Treasury tells Labor to hike taxes, slash spending to avoid budget blowout in leaked advice as millions struggle with price pressures
The independent Treasury informed Labor after its re-election it needs to find "additional revenue and spending reductions" to ensure a 'sustainable budget' as the Albanese government faces a decade of deficits and more than $1 trillion in debt.
It also warned Labor's goal to build 1.2 million homes by the end of this decade "will not be met" in a blow to Australians suffering under the dire housing crisis where prospective buyers are locked out of the market.
These revelations, which originate from a Freedom of Information request put to Treasury by the ABC, mount pressure on Treasurer Jim Chalmers as he drives Labor's economic agenda in the Albanese government's second term.
He has invited leaders across business, economics, unions and politics to an economic forum in August where Australia's sluggish productivity and the need for tax reform will come under the microscope.
Efforts to change how super balances above $3m are taxed, which includes paper gains on assets, have already met intense backlash, while Mr Chalmers has largely opposed calls to tackle GST despite economists arguing it would reduce reliance on income tax.
'I suspect the states will have a view about the GST. It's not a view I've been attracted to historically, but I'm going to try not to get in the process of shooting ideas between now and the round table,' Mr Chalmers told reporters in June.
The ABC revealed Treasury told Labor that "improvements to the budget will need to come from economic growth, additional revenue and spending reductions" and that "tax should be raised as part of broader tax reform".
Uncertainty surrounding the United States and its trade war were also analysed by Treasury with the department presenting an array of scenarios including if there was a loss of confidence in the US dollar.
"The global economic outlook has rapidly deteriorated, with implications for Australia," Treasury said.
The Albanese government was also warned about its lofty 1.2 million homes target.
Treasury said it 'would not be met' and called on Labor to build a 'coherent and well-prioritised' housing agenda.
Mr Chalmers told reporters he was "pretty relaxed" about the new revelations, which were released by error, and insisted Labor was upfront about the information in the new report.
"We have already made it really clear that we will do more to make our economy more productive and more resilient," he told reporters on Monday.
"We have made it clear that we need to build on the progress we have made in repairing the budget so that we can make the budget even more sustainable."
Mr Chalmers dismissed a question about Treasury's warning that Labor was falling short of it housing target as "a partial release" before later being grilled by a reporter.
"For the record, that subheading, in full, on new homes says the 1.2 million new homes target 'will not be met'. It's about as unambiguous as any of the headings yet," the reporter asked the Treasurer.
"Are you saying the department is wrong on that?"
Mr Chalmers shot back: "I have read the incoming Government brief. I don't need reminding of what it says. I read it on the Sunday after the election."
The Treasurer also said Labor has made efforts to boost the rate of housing growth and acknowledged the government was lagging behind its target.
"We will need more effort to reach that substantial ambitious housing target and we're investing tens of billions of dollars," Mr Chalmers said.
"We're working well with the states and territories and local governments, we're engaging with the industry, we're trying to get the capital flowing."
Labor's housing target were a point of concern for REA Group senior economist Anne Flaherty who warned the target already falls behind what is needed for Australia's housing market.
'We are lagging,' Ms Flaherty said on Business Now.
'There are some positive signs that things are picking up a bit but if we continue on the trajectory that we're already on, we're looking at around a 20 per cent shortfall in the government's target of 1.2 million houses or homes.
'I should add to that … (Labor's) 1.2 million new homes is really what we need to keep the ratio of supply of homes to the population steady from where we are.
'With population growth continuing to outpace forecasts, that's likely to mean that this 1.2 million new homes - which we are unlikely to achieve - would already be below what we would actually need.'
Recent figures from the Australian Bureau of Statistics showed the nation is falling well short of its 1.2 million new home goal.
If the government were to achieve its target, it would need to ensure 240,000 are built each year.
However, ABS figures show that since the Housing Accord began in July 2024, only about 90,000 new dwellings have been completed.
There were 90,136 houses built from July to December 2024 under the Albanese government, almost the same amount delivered by the Morrison government over the same period in 2021.
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