Treasurer Jim Chalmers has hosed down speculation that his upcoming Budget will score a big revenue boost from tax reform and the Middle East war.
The conflict in Iran and closure of key a oil and gas route through the Strait of Hormuz has pushed up petroleum prices and forced inflation higher. Consumer prices surged 4.6 per cent in the 12 months to March thanks partly to petrol costs.
Higher commodity prices would be expected to push up company tax revenue, while inflation will over time drive bracket creep — with families pushed into higher income tax brackets as their pay keeps up with cost of living.
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Top economist Chris Richardson reportedly forecast a $36 billion revenue boost from 2026 through 2030.
But Dr Chalmers played down the figures in a Commonwealth Bank podcast on Thursday.
“Any upgrade in any year will be a fraction of what you’ve seen speculated about,” he said.
“I sometimes read these stories, even very good, well-informed people, and I read it and I think I wish we were getting that kind of bump.”
He said there would also be a downside to revenue as the economy would likely slow from the energy shock, with unemployment likely to rise modestly and a higher exchange rate to reduce earnings.
“My current expectation is that some years will be worse, will be downgraded, and some years might be very slightly upgraded,” Dr Chalmers said.
There has also been talk that the Government will trim capital gains tax concessions and crack down on negative gearing.
Both would not boost revenue much in the near term, Dr Chalmers said.
“Even if we went down the path that has been speculated about . . . people shouldn’t expect there to be this huge amount of new revenue show up over the course of the next few years in the Budget,” he said.
But he said debate was “welcome” into how tax reform can “rebalance this issue we’ve got between very generous treatment of assets and less generous treatment of labour income of workers”.
Capital gains have a 50 per cent discount applied before taxes are calculated so as to offset the impact of inflation.
Negative gearing allows taxpayers to deduct losses — most notably rents falling below mortgage costs — so that taxes are levied only on final income.
