Expect federal budget to be as significant as ‘banana republic’ warning

Treasurer Jim Chalmers told Political Editor Charles Croucher Weekend today this morning the “status quo is not working” in the housing market, and this week saw changes in capital gains taxes and negative gearing.

Croucher told the Treasurer that the upcoming budget comes 40 years later than Treasurer Paul Keating warned that Australia was at risk of becoming a ‘banana republic’ due to a massive collapse in export prices and rising foreign debt.

“We’re now looking at a trillion dollars worth of debt sometime later this year… that speech was a line in the sand and shook the way Australians think,” Croucher said.

Chalmers responded by saying there would be “more than the usual amount of change”.

“There is more than the usual amount of change… and more than the usual amount of concern about how our economy is developing.”

Referring to changes to capital gains tax, the Treasurer also said that while housing supply must be the “main play” in solving the housing crisis, it should not end there

“Even though the problem in the housing market starts with supply, it doesn’t stop there. … the status quo, the tax system and the housing market are unfair … there are also many people left out and there are not enough houses,” Chalmers said.

Negative gearing occurs when an investor has costs associated with a property, such as interest on mortgage repayments, that exceed the profit he makes. Investors can then deduct many of those expenses from their taxable income, meaning they pay less at tax time.

Chalmers also announced today that the Budget will include an additional $2 billion over four years for infrastructure spending on roads, water, electricity and sewerage, which will help build up to 65,000 new homes.

The money will be given to municipalities and public utilities, with $500 million of the money earmarked for regional and rural areas.

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