Secret Treasury advice accidentally leaked, Albanese government told to raise taxes and slash spending to fix budget

In an extraordinary blunder, Treasury’s secret advice to the Albanese Government has accidentally been released – and there are some stunning recommendations.

Australia’s cash-strapped budget cannot be repaired without raising taxes and slashing spending according to secret Treasury advice provided to the Albanese Government after the election.

In an extraordinary blunder, the Treasury department has accidentally released the secret advice in response to a freedom of information (FOI) request before pleading with journalists to destroy the document.

The bombshell document reveals Treasurer Jim Chalmers was warned he needs to find “additional revenue and spending reductions” to repair the budget.

The Treasury advised that “tax should be raised as part of broader tax reform” and that “improvements to the budget will need to come from economic growth, additional revenue and spending reductions.”

But rather than increase income taxes, the Treasury has suggested raising “indirect taxes” with a further crackdown on superannuation tax breaks for the rich a possible target.

The document also warns that ambitious targets pledged by the Prime Minister Anthony Albanese to build 1.2 million homes over five years to address the housing crisis “will not be met”.

The secret advice also confirms Treasury has war-gamed various horror scenarios including a global financial crisis originating in the United States that might require a stimulus response, including “direct support” (e.g. cash payments) to calm financial markets.

Secret Treasury advice provided to the Albanese Government in the wake of the election has been released. Picture: NewsWire / Nikki Short

ABC rejected government request to delete documents

After the election, each department traditionally prepares an incoming government brief.

It provides frank and fearless advice to ministers on the challenges ahead and is a confidential document.

Journalists do not have automatic access to the secret advice but can request a copy under freedom of information laws.

If successful, they receive a heavily redacted copy with significant elements obscured.

In this instance, public servants mistakenly included headings and subheadings from the redacted sections, revealing sensitive elements of Treasury’s briefing to the national broadcaster, the ABC.

Upon realising the error, Treasury asked that the document be deleted, but the ABC decided to publish it arguing that “it provides a rare insight into how top advisers view the major economic and policy challenges facing the Albanese government as it begins its second term in power, and so is in the public interest.”

‘Relaxed’: Treasurer Jim Chalmers reacts

The secret advice is contained in the Treasury’s “incoming government” brief to the department’s ministers, including Mr Chalmers and Housing Minister Clare O’Neil.

Jim Chalmers said he was “pretty relaxed” about the document dump.

“What’s happened here is that a Treasury official has sent those documents in error,’’ he said.

“That sort of thing happens from time to time. I’m pretty relaxed about it, to be honest, because, of course, the Treasury provides advice for incoming governments and no government typically goes into the details of that.

“The other reason I’m pretty relaxed about it is we have already made it really clear that we will need to do more to meet our housing targets.

“Now, when you ask me about tax reform more broadly - what we have asked people to come to the round-table with is ideas which are broadly budget-neutral or better.

“And people will come with all kinds of suggestions about how changing one tax over here will make it possible to cut taxes over there.””

A spokesperson for Mr Chalmers earlier confirmed the documents were legitimate but declined to go into further detail.

“Of course the Treasury provides advice for incoming governments … We’ve already made it clear we’ll need to do more to meet our housing goals and make our economy more productive and our budget sustainable,” the spokesperson said.

“These issues were a focus of the treasurer’s recent address to the National Press Club and we will grapple with some of them at the upcoming roundtable.”

The PM and his fiancé Jodie Haydon are in Shanghai. Picture: AAP Image/Pool, Dominic Lorrimer

Superannuation in the Treasury’s sights

The government flagged plans to double the earnings tax on super balances above $3 million before the 2025 election and is now claiming a clear mandate for the changes.

But to secure Senate support for the changes the Albanese Government is under pressure to legislate the indexation of the threshold to ensure more Australians are not captured by the $3 million super rule over time.

The Treasury appears to be urging further changes, with one heading describing “opportunities to build on your agenda” and consideration of “building on” Labor’s superannuation tax changes.

Adjust the 1.2 million homes target

The department also advised the Albanese Government that the 1.2 million homes target pledged in the 2025 election “would not be met”.

The secret advice notes “challenges” with the “responsiveness… capability… [and] speed” of key housing agency Housing Australia.

The Treasury advice suggests a “review” should be conducted to address the challenges.

Australia's treasurer Jim Chalmers confirmed the documents - which advise Labor to increase taxes and slash spending - were legitimate. Picture: David Gray/AFP

GST changes

The Prime Minister has previously declared he will “always” support lower taxes and higher wages but isn’t attracted to increases to the GST to pay for it.

Leaving the door open to further changes to superannuation taxes recently, Mr Albanese appeared to pour cold water on a shift in the 10 per cent GST rate as part of the Productivity Round Table to be held in Canberra in August.

Lifting the GST rate has long been proposed as one option to alleviate the pressure on income taxes to fund government services.

“I am a supporter of progressive taxation,’’ Mr Albanese said.

“Consumption taxes by definition are regressive in their nature, so that’s something that you know doesn’t fit with the agenda.

“But people are entitled to put things up. Every government should be in the ideas business. And no government should imagine it has a monopoly on good ideas.”

Planning for ‘worst-case scenario’ in the US economy

The Treasury advice also confirms that officials have modelled the impact of a financial crisis originating in the United States.

“The global economic outlook has rapidly deteriorated, with implications for Australia,” the department advised Mr Chalmers.

Potential horror scenarios include a loss of confidence in the US dollar as the global reserve currency and threats to the independence of its central bank, the Federal Reserve.

‘Don’t listen to what they say’: Libs react

Opposition Treasury spokesman Ted O’Brien said that the Albanese Government had been caught misleading Australians on tax.

“The Treasury has made it clear - Labor cannot fix the budget without raising taxes and cutting spending,’’ he said.

“Yet the only tax measure Labor has put forward is their unfair superannuation tax on unrealised gains.

“Anyone who thinks Labor’s super tax on unrealised gains is the end of their campaign to tax family savings is kidding themselves.

“Australians deserve to know what’s next. Will Labor extend these taxes to family homes? Family trusts? Small businesses?.”

“When it comes to this Government, don’t listen to what they say, watch what they do.”

Originally published as Secret Treasury advice accidentally leaked, Albanese government told to raise taxes and slash spending to fix budget