SYDNEY, March 18 (Reuters) – Australian Treasurer Jim Chalmers will push for more tax reforms in the upcoming budget as part of a broader productivity drive, aiming to brace the economy for an inflation shock and potential hit from war in the Middle East.
Chalmers is set to deliver a pre-budget speech on Thursday and is expected to say that preparation for the May budget would focus on three packages, with more savings to build fiscal buffers, boosting productivity and tax reforms, according to excerpts of the speech that were viewed by Reuters.
Earlier, a new analysis from the Treasury showed under a more prolonged scenario, the U.S.-Israeli war on Iran could add 1.25 percentage points to inflation and take off 0.6% of economic output in 2027. That was in part why the central bank had to raise rates on Tuesday as inflation risked staying high for longer.
“The conflict in the Middle East is a stark reminder of how quickly the global economic outlook can change,” Chalmers said.
“All this economic uncertainty and volatility is a reason for more reform, not less. It’s a reason to go further, not slower.”
Chalmers did not say what kind of tax reforms would be unveiled in the May budget, but local media have reported on potential changes to the capital gains tax discount, which includes generous breaks for property investors.
(Reporting by Stella Qiu; Editing by Thomas Derpinghaus)
