Negative gearing and capital gains tax on the menu for federal budget | ABC NEWS

Treasurer Jim Chalmers and Finance Minister Katie Gallagher say the federal budget will have more new savings measures than new spending.Economics reporter Tom Crowley joins us now from Parliament House in Canberra.Tom, what do we know about the savings in the budget?

Well, that headline figure that you mentioned there, Gemma, is the number one, that there will be more savings than new spending.Earlier this week, or earlier last week, we got a list of some of the things that the government describes as unavoidable spends, or some new spends that we already knew about.They include some spending on defence, new listings for the pharmaceutical benefits scheme, and a range of other things the government says it couldn't avoid.But now we know that that total sum, which was in the order of $30 billion -ish, will be than the amount that's being saved really just by the one dominant saving measure in this budget, and that is the NDIS.$35 billion over four years, we're told, will be saved from Mark Butler's plan to radically curb the growth in the National Disability Insurance Scheme.That's pretty much the only major saving that we've heard about apart from one or two.

There's about $3 billion saved from taking the private health insurance rebate away from older Australians, over 65, and $2 .7 billion that Katie Gallagher mentioned this morning from cracking down on the use of consultants and non -labour costs such as travel within the public service.That's something that we've heard in successive labour budgets.They've had an ongoing measure that pretty much every couple of years nets some additional savings to the budget.But Katie Gallagher says that there will be other savings and reprioritisations in every portfolio of government, that they've looked very hard to find ways where the government can tighten its own belt ahead of a budget where the inflation context, not the only economic context, of course, the war is part of a much bigger picture that's doing a lot of complicated things to the budget bottom line.But we know that the Reserve Bank Board will make its decision on interest rates tomorrow.Widely expected that there will be a hike at that meeting.

Michelle Bullock's already seen a sneak peek.of the government's bottom line.Everything that they can do to show that they are choosing not to spend too much on new things and showing restraint where they can will underline the political argument that they're seeking to make that the government's budget is helping, not hindering, with that inflation problem.

Tom, there's also rampant speculation about tax reform in the budget.What clues do we have in that regard?

Rampant is right.Capital gains tax and perhaps we think negative gearing are pretty much locked and loaded.We don't know exactly the details of the tax policies but Jim Chalmers and Anthony Albanese in the last few days effectively already selling a tax proposition that's on the basis of improving generational fairness.Jim Chalmers when he spoke earlier this morning was saying it's not about pitting old against young.Noting that the tax breaks like capital gains tax and negative gearing have benefited a generation of people who have experienced not about punishing those people or saying that they shouldn't have benefited from the tax concessions that have been part of the system for a long time, but rather that it's now about trying to give young Australians a stake in the housing market.And that figure, the home ownership rate, how many young Australians are able to own their own homes, is the key one that we think the government is going to be emphasising here with its tax plans.

There's a mixed body of evidence about exactly what changes to negative gearing in the capital gains tax would do house prices.But Jim Chalmers has been saying prices are not really the target.The biggest thing that capital gains and negative gearing changes could do, and this is something the economists agree on, is change the distribution of home ownership away from investors and towards homeowners.That's something the government thinks will be a politically winning message.There's additional speculation about things like the taxation of trusts and lots of questions as well about exactly how any tax changes will be designed.Will they be fully grandfathered so that all pre -existing investments prior to budget night are exempted from the new rules.

or will there be some sort of phase -in or transition, which would be a lot more controversial and leave the government open to accusations that it is changing the rules on people, but might also go further on that measure of trying to tip the balance back towards home ownership for first -home buyers.So that's the balance for the government to assess.We're told that the decisions are maybe not quite finalised or almost finalised, but we won't have to speculate for too much longer.eight days now, Gemma, until that budget day.