sales for all asset classes.

Mr McKellar said the Government hadn’t come at the process as on of genuine tax reform, given the relatively limited tax cuts in the form of a $250 working Australian tax offset.

“If this was parcelled up with other changes, you know, if we were cutting the company tax rate to 25 per cent, if we were addressing marginal tax rates on the income tax scales, if there was something else in terms of a broader business investment allowance, then there’d be swings and roundabouts, there’d be carrot and there’d be stick. This is all stick and no carrot, and that’s the problem,” he said.

Inflation has dropped to the lowest level since before the Iran war after fuel excise was halved to combat the Middle East war reviving cost-of-living pressures - decreasing the chance of an interest rate rise next month.

The consumer price index in April dropped to 4.2 per cent, down from a near three-year high of 4.6 per cent in March, after the Federal Government last month cut petrol and diesel taxes down to 26.3 cents a litre until the end of June.

The Reserve Bank earlier this month forecast headline inflation hitting 4.8 per cent by June while the Treasury Budget papers had a 5 per cent prediction by mid-year.

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Deputy Liberal leader Jane Hume has insisted the Albanese government should wait until after the winter recess to push through their major tax changes rather than be “tricky and sneaky”.

Labor proposed scrapping the 50 per cent Capital Gains Tax discount across all asset classes and tightening negative gearing to new builds in the Budget released earlier this month.

“There is no reason why these tax changes need to be rammed through the Parliament without any scrutiny before the winter recess,” Senator Hume told Sky.

“It’s crazy. It’s entirely unnecessary.”

“It’s very, very complicated, the implications of these tax changes, whether it be CGT, or potentially the change on trusts which will go through separately, or the changes of negative gearing.

“These are really profound changes with significant impacts on our economy.

“Allowing scrutiny of legislation, and allowing stakeholders to have their say, allowing the treasury to consider the implications of what it is that they’re hearing — is so important.

“That’s what the parliament is here to do. Trying to circumvent that process just demonstrates exactly how tricky and sneaky this government is.”

Opposition NDIS spokeswoman Melissa McIntosh was forced to defend the Coalition’s threat to delay support for Labor’s NDIS overhaul as pressure mounts on the government over its tax reforms, while insisting the disability scheme should not become a bargaining chip.

Labor requires Coalition backing to pass its NDIS changes through parliament after the Greens vowed to oppose the legislation in the Senate.

The Coalition has tied its support to demands for greater scrutiny of Labor’s capital gains tax and negative gearing reforms, with Ms McIntosh arguing the approach could allow more voices to be heard.

“You only have a certain number of levers when you’re in opposition, and by no means from my perspective as the portfolio holder or shadow portfolio of the NDIS, would I allow this to be a political sort of football for people on the NDIS,” Ms McIntosh said.

“I’m completely focused on ensuring that a Senate inquiry (for the NDIS) goes ahead, and if the result of negotiations in the Senate means that the NDIS Senate inquiry goes for longer, well, that’s not a bad thing in itself.

“It means that people get longer to have a say.”

The Coalition has threatened to hold back support for Labor’s proposed changes to the National Disability Insurance Scheme to rein in spending.

The Albanese government earmarked the NDIS as a possible savings area in the Budget after the costs of the scheme have ballooned since it was first launched in 2013.

The latest Budget expected the scheme to cost more than $50 billion this year before growing to a projected $128 billion by the year 2032.

It’s well above the initial 2011 Productivity Commission estimate of $13.5 billion, with a growth between 3-6 per cent each year.

The Coalition on Wednesday expressed intent to play hardball with Labor when they introduce legislation around controversial changes to Capital Gains Tax and negative gearing.

Shadow Treasurer Tim Wilson told Sky News that it included using “maximum leverage” on the NDIS reform package.

“We’re going to go through parliamentary processes on both NDIS changes and budget changes, and we’re going to use maximum leverage so Australians can have a say,” Mr Wilson told Sky News.

“The government said they would not introduce these taxes (GCT and negative gearing).

“The Australian people have not had their say, we are going to make sure Australians do have their say.”

It comes after the Greens indicated they planned to oppose Labor’s NDIS cuts.

Changes to negative gearing and the capital gains tax will have a small impact on property affordability, the housing minister concedes.

The Federal Government will on Thursday introduce to parliament its changes to the taxes, to make it easier for more first home buyers to enter the market.

Under the changes, negative gearing would only be limited to new homes from July 2027, while the 50 per cent discount on capital gains tax would be replaced by a rate based on inflation from the same time period.

Housing Minister Clare O’Neil said while the changes would enable 75,000 more people to buy their first home over the next decade, property prices would come down as a result.

“This will have a modest affordability effect on house prices in Australia, but at the end of the day, the thing that is driving house prices is actually not our tax settings,” she told ABC TV on Wednesday.

“It’s a fundamental mismatched between how many homes we’re building and how many homes we need.

“These changes are difficult, but incredibly important for addressing the housing challenges the country faces.”

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Housing Minister Clare O’Neil has hinted Labor may not be finished with tax reform, appearing to leave the door open to future action on bracket creep after Treasurer Jim Chalmers signalled the government was “not done” reshaping the system.

Pressed on ABC News Breakfast about whether the government would consider broader income tax cuts following criticism of the budget and growing calls for reform, including from NSW Premier Chris Minns, Ms O’Neil suggested more change could be on the horizon.

Asked whether reform could address intergenerational inequity and help sell the changes to voters, she replied: “There’s a lot you said that I agree with.”

She argued the government was seeking to rebalance a system that placed too much pressure on wage earners, saying, “One of the big issues we’re tackling in this budget is we’ve got a tax system which taxes workers too heavily and capital too lightly. We’re trying to rebalance that.”

“That’s why the changes to negative gearing and CGT that we’re making in the budget, that will make housing fairer for Australians, are going straight back to the Australian people in tax cuts.”

Ms O’Neil added, “The Treasurer has been pretty clear and direct with Australians. We’re not done on this yet. We want to rebalance the tax system, because if you’re at home right now, and you’re a wage earner, we believe you’ve been treated unfairly by the tax system.”