Latest / Best of Business / Paul Bloxham: HSBC Chief Economist ahead of Australia's 2026 federal budget

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Paul Bloxham: HSBC Chief Economist ahead of Australia's 2026 federal budget · Best of Business

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  Speaker 2: Australia's Treasurer Jim Chalmers is set to deliver the federal
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  Speaker 2: budget in about three hours from now. It's tipped to
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  Speaker 2: be the most consequential in decades. HSBC Chief economist Paul
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  Speaker 2: Blocksham is with us on this high Paul got eight,
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  Speaker 2: What are you looking for in the budget?
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  Speaker 3: Oh, so, there's a few things. I think one of
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  Speaker 3: them that's already been put out there in terms of
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  Speaker 3: lots of media coverage, is that they're going to make
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  Speaker 3: some pretty big reforms or changes to the tax system
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  Speaker 3: around housing in particular. So they're going to remove negative gearing.
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  Speaker 3: We're looking that that's likely what they're going to announce,
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  Speaker 3: and they're going to look at adjusting Australia's capital gains
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  Speaker 3: tax arrangements as well. An aim or an anim of
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  Speaker 3: that is to try to discourage people from investing as
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  Speaker 3: much in housing, so in discouraging housing investors to open
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  Speaker 3: up more availability of housing for first term buyers. So
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  Speaker 3: that's one particular a bunch of things that they're likely
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  Speaker 3: to do. I think the overarching story is going to
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  Speaker 3: be that the Treasury is going to tell us that
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  Speaker 3: they've found lots of savings. They're finding ways to trim
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  Speaker 3: back on some of the bigger social programs, like the
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  Speaker 3: National Disability Insurance Scheme, which has been growing very very
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  Speaker 3: quickly in recent times, and that's going to deliver them
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  Speaker 3: a bit more revenue support, and that we think we're
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  Speaker 3: still going to see some measures delivered in terms of
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  Speaker 3: support for the economy in the short run. So we've
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  Speaker 3: seen a cut in excise already delivered, and we think
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  Speaker 3: that we're looking out for more possible cost of living
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  Speaker 3: support measures that come through.
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  Speaker 2: Now is that problematic because I mean this is as
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  Speaker 2: we know, inflation has jumped quite markedly in just the
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  Speaker 2: last week while and if Bullock sees this carry on,
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  Speaker 2: she's going to tip the country into recession. So if
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  Speaker 2: they spined up in this budget, are they making that
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  Speaker 2: more likely?
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  Speaker 3: Well, that's the risk. So if the budget turns out
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  Speaker 3: to be more expansionary then than ideal, then that will
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  Speaker 3: put more demand into the economy at a time when
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  Speaker 3: inflation is already too high, and that would force the
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  Speaker 3: hand of the RBA, who have already lifted interest rates
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  Speaker 3: three times as we know over the past three meetings,
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  Speaker 3: to have to possibly lift interest rates even further because
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  Speaker 3: at the moment we've got an economy that's growing too
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  Speaker 3: quickly beyond its sustainable capacity. You can't boost demand in
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  Speaker 3: that economy. You actually have to focus on improving supply.
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  Speaker 3: And if the budget delivers something that does boost agg
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  Speaker 3: wiget demand, it increases that risk that the RBA has
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  Speaker 3: to lift rates more. And as you say, then that
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  Speaker 3: really the intention there would be to be slowing the
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  Speaker 3: economy down, pushing it into a harder landing and a
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  Speaker 3: bigger downturn. So getting this budget right and getting the
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  Speaker 3: settings right is quite is quite important, quite imperative, and
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  Speaker 3: I think the main thing we would like to look
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  Speaker 3: out for, beyond the things I just described, more actions
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  Speaker 3: that will improve the supply side of the economy that
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  Speaker 3: will lead to an improvement in productivity. But that hasn't
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  Speaker 3: been a key feature of what we've heard discs in
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  Speaker 3: the lead up to the budget. It's possible we might
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  Speaker 3: see quite more announcements in that regard tonight. It comes
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  Speaker 3: out in three hours, and we'll have to see what happens.
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  Speaker 2: Give me an example of what you would be looking for,
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  Speaker 2: like you if you would gim charmers and you were
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  Speaker 2: thinking about, right, we need to do the supply side,
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  Speaker 2: what would it be.
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  Speaker 3: Well, I think we need to look at a more
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  Speaker 3: broad based tax reform agenda than just looking at the
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  Speaker 3: housing market and looking at capital gains tax things, looking
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  Speaker 3: at things like the personal income tax system. We have
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  Speaker 3: very high personal income tax rates here, the corporate tax system,
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  Speaker 3: very high corporate tax rate, and looking at finding a
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  Speaker 3: way to potentially lower or adjust those and potentially focus
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  Speaker 3: more on one of our more efficient taxes, which is
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  Speaker 3: the GST, the Goods and Services tax, which is quite
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  Speaker 3: low and which delivers a small amount of revenue relative
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  Speaker 3: to other countries around the world. So those sorts of
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  Speaker 3: tax reform adjustments. I think the other thing would be
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  Speaker 3: the regulatory environment, where you look at, you know, can
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  Speaker 3: we find ways to streamline the regulatory environment in a
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  Speaker 3: way that encourages businesses to be more willing to do
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  Speaker 3: investment and innovation and expand because that's those sorts of
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  Speaker 3: things are going to help to encourage more investment and
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  Speaker 3: drive more productivity growth over time. These are the sorts
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  Speaker 3: of things we're looking out for and we might get
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  Speaker 3: some more of them today, but we'll just see what
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  Speaker 3: happens in a few hours time.
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  Speaker 2: Yeah, looking forward to it. Hey, Paul, thanks very much.
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  Speaker 2: Enjoy your next three hours. It's Paul Bloxham of AHSBC.
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