Jim Chalmers to avoid big spending cuts in election-defining 2025 budget

Tax reform is unlikely in Jim Chalmers’ fourth budget with the focus to instead be on more temporary cost-of-living relief and the guarantee of growing spending on health and education.

Jim Chalmers, left, and Anthony Albanese in Brisbane on Sunday. Picture: NewsWire/Tertius Pickard

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Jim Chalmers will avoid significant spending cuts or revenue measures in the March budget to pay for a growing list of expensive election commitments and a one-off hit from Cyclone Alfred, as Labor prepares to shift to campaign mode this week and claim Peter Dutton will be a risk to key services, wages and the economy.

The Australian can reveal ­Anthony Albanese’s preferred election date of April 12 was so set in stone, that many senior ministers and advisers were understood to have adopted perfunctory ­approaches during preliminary meetings for a March 25 budget and put off major decisions.

The execution of major policy announcements, funding allocations and pre-election media strategies since early January were predicated on an April timeline, with Mr Albanese endorsing a plan to head to the polls immediately after Roger Cook-led Labor’s WA election victory on Saturday.

But the Albanese government will now use the WA ALP landslide to help propel a pseudo eight-week campaign, with ALP figures believing the March 25 budget can highlight its management of the economy in the same way Mr Cook did with Perth voters.

Labor insiders say the government’s record of reducing inflation while keeping unemployment low will be a potent argument in the campaign, as long as it is conveyed “sensitively” to an electorate struggling with cost of living.

While Labor MPs Rob Mitchell and Mike Freelander have backed income-tax cuts as part of a cost-of-living package for middle-­income Australians, The Australian understands tax reform is unlikely, with the focus instead to be on more temporary living relief and the guarantee of growing spending on health, education and emergency management services.

The renewed focus on the March 25 budget comes after Mr Albanese last Friday ruled out an April 12 election, with the poll to be held on May 3, 10 or 17.

While Labor’s campaign headquarters in Sydney was put on full readiness last week, with key staff flying in from Monday, key ALP operators had been in place for several weeks preparing for the April 12 election. There was an ­exodus of staff from campaign HQ over the weekend after Mr Albanese’s decision on Friday.

While most Labor MPs are pushing for the budget to include an extension of the $300 electricity bill rebate past its June 30 expiry, Mr Mitchell, who holds McEwen, a target seat for the Liberals in outer Melbourne, said he would also welcome tax cuts for low and middle-income workers as part of a broader cost-of-living package. “They can see the light at the end of the tunnel; we have just got to make it brighter,” he said. “Anything that is helping people on low and middle incomes is going to be absolutely welcome.”

Anthony Albanese and Jim Chalmers. Picture: NewsWire/Tertius Pickard

Dr Freelander backed income-tax relief for middle-income earners, particularly workers earning between $80,000 and $120,000.

“Some form of personal taxation relief should be looked at but I am aware we (also) have a large budget deficit and we have to try and reduce it,” he said.

Another Labor backbencher, who did not want to be named, was also hoping for income tax cuts in the budget.

Speaking in Canberra on ­Sunday, Mr Albanese said his ­government was considering _budget policies to “assist people” struggling with cost-of-living pressures. Mr Albanese, who also appeared with Dr Chalmers in the Treasurer’s flood-affected seat of Rankin, said addressing cost of living was “one of the ­defining characteristics of my term of government”.

“We were saying yes to energy bill relief, yes to tax cuts for all Australians, yes to cheaper child care, yes to free TAFE,” Mr Albanese said.

“Yes to providing a range of support, including lifting rental assistance by 45 per cent over two budgets. We were saying yes to all of that while getting the Liberal Party deficits, turning them into Labor surpluses.”

Anthony Albanese, Jim Chalmers and Jenny McAllister during a visit to the Gallipoli Barracks. Picture: NewsWire/Tertius Pickard

While the Coalition has left the door open to unveiling a fresh ­income-tax cut package ahead of the election, the Opposition Leader said on Sunday he would welcome relief for workers in the March budget. However, Mr Dutton warned against delivering tax cuts or other budget measures that would put too much money into the economy and put upward pressure on inflation.

“If we can see income tax cuts which are responsibly delivered then we would welcome that but we’ve got to also be careful,” Mr Dutton said. “We don’t believe that the problems of inflation are behind us. The Reserve Bank is really still worried about what ­happens with inflation and a big-spending Labor-Greens government could see interest rates going back up at a time when ­families really want them to come down. So there’s no sense giving money with the one hand and then seeing it taken with the other. And that’s what we’re seeing in relation to the energy supplements.”

Peter Dutton during a briefing with Morton Bay Council disaster management as a result of ex-cyclone Alfred. Picture: Lyndon Mechielsen

With Labor planning on launching a scare campaign claiming the Coalition would cut services and welfare to pay for its nuclear policy, Social Services Minister Amanda Rishworth will on Monday release full details on how social security payments increase from March 20 under the latest round of indexation. The figures show a single pensioner will be receiving $3913 a year more since the Albanese government was elected because it had indexed payments in line with inflation over the past three years, while Jobseeker recipients would be pocketing between $3374 and $5038 extra.

Ms Rishworth said indexation of social security payments would “be at risk under Peter Dutton”.

“We’ve spent the past three years strengthening our social ­security system, so that it helps Australians at whatever age or stage they’re at in life,” Ms Rishworth said. “Indexation is a critical part of our social security safety net. For pensioners and other ­payment recipients receiving this financial boost, this will help ease some pressure.”

Labor will target opposition Treasury spokesman Angus Taylor in the lead-up to the May ­election, believing his advocacy on the economy was a weakness for the Coalition.

Peter Dutton on Sunday. Picture: Lyndon Mechielsen

Economists are likely to be dismayed by Labor’s looming budget, as it will likely be highly political and put increased strain on the structural budget deficit.

Labor sources said the budget would show an improvement to the bottom line from the forecast in the mid-year update in ­December, but argue that the ­upgrade will be nowhere near the $11bn forecast by Rich Insight founder Chris Richardson.

Mr Richardson is forecasting a smaller deficit in 2024-25 of $16.1bn – compared with MYEFO’s $26.9bn – with personal taxes “set to outperform ­because population and jobs are both set to outperform”.

“The luck won’t last … it’s the equivalent of a huge but one-off lottery win,” Mr Richardson warned. “What will last, however, are the permanent promises made to ourselves off the back of that ­lottery win – promises that are ­accelerating (from both sides) as the election nears.”