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Tax cuts are coming, but not soon, in a cautious budget

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Today’s budget is a cautious and responsible response to the cost-of-living pressures facing voters.

As noted ahead of budget night, many of the major spending initiatives had already been announced.

But, in the only major surprise, there are income tax cuts for all income taxpayers. Even if we need to be patient. The new tax cuts only start in July 2026, with a second round in July 2027.

And as Treasurer Jim Chalmers himself said, they are “modest” cuts. A worker on average earnings will receive A$268 in the first year, rising to $536 in the second year.

Combined with the government’s first round of tax cuts in last year’s budget, this will add up to $2,190 per year in 2027.

The cost to the budget of the latest tax cuts in 2026-27 will be $3 billion, and over three years will be $17.1 billion. The cuts still need to pass parliament.

But calls by economists such as Chris Richardson and Ken Henry for major tax reform have not been heeded. Major reforms inevitably create losers as well as winners. So, big changes were never likely just weeks before an election.

And there is still bracket creep (increases in tax revenues as taxpayers move into higher tax brackets) over the next decade. Total tax receipts are projected to rise from 25.3% of gross domestic product (GDP) in 2024-25 to 26.8% in 2035-36. This will do most of the work in the very gradual windback of the budget deficit.

How concerned should we be about the budget moving into deficit?

In the first back-to-back surpluses for almost 20 years, there were budget surpluses in 2022-23 and 2023-24. This year we are returning to deficit and further deficits are expected for about a decade. Should we be alarmed?

A balanced or surplus budget is not necessarily a good budget. What we want is a budget appropriate to current economic conditions and sustainable in the long run.

The Australian economy has only been growing modestly in recent years and is forecast to grow 1.5% in the current year. Inflation is near the target range in underlying terms. So, a modest deficit is not unreasonable.

The longer run projections show a very gradual return to balance. But this assumes no recession and no further income tax cuts, for a decade. It might be better to rebuild the fiscal position more quickly so as to be better placed to provide fiscal stimulus in the event of a global recession or another pandemic.

‘A new world of uncertainty’

As Chalmers said, we are in a “new world of uncertainty” with “the threat of a global trade war”. The volume of Australian exports is forecast to only expand by 2.5% in 2025-26 and 2026-27, but it could be lower.

In February, the Reserve Bank forecast headline inflation would rebound above the 2% to 3% target range when the electricity rebates expired. The extension of the rebates in Tuesday’s budget as well as the reductions in the price of prescription medicines will help keep inflation below 3%. Headline inflation is forecast to improve to 2.5% in 2026-27.

In the December 2024 budget update, the unemployment rate was forecast to be around 4.5% in mid-2025 and stay around that level for the next couple of years. Given the unemployment rate was steady at 4.1% in February, the reduction to 4.25% seems plausible.

What will it mean for interest rates?

One reason the government went for a modest tax cut rather than a wild “cash splash” is it did not want to undermine the narrative there will be future interest rate cuts by stimulating household spending too much.

If households were given immediate cash to spend, this could drive up inflation.

The Reserve Bank is unlikely to change interest rates at its April 1 meeting. But it would be very unhelpful for the government’s electoral prospects if the minutes showed the central bank had become more concerned about inflation and less likely to cut interest rates at future meetings.

The Reserve Bank is unlikely to feel this budget contains enough government spending to boost economic activity in the near term and therefore change its view on the economic outlook.

So, a further interest rate cut remains possible at the bank’s following meeting on May 20.

And any further relief on interest rates would be welcomed by households – as well as whoever might be in government by then.The Conversation

John Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Money

Gold and silver prices drop after Gaza ceasefire

Gold dips below $4,000/oz amid profit-taking and Gaza ceasefire; silver also softens from record highs

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Gold dips below $4,000/oz amid profit-taking and Gaza ceasefire; silver also softens from record highs

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In Short:
– Gold prices fell over 2% to below $4,000 per ounce due to a stronger dollar and profit-taking.
– Silver eased to $48.93 per ounce, influenced by market activity and ongoing high demand despite supply issues.
Gold prices fell over 2% on Thursday, dropping below $4,000 per ounce. The decline followed a strong rise earlier in the year and was influenced by a stronger dollar and profit-taking after a ceasefire deal between Israel and Hamas.Spot gold decreased to $3,959.48 per ounce, while U.S. gold futures for December delivery settled at $3,972.6.

