Australia's budget slashes climate funds but targets housing with tax reforms

The Albanese government is preparing to unveil a budget that scales back climate spending while targeting housing affordability through tax reforms. Treasurer Jim Chalmers has signalled major changes to capital gains tax (CGT) rules, describing the current system as unfair and unsustainable. Meanwhile, Finance Minister Katy Gallagher has defended government spending, dismissing claims it is driving inflation. The upcoming budget will not match the high levels of climate funding seen in Labor’s first term. Gallagher admitted the previous net-zero investments—totaling tens of billions—were 'not sustainable'. Instead, the government plans to allocate $500 million to streamline environmental approvals, a significant reduction from earlier commitments.

Chalmers is set to cut the 50 per cent CGT discount for assets held over 12 months. Labor previously proposed halving this discount to 25 per cent during the 2016 and 2019 elections, but both attempts failed. The move comes as housing affordability worsens, with Australians now needing an annual income of around $200,000 to buy a typical capital city home without mortgage stress.

Gallagher also rejected suggestions that government expenditure was worsening inflation. She argued that broader economic pressures, rather than public spending, were the primary drivers of rising costs. The budget will introduce stricter CGT rules while reducing climate funding. The $500 million pledge for environmental approvals marks a shift from earlier spending levels. With housing costs soaring, the government’s tax reforms aim to ease financial pressure on buyers.