Article by Jack Quail, Paul Garvey and Perry Williams, courtesy of The Australian.
15.10.2025
One of Labor’s most successful premiers, Mark McGowan, and business chiefs are warning Jim Chalmers to prioritise spending restraint over higher taxes, as trade unions demand new levies on property investors, gas companies and the wealthy to plug the budget black hole created by the overhaul of the super tax.
As economists cautioned that the revenue gap of up to $20bn could keep a budget surplus out of reach for more than a decade, the Treasurer flew to Washington on Wednesday for International Monetary Fund and World Bank meetings, where the surge in global public debt is expected to dominate discussions.
Business leaders, including the chairmen of Whitehaven Coal and Soul Patts, urged Canberra to follow their lead and rein in spending to repair the looming fiscal hole after Dr Chalmers’ succumbed to a backlash and scrapped the unrealised gains tax.
Unions are pushing in the opposite direction, with ACTU secretary Sally McManus on Wednesday reviving a suite of tax proposals the peak body took to the government’s recent economic reform roundtable – measures that were vehemently opposed by business.
Mr McGowan, the former West Australian premier, called on the federal government to look at constraining expenditure, including the growth of the National Disability Insurance Scheme, before considering changes to tax.
“If I was the commonwealth government, I would look more towards spending,” Mr McGowan told the Property Council’s annual conference in Perth.
“The growth in the NDIS has been ridiculously high and they need to arrest that.”
The former premier – whose 2021 election victory was the biggest of any federal and state leader in Australian history – also urged the government to pursue regulatory reform, pointing to Labor’s plans to overhaul federal environmental laws and simplify overlapping commonwealth-state regulations.
“That sort of productivity-enhancing regulation is easier to do than tax and it can have great benefits,” he said.
The intervention follows Dr Chalmers’ announcement on Tuesday that Labor would wind- back its planned tax hike on high-balance superannuation accounts, indexing its $3m threshold and limiting the new levy to realised gains.
But in addressing two of the plan’s most controversial elements, the Treasurer has created a new problem – the revision is expected to generate a multi-billion-dollar fiscal shortfall that economists warn will delay the budget’s expected return to surplus in 2035.
“I now doubt a surplus will be achieved in my lifetime, let alone by 2035,” said former JP Morgan chief economist Stephen Walters, now of Optimal Economics.
“Something profound needs to change.”
The original tax package, which did not feature indexation and levied paper profits, was forecast to raise $43.9bn over a decade, and after that more than $8bn a year, according to analysis by the Parliamentary Budget Office. That 10-year projection could more than halve, economists warned, as taxing only realised gains such as interest and dividends would reduce returns, while indexation would prevent more Australians from being drawn into the levy’s net.
While curbing Canberra’s spending could address this revenue shortfall, such a move would be fiercely resisted by the union movement and social welfare groups who have instead insisted that Labor look to new areas of untapped tax revenue.
The ACTU on Wednesday renewed its push for a suite of tax increases first proposed ahead of Labor’s economic reform roundtable in August, with Ms McManus urging a clamp down on individuals and corporations engaged in tax avoidance. “The current tax system makes intergenerational inequality worse – by putting the lion’s share of revenue-raising on the shoulders of younger workers, and unfairly allowing investors to inflate house prices,” she said.
Ms McManus urged the government to cap negative gearing and capital gains tax concessions to one property and to impose a 25 per cent tax on family trusts to curb their use as “secretive tax-minimisation schemes for rich people”. Ms McManus also called for the replacement of the “failed” petroleum resource rent tax with a 25 per cent levy on oil and gas exports, arguing it would stop major resource companies” from reaping “mega profits and paying almost no tax”.
Ballooning government debt and deficits across advanced and developing economies are expected to take centre stage at the IMF and World Bank talk in Washington DC, after global liabilities surged by more than $21 trillion in the first half of 2026 to almost $338 trillion – an increase matching pandemic-era growth, according to the Institute of International Finance.
While still low compared with other advanced economies, Australia has recorded the sharpest increase in public debt in the developed world in the past two decades, according to the OECD, growing almost fourfold during that period.
The growing debt burden – due to two global economic crises, the escalating cost of big-build public-works projects and an explosion in social-services spending – is expected to push higher still, with federal government total borrowings set to surpass $1 trillion in months.
As Dr Chalmers faced a significant revenue writedown, two business leaders demanded a pull back on government spending, arguing Labor must show the same discipline on costs as corporate Australia as it navigated an uncertain global economy.
Whitehaven Coal chairman Mark Vaile said many top businesses were cutting costs to ensure they remained competitive, and urged Canberra to follow suit. “Business doesn’t have a choice. We’re into our second year of running very tight fiscal policy, to use government parlance, and managing out costs. And it should be no different for the government,” he said.
Mr Vaile, a former deputy prime minister and Nationals leader, said more government spending implied raising taxes or cutting spending.
Robert Millner, chairman of $16bn conglomerate Soul Patts, said economic volatility meant the federal government must tread carefully on spending. “There’s a lot of economic uncertainty,” he said. “Fortescue is offloading people, the banks are offloading people. And there are a lot of cost pressures from high labour and energy costs.”
Australian Chamber of Commerce and Industry chief executive Andrew McKellar warned against a “piecemeal, revenue grab” by the government.
