Chalmers Rules Out Fuel Excise Extension as Reserve Bank Warns Against Stimulus

Key facts

• Reserve Bank governor Michele Bullock warned extra government spending makes reducing inflation harder.
• Treasurer Jim Chalmers denied the budget would include 'heaps of stimulus', saying it will wind back spending overall.
• Speculation suggests a one-off tax offset worth up to $300 per worker may be included in the budget.
• Opposition Leader Angus Taylor flagged support for tax relief but accused Labor of lying about investor taxes.
• The RBA raised interest rates for the third consecutive time, wiping out last year's rate cuts.
• The budget is expected to address revenue-raising tweaks to negative gearing, capital gains tax discount, and family trusts.

Lede: Chalmers Under Fire Over Fuel Excise and Inflation

Treasurer Jim Chalmers has denied he has been “dacked” by Reserve Bank governor Michele Bullock over inflation, after her warning that new tax cuts in the budget could fuel price pressures. Speaking on the Today show, Chalmers faced host Karl Stefanovic’s pointed question: “How does it feel to get fiscally dacked by the Reserve Bank Governor?” The exchange came a day after the RBA raised interest rates for the third consecutive time, erasing last year’s trio of rate cuts and intensifying scrutiny on the level of government spending. Chalmers insisted the budget would be “really responsible” and would not include a “heap more stimulus”, as Bullock had cautioned against additional demand-boosting measures.

RBA Warning: Bullock Says Extra Spending Makes Inflation Fight Harder

Michele Bullock, who has previously been reluctant to weigh into the debate on government spending and inflation, said on Tuesday that “it doesn’t take much additional spending to make the job of returning inflation to target more challenging.” She added that providing more money to households would inflame demand, stating: “We are poorer, and there is no way out of that.” The RBA’s statement did not specifically mention government spending, but Bullock’s subsequent remarks made clear that any extra stimulus would complicate the bank’s efforts to dampen demand. Her comments underline the dilemma facing Labor in next week’s budget, which Prime Minister Anthony Albanese has framed as his most ambitious to date.

Tax Offset Speculation: Up to $300 Per Worker in Play

Amid speculation that the budget will include a one-off tax offset worth up to $300 for every worker, the Albanese government is under fire over whether such a measure could fuel inflation. A temporary offset is not a cash handout per se, but it would mean a larger tax cut in the financial year it applies. on Tuesday that households could score tax relief to offset revenue-raising tweaks to negative gearing, the capital gains tax discount, and family trusts, whose distributions are likely to be taxed at a minimum rate of 30 per cent. The tax offset, first reported in The Australian, may not kick in until next year, in which case the government may argue it would not add to inflation in the near-term.

Opposition Response: Taylor Flags Support but Slams Labor’s ‘Lies’

Opposition Leader Angus Taylor flagged support for proposed tax relief in next week’s budget, saying “we believe in lower taxes.” This paves the way for the Coalition to support any offset unless Labor ties the relief to legislation that includes its broader tax hikes on asset owners. Taylor was shadow treasurer when the Peter Dutton-led opposition infamously opposed a small tax cut announced by Labor before the last election, denting the opposition’s reputation for supporting lower taxes. On the broader measures, which largely re-adopt Bill Shorten’s 2019 tax agenda, Taylor was resolute: “They lie without any sense of remorse now, they break their promises without any sense of remorse. This is a Labor Party that has clearly lost any respect for the Australian people and thinks that it’s all just a political game. They are incompetent, they are fraudulent, and they are liars.”

Broader Context: Fuel Prices and Global Oil Crisis

The government is facing pressure to shield households from the global oil crisis and rising fuel prices, even as it tries to rein in spending to take heat out of the economy. Chalmers insisted that most voters understood that the “big reason we’ve had these recent spikes in prices because we’ve got a major war in the Middle East.” The opposition is also flirting with bold policies on slashing company tax for small businesses or using the GST or other means to pressure states to wean themselves off stamp duty. Meanwhile, higher business investment, a sign of a rebounding economy, helped drive up inflation last year, according to the RBA.

Outlook: Budget Day and the Inflation Balancing Act

The budget, due next week, will be a test of Labor’s ability to balance competing pressures: providing relief to households hit by high fuel prices and cost-of-living pressures, while not adding to inflationary pressures that could force the RBA to keep hiking rates. Chalmers has promised the budget will be “the most responsible” yet, with spending wound back overall. But with Bullock’s warning ringing in his ears, and the opposition ready to pounce on any perceived fiscal indiscipline, the treasurer faces a delicate path. The one-off tax offset, if included, will be scrutinised for its timing and impact on demand. The outcome will shape the economic narrative for the months ahead.

The bottom line

• Treasurer Jim Chalmers has ruled out extending the fuel excise cut and downplayed hopes for broad tax relief in the upcoming budget.
• Reserve Bank governor Michele Bullock warned that additional government spending makes it harder to reduce inflation, putting pressure on Labor to limit stimulus.
• Speculation of a one-off tax offset worth up to $300 per worker has emerged, potentially to offset revenue-raising measures on negative gearing, capital gains, and family trusts.
• Opposition Leader Angus Taylor has signalled support for tax relief but accused Labor of lying about its tax plans, setting up a political battle over fiscal credibility.
• The budget must navigate between shielding households from global oil price spikes and not exacerbating inflation, with the RBA watching closely.
• The government insists the budget will wind back spending overall, despite reports of possible tax offsets, as it seeks to balance relief with responsibility.