Silver also experienced a slight decline, easing from its record high to $48.93 per ounce. The dollar index increased, making gold more expensive for overseas buyers.

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Traders noted increased activity in the market as profit-taking coincided with reduced tensions in a historically volatile region.

An independent metals trader stated that while gold and silver may need to consolidate further, the underlying demand drivers remain intact.

Market Overview

Gold surpassed $4,000 per ounce on Wednesday, reaching $4,059.05, boosted by geopolitical tensions and strong demand from central banks. The asset has gained about 52% this year, reflecting a significant increase due to various economic factors. The U.S. central bank’s decision to cut rates in September also contributed to the rally, with expectations for future cuts in the coming months.

Silver’s price increase of 69% this year is tied closely to similar economic trends impacting gold. Notably, liquidity issues in the silver market are being exacerbated by strong demand and tight supply conditions. Other precious metals, such as platinum and palladium, also saw declines during this period.

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Money

North Korean hackers steal $2 billion in crypto

North Korean hackers steal over $2 billion in cryptocurrency, marking the largest annual total in history

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North Korean hackers steal over $2 billion in cryptocurrency, marking the largest annual total in history

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In Short:
– North Korean hackers stole over $2 billion in cryptocurrency in 2025, nearly tripling last year’s total.
– A shift to social engineering tactics has led to increased targeting of high-net-worth individuals for cyber attacks.
North Korean hackers have reportedly stolen over $2 billion in cryptocurrency assets in 2025, setting a record with three months still left in the year.
Data from blockchain analytics firm Elliptic indicates that this amount nearly triples the total stolen last year, accounting for approximately 13% of North Korea’s estimated GDP and raising the regime’s total crypto theft to over $6 billion since 2017.Banner

A significant portion of the 2025 theft is attributed to the February hack of cryptocurrency exchange Bybit, which amounted to $1.46 billion.

The FBI has linked this breach to state-sponsored North Korean hackers, who exploited weaknesses in Bybit’s wallet management system. More than 30 additional cyber attacks have also been associated with North Korea this year, including notable breaches at LND.fi and WOO X.

Shift In Tactics

A shift in methodology among North Korean hackers has been observed, as they now focus on social engineering rather than technical exploits. According to Elliptic, the primary vulnerability lies with individuals rather than technology.

High-net-worth individuals and corporate executives are increasingly targeted due to their relatively weaker security measures.

The hackers utilise deceptive tactics, including phishing schemes and fake job offers, to access private cryptocurrency wallets. Intelligence reports suggest that the stolen funds are used to finance North Korea’s nuclear programmes.

The regime has also improved its money laundering techniques by employing various cryptocurrencies and mixing methods to obscure fund origins. Blockchain analysts are actively tracking these stolen assets, with notable progress achieved in identifying recoverable funds.


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Gold prices soar to $4,000 an ounce milestone

Gold prices soar to $4,000 an ounce amid investor panic over dollar weakness and economic uncertainty

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Gold prices soar to $4,000 an ounce amid investor panic over dollar weakness and economic uncertainty

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In Short:
– Gold prices reached $4,000 per ounce due to a declining dollar and economic uncertainties.
– Investors are advised to be cautious as prices near $4,000 may lead to potential market corrections.
Gold prices reached $4,000 per ounce for the first time on Tuesday as investors sought refuge from a declining dollar, geopolitical tensions, economic insecurity, and persistent inflation.Gold futures closed at a record $4,004.40, peaking at $4,014.60 during the day.

Prices have risen about 50% this year, influenced by a 10% drop in the U.S. dollar index and shifts in trade policies under President Donald Trump.

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Central banks and retail investors are increasingly purchasing gold.

Countries like China are moving away from U.S. Treasurys after significant sanctions imposed on Russia due to the Ukraine invasion in 2022. Retail investors desire protection from inflation.

The surge in gold prices followed the Federal Reserve’s interest rate cut in September, making short-term debt instruments less appealing. The expectation is for two further rate reductions by year-end, with the Fed’s next meeting scheduled for October 29.

Market Caution

Bank of America has recommended a cautious approach towards gold as prices near $4,000, warning of potential “uptrend exhaustion” that could result in a market correction in the fourth quarter.

Investors should remain vigilant regarding gold investments, as potential price consolidations may occur.


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