Treasury backs increase in taxes to repair budget, estimates hears

Higher taxes could be on the cards if Anthony Albanese takes the advice of a senior department official.

Anthony Albanese is being urged to increase taxes and intervene amid surging energy prices by Treasury boss Steven Kennedy.

In an opening statement at a Senate estimates hearing on Tuesday afternoon, Dr Kennedy said the government must address the “profound” budget pressures.

“In this Budget, the Government returned much of the upgrade in receipts to the bottom line and constrained spending, significantly lowering near-term deficits and debt,” he said.

“However, beyond the near term, the budget pressures are more profound and will likely require a combination of spending restraint and increases in taxes to reduce deficits and lower debt.”

Steven Kennedy was absent from estimates on Tuesday. Picture: NCA NewsWire / Gary Ramage

“We are fortunate in Australia to begin this journey with a relatively lower level of debt as a proportion of GDP than in many countries. Nevertheless, necessary policy decisions will be difficult in order to best promote the national interest.”

Dr Kennedy was due to appear before a Senate estimates hearing on Tuesday for a grilling following the release of Labor’s first budget in over a decade.

But due to a family emergency, the statement was delivered by deputy secretary Luke Yeaman.

Treasury has also warned the “marked” deterioration of the global economic outlook since April has made it “probable” that “major developed economies will soon experience recessions”.

“The primary causes of these ructions are two-fold: pandemic and war,” Dr Kennedy said in the statement.

Treasury Deputy Secretary Luke Yeaman stepped in for Dr Kennedy. Picture: NCA NewsWire / Martin Ollman

TREASURY WOULD SUPPORT INTERVENTION ON POWER PRICES

Meanwhile, Treasury has backed a government intervention to address surging power prices given the circumstances triggered by Russia’s invasion of Ukraine.

Grim modelling included in the October budget suggested by retail electricity prices would increase by up to 56 per cent over the next two years.

In his prepared remarks, Dr Kennedy said Treasury was supportive of “direct” government intervention.

“The circumstances of war-driven price shocks are different and outside the frame of such an approach. In our view, such shocks bring into scope government intervention,” he said.

Treasury would support a government intervention on energy prices. Picture: NCA NewsWire / Gary Ramage

“For example, the current gas and thermal coal price increases are leading to unusually high prices and profits for some companies; prices and profits well beyond the usual bounds of investment and profit cycles.

“The same price increases are leading to a reduction in the real incomes of many people, with the most severely affected being lower income working households.

“The energy price increases are also significantly reducing the profits of many businesses and raising questions about their viability.”

Electricity and gas prices are expected to directly contribute 0.75 percentage points to inflation

in 2022–23 and 1 percentage point in 2023–24.

Last month, Treasurer Jim Chalmers flagged he was considering further action to keep prices down.

“Any responsible government facing these sorts of price hikes needs to consider a broader suite of regulatory intervention than they might have considered in times gone by,” he told reporters ahead of the budget’s release.