Treasury Briefings Reveal Government Will Miss Housing Target, Needs Tax Hikes to Balance Budget
Accidentally released Treasury briefings revealed Monday that Australia's government will likely miss its signature promise to build 1.2 million homes over five years and must raise taxes or cut spending to achieve budget sustainability, prompting Treasurer Jim Chalmers to defend the administration's economic agenda.
The sensitive briefings, prepared for the incoming government after recent elections, were sent to the ABC in error by a Treasury official, according to Chalmers, who said such mistakes "happen from time to time."
"The point that the incoming government brief makes is the same point that I've been making, Claire O'Neill and others have been making, is that we will need more effort to reach that substantial, ambitious housing target," Chalmers told reporters at a press conference Monday.
The Treasury documents stated unambiguously that "the 1.2 million new homes target will not be met," according to journalists who questioned Chalmers about the briefings. The assessment represents a significant challenge to one of the Labor government's most prominent election commitments.
Chalmers Remains "Relaxed" About Release
Despite the potentially damaging revelations, Chalmers said he was "pretty relaxed" about the accidental disclosure because the government had already acknowledged challenges in meeting housing goals and budget sustainability targets.
"We've already made it really clear that we will need to do more to meet our housing targets," Chalmers said. "We've already made it really clear that we will do more to make our economy more productive and more resilient."
The Treasurer emphasized that under current trajectories, the government would fall short of its housing target, but maintained that changes could be implemented over the next four years to build more homes through collaboration with state and local governments.
"We would fall short. But that doesn't mean that between now and over the course of the next four years that we can't consider ways and work with the states and territories and others, local governments and others, on ways to build more homes," he said.
Budget Sustainability Requires Tax and Spending Changes
The Treasury briefings also advised that achieving budget sustainability would require either raising taxes or reducing government spending. When pressed on whether tax increases were necessary, Chalmers pointed to the government's track record of combining various fiscal measures.
"We've shown in our first term an ability to deploy all three of those things," Chalmers said, referring to tax changes, spending restraint and budget savings. "For example, I increased taxes in the PRRT so that Australians got a bigger return sooner for offshore gas."
The government has achieved two budget surpluses and what Chalmers described as "the biggest ever nominal turnaround in the budget in a single parliamentary term," reducing Liberal Party debt by $170 billion through a combination of measures including $100 billion in savings.
Chalmers noted that Australia's tax-to-GDP ratio remains lower than under the John Howard government, which the opposition considers "the gold standard." When the current government took office, spending as a percentage of GDP was about one-third of the economy, which was reduced to about one-quarter before settling around 26-27 percent due to pressures from the care economy and other factors.
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Global Economic Uncertainty Shapes Government Strategy
The Treasurer emphasized that global economic conditions would be "the primary influence on our economy and on our choices in the government's second term," citing extreme global economic uncertainty compounded by conflict and trade tensions worldwide.
"What we're dealing with is extreme global economic uncertainty compounded by conflict and trade tensions around the world," Chalmers said. "So our engagement is all about navigating a world where volatility and unpredictability are the norm, not the exception."
This economic strategy involves increased international engagement, with Prime Minister Anthony Albanese currently in China for economic discussions and Chalmers preparing to attend G20 meetings in Durban, South Africa, later this week.
China Engagement and G20 Meetings
Chalmers said the economy was "the major focus of the Prime Minister's engagements in China," describing it as "a really crucial part of our prosperity" that makes China "an important and obvious focus for our economic diplomacy."
The Prime Minister is convening a meeting between major iron ore exporters and the Chinese steel industry, reflecting the importance of the resources sector to Australia's economy. Chalmers noted recent volatility in iron ore prices, which have seen "a very modest tick up" recently but have also fallen below budget projections at various times.
"Our iron ore industry, our exports, make a really valued and important contribution to our economy, to our labour market, to our budget," Chalmers said. "We're big supporters of the resources sector."
At the G20 meetings in Durban, Chalmers will meet directly with counterparts from Indonesia, Japan, Canada, the UK and Germany, focusing on strengthening economic ties with particular attention to capital flows, supply chains and critical minerals.
