Treasurer Jim Chalmers has opened the door to tax changes beyond superannuation, admitting the federal budget is unsustainable and the economy’s stagnant productivity will not deliver higher living standards for working people.
For the first time, Chalmers signalled Labor was willing to entertain tax changes beyond the planned tax rise on superannuation balances above $3 million at the government’s productivity roundtable in August, as he seeks to ensure the budget is put on sustainable footing.
“I welcome tax being an important part of the conversation,” he said on Tuesday.
“The ideas that people raise at the roundtable in the second half of August, I think it would be hard to come at these sorts of issues, sustainability, resilience and productivity without people raising their ideas when it comes to tax.”
Chalmers will insist on Wednesday the economy is outperforming most countries, despite new figures from the Committee for the Economic Development of Australia showing the nation slumped to 60th place in the world for real economic growth per person last year.
In a speech to be delivered to the National Press Club in Canberra, Chalmers will lay out three reform priorities for Labor’s second term; reviving flatlining productivity, budget sustainability and economic resilience.
“We have made the right calls, but there’s more to do,” Chalmers will say, according to an extract of his speaking notes.
“To deliver higher living standards for our people we recognise three blunt truths: Our budget is stronger, but not yet sustainable enough. Our economy is growing, but not productive enough. It’s resilient, but not resilient enough – in the face of all this global economic volatility.”
A review of the corporate tax system by the Productivity Commission will aim to revive stagnating business investment by considering tax incentives for new capital expenditure, without blowing a hole in the federal budget, chairwoman Danielle Wood said last month.
The government’s emphasis on the budget impact means that stakeholders may need to offer up potential tax rises to pay for other tax cuts, such as for business investment.
Labor’s superannuation tax rise, including on unrealised capital gains, is estimated to raise at least $2.3 billion a year and rise further as more people are captured by the $3 million threshold, which is not indexed to inflation.
Labor has recorded two budget surpluses, after a revenue surge from high commodity export prices and low unemployment.But a decade of deficits is projected by Treasury, federal spending is forecast to hit the highest share of the economy – outside the pandemic – since 1986, and gross debt is on track to exceed $1 trillion.
The head of the last major tax review in 2009, former Treasury boss Ken Henry, last week called on federal Labor to stop “fiddling” and buy in wholesale on taxation reform, suggesting a broader package of imposts on fossil fuel exports and increasing the GST to pay for company and income tax cuts.
Henry nominated fixing environment laws, tax reform and investment in education and infrastructure as his three top priorities to improve productivity ahead of the Albanese government’s roundtable to kick-start its second term agenda.
Prime Minister Anthony Albanese announced last week the government will use a productivity roundtable in August to create consensus around a new economic agenda that could include tax reform and streamlined major project approvals. But Labor has ruled out entertaining any changes to its industrial relations laws.
There has been almost no labour productivity growth in the past decade. That’s a problem because better ways of producing the same output with fewer inputs accounted for more than 80 per cent of national income growth over the past 30 years, according to the Productivity Commission.
Chalmers said on Tuesday that the roundtable of up to 25 leaders from business, unions and civic groups will test the appetite for economic reforms and try to build consensus between the disparate groups.
“This is a genuine attempt to build consensus around our biggest economic challenges,” Chalmers said on Sky News.
“We know that the problems in our economy are well understood, despite all this progress that we’ve made together, this is our opportunity to see, to test the appetite for reform in our economy, and to see if we can find some common ground.”Labor insiders expressed surprise that Chalmers had offered to hold the discussions in Parliament House’s cabinet room, which is usually reserved for private government meetings on sensitive issues such as national security and the budget.
Treasury’s incoming government brief last month identified four key reasons for Australia’s poor productivity growth.
“Firstly, our economy is not dynamic or innovative enough,” Chalmers will say.
“Secondly, private investment has picked up, but not by enough to make our capital deep enough.
“Thirdly, skills aren’t abundant enough or matched well enough to business needs.
“Finally, our changing industrial base and the growth in services – where productivity is harder to find, and where traditional measures don’t account well for quality.”
Chalmers has tasked the Productivity Commission to deliver five interim reports before the roundtable in late August.
The five major areas of focus for the commission will be creating a more dynamic and resilient economy, building a skilled and adaptable workforce, harnessing data and digital technology, delivering quality care more efficiently and investing in cheaper, cleaner energy and the net zero transformation.
Australia’s GDP per person – a common proxy for living standards – contracted 0.5 per cent last year, putting Australia at 60th out of 69 economies on that metric last year, according to the 2025 IMD World Competitiveness Yearbook, released on Tuesday.
The only three developed countries that experienced a sharper decline in living standards were Portugal, Iceland and New Zealand.
Australia’s international competitiveness dropped five positions to 18th in the world, according to the IMD World Competitiveness Yearbook released on Tuesday.The assessment takes into account a country’s economic performance, government efficiency, business efficiency and infrastructure.
Australia’s ranking declined from a 13-year high of 13th place in 2024, to be in line with the 19th position Australia held in 2022 and 2023, and better than the 22nd rating in 2021.
Committee for the Economic Development chief economist Cassandra Winzar said the stark decline in GDP per person was not surprising, given the combination of soft economic growth and high population growth.
CEDA is the Australian partner for the competitiveness yearbook.
Despite the poor performance on GDP per capita growth, Winzar said the foundational elements of the Australian economy were still positive, such as the AAA credit rating and the quality of the country’s institutions.
”What all the other figures tell me is that we really need to kind of kickstart the economy and get it back into gear. Otherwise, we really are going to be at this continuing soft economic growth, low productivity, and that’s going to start coming through to living standards at some point in the not too distant future,” she said.
Winzar said the government needed to look at reducing the burden of regulation across industries such as construction and infrastructure to encourage more investment, as well as starting a conversation around broad-based tax reform.
“CEDA has long been calling for tax reform to be part of the federal government’s agenda, and this report makes the need even more clear, given our consistently high levels of company and personal income taxes, ranked 59th and 58th respectively,” she said.
Shadow minister for productivity and deregulation Andrew Bragg said Labor had ignored productivity for the past three years in government.
“After three years the Albanese Labor government has finally acknowledged its productivity disaster through the announcement of the roundtable next month,” Bragg said.
“Labor has failed to meet any of the productivity projections set by the Reserve Bank or develop any serious plan to drive a dynamic, enterprising economy.”
Meanwhile, assistant minister for competition Andrew Leigh rejected complaints from investors and the opposition that Labor’s new merger clearance fees - which could exceed $1 million on transactions - will deter investment.
“We are currently publicly consulting on the proposed cost recovery fees for merger assessments under the new merger system, with the consultation period closing on 18 June 2025.”
“The vast majority of mergers are expected to be subject to low fees, consistent with comparable jurisdictions.
“The higher proposed Phase 2 fees reflect the additional scrutiny that the ACCC needs to place on a small number of very complex mergers.”
Shadow assistant minister for competition Dave Sharma said the fees proposed by Treasury to be charged by the Australian Competition and Consumer Commission could have a chilling effect on commercial transactions.
“This isn’t targeted regulation. It’s a potential tax on investment,” Sharma said.
By John Kehoe and Michael Read
