Budget to reveal tax down as Labor MPs urge ‘steady hands’ spending restraint

Jim Chalmers’ fourth budget will show tax as a proportion of the economy has declined to 23.1 per cent this financial year, as Labor MPs declare spending restraint is needed.

Treasurer Jim Chalmers. Picture: NewsWire/Martin Ollman

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Jim Chalmers’ fourth budget will show tax as a proportion of the economy has declined to 23.1 per cent this financial year, as Labor MPs declare spending restraint is needed on Tuesday to demonstrate the nation was being led by “steady hands” in times of global economic uncertainty.

In a development that blunts the Coalition’s claim the old tax to GDP ratio needs to be restored, The Australian understands Tuesday’s budget will show the tax to GDP ratio for 2024-25 will be lower than the 23.4 per cent forecast in December’s mid-year budget update and lower than last year’s level of 23.7 per cent.

With the Coalition pledging to restore the 23.9 per cent tax to GDP cap that was abolished by the Albanese government, the budget will also forecast this proposed cap would not be breached in the forward estimates.

While Labor MPs called for more cost-of-living relief in the budget beyond the rebates announced, many told The Australian the Treasurer needed to show constraint and demonstrate the country was being led by a “set of steady hands” in the face of a looming trade war.

Seven MPs who spoke to The Australian all urged the government not to “go overboard” on spending in the upcoming budget.

“I don’t think we want to be like shovelling money out the door,” one Labor MP said.

“I just want there to be some more, like meaningful, but not kind of irresponsible cost-of-living relief stuff.”

A Labor MP said they were expecting “a couple of other things that will help with the cost of living” in Tuesday’s budget.

“But we’ve going to be realistic. None of us really know what the next three years under Trump is going to be, around these tariffs,” the MP said.

“There is an acknowledgment that people are still doing it tough, but also we’ve got to be responsible.

“And I think he’s done very well as the treasurer … but the only problem is that … prime ministers want to stay in government, so I think there’ll be a couple more things to announce, but I don’t think we’re going to go overboard.”

Another said “I imagine there will be one or two things they’re saving for budget night”, but also agreed the resilience of the economy ahead of any future US tariffs should be the priority.

One MP admitted this was “the budget that we didn’t know was going to happen”, and said it was important that it gave “a nod that people are still finding it tough”.

“We need to make sure that we have a resilient economy, so that it can deal with shocks, whatever they may be,” another Labor MP said.

“There will be deficits in the out years, which is a reflection of the fact that there are a number of areas of government spending, including, you know, health, NDIS, but also defence, where there are now pressures. But I mean, Jim’s acknowledged this on a whole bunch of occasions, and this is now something we are going to have to deal with in the medium term.

“But, you know, our solution is not austerity.”

One of Dr Chalmers’ Queensland colleagues, Graham Perrett, said the Treasurer had every reason to be cautious in the upcoming budget.

“When you’re a trading nation and the term trade war has been bandied around … treasurers are rightfully nervous,” he said.

“It’s a tight budget, so I’m not, I’m not expecting much more.”

Another MP agreed they were not expecting “a fandangled” budget.

“It’ll be a bit of health (spending) and a focus on the things we’ve done that brings down inflation. Because I think the broader message will be, inflation’s in an uncertain place right now,” they said.

“We need to look steady, particularly in comparison to the US.”

However, one Labor MP said that they expected an announcement around electrification in the near term.

“I’d like something on electrification, if not in the budget, then before the election, and my understanding is that is a possibility,” they said.

“We need something a bit more broad that what we’ve already done, so not necessarily a rebate, because you don’t want to duplicate what the states are doing, but just sort of some sort of broader package, particularly to help renters and strata.”

Other MPs urged against such big reforms, pointing to similar policies in Victoria having gone down badly

Tasmanian MP Helen Polley said there was a shared view that the budget needed to be responsible.

“I have confidence in the Prime Minister and Treasurer to bring down a responsible budget, but acknowledging people are still doing it tough,” she said.

Another MP said the government should be open to slapping its own tariffs on the US.

“If I was going to support any tariffs going back on the Americans … it would be for those things that are produced in the States … with that Republican support base, that’s where I’d be aiming at,” they said.

Labor MPs confirmed a Senate estimates program had been finalised and would kick off on Thursday.

But despite being scheduled to continue into the following week, many Senators said they expected estimates to be cut short by the start of an election campaign, widely mooted to be called on the weekend.

While those who spoke to The Australian were optimistic about their election prospects in the wake of poor performance within Coalition ranks, many still expected a swing against the party.

“It’ll come down seat by seat. I think we’ll have a swing against us, but looking at things recently, I don’t think it’ll be huge,” they said.