August Reform Roundtable Takes Shape
The government is finalizing preparations for an economic reform roundtable scheduled for August, which Chalmers said has generated significant interest from colleagues, regulators, business and union leaders.
The three-day event will focus on resilience on day one, productivity on day two, and sustainability on day three. Reserve Bank Governor Michelle Bullock will kick off day one after addresses by the Prime Minister and Treasurer, while Productivity Commission Chair Danielle Wood will open day two and Infrastructure Australia CEO Jenny Wilkinson will begin day three.
"From those discussions I am really encouraged and really optimistic that people will bring to the reform round table good constructive ideas for how we build on the agenda the government is already rolling out," Chalmers said.
The Treasurer has asked participants to bring ideas that are "broadly budget neutral or better," anticipating suggestions about changing one tax to enable cuts in another area.
Tax Reform and GST Considerations
When questioned about potential GST reform, Chalmers reiterated that both he and the Prime Minister have maintained consistent positions opposing changes to the goods and services tax.
"We've tried not to artificially limit the ideas that the states or others will bring to the reform roundtable," Chalmers said. "We've tried to have a relatively open mind, but you've all heard me talk about the GST before, and you all would have noticed what the Prime Minister said about the GST in the last few days, and those views haven't changed."
The government is also considering road user charges for electric vehicles as fossil fuel use in car fleets declines and EV adoption increases, which will have implications for the tax base. Chalmers said he has been "upfront with people really for some months now" about this issue, engaging with states and the sector.
"This is not a new development. And our interest in seeing what can be done over the medium and long term is not a revelation either," he said.
US Relations and Trade Tensions
Regarding recent US tariff announcements affecting the EU and Mexico, Chalmers said there had been "no change to our baseline tariffs when it comes to the US" but acknowledged that "every week brings new developments, new uncertainties."
The government is engaging with the Trump administration at multiple levels, with the Prime Minister having three conversations with President Trump, Chalmers holding three discussions with Treasury Secretary Scott Bessent, and Foreign Minister Penny Wong meeting with Secretary of State Marco Rubio.
"We're engaging at a whole range of levels with our American counterparts, but also in China at the G20, really wherever and whenever we can," Chalmers said.
Housing Target Defense
Despite Treasury's assessment that the housing target will not be met, Chalmers defended the government's ambitious approach to addressing Australia's housing challenges.
"We have to be ambitious in housing, and we are," he said. "I think it would be strange if a government like ours saw the obvious challenges in housing and decided anything other than to try and be ambitious about building many more homes for people."
The government is investing tens of billions of dollars in housing initiatives, working with state and local governments, engaging with industry, and implementing policy changes including modified tax arrangements for Build to Rent developments.
Chalmers described housing as "one of the defining challenges in our economy" and said the government would rather have "a big, ambitious, difficult target and work around the clock to meet it" than continue previous approaches that built too few homes.
Treasury Scenarios and Planning
Addressing concerns about worst-case economic scenarios outlined in the Treasury briefings, including potential challenges to the US dollar's status as global reserve currency, Chalmers said he welcomed and encouraged such analysis.
"I believe if you consider worst case scenarios, it gives you a better chance to work through them if they eventuate," he said, noting this approach was used during the global financial crisis and remains relevant given this is "the fourth big economic shock in less than two decades."
The global economic uncertainty represents "the thing that is most likely to constrain our choices and shape our choices" in the government's second term, according to Chalmers.
Legislative Priorities
Looking ahead to Parliament's return next week, Chalmers confirmed that student debt relief would be the government's first legislative priority, as announced by the Prime Minister. The superannuation legislation affecting high-balance accounts remains under consideration, with discussions ongoing with crossbench senators including the Greens' Nick McKim.
"We will have a discussion at some stage, recognising that we can't pass legislation in the Senate on our own," Chalmers said, noting McKim's office has been "very constructive" in preliminary discussions.
The accidentally released Treasury briefings have provided unusual public insight into the frank advice governments typically receive about policy challenges and economic risks, highlighting the gap between political promises and bureaucratic assessments of achievability.
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