Federal budget verdict: Jim Chalmers’ report card is in

This is the budget Jim Chalmers has been itching to hand down for a decade. It will be framed by Labor as an economically responsible budget that makes difficult but necessary decisions to raise taxes, cut spending and boost productivity. But it’s more significant than that because of the scope and ambition of what Labor is trying to achieve. It’s also unbalanced in that it embraces some big challenges and shuns others. Grading the budget. First off, to paraphrase Paul Keating, this is a budget for the Labor true believers. After four years of cautious incrementalism, Chalmers – backed to the hilt by Anthony Albanese – hasn’t just reached for one or two slightly controversial or ambitious measures. Instead, as the treasurer said on budget night, “this is the most important and ambitious budget in decades” and “this is about better aligning the taxes paid on these types of [investment] incomes with the taxes paid on wages”. At its heart, Chalmers’ fifth federal budget is hugely ambitious on some of the tax changes on the revenue raising side it attempts , but it doesn’t take on the task of using that extra revenue to make broadscale tax reform. Chalmers has done three big things on the revenue side: curbing negative gearing and capital gains tax breaks and ensuring that trusts pay a minimum 30 per cent tax. This will raise a whopping $100 billion extra in revenue for federal coffers over the next 10 years, though the amount falls to about $77 billion when the cost of handing out the $250 working Australians tax offset is factored in. It’s still a huge sum of money raised. These three changes will be manna from heaven for most Labor supporters, who backed the changes when proposed by Bill Shorten at the 2016 and 2019 elections but were disappointed that Albanese had abandoned them when he became leader, and who have been tearing their hair out since Labor’s big win at the 2025 election. The government is aiming to get more young people into the property market. On revenue raising, therefore, Chalmers gets an A for undertaking tax changes that Labor argues will rebalance the tax system away from property investors and towards first home buyers, and for having the courage of its convictions (finally). Unfortunately, Labor loses a bunch of marks for two things. First, it did not take these proposed changes to the last election (and in fact ruled them out many times) so this is a whopping broken promise. It remains to be seen whether voters will mark them down for that, or whether the government has judged the moment correctly, that the cost of inaction would have been higher and that voters expect their leaders to, well, lead and respond when circumstances change. The government’s ability to win this argument could set up this budget to be a big success, or a Joe Hockey-style lead balloon. The second problem is a more difficult hurdle for the treasurer to clear. Chalmers is claiming this budget cuts taxes in five different ways. It’s a garbage line. This budget contains three 1 percentage point tax cuts that were already announced, offers taxpayers the chance to accept a $1000 instant tax deduction, and introduces the working Australians tax offset of $250 from the next financial year. The total estimated value of these five changes is a bit over $2000 per year to an individual but that is a best-case scenario. It will be a lot less for most people. Despite what the treasurer may claim, that is not major reform of the personal income tax system. Combined with an underwhelming series of tax measures for business, including making the instant asset write-off permanent but not touching company tax, the budget gets a D for reducing the tax burden on Australians – and a B overall, with the jury out for now on whether it is a success. On improving productivity, which has been flat-lining in Australia for more than a decade, the government has produced a grab bag of ideas, some of which will help. Every government, for example, promises to reduce red tape. The focus on building a national single market and harmonising standards and laws so it is easier for businesses to work across borders is sensible and overdue, as is expanding the use of the government’s digital ID and slashing fees and wait times for getting more homes built. But here’s the kicker. Chalmers says these reforms will boost productivity in the Australian economy (finally), which will, in turn, start to rebuild Australians’ wages in real terms. Unfortunately, as Treasury’s Budget Paper No. 1 makes clear, “the long-term productivity growth assumption remains at 1.2 per cent in the 2026-27 budget”. So that’s a C-, at best. And finally, on cutting spending, this budget makes one massive saving – about $36 billion worth of cuts over the next four years to the National Disability Insurance Scheme (NDIS), which will result in 300,000 kids being moved off the scheme. Subsidies for electric cars are being wound back. There are smaller savings, such as on private health insurance ($3 billion), cutting back on the number of consultants used by government ($2.7 billion) and winding back subsidies for electric vehicles ($1.7 billion). Therefore, Chalmers gets an A- on the cuts side. This is where Chalmers’ budget performs best: the NDIS cuts are already controversial and they will cause pain and distress for some families and individuals. But they are also necessary to make the scheme more sustainable.