Federal budget 2025: Labor on back foot over tax cuts

Anthony Albanese speaks to the media on Wednesday, as Peter Dutton does the same in the background. Picture: Getty Images

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Anthony Albanese and Jim Chalmers started the traditional post-budget media sales job on the back foot but moved quickly to wrong foot Peter Dutton over the latest tax-cut “top ups”.

After keeping more “tax cuts for everyone” top secret and producing them as big budget “surprise”, the Prime Minister and Treasurer jumped on to radio and TV shows with the expectation of a good reception at the start of the tax-cut and cost-of-living 2025 election campaign.

Labor offered tax cuts and billions of dollars in other cost-of-living relief and pushed the Opposition Leader and opposition Treasury spokesman Angus Taylor to a decision of whether to reject, accept or raise the “top-up” tax cuts of $5 a week next year. The Coalition’s rejection was what Labor had hoped, although the immediate reception – which doesn’t mean the public will feel the same – was dismissive and tough.

Dismissive because the $5 a week was a “cup of coffee” and not meaningful and tough because the total $17bn cost of that coffee was seen to be the wrong thing to do while the economy faces a decade of deficits and trillion dollars in debt.

On the biggest political “day” for a treasurer, Chalmers launched into a simultaneous sell for Labor and attack on Dutton.

“The election will be a choice between Labor cutting taxes … versus Peter Dutton, who’s got secret cuts which will make Australians worse off,” he said.

Seeking to seed dissent in ­Coalition ranks based on “chirping” he’d heard, Chalmers said: “That was the brain explosion that came out of the opposition lock-up when the shadow treasurer decided after bleating about lower taxes in the lead-up to the budget, when this government is delivering it, they say they’re against it”.

“To vote against this legislation would be to stand against more cost-of-living relief that Australians need and deserve,” Chalmers said, as Labor pushed through legislation in the final days of parliament for the 2026 tax cuts.

In among the banter about TV shows and currawong calls, media queries were on the paltry nature of the tax cuts – cup of coffee has become the standard measure – and a massive hit to the budget bottom line at a time Chalmers himself is warning of global uncertainty and economic storms.

Indeed, Chalmers has added the potential for global economic shocks from a new trade and tariff war as the “fourth shock” in less than 20 years following the financial crisis that became a demand shock, a pandemic that became a supply shock and an inflationary shock that lingers around the world.

“Escalating trade tensions now risk, if not represent, the fourth big economic shock in just 17 years,” he said in his post-­budget speech.

Despite this risk, Chalmers argued that the $17bn bill for the $5 a week tax cuts could be afforded because of good economic management and that he knew there was a need for more to be done to ease cost of living.

Yet even Jacqui Lambie, the Tasmanian independent friend of the workers, thought it was disgusting because everyone got the same tax cut and it wasn’t means-tested.

There’s a long way to go on the tax fight in 2025 and people will make their own judgments but so far Labor is on the back foot because the individual tax cut is too small, the total cost is too big and the money simply isn’t there.

This isn’t a good start to the tax fight for Labor.