Inflation sits around 4.6 percent, adding urgency to balance growth support with price stability in the budget.

Economists warn external factors such as international tensions and higher energy costs could complicate reform efforts amid voters’ cost-of-living concerns.

The Australian budget is shaping up for May 2026 with Treasurer Jim Chalmers signaling major tax reform, including changes to capital gains tax and negative gearing, aimed at improving intergenerational equity and helping younger Australians access the property market.

Chalmers indicated any CGT and negative gearing reforms would be grandfathered for current asset owners and would be phased in, limiting an immediate revenue windfall and focusing on long-term housing supply and fairness.

The reform package is anticipated to raise some revenue and rein in investor activity, while aiding first-time and low-income home buyers.

The May budget is expected to feature reduced CGT concessions and an overhaul of negative gearing, framed within a broader push for intergenerational equity and housing construction incentives.

Officials expect the reforms to be part of a broader tax package that reduces the incentive for investor-driven price pressures while encouraging new housing supply and investment in construction.

A government housing outlook shows a target of 1.2 million homes by mid-2029, but current projections fall about 200,000 short, with rising costs and global tensions contributing to a challenging supply outlook.

Industry groups are pressing for easier regulation, calling for a 25% cut in unnecessary red tape by 2030 to reduce costs for business and households.

Beyond housing, the budget is expected to include a productivity package focused on growth, potentially leveraging AI and cutting compliance costs.

Public support for CGT reform appears mixed, with polls showing modest backing for a reduced concession and substantial uncertainty among voters.

The government aims to spur new housing supply while preserving investor incentives, with details to be announced in the budget.